Top

Top

Agenda Item No

 

The Vale of Glamorgan Council

 

Scrutiny Committee (Lifelong Learning) 10th December 2012

 

Report of the Chief Learning and Skills Officer

 

Initial Revenue Budget Proposals 2013/14

 

Purpose of the Report

1.             To submit for consultation the initial budget proposals for 2013/14 and to inform Scrutiny Committee of the amended original budget for 2012/13 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 2013/14 be considered and any comments passed to Corporate Resources Scrutiny Committee as the lead Scrutiny Committee.

Reasons for the Recommendations

1.             To incorporate changes to the budgets.

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 16th October 2012 (and the final settlement is likely in December/January).

3.             The Council is required under statute to fix the level of council tax for 2013/14 by 11th March 2013 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 2013/14 is £218.838M.

5.             The Council's provisional RSG is £125.934M and its share of the Non- Domestic Rates (NDR) is £37.752M together these figures will constitute the Council’s provisional Aggregate External Finance (AEF).

6.             The Council will also receive a sum provisionally set at £1.246M via the Outcome Agreement Grant (OAG) for 2013/14. 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 grant. The proportion of the grant eventually received in 2013/14 is determined by a ratings score of the Council's performance in achieving its 2012/13 Outcome Agreement targets.

7.             Transfers into the RSG settlement are as follows:

          Appetite for Life Grant (Catering) - £103k

          This grant supported dietetic/nutritional posts in collaboration with Cardiff Local Health Board, staff training in nutritional requirements and new equipment. The funding could also support trials offering new foods.

          School Counselling Grant (Education & Schools) - £201k

          The specific grant funds were accessible for counselling services for secondary school pupils, year 6 pupils in primary school and 16-18 year olds

          School Breakfast Grant (Catering) - £621k

          This grant funded the Breakfast Club Initiative within 31 primary schools, increasing to 36 partaking schools by the end of 2012/13.

          Post 16 SEN in Mainstream (Education & Schools) - £38k

          Transfer of responsibilities for additional learning support for post 16 pupils with special educational needs in Mainstream schools and other related provision previously funded by a specific grant

          Post 16 SEN Special School Out of County (Education & Schools) -£820k

          Transfer of responsibilities for post 16 Education in the Vale’s three Special Schools and also for specialist placements out of county and at independent schools previously funded by a specific grant.

Revised Budget 2012/13

8.             Appendix ‘1’ to this report sets out the necessary adjustments to the original estimate for 2012/13 for the Directorate, 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, Transfers and Recharges - these are accounting adjustments largely outside the control of Services. They reflect charges for the use of capital assets, changes to inter-service recharges and functions and pensions adjustments to comply with accounting standards. The overall impact on the Council is nil.

9.             The following table compares the amended original budget with the projected outturn for 2012/13.

 

2012/13

2012/13

Variance

 

Amended

Original

Projected

 (+)Favourable

Directorate/Service

Budget

Outturn

 (-) Adverse

 

£’000

£’000

     £’000

Learning and Skills

 

 

 

Education and Schools

90,967

90,967

                           0

Libraries

2,567

2,567

                           0

Lifelong Learning 

195

195

                           0

Youth Service

1,137

1,137

                           0

Catering

1,015

1,015

                           0

Grand Total

95,881

95,881

0

 

10.        Education and Schools – Overall, the Education Budget is currently projected to balance as at the end of March 2013, however, this is after transferring £144k from Education Reserves.  Any savings identified between now and the end of the year will be available to reduce the use of reserves, or to re-direct into the School Investment Strategy or other reserves.

11.        This is due to projected overspends against School Improvement £29k and Additional Learning Needs (ALN) £211k offset by a projected underspend against Strategic Planning and Performance of £96k. ALN is an extremely volatile budget and various options for offsetting any potential overspend are being investigated.

12.        The overspend against School Improvement of £29k is due to adopting an amended funding approach for the WJEC subscription which had been previously proposed as a saving £42k, and also additional costs for subscriptions and licences paid on behalf of schools £11k. This is offset by a reduction in the projected cost of the Joint Education Service in year £10k and in addition income has been generated in year and vacancy savings made within the service £14k.

