Agenda Item No

 

The Vale of Glamorgan Council

Scrutiny Committee (Lifelong Learning) 1st December 2008

Report of the Director of Finance ICT and Property

Initial Revenue Budget Proposals 2009/10

 

Purpose of the Report

1.             To submit for consultation the initial budget proposals for 2009/2010 and to inform Scrutiny Committee of the amended original budget for 2008/2009 for services which form part of this Committee's remit.

Recommendations

It is recommended that:

 

1.             The amended original budget for 2008/09 as set out in the table at paragraph 8 be noted.

2.             Scrutiny Committee considers the initial budget proposals and comments are forwarded to Corporate Resources Scrutiny Committee and Cabinet.

Reasons for the Recommendations

1.             To facilitate monitoring of the budget.

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 Assembly Government (WAG). The provisional settlement was announced on the 15th October 2008 with details of the final settlement expected by January 2009.

3.             The Council is required under statute to fix the level of council tax for 2009/2010 by 11th March 2009 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 Welsh Assembly Government’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. For 2009/10, the Council’s provisional SSA has been notified as £195.170M.

5.             The Council has been provisionally advised that, for 2009/10, it will receive from WAG, RSG of £111.733M and Non- Domestic Rates (NDR) of £35.909M. Together, these sums constitute the Council’s Aggregate External Finance (AEF). The AEF represents an increase of £5.487M, which is equivalent to 3.9% over that received for 2008/09. The provisional settlement includes additional resources of £140,000 in respect of new responsibilities for Learner Travel.

6.             WAG has announced that the Council will provisionally continue to receive a Deprivation Grant of £167,000 and an Improvement Agreement Grant of £1,252,000. These are both unhypothecated grants (i.e. they are 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 2009/10 is determined by a ratings score of the Council’s performance in achieving its 2008/09 Improvement Agreement targets.

Revised Budget 2008/09

7.             Appendix ‘1’ to this report sets out the necessary transfers to the original budget for 2008/09, which are required to be made as follows (there is no overall effect on the net budget of the Council).

·               Asset Rents – The main reason for this movement is due to revisions to the  Accounting Code of Practice that requires deferred government grant income be released to revenue services which offsets the asset rent already charged.

·               Recharges - Adjustment required to reflect movement in charges between internal Council services.

·               Budget Transfers - Budget adjustments to reflect transfers of functions and responsibilities between services.

8.             The following table compares the amended original budget with the projected outturn for 2008/09.

	2008/09	2008/09	Variance
	Amended    Original	Projected	(+)Favourable
Directorate/Service	Budget	Outturn	(-) Adverse
	£’000	£’000	£’000
Education and Schools	85,242	85,242	0
Libraries	2,575	2,575	0
Lifelong Learning	1,837	1,837	0
Catering	1,094	1,094	0
Human Resources and Equalities	0	0	0
Total	90,748	90,748	0

 

9.             Education and Schools   – Overall, the Education Budget is projected to balance as at the end of March 2009.  Particular pressures have been felt in respect of School Transport which is projected to overspend by £35,000 due to increased re-tendered contract costs, and the need to fund the costs of school efficiency measures such as the amalgamation of Romilly Infant and Junior Schools (£45,000).  The education budget has also had to absorb minor health and safety works which are the responsibility of the authority and cannot be accommodated within the capital programme.  These total £29,000.  All the above pressures have been funded from savings elsewhere in the budget.  Overspends are also projected for the Pupil Referral Unit (£34,000) and extra-district payments (£112,390).  However, in both cases these are offset by increased income from incoming placements from other authorities.  The education service currently has a number of vacant posts which will be filled once the re-structuring of the service is completed.  Any savings identified between now and the end of the financial year will be available to re-direct into the School Investment Strategy or other reserves.

10.        Catering – This service is anticipated to outturn on budget. However external factors and requirements to meet WAG nutritional guidelines can affect the outturn for the service.

Base Budget 2009/10

11.        Cabinet approved the Budget Strategy and Timetable for 2008/09 on 31st July 2008 as part of the 2008/09–2011/12 Medium Term Financial Plan (Minute No.C3160).

12.        The Budget Strategy for 2009/10 outlined 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 and approved policy decisions. This means the cost of price increases and pay awards should be included.

13.        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.

 

14.        Services will be expected to identify and achieve recurrent efficiency savings equivalent to at least 2% of their budget and Schools should plan for efficiency savings of at least 0.3%. The target for Social Services will be £2 million as previously agreed in order to meet the requirements of the change plan.

15.        The costs of service development will need to be met from within the respective services from savings that they identify; in addition works may need to be prioritised within a service to meet any higher priority demands. Services have therefore been asked to identify any burgeoning revenue cost pressures.      

