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MAIDSTONE BOROUGH COUNCIL
RECORD OF RECOMMENDATION OF THE CABINET
TO COUNCIL
Recommendation Made: 11 February 2009
BUDGET STRATEGY - CORPORATE REVENUE & CAPITAL BUDGET 2009/10 ONWARDS
Issue for Decision
To
consider the proposed Revenue and Capital Budgets for all portfolios for
2009/10, including service savings and growth previously agreed, in accordance
with the agreed budget strategy and to consider the proposals for 2009/10 in
the context of the draft Medium Term Financial Strategy and the Medium Term
Financial Projection.
Recommendations Made
1. That the revised revenue estimates be agreed as set out in Appendix A (circulated separately).
2. That the minimum level of General Fund Balances be set at £2m for 2009/10.
3. That the proposed Council Tax at Band D for 2009/10 be £216.99 (an increase of 4.46%) be agreed.
4. That the additional costs of £39,000 for planning enforcement in 2008/09 be funded from Balances.
5. That no further budget issues identified in the Third Quarter Budget Monitoring report require consideration at this stage be agreed.
6. That the revenue estimates for 2009/10 as set out in Appendices A and B of the Report of Management Team, incorporating the growth and savings items set out in Appendices C and D of the Report of Management Team, subject to the deletion of £15,000 savings from Whatman’s arena in the Leisure and Culture Portfolio, be agreed.
7. That any difference between the budget for the annual cost of living increase and the final settlement be added to the Leaders Contingency Budget.
8. That the non delivery of the previously proposed savings items as identified below, be agreed.
a) Proms in the Park – The proposal to delete this event was originally projected to save £25,000. However, detailed consideration of the budgets has identified that the saving is only £15,000, which produces a shortfall of £10,000.
b) Housing Stock Condition Survey – The proposal to save £20,000 has not been achieved as it involved utilising resources in the current financial year and could not be sustained as a budget saving in the medium term.
9. That the additional Benefit Administration Subsidy of approximately £70,000 in 2009/10 be added to the budget in the Leader’s portfolio to deal with the effects of the economic downturn.
10. That the Statement of Reserves and Balances as set out in Appendix E of the Report of Management Team, subject to the addition of 1 and 2 above, be agreed.
11. That the minimum level of General Fund Balances be set at £2m for 2009/10 be agreed.
12. That the medium
term Capital Programme, as set out in Appendix F of the Report of Management
Team, be agreed subject to:-
(i) the
addition in 2009/10 of £60,000 for CCTV at the Park and Ride sites
(ii) the annual
addition of £30,000 from 2009/10 for Repairs and Improvements to the Leisure
Centre
(iii) further slippage in 2008/09 into 2009/10 of £3.7m as identified in the 3rd Quarter Budget Monitoring report.
13. That no additional resources for Support for Social Housing be allocated at this stage be agreed.
14. That the funding of the Capital Programme as set out in Appendix F of the Report of Management Team, noting that the funding is dependent upon the delivery of an assumed level of slippage in the programme of 10% and cumulative additional capital receipts during 2008/09 and 2009/10 of £4.2m, be agreed.
15. That the Treasury Management Strategy include a contingency for Prudential Borrowing of up to £4m, subject to the prior agreement of the Leader, during 2009/10 be agreed.
16. That the proposed Council Tax at Band D for 2009/10 be £216.99 (an increase of 4.46%) be agreed.
17. That the Medium
Term Financial Strategy as set out in Appendix H of the Report of Management
Team be agreed.
18. That the Medium Term Financial Projection, as set out in Appendix I of the Report of Management Team as the basis for future financial planning be endorsed.
