Agenda Item No. 6
THE VALE OF GLAMORGAN COUNCIL
CABINET: 15TH OCTOBER 2018
REFERENCE FROM CORPORATE PERFORMANCE AND RESOURCES SCRUTINY COMMITTEE: 20TH SEPTEMBER 2018
“ MEDIUM TERM FINANCIAL PLAN 2018/19 TO 2021/22 (REF) –
The draft Medium Term Financial Plan 2018/19 to 2021/22 had been submitted to Cabinet for consideration and approval at its meeting on 17th September. Cabinet had subsequently referred the report to the Scrutiny Committee for its consideration with any comments to be referred back to Cabinet prior to the final budget proposals for 2019/20. The reference from that meeting was tabled for the Committee’s consideration.
By way of background, the Section 151 Officer advised that the Budget Strategy for 2019/20 had been approved by Cabinet on 16th July, 2018 and this had established a baseline for services to prepare initial revenue budgets for 2019/20 based on the costs of providing the current level of service and approved policy decisions including any net savings targets set.
The draft Medium Term Financial Plan 2018/19 to 2021/22 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. It was a mechanism that attempted to match future predicted resources and expenditure, identify potential shortfalls and provide the financial framework for the next three years. Its purpose was to inform Members and to suggest a way of dealing with the future financial pressures facing the Council.
The draft Medium Term Financial Plan attached covered the period 2018/19 to 2021/22. As part of the final revenue settlement for 2018/19, Welsh Government provided an indicative figure of a 1% reduction for the potential change in funding for 2019/20. No further indications were provided for future years. Due to the considerable uncertainty and the continuation of austerity measures, it was considered prudent that a reduction of 1% be applied year on year for the period of the Plan.
It should be 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 2019/20 and 2021/22 of £15.714m excluding schools, comprising of
£3.627m of savings already identified and £12.087m yet to be allocated.
|
Projected Savings Required
|
2019/20
£000
|
2020/21
£000
|
2021/22
£000
|
|
Predicted Shortfall
|
6,800
|
4,567
|
4,347
|
|
Identified Savings
|
(2,920)
|
(707)
|
0
|
|
Additional Shortfall
|
3,880
|
3,860
|
4,347
|
The achievement of the identified savings would be extremely challenging in the context of historical savings already delivered, but failure to deliver this level of savings would significantly impact on the Council achieving its required financial strategy which would now be based on an estimated reduction of £15.714m by 2021/22 excluding Schools.
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 2019/20 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.
Options which were recommended within the Plan for exploration as part of the 2019/20 budget process to close the funding gap in future years were:
- 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;
- Reviewing the strategic approach to income generation;
- Consider the increase in Council Tax;
- Reviewing the achievement of the 2018/19 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.
The Section 151 Officer informed Members that assumptions had been made around the pay awards, an increase of 2% had been included, with a higher percentage being assumed for staff on scale point 19 and below. The Council would also be reviewing all assumptions as the budget setting process was undertaken. Committee was advised to consider the report and provide any comments as part of the budget setting process.
A Member queried the fact that Children’s Services had not been highlighted as a risk and that, in his view, the 1% reduction assumption with regard to Welsh Government funding was inappropriate with the suggestion that at least 2% if not 3% be included. The Head of Service stated that the indicative figures from Welsh Government were currently set at a reduction of 1% and confirmed that a 1% increase in Council Tax equated to £690k. It was recognised that making savings was becoming increasingly difficult for departments, with another Member further advising that in his view, the assumptions were correct and that the Council Tax was a balance of the corporate need and public perception and the need to fund public services. He stated that as far as he was concerned, the NHS managed to, in his words “get away with far more than Local Authorities could” but although accepting that a Council Tax increase may be required, Welsh Government should be letting Local Authorities know much earlier in the process about their budget proposals in order that full budgets could be considered and agreed earlier on in the process.
Following a further query regarding rate relief for smaller businesses and whether it would have a big impact on the Council, the Head of Service stated that it would have an impact on businesses locally as the re-evaluations came into effect 18 months ago, and had increased the rateable value in the Vale for some premises. The Council had also always adopted the Welsh Government Small Business Relief Scheme.
In referring to planned savings, a Member took the opportunity to urge the Senior Management Team to advise Members as early on in the process as they could of any savings that were unlikely to be made. In his view the Senior Management Team needed to be far more frank and honest in what they could deliver.
Following consideration of the report and a vote, it was subsequently
RECOMMENDED –
(1) T H A T reference to the Children’s Services as a risk area be highlighted in the report.
(2) T H A T Cabinet be requested to consider the potential impacts of the Welsh Government decrease in funding of a sum greater than 1%.
(3) T H A T Council continue to make the case to Welsh Government for a fairer funding settlement.
Reasons for recommendations
(1) Having regard to the fact that Children’s Services appeared to be omitted from the report as a risk.
(2&3) Having regard to the impact if the decrease in funding was greater than 1%.”