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MAIDSTONE BOROUGH COUNCIL
CABINET MEMBER FOR CORPORATE SERVICES
REPORT OF HEAD OF FINANCE
Report prepared by Paul Riley
Date Issued: 21 January 2010
1. ESTIMATES 2010/11
1.1 Issue for Decision
1.1.1 This report
presents the Revenue and Capital estimates for 2010/11 along with the revised estimates
for the current financial year. The revenue estimates have been prepared on
the basis of the latest instructions from the Cabinet, including agreed savings
and growth options.
1.2
Recommendation
of Head of Finance
1.2.1 That the Cabinet
Member for Corporate Services approves the revised revenue estimates for 2009/10
and the provisional revenue estimates for 2010/11 as contained in APPENDICES A, B and
C.
1.2.2 That the Cabinet
Member for Corporate Services approves the Capital Programme as detailed in APPENDIX
E.
1.3
Reasons
for Recommendation
1.3.1 At
the July meeting, Cabinet considered the initial projection for 2010/11 onwards
and agreed the following:
a) That the current Medium Term Financial Strategy as set out in Appendix
B of the report of Management Team be noted and that it be updated in line
with best practice to integrate service and financial planning for the next
3 year planning period.
b) That the levels of council tax set out in Appendix F of the report of
Management Team be used for budget planning purposes but the
final council tax level will be set as low as possible.
c) That the “most likely” scenario set out in Appendix F(ii) of the report
of Management Team forms the basis of the need to identify savings of £1.4m
in 2010/11 and that officers work with Cabinet Members to present
proposals for savings at the December Cabinet Meeting.
d) That the current Capital Programme be noted.
e) That the use of public consultation to inform the budget strategy be
supported and that officers bring a report setting out the most effective
consultation methods to the next Cabinet meeting.
f) That the timetable for the 2010/11 Budget Strategy, as set out below
(in the July 2009 report), be approved.
1.3.2 The initial financial projection was selected by Cabinet as the most likely of three scenarios. The key assumptions from that scenario were:
a) An overall inflation rate of 2.5% per annum over the period.
b) Anticipated grant based on the indicative figures provided by Government in 2007. This allowed for a 0.5% cash increase in the grant received over the level received in 2009/10 followed by 0% increases in future years.
c) Additional resources for the completion of the new recycling contracts and for resolution of other budget pressures following changes to disposal arrangements.
d) A continuation of the annual increase in the national concessionary fares scheme, based on previous trends in take up of the scheme.
e) The use of all available capital receipts to fund the capital programme, reducing the level of investment income. The investment income is also affected by the rate of interest on the current investments, estimated at an average rate of 1.5%.
f) A need to borrow up to £2.0m to finance capital expenditure, creating a need for revenue resources to service the debt.
g) That the current policy to maintain a minimum balance of 10% of net revenue spend is maintained.
h) That Council Tax increase be equivalent to the 2009/10 increase for the purpose of developing the strategy.
i) That no increase in the Council Tax Base be assumed.
1.3.3 A number of risks were identified as part of the initial projection as follows:-
a) The uncertainty surrounding the costs of the national concessionary fares scheme and the future proposals to transfer the function to upper tier authorities in two tier regions.
b) The potential non-delivery of the capital receipts from sale of assets assumed during the programme period, leading to the possible need for borrowing to finance the programme.
c) The potential future loss of HCA grant aid to the Council’s capital programme following the intensive investment programme in 2008/09 and 2009/10.
d)
The
continuing risk of income shortfall on the revenue budget due to the recession.
1.3.4 Following these decisions, further reports, to approve the medium term financial strategy and to agree the approach to budget consultation for 2010/11, were approved by Cabinet.
1.3.5 At its meeting on
16 December 2009, Cabinet considered the latest information relating to the
budget strategy for 2010/11 onwards and agreed the following:-
a) That a provisional spending level based upon the revised strategic
projection set out in Appendix B of the report of Management Team,
incorporating the revisions to growth items as identified in Appendix A of
the report of Management Team and the savings as identified in Appendix C of
the report of Management Team be agreed.
b) That updates, as soon as available, on progress to achieving the
savings targets from staffing as outlined in the report of Management Team
be requested.
c) That the updated Capital Programme detailed in Appendix D of the
report of Management Team, along with the budget set out therein for
2012/13, be agreed.
d) That the outcome of the budget consultation exercise set out in
section 1.11 and Appendix G of the report of Management Team be noted
and Cabinet’s gratitude be expressed to all those who participated.
e) That the updated medium term financial strategy as set out in
Appendix H of the report of Management Team and its stronger connection to the
strategic plan be agreed.
f) That a continued Council Tax strategy which is materially within
the Government’s Council Tax capping strategy as outlined in the report of
the report of Management Team be agreed.
g) That the Corporate Services Overview and Scrutiny committee be
consulted on the budget strategy based on the above decisions.
1.4
Revenue
Budget 2010/11
1.4.1 Attached at APPENDIX A and APPENDIX B are the detailed estimates for 2010/11 along with:-
a) actual spend for
2008/09;
b) original estimate
for 2009/10;
c) revised estimate for 2009/10.
