Agenda Item No. 4

 

THE VALE OF GLAMORGAN COUNCIL

 

CORPORATE PERFORMANCE AND RESOURCES SCRUTINY COMMITTEE: 19 OCTOBER 2017

 

REFERENCE FROM CABINET: 18 SEPTEMBER 2017

 

C74     Medium Term Financial Plan 2017/18 to 2020/21 (L) (Scrutiny Committee - Corporate Performance and Resources) -

 

The draft Medium Term Financial Plan 2017/18 to 2020/21 was submitted for consideration and approval.

 

The draft Medium Term Financial Plan 2017/18 to 2020/21 was attached at Appendix 1 to the report. 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.

 

Delivery of the Council’s priorities was reliant on having robust corporate governance arrangements. These arrangements were set out in the strategic planning framework and financial planning was one of the elements of the integrated approach to corporate planning. The Corporate Plan outlined the work that the Council would undertake towards achieving the 4 Well-Being outcomes. The budget setting process and the Plan needed to be developed in parallel with the well-being outcomes and would look to align sources of funding to the Council’s commitments.

 

In developing the Corporate Plan, the Council had reflected on the way it worked and had stated 5 principles it would follow. The Medium Term Financial Plan reflected the new approach to working and was demonstrated throughout the Plan.

 

This iteration of the Plan built upon the work carried out as part of the 2017/18 budget process as detailed in the Final Revenue Budget Proposals report approved by Council on 1 March, 2017 (Minute No. 864 refers). 

 

The draft Medium Term Financial Plan was attached covering the period 2017/18 to 2020/21. Welsh Government (WG) had not provided indications of local government funding levels for 2018/19 to 2020/21 and therefore assumptions had to be made.  Due to the considerable uncertainty and the continuation of austerity measures, it was considered prudent that a reduction of 3% was applied for 2018/19. With the continued economic uncertainty as a result of the United Kingdom’s exit from the European Union, it was considered prudent that further reductions of 3% for both 2019/20 and 2020/21 should be planned for.

 

The report noted that the use of the above information did not provide the level of certainty required for forward planning. The basis of these latest assumptions, therefore, could in no way be guaranteed and any changes to the figures used could have a significant financial impact. However, every indication was that restrictions in public sector funding would continue for the foreseeable future and the failure to prepare for further reductions now could have far greater consequences for service delivery in the future.

 

Initial estimates presented the following picture showing a projected savings target between 2018/19 and 2020/21 of £20.941m excluding schools, comprising of £9.326m of savings already identified and £11.615m yet to be allocated.

 

Projected Savings Required

2018/19

£000

2019/20

£000

2020/21

£000

Predicted Shortfall

7,525

7,159

6,257

Identified Savings

(6,726)

(2,600)

0

Additional Shortfall

799

4,559

6,257

 

The achievement of the identified savings would be extremely challenging in the context of historical savings already delivered, but failure to deliver these levels of savings would significantly impact on the Council achieving its required financial strategy which would now be based on an estimated reduction of £20.941m by 2020/21 excluding Schools.

 

The report noted that in arriving at this shortfall, there would inevitably be additional cost pressures arising between now and 2020/21 which were as yet unknown and little provision had been made for service development. Clearly, 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 the successful delivery of its Reshaping Services programme.

 

To ensure that the budget set for 2018/19 continued to address the priorities of the Vale of Glamorgan residents and the Council’s service users, the budget setting process would incorporate engagement with a range of key stakeholders.

 

While the actual shortfall in funding for 2018/19 would not be known until December 2017, the report proposed that the following areas were considered as a means of reducing the projected £799k funding gap if the reduction in funding from WG was 3% as included in the Plan: 

  • No provision for prices inflation which equated to £455k;
  • The impact of the change to the Council Tax base; and
  • A further use of the Council Fund to fund any remaining shortfall.

Options which were recommended within the Plan for exploration as part of the 2018/19 budget process to close the funding gap in future years were as follows: 

  • Considering the results of the budget engagement process in determining priorities for future savings and service delivery;
  • Reviewing the appropriateness of financial strategies for services;
  • Reviewing the feasibility of any change in the use of the Council Fund Reserve and other reserves as part of the financial strategy;
  • A further review of 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 inflation through reviewing their staffing structure in line with changes to service delivery and workforce planning requirements;
  • Further consideration of the level of price inflation provided;
  • Reviewing the priorities for funding statutory and non-statutory services, including establishing minimum levels of service provision;
  • Considering the latest position regarding the Council’s Reshaping Services programme and identifying further area for savings;
  • Collaborative working in line with the Welsh Government reform agenda;
  • Develop a strategic approach to income generation;
  • Finalise the MRP review;
  • Reviewing the achievement of the 2017/18 savings targets; and
  • Considering the possibility of a reduction in the level of service and determining what services the Council needed to deliver in the future.

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 current strategy had approved the use of £0.7m of the Council Fund in 2017/18. However, the Medium Term Financial Plan had identified a significant increase in the level of savings required.  As such, it may be 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 2018/19 and specific capital grants from WG, coupled with limited capital receipts, continued to give the Council little room for manoeuvre in progressing its priorities in this area.

 

A Capital Programme had been agreed for the period 2017/18 to 2021/22. 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.

 

This was a matter for Executive decision

 

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

 

RESOLVED –

 

(1)       T H A T the contents of the draft Medium Term Financial Plan for 2017/18 to 2020/21 attached at Appendix 1 to the report be endorsed.

 

(2)       T H A T the draft Medium Term Financial Plan for 2017/18 be referred to the Scrutiny Committee (Corporate Performance and Resources) with any comments made by that Committee being taken into account by Cabinet as part of the final budget proposals for 2018/19.

 

Reasons for decisions

 

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

 

(2)       To consider comments of Scrutiny Committee (Corporate Performance and Resources)

 

Attached as Appendix – Report to Cabinet – 18 SEPTEMBER 2017