19. That it be noted that, at the meeting of the General Purposes Group on 7 January 2009, the Council calculated its Council Tax base for the year 2009-10 in accordance with regulations made under Section 33 (5) of the Local Government Finance Act 1992, as 59,057.6 being the amount calculated by the Council in accordance with Regulation 3 of the Local Authorities (Calculation of Council Tax Base) regulations 1992;
20. That it be noted that, as detailed in Appendix B, the Council Tax Base for each of the Parish Areas, calculated in accordance with Regulation 6 of the Regulations, are the amounts of its Council Tax Base for the year for dwellings in those parts of its area to which a special item relates (Parish precepts);
21. That the following amounts now be calculated by the Council for the year 2009-10 in accordance with Section 32-36 of the Local Government Finance Act 1992:-
(a) £77,663,923 being the aggregate of the amounts which the Council estimates for its items set out in Sections 32 (2) (a) to (e) of the Act;
(b) £54,463,889 being the aggregate of the amounts which the Council estimates for the items set out in Section 32 (3) (a) to (c) of the Act;
(c) £23,200,034 being the amount by which the aggregate at (a) above exceeds the aggregate at (b) above, calculated by the Council, in accordance with Section 32 (4) of the Act as its budget requirement for the year;
(d) £9,480,479 being the aggregate of the sums which the Council estimates will be payable for the year into its General Fund in respect of redistributed Non Domestic Rates and Revenue Support Grant, increased by the amount which the Council estimates will be transferred in the year from its Collection Fund to its General Fund in accordance with Section 97 (3) of the Local Government Finance Act 1988 (Council Tax Surplus) and increased by the amount which the Council estimates will be transferred from its Collection Fund to its General Fund, pursuant to the Collection Fund (Community Charges) directions under Section 98(4) of the Local Government Finance Act 1988 (Community Charge Surplus) and reduced by the amount representing the authority’s contribution to Council tax benefit resulting from an increase in its Council Tax calculated in accordance with the Collection Fund (General) (England) Directions 2000, the Collection Fund (Council Tax Benefit) (England) Directions 2000 and the Local Authorities (Alteration of Requisite Calculations) (England) Regulations 2000.
(e) £232.31 being the amount at (c) above, less the amount at (d) above, all divided by the amount at 19 above, calculated by the Council, in accordance with Section 33 (1) of the Act, as the basic amount of its Council Tax for the year;
(f) £904,704 being the aggregate amount of all special items referred to in Section 34 (1) of the Act as detailed in Appendix B;
(g) £216.99 being the amount at (e) above, less the result given by dividing the amount at (f) above by the amount at 19 above, calculated by the Council, in accordance with Section 34(2) of the Act, as the basic amount of its Council Tax for the year for dwellings in those parts of its area to which no special item relates;
(h) As detailed in Appendix C, being the amounts given by adding to the amounts at (g) above, the amounts of the special item(s) relating to dwellings in those parts of the Council’s area mentioned in Appendix B, divided in each case by the amount at 19 above, calculated by the Council, in accordance with Section 34(3) of the Act, as the basic amounts of its Council Tax (detailed in Band D) for the year for dwellings in those parts of its area to which one or more special items relates;
(i) As detailed in Appendix C, being the amounts given by multiplying the amounts at (g) and (h) above, by the number which, in the proportion set out in Section (5) (1) of the Act, is applicable to dwellings listed in a particular valuation band, divided by the number which in that proportion is applicable to dwellings listed in valuation band ‘D’, calculated by the Council, in accordance with Section 36 (1) of the Act, as the amounts to be taken into account for the year in respect of categories of dwellings listed in different valuation bands.
22. That it be noted that for the year 2009-10 Kent County Council, the Kent Police Authority and the Kent and Medway Towns Fire Authority have stated the following amounts in precepts issued to the Council, in accordance with Section 40 of the Local Government Finance Act 1992, for each of the categories of dwellings shown below:
|
Variation Bands |
KCC* £ |
KPA £ |
KMTFA £
|
|
A |
684.18 |
89.77 |
44.04 |
|
B |
798.21 |
104.73 |
51.38 |
|
C |
912.24 |
119.69 |
58.72 |
|
D |
1,026.27 |
134.65 |
66.06 |
|
E |
1,254.33 |
164.57 |
80.74 |
|
F |
1,482.39 |
194.49 |
95.42 |
|
G |
1,710.45 |
224.42 |
110.10 |
|
H |
2,052.54 |
269.30 |
132.12 |
*Provisional, subject to formal notification.
