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Agenda Item No

 

The Vale of Glamorgan Council

 

Scrutiny Committee (Economy and Environment) 6th December 2011

 

Report from the Director of Environmental and Economic Regeneration

 

Initial Revenue Budget Proposals 2012/13

 

Purpose of the Report

1.             To submit for consultation the initial budget proposals for 2012/13 and to inform Scrutiny Committee of the amended original budget for 2011/12 for services which form part of this Committee's remit

Recommendations

It is recommended that:

1.             The amended budget as set out in Appendix '1' be noted.

2.             The initial revenue budget proposals for 2012/13 be considered and any comments passed to Corporate Resources Scrutiny Committee as the lead Scrutiny Committee.

Reasons for the Recommendations

1.             To note changes made to projected spending.

2.             In order that Cabinet be informed of the comments of Scrutiny Committees before making a final proposal on the budget.

Background

2.             The Council’s budget is determined largely by the Revenue Support Grant (RSG) settlement set by the Welsh Government (WG). The provisional RSG settlement was received from WG on the 18th October 2011 (and the final settlement is likely in December/January).

3.             The Council is required under statute to fix the level of council tax for 2012/13 by 11th March 2012 and, in order to do so, will have to agree a balanced revenue budget by the same date. To be in a position to meet the statutory deadlines and the requirements for consultation set out in the Council’s Constitution, much of the work on quantifying the resource requirements of individual services needs to be carried out before the final RSG settlement is notified to the Council.

4.             SSA (Standard Spending Assessment) represents WG's view of the relative resources needed to provide a standard level of service in each local authority in Wales and its primary use is to allocate RSG to these authorities. WG has advised the Council that its provisional SSA for 2012/13 is £204.895m.

5.             The Council's provisional RSG is £114.128m and its share of the Non- Domestic Rates (NDR) is £36.744m together these figures will constitute the Council’s provisional Aggregate External Finance (AEF).

6.             The Council will also receive a sum provisionally set at £1.253m via the Outcome Agreement Grant (OAG) for 2012/13. The OAG is an unhypothecated grant (i.e. not earmarked for particular services). The Council is not guaranteed to receive the full amount of the Improvement Agreement Grant. The proportion of the grant eventually received in 2012/13 is determined by a ratings score of the Council's performance in achieving its 2011/12 Outcome Agreement targets.

Revised Budget 2011/12

7.             Appendix ‘1’ to this report sets out the necessary transfers to the original estimate for 2011/12, which are required to be made as follows (there is no overall effect on the net budget of the Council).

·       Asset Rents, International Accounting Standard (IAS) 19, and Recharges etc - these relate to accounting items and expenditure outside the control of Services. They reflect charges to Services for the use of capital assets, changes to inter service recharges, superannuation increases not required and adjustments in respect of pensions to comply with accounting standards.

·       Transfers - to reflect mainly transfers of functions and responsibilities between services. This relates to

-       transfer of £1.869m from the Education and Schools (Strategy and Performance) budget to the E&ER Directorate (Planning and Transportation) budget to ensure budgets more accurately reflect accountability and delivery responsibilities for Mainstream Transport.

 

8.             The following table compares the amended original budget with the projected outturn for 2011/12.

 

2011/12

2011/12

Variance

 

Amended

Original

Projected

 (+)Favourable

Directorate/Service

Budget

Outturn

 (-) Adverse

 

£’000

£’000

     £’000

 

 

 

 

Environmental and Economic Regeneration

 

 

 

Planning and Transportation                  

4,928

4,982

(-)54

Economic Development and Leisure

7,028

7,394

(-)366

Visible Services

21,224

21,054

(+)170

 

 

 

 

Grand Total

33,180

33,430

(-)250

 

9.             Planning and Transportation  –The projected outturn for Planning and Transportation shows an adverse variance of £54k when compared to the amended original budget. This is because of increased supplies and services and premises cost of £76k mainly due to the inclusion of Local Road Safety Grant expenditure within the estimates. Transport costs have increased by £50k primarily as a result of the increasing costs of providing home to school transport. Customer receipts have reduced by £65k as a result of the current economic climate. This is offset by savings on employee costs of £102k as a result of holding vacant posts. There has also been an increase in grant income of £35k which is lower than anticipated due to a reduction in the Additional Planning Resources Grant. Funding of the adverse variance will be met from £54k of the savings within Visible Services.