13.        Strategic Planning is projecting an underspend of £96k due to the vacant Director post £53k, savings against the pensions budgets £46k, there is also an underspend against salaries budgets £54k. This is offset by a projected overspend of £15k for Schools Rates and a projected overspend against Maternity costs met on behalf of schools of £80k. The outturn for maternity is difficult to project accurately and was overspent by £195k in 2011/12 and, therefore, it will need to be monitored carefully. There is a projected underspend of £38k against the Schools ICT and Data budget due to delays in recruiting to posts, additional income generated in year and the introduction of an SLA with Cardiff and Vale college to manage the data in relation to Adult enrolments.

14.        Additional Learning Needs is projecting an overspend of £211k this is due to an overspend against the budget for children’s placements in independent schools £257k this is partly offset by additional recoupment income of £63k. ALN is also projecting an overspend of £200k against the one to one LSA budget this has been offset in year by £244k found as a result of de-committing expenditure including specific budgets for secondary behaviour support due to the overspends projected elsewhere in the ALN budget. There is also an overspend in ALN of £61k due to the refurbishment costs of the Pupil Referral Unit (PRU) prior to inspection and lower than projected Age Weighted Pupil Unit contributions from schools towards pupils placed in the PRU.

15.        Provision has been made within the budget for the annual cost of financing the School Investment Strategy of £600k. This sum will be transferred to the School Investment Strategy Reserve.

16.        In addition to finance the School’s contributions to the ER/VR scheme Education is projecting to transfer £66k from Education Reserves this will be repaid by participating schools over 2013/14 and 2014/15.

17.        Catering - Although anticipated to out turn on target, the service is exposed to external pressures.

Base Budget 2013/14

18.        Cabinet approved the Budget Strategy and the Interim Medium Term Financial Plan on the 9th July 2012.

19.        The Budget Strategy for 2013/14 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.

20.        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 the Medium Term Financial Plan.

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

21.        Having regard to the above, it is, therefore, proposed in respect of the 2013/14 Budget Strategy that Directors be instructed to prepare initial revenue budgets for 2013/14, in accordance with a timetable agreed by the Director of Resources. 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 2012/13 final revenue budget report;

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

·         Budget reports to include revised estimates for 2012/13;

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

22.        A summary of the overall base budget for 2013/14 for the Directorate is attached at Appendix '2'. This has been arrived at by adjusting the 2012/13 budget for items such as inflation and unavoidable growth.

23.        IAS 19 /Asset Rents - relate to accounting items outside the control of Services. They reflect charges to Services for the use of capital assets and adjustments in respect of pensions to comply with accounting standards.

24.        Recharges/Transfers - relate to changes in inter-service recharges and from the transfer of functions and responsibilities between services. 

25.        Budget Adjustments - the estimated April 2012 pay award did not materialise and an adjustment has been made to remove this sum from Service budgets and the transfer of a sum into Services to fund the impact of job evaluation.

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

27.        Committed Growth - This is made up of £916k relating to the Individual Schools Budget and transfers into RSG as follows:

·         Appetite for Life Grant –   £103k

·         School Counselling Grant - £201k

·         School Breakfast Grant - £621k

·         Post 16 SEN in Mainstream - £38k

·         Post 16 SEN School Out of County - £820k

28.        The total of the Committed Growth in the Individual School Budget (ISB) amounts to £916k. Together with a provision for pay awards and inflation of £675k, this constitutes the minimum increase in ISB required by WG (2.08% increase)

29.        The savings total reflects the target for efficiency savings set in the 2012/13 budget.

30.        The Final Revenue Budget proposals for 2012/13 included corporate savings targets for Services to 2014/15 as shown below.




Efficiency Savings Targets

2013/14

2014/15

TOTAL

 

£000

     £000

     £000

Learning & Skills (excl. schools)

244

257

501

 

          A detailed list of the savings targets for the Directorate shown above are attached at Appendix 3.

31.        A list of 2013/14 cost pressures as identified by Services for the Directorate is attached at Appendix 4. These are not shown in any order of priority. Some will need to be met for some services. They exclude the cost of redundancies, which may be incurred in order to maintain the budget within the resources available. These costs could be significant.