1.4.2 APPENDIX A gives a summary of
the net expenditure for each service head which produces a total of -£427,190.
1.4.3 Following the
summary of net budget requirement more detailed estimates for each service head
are given at APPENDIX B. Each service head details the individual expenditure
requirements analysed between employee expenses, other running expenses,
internal recharges, central recharges and capital costs. The expenditure is then
reduced by income, such as fees and charges, and recharges to other service
heads. Against each service head are notes which identify any special
circumstances relating to that service head and any major items of budget
variance.
1.4.4 The cumulative impact of recent reviews of the structure and the impact of the recession has altered the focus of staff resources. The consequence of this shows in the alterations in internal and central recharges.
1.4.5 Also attached at APPENDIX C are detailed growth and savings proposals that have previously been considered by Cabinet. These proposals have been incorporated into Appendices A and B in order to properly reflect their potential effect upon the portfolio.
1.4.6 The estimate for 2010/11 totals -£427,190 an increase of £2,864,490 (87%) on the original estimate for 2009/10. This portfolio holds the two main appropriation accounts which allow for accounting adjustments that ensure entries for depreciation, asset write down and pension fund to be reported in the cost of individual services without having an influence on the level of Council Tax required. There have been notable movements in these indicative figures throughout all portfolio’s resulting in a reduction in credit adjustments. These adjustments appear as growth to this portfolio of £2,335,990.
1.4.7 Due to
the size and complexity of this portfolio all major movements in the service
budgets have been tabulated in Appendix D. This includes the
appropriation account adjustments detailed in paragraph 1.4.6 above. The notable
budget variations that do not form part of the appropriation accounts are as
follows:-
a) Rent
allowances – income has reduced as a budget strategy item due to the reduction
of administration grant by the Department of Works & Pensions (DWP). This
is a permanent reduction in the grant. At the same time the DWP has provided a
single year grant of £130,000 to support additional costs incurred due to the
recession. This grant is for one year only and for this reason, has not been
included in the base budget.
b) Interest
on investments – this figure has been reduced as part of the budget strategy in
recognition of the use of invested capital receipts and the low rates of
interest currently paid on investments.
c) Unapportionable
central overheads and council tax – both service heads reflect a reduced level
of central recharges following the restructure.
1.4.8 The
revised estimate for 2009/10 is -£2,695,400, an increase of £596,280 (18.1%) on
the original estimate for 2009/10. As detailed in paragraph 1.4.6 the
appropriation accounts adjustments total £340,720 of this increase and a number
of service heads have varied due to changes in recharges following the
restructure. Other notable budget variations include:
a) Interest on investments – Due to recent slippage in the capital programme,
Cabinet agreed an increase in this estimate to account for additional
investments.
b) General – This central cost centre records the redundancy payments made during the second phase of the recent restructure. This was funded from the initial year savings.
1.5
Capital
Budget
1.5.1 Attached at APPENDIX
E is the proposed medium term capital programme for services covered by
this portfolio.
1.5.2 The Appendix
includes information, scheme by scheme, for the current year and the following
three years to 2012/13. The budgets available in the programme relate to
planned programmes for the Council’s corporate properties and for Information
Technology.
1.5.3 Due to the current financial situation the programme is constrained by the available resources and the Council’s ability to finance potential borrowing in future years.
1.6
Alternative
Actions and why not Recommended
1.6.1 Alternatives
have been considered previously by the Cabinet Member and are not appropriate
at this stage of the Budget Strategy process.
1.7 Impact on
Corporate Objectives
1.7.1 This report is part of the Corporate Budget process which will identify resources to deliver the corporate priorities and strategies agreed by the Council.
1.8
Risk
Management
1.8.1 The
level of resources, the impact of service demands and the overall budget
process is a strategic risk. The Budget Strategy process, which commenced
early in July 2009, incorporating an assessment of budget pressures, the level
of resources available and the wide range of external factors, such as capping
and government grants, enable the Cabinet to address the Strategic Risk in an
effective and efficient manner. The inter-relationship of the Budget Strategy
with the Strategic Plan and other important strategies also facilitates the
management of this key strategic risk.
1.9 Other Implications
1.9.1
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1. Financial
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1. Staffing
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2. Legal
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3. Equality Impact Needs Assessment
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4. Environmental/Sustainable Development
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5. Community Safety
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6. Human Rights Act
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7. Procurement
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8. Asset Management
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1.9.2 Financial Implications - The
estimates presented here reflect decisions taken by the Cabinet at previous
meetings.
Background Documents
Budget
working papers file held in Corporate Finance.
How to Comment Should you have any comments on the issue that is
being considered please contact either the relevant Officer or the Member
of the Executive who will be taking the decision. Councillor Richard Ash Cabinet
Member for Corporate Services E-mail: richardash@maidstone.gov.uk Paul Riley Head
of Finance Telephone:
01622 602396 E-mail:
paulriley@maidstone.gov.uk
Telephone: 01622
730151
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NO REPORT WILL BE ACCEPTED WITHOUT THIS BOX BEING COMPLETED
Is this a Key Decision? Yes No
If yes, when did it appear in the Forward Plan?
X
Reason for Urgency
[State why the decision is urgent and cannot wait until the next issue of the forward plan.] |