10.        Economic Development and Leisure – The projected outturn for Economic Development and Leisure shows an adverse variance of £366k when compared to the amended original budget. There is an adverse variance in expenditure categories of £886k mainly within supplies and services and employees, including one off costs of £92k that has been incurred as a result of the proposed Leisure Centre Partnership and transfer of Dyffryn Gardens to the National Trust. This is offset by an increase in grant and internal recharge income of £422k, an increase in contributions from funds of £81k and an additional £17k in customer receipts. £250k of the adverse variance is due to the Leisure Centre Partnership estimated to be in place three months later than initially anticipated. The £250k adverse variance will be met from savings within Policy.  The remaining adverse variance of £116k will be met from savings within Visible Services.

11.        Visible Services – The projected outturn for Visible Services shows a favourable variance of £170k when compared to the amended original budget. The Visible Services Head of Service holds a budget for any pressures that may arise during the financial year. It is this budget that has been reduced by £170k to offset the pressures detailed above within Planning and Leisure.  Even though the overall budget has only been reduced by £170k there are variances within Visible Services. It is projected that the employee’s budget will be £59k overspent within the Highways & Engineers service. Premises and Repairs budgets are projected to be overspent by £663k which is mainly attributable to the level of repairs required to the highway network as a consequence of the last two severe winters plus there has been an increase of 18% in Street Lighting energy costs for 2011-12. There is a projected overspend on transport costs of £360k with the main contributing factors being the increased cost of fuel and the delay in rolling out the co-mingling service which has led to higher than budgeted transport cost. To offset these projected overspends the supplies and services budget has been reduced by £670k. The majority of this saving is in Waste Management due to savings in landfill costs due to reduced tonnage and a renegotiated contract for treatment of recycling. In total £380k of reserves is to be used to help fund the increased cost of repairing the highway and the increased cost of street lighting energy. Finally there has been an increase in the income estimate for Visible Services of £202k.

Base Budget 2012/13

12.        Cabinet approved the Budget Strategy and the Medium Term Financial Plan on the 20th July 2011.

13.        The Budget Strategy for 2012/13 outlines that in order to establish a baseline, Services should prepare initial revenue budgets for next year based on the cost of providing the current level of service together with any approved policy decisions and including any net savings target. This means the cost of price increases and pay awards should be included.

14.        Increases to budgets approved during the course of a financial year can restrict the freedom the Council has to allocate its resources to priorities during the following budget cycle when it is aware of all the competing demands. Consequently:

·       Supplementary estimates will only increase the base budget if Council has given specific approval to this effect. Increases met by virement within a year will not be treated as committed growth.

·       Directors should find the cost of increments and staff changes from their base budget unless the relevant specific approval has been given for additional funding.

·       The effect of replacing grant from outside bodies that has discontinued will not be treated as committed growth. In addition, before any project or initiative that is to be met either wholly or partly by way of grant may proceed, the exit strategy must be approved.

·       Certain items of unavoidable committed growth will continue and these include the effect of interest changes and the financing cost of the capital programme, increases in taxes, increases in levies and precepts charged by outside bodies and changes to housing benefits net expenditure.

·       Services will be expected to identify and achieve recurrent efficiency and other savings, including (but not restricted to) those identified in this Medium Term Financial Plan.

·       It is envisaged that the costs of service development will need to be met from within the respective directorates.

15.        Having regard to the above, it was proposed that in respect of the 2012/13 Budget Strategy, Directors were instructed to prepare initial revenue budgets for 2012/13, in accordance with a timetable agreed by the Director of Finance, ICT and Property. Preparation should be on the following basis:

·       Capital charges, central accommodation costs and central support costs to be estimated centrally;

·       Services to prepare baseline budgets on current service levels as set out in the 2011/12 final revenue budget report;

·       Budgets to be broken down subjectively and objectively in as much detail as deemed appropriate by the Director of Finance, ICT and Property;

·       Budget reports to include revised estimates for 2011/12;

·       Full account to be taken of the revenue costs, other than debt charges, of new capital schemes coming into use.

 

16.        A summary of the overall base budget for 2012/13 is attached at Appendix '2'. This has been arrived at by adjusting the 2011/12 budget for items such as inflation and unavoidable growth.

17.        Asset Rents, IAS 19, and Recharges etc - these relate to accounting items and expenditure outside the control of Services. They reflect charges to Services for the use of capital assets, changes to inter service recharges, superannuation increases not required and adjustments in respect of pensions to comply with accounting standards.

18.        Transfers - to reflect mainly transfers of functions and responsibilities between services. This relates to:-

-       transfer of £1.869m from the Education and Schools (Strategy and Performance) budget to the E&ER Directorate (Planning and Transportation) budget to ensure budgets more accurately reflect accountability and delivery responsibilities for Mainstream Transport.