Budget Review

32.        The 2012/13 Final Revenue Budget Proposals set initial corporate savings targets for the Council as a whole for 2013/14 and 2014/15 of £3.175M and £2.950M respectively with the exact level of savings required, together with their impact from 2013/14 onwards, to be considered as part of a Budget Review to be undertaken following the Council elections in May 2012.

33.        The results of the Budget Review process will, therefore, inform the 2013/14 Budget Process. The purpose of the review is to ensure:

·         A sustainable budget is achieved within predicted funding levels

·         The budget is aligned to the Council’s priorities as set out in the Corporate Plan

·         Best value for money is being obtained, i.e. identifying efficiency savings, opportunities for income generation and better use of external grants

34.        The outcome of the review will be to put in place a 4-year financial strategy for the period to March 2017.

35.        The 2013/14 Review is supported by Cost Centre Analyses (CCAs) which provide details for each service area including:

·         Comparisons of the 2010/11 outturn, 2011/12 budget and actual outturn, and 2012/13 current year budget.

·         Separation of the largely controllable (e.g. salaries and wages) and uncontrollable (e.g. recharges from other departments) elements of income and expenditure.

·         Identification of the costs centres within Service Areas

·         A copy of the Cost Centre Analysis for this Directorate is attached at Appendix 5.

36.        Each cost centre has been awarded a rating that measures its relative risk (based on the Council’s risk management strategy) and corporate priority. This is attached at Appendix 6. The following tables show the criteria used for the risk and corporate priority rating:

 Risk Assessment Matrix

 

 

 

 

 

Impact of Risk

 

Catastrophic

 

MEDIUM (M)

 

MEDIUM/HIGH (MH)

 

HIGH (H)

 

VERY HIGH (VH)

 

High

 

MEDIUM/LOW (ML)

 

MEDIUM (M)

 

MEDIUM/HIGH (MH)

 

HIGH (H)

 

Medium

 

 LOW (L)

 

MEDIUM (M)

 

MEDIUM (M)

 

MEDIUM/HIGH (MH)

 

Low

 

VERY LOW (VL)

 

 LOW (L)

 

MEDIUM/LOW (ML)

 

MEDIUM (M)

 

Very Unlikely

Possible

Probable

Almost Certain

 

Likelihood/Probability of Risk Occurring

 

Corporate Priority

Category

Score

Commitments and areas where the Council has no control over the expenditure, e.g. contractual and legal commitments, absolute minimum statutory service, taxes, etc.

3

Political Priority (publicly announced commitment e.g. items included in the Community Strategy, Corporate Plan)

2

“Invest to Save” and preventative expenditure

2

Statutory expenditure above the absolute minimum

1

 

37.        The Budget Working Group (BWG) is responsible for completing the Budget Review. In coming to its conclusions, the BWG will also use high-level information on the comparative spending levels of individual services across Wales together with the financial information included in the Cost Centre Analyses. The results of the relative risk and corporate priority assessment will also be factored in as part of this process.  Service developments in all areas will be dependent upon the eventual level of resources available.

38.        The shortfall in the 2013/14 budget for the Council as a whole is £8.426M assuming all cost pressures are met. Future resource requirements have also been assessed having regard to the likely future revenue settlements and cost pressure information provided by services to 2016/17 as shown below:

Matching Predicted Resources to Expenditure

2014/15

£000

2015/16

£000

2016/17

£000

Total

£000

Real Term decrease in resources

   702

1,934

1,963

  4,599

Cost Pressures

6,173

4,644

4,272

15,089

Existing Corporate Savings Targets

(2,133)

     0

     0

(2,133)

Shortfall

4,742

6,578

6,235

17,555

 

The initial projections show a cumulative shortfall of some £25.981M for the Council as a whole by 2016/17 including the shortfall on 2013/14. In view of the difficulty in predicting future levels of inflation and cost pressures, the above table needs to be treated with a degree of caution and the eventual position may be better or worse than stated. In particular, changes in future settlements from WG have a significant impact. The projection assumes the level of increase in 2014/15 in Aggregate External Finance (AEF) will be in line with the forward indication received from WG. However, for 2015/16 and 2016/17 no future indications have been received and so it has been assumed that there will be no increase. For each 1% difference in this assumption the impact on a year's shortfall would be £1.6M. So, for example, if the Council's AEF was 1% lower than predicted in both 2015/16 and 2016/17 the cumulative shortfall would increase by £3.2M.