23. That, having calculated the aggregate in each case of the amounts at 21 (i), and 22 above, the Council, in accordance with Section 30 (2) of the Local Government Finance Act 1992, hereby sets in Appendix D, the amounts of Council Tax for the year 2009-10 for each of the categories of dwellings shown.
Reasons for Recommendation
In July 2008, the Cabinet agreed an
initial budget strategy as follows:-
1. That the Medium Term Financial Strategy, as set out in Appendix B of the Report of Management Team, be agreed.
2. That at this stage the Council Tax Strategy of delivering a Council Tax increase which avoids the threat of capping by the Secretary of State be endorsed.
3. That Cabinet Members be requested to identify savings for 2009/10 of £1m in priority order.
4. That Cabinet receive a report to the next meeting covering options for deferring schemes in the current capital programme along with an update on the prospects for the current programme of capital receipts.
5. That, subject to 4, above, the current medium term capital programme be subject to Cabinet Member review, based on the criteria of prioritisation, affordability and deliverability.
6. That Cabinet agree a consultation process on the same basis as implemented in 2007 including Borough Update, budget simulator and general information programme.
The initial projection was based on a number of assumptions, mainly:-
a) An overall inflation rate of 2.5% per annum over the period.
b) The anticipated Government grant based on the indicative figures provided by Government in 2007, based on the outcome from the Comprehensive Spending Review 2007. This allows for a 0.5% cash increase only on the grant received in the current financial year.
c) The projection included the agreed additional costs of recycling based on the strategy agreed by Council in September 2007.
d) A continued increase in the new national concessionary fares scheme, based on the previous trend of increased spend on concessionary fares.
e) That the Capital Programme would be supported from existing capital receipts at a level of £2.5m per annum.
f) That Members will continue with the previous policy on Balances to maintain a level of uncommitted Balances of at least 10% net revenue spend. No contributions were planned for 2009/10 onwards due to the current level of balances available.
g) That the policy allowing for a zero inflation increase on non-contractual or non-key service areas will continue throughout the period of the Medium Term Financial Projection. This enforces the efficiency regime throughout the Council and reduces the pressure on Council Tax savings levels by the building of efficiencies of approximately £0.1m per annum.
h) Based on the decision to increase Council Tax by 3% in 2007/08 and 2.94% in 2008/09 the Medium Term Financial Projection was based on a similar annual increase over the period.
i) The projection was based on a prudent increase in the tax base of 0.5%. This was to be reviewed later in the year to reflect more up to date information.
A number of key risks were identified as part of the initial strategy as follows:-
a) The uncertainty and potential escalation in costs of the new national concessionary fares scheme.
b) The current capital programme assumes a level of continuing capital receipts which would require a re-appraisal of the capital programme if these were not delivered.
c) The pressure on the budget of potential new initiatives such as Park & Ride.
d)
The
initial indications of the credit crunch and potential economic downturn.
At its meeting on 17 December 2008, the Cabinet considered the latest information relating to the budget strategy for 2009/10 onwards and agreed the following:-
a) Agree the growth items identified in Appendices D and E, subject to the addition of a £40,000 contingency to meet short term demands of the economic downturn.
b) Agree the savings items identified in Appendix F subject to the following additions:-
(i) Overall inflation allowance reduced from 3% to 2.5%, saving £100,000.
(ii)
Reduce
the budget for concurrent functions one off schemes to zero saving £20,000.
(iii) Agree the implementation of Directorate Gatekeeper Groups to monitor overall spending, increasing the corporate slippage allowance, saving £30,000.