 

19.        Adjustment -  this is made up of an adjustment to remove the estimated April 2011 pay award for employees earning less than £21,000 which did not materialise from the individual services, and included in General Policy. In addition the following one off growth items in 2011/12 have been removed from the individual services and included in General Policy:-

        Planning and Transportation - Planning Fee Income £50k.

        Economic Development and Leisure - Penarth Leisure Centre £150k.                      

        Visible Services - Highways Service £900k.

20.        The total figure for inflation relates to general price increases and a 1% allowance for pay awards.

21.        Committed Growth relates to changes in insurance charges due to increased premiums and a change in the methodology to reflect a greater emphasis on claims value / number. It also includes the following item :

·       Visible Services – £225k for Landfill Tax annual increase.

22.        The Medium Term Financial Plan includes savings targets for Services for 2012/13.to 2014/15.

Annual Efficiency Savings Targets

2011/12

2012/13

2013/14

2014/15

TOTAL

 

     £000

     £000

     £000

     £000

     £000

Environmental & Economic Regeneration

   1,744

    1,089

       725

       297

    3,855

 

23.        Savings of £949k for 2012/13 are included in the estimates and were approved by Council on the 28th February 2011 (minute 957). There is an additional savings required which is made up of:-

·       Environmental and Economic Regeneration - changes to waste collection and disposal arrangements £140k.

 

24.        A list of 2012/13 cost pressures as identified by the Directorate is attached at Appendix 3. These are not shown in any order of priority. 

25.        Attached at Appendix '4' are the proposed 2014/15 savings shown for the Directorate. More detail is required on these savings and their impact will be considered as part of the budget review following the elections in May 2012.

Next Steps

26.        The next stage is for Scrutiny Committee to consider the proposals.  Corporate Resources Scrutiny Committee is the lead Scrutiny Committee and will consider both the Initial Revenue Budget Proposals and any comments that other Scrutiny Committees have made. The responses of Scrutiny Committee must be made no later than the 20th December 2011.

27.        It is also proposed to consult on the initial budget proposals with Local Service Board partners.

28.        The Cabinet Budget Working Group will hold a series of meetings in November 2011 with the relevant Cabinet Members and officers to consider the budget proposals. They will submit their recommendations so that the Cabinet may make its final budget proposal no later than the 29th February 2012. Before making its recommendation, the Budget Working Group will consider the comments made by Scrutiny.

29.        Cabinet’s final budget proposals will be considered by Council at a meeting to be held by the 7th March 2012.

Resource Implications (Financial and Employment and Climate Change, if appropriate)

30.        It is important that Directors balance their budgets. 

31.        Each year the purpose, nature and level of earmarked reserves are reviewed and will again be reviewed as part of the 2012/13 Budget Process. Appendix '5' sets out the Directorate’s estimated reserves as at 31st March 2012.

32.        The pressure on spending totals £11.297m, comprising net Inflation (£2.798m), net growth (£1.455m) identified and cost pressures (£7.044m). Each 1% increase in Council Tax will yield approximately £509k additional income.

Legal Implications (to Include Human Rights Implications)

33.        The Council is required under statute to fix its Council Tax by 11th March 2012 and in order to do so will have to agree a balanced revenue budget by the same date.

Crime and Disorder Implications

34.        The obligations of the Council with regard to Section 17 needs to be fully considered in the budget decision making process.

Equal Opportunities Implications (to include Welsh Language issues)

35.        Additional finance improves the Council’s opportunities for assisting disadvantaged members of society.

Corporate/Service Objectives

36.        Contributes to the corporate priority of Corporate Resources by the provision of sound financial management.

Policy Framework and Budget

37.        This report is following the procedure laid down in the Constitution for the making of the budget and so does not need to be referred to Council. However, the final 2012/13 budget will require the approval of Full Council.

Consultation (including Ward Member Consultation)

38.        The Corporate Management Team has been consulted on this report. The initial budget proposals will be the subject of consultation with Scrutiny Committees. The Trade Unions and Schools forum will also be consulted.

Relevant Scrutiny Committee

39.        The lead Scrutiny Committee is Corporate Resources.

Background Papers

Finance Department Papers

Contact Officer

Carolyn Michael, Senior Group Accountant

Officers Consulted

The Corporate Management Team has been consulted on this report

Responsible Officer:

Rob Quick, Director of Environmental and Economic Regeneration

 

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