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Agenda Item No.

 

THE VALE OF GLAMORGAN COUNCIL

 

SCRUTINY COMMITTEE (CORPORATE RESOURCES): 12 JANUARY 2016

 

REFERENCE FROM CABINET: 14 DECEMBER 2015

 

C3013        MEDIUM TERM FINANCIAL PLAN 2015/16 TO 2018/19 (L) (SCRUTINY COMMITTEE – CORPORATE RESOURCES) -

 

Approval was sought for the draft Medium Term Financial Plan 2015/16 to 2018/19 attached at Appendix 1 to the report.

 

The Budget Strategy for 2016/17 was approved by Cabinet on 27 July, 2015, (min no. C2865 referred). This established a baseline for services to prepare initial revenue budgets for 2016/17 based on the cost of providing the existing level of service and approved policy decisions and included any net savings targets set. It also set out the timetable to be followed and requested Directors to continue to progress the Reshaping Services Programme.

 

The purpose of the Medium Term Financial Plan was to link the Council’s strategic planning process with the budget process and to ensure consistency between them. It was a mechanism that attempted to match future predicted resources and expenditure, identify potential shortfalls and provide the financial framework for the next 3 years. It was not the budget setting process that allocated detailed budgets for services. Its purpose was to inform members and to suggest a way of dealing with the future financial pressures facing the Council.

 

This Medium Term Financial Plan, therefore, attempted to:

 

•           Identify the main financial implications resulting from the increased pressure falling upon Council services, including pay and price inflation, legislative and demographic changes;

•           Estimate the reduced financial resources that would be available to the Council to meet these demands;

•           Match the predicted expenditure and resources and provide a framework to develop a financial strategy towards achieving a balanced budget for the next 3 financial years.

 

Initial estimates presented the following picture showing a projected savings target between 2016/17 and 2018/19 of £30.9m, comprising of £17.8m of savings already identified and £13.1m yet to be allocated.

 

 

Matching Predicted Resources to Expenditure

2016/17

£000

2017/18

£000

2018/19

£000

Real Term Decrease in Resources

7,020

5,119

4,979

Cost Pressures

8,397

3,682

1,735

Identified Savings

(12,170)

(5,652)

(0)

Additional Shortfall

3,247

3,149

6,714

 

The matching exercise indicated that there remained £3.2m of savings to be identified for 2016/17 and this was after already identifying £12.2m.  The initial revenue budget proposals for 2016/17 were presented to Cabinet on 16 November, 2015 and reported a £6.4m shortfall for 2016/17.  The reason for the lower shortfall being reported as part of the Medium Term Financial Plan was firstly due to the inclusion of an assumed increase in Council Tax of 2%, which equated to £1.2m, although clearly this was purely for indicative purposes and the final increase could well vary.  Secondly, the assumption in the Plan that schools would only be funded at the Minimum Funding Commitment, while the budget proposals identified the full cost pressures for schools which totalled a further £2m. 

 

The achievement of the identified savings was by no means guaranteed, but failure to deliver this level of savings would significantly impact on the Council achieving its required financial strategy which would now be based on an estimated reduction of £30.9m by 2018/19.

 

The report noted that in arriving at this shortfall, there would inevitably be additional cost pressures arising between now and 2018/19 which were as yet unknown and little provision had been made for service development. Although savings would continue to remain a major expectation of future budgets, it was unlikely that the Council would seek to or be able to fund all cost pressures.

 

As a result of the high level of savings required, there would be difficulties in maintaining the quality and quantity of services without exploring opportunities for collaboration and alternative forms of service delivery.  The only realistic option facing the Council in future years was successful delivery of the programme of reshaping and transforming services.

 

To ensure that the budget set for 2016/17 continued to address the priorities of Vale residents and the Council’s service users, the budget setting process would incorporate engagement with a range of key stakeholders.

 

Options which were recommended within the Plan for exploration as part of the 2016/17 budget process were:

 

•           Considering the results of the budget engagement process in determining priorities for future savings and service delivery;

•           Review the appropriateness of the current financial strategies for Education and Schools, Social Services and Other Services;

•           Review feasibility of increasing  the use of the Council Fund Reserve as part of the financial strategy;

•           Reviewing the level of cost pressures with a view to services managing and reducing demand and mitigating pressures;

•           Services funding their own residual cost pressures through reviewing their existing budgets and revised/alternative means of service provision;

•           Services meeting their own pay and price inflation etc. through reviewing their staffing structure in line with changes to service delivery and workforce planning requirements;

•           Reviewing the priorities for funding statutory and non-statutory services, including establishing minimum levels of service provision; and

•           Pursuing options for reshaping services including means of alternative service delivery in order to attempt to maintain the level of service while reducing the cost of provision. 

 

It was clear, however, that whatever strategy was taken forward it would involve the use of the Council Fund and other reserves to allow the specific savings required to be developed, consulted upon and implemented. The strategy set out in the 2015/16 final revenue budget proposals assumed the further use of a minimum of £4m Council Fund Reserve between 2015/16 and 2016/17. As the savings targets set for these years were based on this assumption, any reduction in the use of the Reserve would increase the level of savings required. However, the Medium Term Financial Plan had identified a significant increase in the level of savings required.  As such, the report considered it necessary to increase the use of reserves in the short term subject to the Council Fund reserve balance not falling below a figure which the Section 151 Officer deemed to be a reasonable minimum.

 

From a Capital Programme perspective, an expected decrease in the Council’s General Capital Funding allocation in 2016/17 and specific capital grants from WG, coupled with limited capital receipts, continued to give the Council little room for maneuver in progressing its priorities in this area.

 

A Capital Programme had been agreed for the period 2015/16 to 2019/20. Any amendments would be dependent on future funding levels and for the most part were expected to relate to changes in phasing of the existing approved programme. However, unless contractually committed, formal bids would need to be made for all capital schemes, irrespective of whether they were present in the current Capital Programme.

 

At the meeting the Section 151 Officer reiterated that this report pulled together all the known information at this point in time and that as soon as more information became available, the predictions contained within the Medium Term Financial Plan would be updated.

 

The Deputy Leader commented that he was concerned about the financial situation facing Welsh Councils, with a number of unknown factors that could affect budgets combined with unavoidable cost pressures.

 

The Leader agreed with his colleague, stating that the Council was still in a difficult financial situation, however this report would help move the Council forward.

 

This was a matter for Executive decision

 

Cabinet, having considered the report and all the issues and implications contained therein

 

RESOLVED – T H A T the contents of the draft Medium Term Financial Plan for 2015/16 to 2018/19 attached at Appendix 1 to the report be endorsed and the Plan be referred to the Scrutiny Committee (Corporate Resources) for information.

 

Reason for decision

 

To facilitate the integration of medium term financial planning into the corporate planning and budget process.

 

 

Attached as Appendix – Report to Cabinet – 14 DECEMBER 2015