(iv) Reducing
the budget for concessionary fares, producing a saving of £300,000.
c) Agree the Capital Programme identified in Appendix G, subject to implementing the potential slippage identified in Appendix H, apart from Improvements to car parks and with regular reviews of the programme to monitor the need for schemes to be slipped.
d) Consider the option of releasing further resources for social housing, based on options available, at its meeting in February 2009.
e) Agree the proposals relating to the use of balances as detailed in paragraph 1.9.3, subject to our amendment to ‘d’ which now allows the balance of LABGI funds (£0.24m) be retained as a further contingency against the economic downturn. The phase II review of structure is assumed to be self funding in 2009/10 with full year savings available in 2010/11.
f) Note the outcome of the Budget Consultation Exercise as detailed in Appendix J, with thanks to all those who contributed so positively to the exercise and agree that a feedback exercise to recipients be considered by the Leader.
g)
Agree
the strategic projection for 2009/10 as detailed in paragraph 1.11.2, as
amended by the above decisions, and to incorporate a Council Tax strategy which
is materially within the Government’s Council Tax capping strategy.
h) Cabinet note the medium term financial projection and in particular the projected level of savings required in 2010/11 and instruct Officers to immediately initiate a programme of reviews to ensure that all possible efficiency savings are identified at an early stage and that any consequential requirement for savings is considered in a way which does not impact on services which deliver the Council’s key priorities as identified in the draft Strategic Plan.
The
other key risks were considered but did not require any further
budget provision.
The Budget Strategy has been developed in parallel with the Cabinet’s consideration of a number of other plans. It is the intention of the Budget Strategy to address the financial consequences of the economic downturn and credit crunch in a sustainable manner to allow the Authority to continue to deliver on its key priorities and position itself to move forward once the current economic position has stabilised and improved. In particular the Budget Strategy incorporates the following:-
a) The Strategic Plan/The Sustainable Community Strategy – whilst the timing of the delivery of these agreed plans is, at present, not strictly in line with the requirement to deliver the Budget Strategy, the drafts of these plans and their general thrust has been considered in developing the Budget Strategy. Once final strategies are agreed, it will be necessary to review the resources and, if necessary, during the course of 2009/10, some minor realignment of resources may be necessary. However, Cabinet Members, during the course of the exercise to review the Strategic Plan and to develop the Sustainable Community Strategy, have confirmed that the Budget Strategy includes the resources necessary to deliver the strategic objectives of these draft plans. Examples of additional resources included in the Budget Strategy to deliver key objectives are the capital resources available for the delivery of support for Social Housing and additional revenue resources for waste/recycling.
However, there are a small number of proposed objectives within these documents which will require further consideration, perhaps when the economic climate puts the Authority in a better position. Examples of these include the proposition to consider an acquisition fund for Land and Property and redevelopment of the Cemetery Chapel.
b) The People Strategy – budget provision has been included previously to cover the review of the Remuneration Strategy and other initiatives within the People Strategy have been funded from within existing resources, including the implementation of the now approved Total Reward package.
c) Asset Management – the budget requirements, from previous stock condition surveys, is included in both the Revenue and Capital Budgets over the medium term.
d) ITC Strategy – Cabinet, in December 2008, reviewed and agreed this strategy which included a resource summary which is in line with that included in the Budget Strategy.
e) Review of Housing/Homelessness Strategies – recent reviews have been undertaken of these housing strategies and the resources included in the Budget Strategy are in line with those contained within these housing related strategies. Review of housing resources was undertaken by Cabinet in October 2008 and a further report is included on this agenda.
f) Strategic Risk Strategy – in parallel with all the corporate strategies, the Strategic Risk Register has been considered by the Audit Committee and Cabinet and the impact of these risks, where appropriate, is incorporated into the Budget Strategy. In particular, a new strategic risk covering the economic downturn and credit crunch has been considered and agreed by these committees and these issues will continue to be actively managed and reported until economic conditions change.
g) Other Strategies – a number of other strategies have been agreed by this Authority over past periods and, where appropriate, resources are included in the Budget Strategy including Climate Change, Equalities, Green Space, Economic Development and Tourism Strategies and the Integrated Transport Strategy.