39.        The Review will further develop the above projections. In addition it will examine the cost pressures to determine which will require funding.

40.        As a starting point to assist in dealing with the funding gap the savings areas previously put forward by Directors to meet the 2013/14 and 2014/15 targets are being analysed with a view to their implementation with effect from April 2013. These are included at Appendix 3.

41.        Clearly however, these will be insufficient. Consequently it is proposed to request Directors to formulate additional options for savings, additional income etc. over the next 4 years. This includes outlining the service implications and estimated HR implications (including potential redundancies, reductions in headcount and FTEs).

42.        In order to provide some guidance to Directors it is suggested that a target be set for each Director. Initially, it is proposed each Director should identify savings equivalent to their pro rata share of the shortfall based on their controllable expenditure. Over the 4 year period, this approximates to an average annually recurring reduction of about 6.5%. It is extremely unlikely that this will be the eventual outcome of the budget review but it should help officers focus and provide members with options. Schools have been excluded from the target and will be looked at during the review. The target sums are set out in the table below, and are in addition to existing targets:

Annual Saving Target

2013/14

£000

2014/15

£000

2015/16

£000

2016/17

£000

Total

£000

Learning and Skills

1,141

   642

   890

   844

  3,517

 

43.        An update of the progress on the Budget Review will be reported to Corporate Resources Scrutiny Committee in January 2013.  Comments of Scrutiny Committee will be considered by the BWG prior to preparing the final budget proposals for initial consideration by Cabinet and Council in February/March 2013. 

44.        Due to the 2013/14 Budget Process running in tandem with the review of the Corporate Plan it is essential that services have regard to the targets, objectives and key tasks contained within the Draft Plan when considering future cost pressures and options for savings.

Next Steps

45.        The next stage is for the estimates to be submitted to Scrutiny Committees for consultation. 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 2012.

46.        It is also proposed to consult on the initial budget proposals with the Public, Local Service Board partners, Town and Community Councils and the Business sector.

47.        The Cabinet Budget Working Group will hold a series of meetings in November 2012 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 28th February 2013. Before making its recommendation, the Budget Working Group will consider the comments made by Scrutiny.

48.        Progress on the Budget Review will be reported to Corporate Resources Scrutiny Committee in January 2013.

49.        Cabinet’s final budget proposals will be considered by Council at a meeting to be held by the 11th March 2013.

Resource Implications (Financial and Employment)

50.        It is important that Directors balance their budgets.

51.        Each year the purpose, nature and level of earmarked reserves are reviewed and will again be reviewed as part of the 2013/14 Budget Process. Appendix '7' sets out the Directorate’s estimated reserves as at 31st March 2013.

52.        Each 1% increase in Council Tax will yield approximately £450k additional income. This is less than in other years as under the new Council Tax Support regime part of any increase is reduced by a corresponding increase in Council Tax Support.

Sustainability and Climate Change Implications

53.        The promotion of sustainability and action to arrest climate change is central to the work of the Council and a key consideration when allocating scarce resources to meet the needs of the present without compromising the ability of future generations to meet their own needs.

Legal Implications (to Include Human Rights Implications)

54.        The Council is required under statute to fix its council tax by 11th March 2013 and in order to do so will have to agree a balanced revenue budget by the same date.

Crime and Disorder Implications

55.        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)

56.        These initial budget proposals have due regard to the requirements of the Council’s Strategic Equality Plan including the Equalities Act 2010 and Public Sector Equality Duty for Wales. The subsequent development of individual strategies for achieving savings will require the completion of Equality Impact Assessments. This involves systematically assessing the likely (or actual) effects of policies on people in respect of disability, gender, sexuality (including gender identity), age, Welsh language, and racial equality.

Corporate/Service Objectives

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

Policy Framework and Budget

58.        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 2013/14 budget will require the approval of full Council

Consultation (including Ward Member Consultation)

59.        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

60.        The lead Scrutiny Committee is Corporate Resources.

Background Papers

Interim Medium Term Financial Plan

Contact Officer

Carolyn Michael

Officers Consulted

The Corporate Management Team has been consulted on this report

Responsible Officer:

Jennifer Hill, Chief Learning and Skills Officer