16.        A summary of the overall base budget for 2009/10 is attached at Appendix ‘2’. This has been arrived at by adjusting the 2008/09 budget for items such as Budget transfers inflation and unavoidable growth.

17.        Asset Rents, FRS 17, Deferred Government Grant and Recharges – 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 and adjustments in respect of pensions to comply with accounting standards. They have been deducted from individual Service budgets to produce a “base” estimate.

18.        Budget Transfers - Budget adjustments to reflect transfers of functions and responsibilities between services.

19.        Inflation amounts to £610,000 of which £290,000 relates to pay awards and £320,000 for general price increases. It should be noted that these figures exclude inflation for Schools, which is dealt with under the Cost Pressures section of this report.

20.        Committed Growth there is none for this Directorate.

21.        A list of 2009/10 cost pressures as identified by Services is attached at Appendix 3. These are not shown in a strict order of priority and total £6.138M. The total for all services is £13.646M and some are likely to need to be met. 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.

22.        Increased energy costs are likely to have a significant impact right across the Council and a provisional cost pressure of £2.75M is included within Policy.  There is some uncertainty as to the likely level of future energy prices and further work will be carried out on this matter by the Budget Working Group. This will include the potential for energy saving measures to offset to some extent the pressure being exerted by increased prices.

Budget Review

23.         In 2004/05 a Budget Review was undertaken with the purpose of:

·     Ensuring that the base budget was aligned to the Council’s priorities as set out in the Corporate Plan and Service Plans (i.e. resources were not being expended on low priority areas at the expense of higher rated ones);

·     Best value for money was being obtained (i.e. identifying efficiency savings and opportunities for income generation);

·     A sustainable budget was achieved and funding identified for future service development.

 

24.        The outcome of the Review was to put in place a financial strategy for the period leading up to the 2008 elections and this has been reflected in subsequent budget strategies to 2008/09 and as set out in the relevant Medium Term Financial Plans.

25.         The previous Review objectives still remain valid and it is now proposed to initiate a further Budget Review during 2008/09 that will inform the 2009/10 budget process.

26.        The 2008/09 Review will be supported by Cost Centre Analyses (CCAs) (see Appendix 4) which, will provide details for each cost centre within a service area including:

·     Comparisons of the 2007/08 budget, actual outturn and current year budget over the different types of expenditure and income.

·     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 activities provided and the relevant Service Head/Operational Manager and budget holder where different.

·     Objectives for the range of activities provided under that cost centre

·     Where appropriate other relevant information to supplement the financial information e.g. staffing, outputs.

 

27.        The detail provided in the CCAs should assist Members in their consideration of the budget by providing information on the type of expenditure that is being incurred and the activities and objectives the expenditure is supporting. It should assist in identifying areas of lower priority and the potential for switching resources from lower priority activities to higher priority areas.

28.        The results of the budget review will be included in the final Budget Report for 2009/10 presented to Cabinet in February 2009.

Next Steps

29.        The budget is now presented to Scrutiny Committee 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 23rd December 2008.

30.        The Cabinet Budget Working Group will hold a series of meetings in December and January 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 25th February 2009. Before making its recommendation, the Budget Working Group will consider the comments made by Scrutiny. 

31.        Cabinet’s final budget proposals will be considered by Council at a meeting to be held by the 4th March 2009

Resource Implications (Financial and Employment)

32.        Each year the purpose, nature and level of earmarked reserves are reviewed and will again be reviewed as part of the 2009/10 Budget Process. Appendix 5 sets out the Authority’s estimated reserves as at 31st March 2009.

33.        The provisional settlement indicates an increase of £5.487M in AEF funding over 2008/09 as set out in this report. Against this, increased cost due to inflation and committed growth total £8.513M. In addition, cost pressures totalling £13.646M have been identified. Each 1% increase in Council Tax will yield approximately £450,000 additional income.

Legal Implications (to Include Human Rights Implications)

34.        The Council is required under statute to fix its council tax by 11th March 2009 and in order to do so will have to agree a balanced revenue budget by the same date

Crime and Disorder Implications

35.        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)

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

Corporate/Service Objectives

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

Policy Framework and Budget

38.        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 2009/10 budget will require the approval of full Council

Consultation (including Ward Member Consultation)

39.        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

40.        The lead Scrutiny Committee is Corporate Resources

Background Papers

Finance Department Papers

Medium Term Financial Plan 2008/09 – 2011/12

Contact Officer

Sian Keen, Group Accountant, 01446 709255

Officers Consulted

The Corporate Management Team has been consulted on this report

Responsible Officer:

Sian Keen, Group Accountant, 01446 709255