Since
the December Cabinet meeting, all Cabinet Members have received their
individual portfolio budgets, incorporating both Revenue and Capital spending
proposals, and the results of these reports are included in the strategic report
of Management Team to Cabinet. The outcome from this decision will be reported
to Council on 25th February 2009.
The Corporate Services Overview and Scrutiny Committee was consulted on the Cabinet’s budget proposals in January 2009 and detailed savings proposals where reported to their meeting in February 2009. Comments resulting from this exercise are included elsewhere in this decision.
Since Cabinet considered the Budget Strategy in December 2008, economic factors have moved on and the following is the latest information, compared to that in April 2008 and the information included in the December 2008 report.
Factors |
April 2008 Information % |
December 2008 Information % |
Latest Information % |
|
Target inflation – CPI |
2.5 |
4.5 |
3.1 |
|
Headline inflation - RPI |
3.8 |
4.2 |
0.9 |
|
Underlying inflation – RPI (x) |
3.5 |
4.7 |
2.7 |
|
Base Rate |
5.25 |
2.0 |
1.5 |
The level of inflation reached a peak in September 2008 and is projected to fall further over coming months. There is currently a national debate about the prospects for a period of deflation. Further reductions in base rates are also projected for 2009, with rates potentially reducing to 1% or even as low as 0.5%. The rate at which these rates may be introduced and the period for which they will remain is uncertain.
The overall impact, extent and duration of the current economic downturn is similarly subject to national debate and is a factor which must influence the creation of the Budget Strategy for 2009/10. The medium term position is dealt with in this report and Cabinet must be conscious of the medium term impact of any decisions taken for 2009/10. The projected level of uncommitted Balances is a major positive factor in addressing this strategy risk of further adverse effects of the economic downturn.
Revised
Revenue Estimate 2008/09
Appendix A of the Report of Management Team is an overall summary of the revised revenue estimates for the current financial year, compared to the original estimates, and proposals for 2009/10 which have been agreed by individual Cabinet Members. At Appendix B of the Report of Management Team are the budget summaries agreed by Cabinet Members for the delivery of their services. This information, along with the detailed estimate breakdown and commentaries on budget changes, will be reported to Council on 25th February 2009.
It was noted from Appendix A of the Report of Management Team that the revised revenue estimate for service spending in the current financial year is £23.94m which compares to the original estimate of £22.64m. This will require a contribution from Balances of £2.3m compared to an original estimate of a contribution from Balances of £1m. The major reasons for this change of £1.3m are:-
a) The decision to carry forward resources from 2007/08 of £1.7m of which £0.76m will now be carried forward to 2009/10 to fund the Waste/Recycling Strategy requirement for the purchase of wheelie bins.
b) The decision to fund a number of budget issues in the current financial year from Balances, has been agreed at various Cabinet meetings. These were the result of the two quarterly Budget Monitoring reports and reflect the consequences of the economic downturn as reported to Cabinet and with the net requirement for a contribution from Balances of £0.5m. A further Budget Monitoring report, based on the financial position as at December 2008, is reported elsewhere on this agenda. A further requirement, not covered in this report, for a contribution from Balances of £0.1m is included in that report.
c) The budget saving from the latest information on concessionary fares has resulted in a contribution to Balances of £0.47m which has substantially offset the previously reported outcomes from the economic downturn. The net result is that the overall level of balances available at March 2008 have not been materially reduced by the turbulence experienced in the current financial year.
d) The decision to fund a major IT investment project of £0.3m by the use of Invest to Save resources.
