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Agenda Item No

 

The Vale of Glamorgan Council

 

Scrutiny Committee (Lifelong Learning) 5th December 2011

 

Report from the Director of Learning and Development

 

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 2011/12 be considered and any comments passed to Corporate Resources Scrutiny Committee as the lead Scrutiny Committee.

Reasons for the Recommendations

1.             To incorporate changes in 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. Primarily, 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.
-  transfer of £204k from Catering budget to Education and Schools (Strategy and Performance) budget to simplify accounting arrangements; this budget is delegated to Secondary Schools to fund Catering provision.
-  transfer of a post for £10k from Lifelong Learning to Education budget  .

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

Learning and Development

 

 

 

Education and Schools

89,838

89,838

0

Libraries

2,747

2,747

0

Lifelong Learning 

1,498

1,498

0

Catering

964

964

0

 

Grand Total

95,047

95,047

          0

 

 

 

 

9.             Education and Schools – Overall, the Education Budget is currently projected to overspend by £62,000 as at the end of March 2012. Efforts will be made to take the necessary measures to mitigate the overspend. Any residual overspend will be found from Education reserves. This is due to a projected £65,000 overspend against the Additional Learning Needs (ALN) budget offset by a £3k under spend against School Improvement due to increased income generated in year . The ALN overspend is made up of a £5k overspend against the PRU. In addition there is a projected overspend of £200k for Learning Support Assistants support, also additional Independent schools expenditure has been incurred in year of £116k. As part of the efficiency savings implemented for 2011/12 and 2012/13 £56k has been incurred for redundancies in year. These overspends have also been offset by increased Recoupment Income and reduced Recoupment Expenditure £245k, a £42k saving has been found from a vacant post in Primary Behaviour Support Team and a £25k underspend against the Secondary Behaviour Support budget has been identified. 

10.        The ALN budget is a volatile budget that is demand led, the position will be monitored closely throughout the year. It is possible that the projected overspend may reduce due to increased recoupment income or reduced out of county expenditure. If the overspend is realised it will be offset by a contribution from Education Reserves in year.

11.        In addition overspends of £75k against Rates budgets relating to schools and £35k for Private Provider Nursery placements due to an increased birth rate have been offset by under spends against Non Delegated Schools Budgets £101k and Value Added Budget £9k.

12.        Provision has been made within the budget for the annual cost of financing the School Investment Strategy of £600,000. This sum will be transferred to the School Investment Strategy Reserve. In addition to finance the School’s contributions to the Early Retirement / Voluntary Redundancy scheme Education is projecting to transfer £316,000 from Education Reserves this will be repaid by participating schools over 2012/13 and 2013/14.

13.        Lifelong Learning – It is projected that this service will outturn within budget after offsetting a projected favourable variance within the Lifelong Learning Education Training Section in respect of the Work Programme against a projected adverse variance of £55k within the Community Enterprise Centre resulting from delays in meeting 2011/12 savings.

14.        Catering – This service is anticipated to outturn within budget; however the service can be affected by external factors including snow closures and changes in meal take-up numbers.

Base Budget 2012/13

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

16.        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.

17.        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.

18.        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.

19.        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.

20.        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.

21.        Transfers - to reflect mainly transfers of functions and responsibilities between services. Primarily, 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.

-transfer of £204k from Catering budget to Education and Schools (Strategy and Performance) budget to simplify accounting arrangements; this budget is delegated to Secondary Schools to fund Catering provision.

- transfer of post from Lifelong Learning to Education £10k.

- transfer of £12k from Education to Catering in respect of refuse services.

22.        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 (excluding Schools) from the individual services, and included in General Policy.               

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

24.        Committed Growth partly relates to insurance charges changing due to increased premiums and a change in methodology to reflect a greater emphasis on claims value / number. The balance relates to the following items:

·               Individual Schools Budget - £844k made up as follows:

Teachers Threshold

£223K

 Teachers Leadership

 £60k

 Teaching Increments

 £143k

 Non Teaching Increments

 £185k

 Rates

 £163k

 Pay Award not required

 (£174k)

 Superannuation increase not required

 (£57k)

 Other Growth

 £301k

 

 

25.        The total of the Committed Growth in the Individual School Budget (ISB) amounts to £844k. Together with a provision for pay awards and inflation of £622k, this constitutes the minimum increase in ISB required by WG (1.58% increase)

26.        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

Learning & Development (excl. schools)

       642

    1,040

       244

       257

    2,183

 

27.        The savings of £1.04m for 2012/13 as shown above are included in the estimates and the initial savings were approved by Council on the 28th February 2011 (minute 957).

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

29.        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

30.        The next stage is for the estimates to be considered by Scrutiny Committee. 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.

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

32.        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.

33.        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)

34.        It is important that Directors balance their budgets. 

35.        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.

36.        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)

37.        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

38.        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)

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

Corporate/Service Objectives

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

Policy Framework and Budget

41.        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)

42.        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

43.        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:

Bryan Jeffreys  Director of Learning and Development