There is one outstanding issue, produced as a result of the consideration of the portfolio estimates by Cabinet Members and this relates to the requirement for a further £39,000 for Planning Enforcement in the current financial year. It was recommended that this be funded from Balances as it is in line with the major growth item included in 2009/10 and cannot be funded within the resources available to the Regeneration Portfolio due to other substantial financial problems as a result of the economic downturn.
Estimate
2009/10
The Budget proposed for 2009/10, as detailed in Appendices A and B of the Report of Management Team, produce a net budget requirement of £22.27m. This is at a level which will allow the Council to set an increase in the level of Council Tax below that which is anticipated to be the Government’s Council Tax capping level i.e. 5%. This is in accordance with the strategy agreed by Cabinet at its meetings in July and December 2008.
The creation of the budget proposals now contained in the Report of Management Team has been based on a number of initiatives and techniques, as follows:
a) Revenue Prioritisation which has helped to identify those services which are delivering less of the Council’s priorities and are, therefore, available for consideration of budget reductions.
b) The Budget Consultation Exercise which identified those areas where the public felt that savings could be more easily achieved in order to deliver a Council Tax increase which was within the capping criteria. The results of this exercise were reported to and considered by Cabinet in December 2008.
c) An in-depth review of each portfolio budget to identify where resources could be saved without impacting on service delivery. This in-depth review also helped to confirm that each Cabinet Member has the resources available to deliver the key objectives as identified in the draft Strategic Plan.
d) The impact of the Council’s wide ranging efficiency agenda, which is dealt with later in this report, has identified substantial savings which has helped to mitigate the impact of the current economic downturn on the necessity for service savings.
At Appendix C of the Report of Management Team are the items of growth included in the budget projections. Appendix D of the Report of Management Team includes all the savings items included in the budget projections, as previously agreed by Cabinet.
The budget includes provision for an annual cost of living pay increase. The staff side have submitted a claim and an offer has been made. Negotiations are still continuing. If there is a variation between the budget and the final settlement, it is recommended that this be added to the Contingency Budget in the Leader’s Portfolio for consideration in the context of the economic downturn and the Medium Term Financial Projection.
During
the Cabinet Members’ consideration of their detailed portfolio budgets, two
previously agreed proposals for savings have been referred to Cabinet for
further consideration. These savings are not included in the budget detailed
at Appendices A and B of the Report of Management Team and are as follows:-
a) Proms in the Park – The proposal to delete this event was originally projected to save £25,000. However, detailed consideration of the budgets has identified that the saving is only £15,000, which produces a shortfall of £10,000.
b) Housing Stock Condition Survey – The proposal to save £20,000 has not been achieved as it involved utilising resources in the current financial year and could not be sustained as a budget saving in the medium term.
A further issue has materialised since the Cabinet considered its Budget Strategy in December 2008 and relates to the benefit administration subsidy received from Central Government. Notification had previously been received of a reduction in grant of approximately £80,000. Due to the national pressures on this service, due to the economic downturn and the significant increase in unemployment, the Government has now decided to increase the administration subsidy previously notified by 8% i.e. back to the level received in the current financial year. This is anticipated to increase the income to this Authority by approximately £70,000. The uncertainty of this situation is that it is unclear whether this increase in subsidy is to be ongoing beyond 2009/10 and, in the absence of this certainty, it was recommended that this is dealt with as a one off increase in income and be allocated to the budget in the Leader’s portfolio for dealing with the consequences of the economic downturn.
VAT - Since 2006/07 HM Revenues & Customs have suspended the requirement for Local Authorities to submit a partial exemption calculation regarding its fees and charges that are exempt from VAT. In 2009/10 HMRC will reverse their decision to suspend this requirement and the Council will once again be required to submit a partial exemption calculation. In the financial years 2005/06 and 2006/07 the Council made a provision of £130,000 to cover the possibility of having to repay VAT reclaimed as the calculation had progressively moved closer to the upper limit of this exemption. In 2009/10 and beyond, the Capital Programme includes major works at the Leisure Centre and the Crematorium. Both of these services are high providers of VAT exempt services. The possibility of the Council once again risking the repayment of £130,000 has been considered and Officers will be meeting with tax advisors in the near future to discuss actions to mitigate this risk. At this stage, it is not considered necessary to make specific budgetary provision for this possibility. If resources are required, they are likely to be one off in 2009/10 and may be funded from Balances.
Statement
of Reserves and Balances
Attached
at Appendix E of the Report of Management Team is a statement of the General
Fund Balances which identifies, for the period up to March 2010, projected
balances covering the General Balance, the Invest to Save budget and other
areas where previous decisions have allocated funds to address specific
concerns.
Cabinet
noted that the General Fund Balance at March 2008, which was not allocated to
commitments, was £3.1m. Of this amount, it was previously agreed that up to
£0.5m may need to be available to address any substantial problems related to
concessionary fares. It was apparent from information received to date that
this is not the position and this has now be disregarded from any consideration
of Balances.
During the course of the current financial year, due to the adverse economic conditions, approximately £0.54m of Balances have been agreed to address specific problems, as reported in the previous two quarterly Budget Monitoring Reports. However, this has recently been substantially reversed due to the latest information on Concessionary Fares spending and, included in the revised budget for 2008/09, approximately £0.46m has been reallocated to Balances from the budget for Concessionary Fares.
As a result of the overall consideration of the revised budget for 2008/09, it is now anticipated that unallocated Balances, as at March 2009, is projected to be at its previous level of approximately £3.1m. This is after taking into account previous decisions to commit Balances to the implementation of the Waste/Recycling Strategy in 2009/10 and a three year commitment to fund the Disabled Travel Voucher Scheme.
Cabinet was reminded that the Medium Term Budget Strategy requires a minimum level of Balances of 10% of net revenue spend i.e. approximately £2.2m. The additional resources available in Balances was agreed at the Cabinet meeting in December 2008 to be set aside as a contingency against further economic downturn in the current financial year, 2009/10 and beyond. This requirement will be reviewed at regular intervals during this period.
In view of the economic downturn, further guidance has been issued on reviewing levels of Balances, however, it was not recommended that any changes be made to the medium term strategy on Balances but in the short term the level of Balances is reviewed quarterly as part of the current arrangements for Budget Monitoring.
Due to the level of Balances, the Medium Term Financial Projection does not anticipate any further contributions to Balances, and in view of the financial pressures facing the Authority and the overall requirement to propose a balanced budget to Council, it is not anticipated that, other than for specific commitments, contributions from Balances to support service spending be recommended to Council.
It
is necessary to quantify the minimum level of General Fund Balances below which
Cabinet cannot go without the authority of Council. For 2008/09 that level was
set at £2m and it is suggested that, for 2009/10 this minimum level be retained
at £2m. This should be sustainable due to the overall level of Balances but
Cabinet should note that any decision to take Balances below this level would
need to be reported to Council for authority to do so.
Government Grant
The report to Cabinet in December 2008 incorporated a proposal from Central Government for Grant Support of £9.4m.
The
Government on 21st January 2009 confirmed the grant figure and this has been
incorporated into the overall funding requirements within this report.
Cabinet
were reminded that this level of grant funding only incorporates a 0.5% cash
increase on that received in the current financial year. Similarly, for
2010/11 a cash increase of 0.5% is anticipated from Central Government from the
2007 Comprehensive Spending Review. For years beyond 2010/11, the level of
Government Grant will be produced from future Comprehensive Spending Reviews.
Capital
Programme
The
overall Budget Strategy for the Authority incorporates both Revenue and Capital
Spend, with the Capital Programme being seen as a major contribution to the
delivery of key priorities.
At Appendix F of the Report of Management Team are the proposals for capital spend for 2009/10 and future years. Also incorporated are the current year’s budget and the revised Capital Programme, as previously reported to Cabinet as part of the Budget Monitoring process and as approved by Cabinet in December 2008. The programme incorporates the programme of slippage which was agreed by Cabinet at its last meeting.
The schemes included in the Capital Programme have been previously subject to an exercise to score schemes against criteria of prioritisation, affordability and deliverability.
Appendix
F of the Report of Management Team also includes a summary of capital spending
proposals and funding proposals based on the situation agreed by Cabinet in
December 2008.
The Capital Programme for 2008/09 includes the addition to the programme for support for Social Housing of £0.4m agreed by Cabinet in October 2008.
Whilst the Capital Programme included in the Report of Management Team is in line with that agreed at the December Cabinet meeting, the following issues will need further consideration at some stage:
a) Leisure Centre – The Leisure Centre management tendering exercise has recently been concluded which identifies that the most advantageous tender which is recommended requires an increase in the annual budget provision for the Leisure Centre of £30,000 per annum. It also recommends that the nature of the tender requires the Capital Budget to be seen as a contractual commitment for a fifteen year period. Cabinet need to be content that, particularly in view of the current adverse economic conditions, this commitment can be justified and sustained in terms of the criteria of prioritisation and affordability.
b) CCTV – The budget includes that which was originally included in the 2008/09 Capital Programme and has not been amended, either by an increase or a reduction, to reflect the various options which were considered by Cabinet at the meeting in January 2009.
c) Housing – the option of providing further resources for Social Housing needs to be considered at this stage, in the context of the overall programme and the funding issues associated with it. No immediate opportunities are available to fund Social Housing which meets the strategic housing needs, although opportunities may arise during the course of 2009/10.
Cabinet noted that it is necessary to allow for the leasing of operational assets (annual provision of £0.25m), the costs of which are provided through the Revenue Budget. Due to the flexibility of the current Capital Financing Regulations and the option of Prudential Borrowing and Capital Receipts, a funding appraisal is undertaken for each proposed major acquisition. Funding will then be recommended either by leasing or one of the other options available. These was included in the quarterly report to Cabinet.
Appendix G of the Report of Management Team is a summary of Capital Receipts which identifies those receipts which were available at April 2008, those anticipated in the current financial year and a prudent view of receipts planned for 2009/10 onwards. This summary does vary from that which was presented to Cabinet in December 2008 which is also shown for comparison. In December, additional capital receipts in 2008 to 2010 were projected to be £4.2m. However, the latest estimate is only £3.1m, a reduction of £1m. Appendix G of the Report of Management Team identifies that, for the period up to March 2010, the likelihood of substantial Capital Receipts is in doubt. The statement also identifies those existing Capital Receipts which were agreed to be devoted to funding the Capital Programme in the current financial year and 2009/10. It was noted that the current plan is that there will be no available capital receipts as at March 2010 to fund future years Capital Programme. It may be anticipated that beyond that period the economic downturn may have improved and that potential for future Capital Receipts will improve. This is a situation which will be carefully monitored and reported over the period in question.
The Capital Programme for 2008/09 and 2009/10 onwards includes an assumption that the overall programme will slip by 10% per annum. In the critical period up to March 2010, when there is an anticipation of little or no further Capital Receipts the assumed slippage is as follows:-
|
Year
|
Slippage £ 000 |
|
|
|
|
2008/09 |
1,369 |
|
2009/10 |
1,631 |
|
|
|
|
Total |
3,000 |
The risks associated with non delivery of the assumed slippage and the level of ongoing capital receipts are as follows:-
a) Further action would need to be taken to ensure slippage of the programme.
b) An injection of revenue resources to fund the programme, which would potential utilise a significant element of currently unallocated balances.
c) Use of prudential borrowing.
In view of the uncertainty over the level of Capital Receipts which may be received and the assumed level of slippage, it may be prudent to consider an element of prudential borrowing to be built into the 2009/10 Treasury Management Policy, which is dealt with elsewhere on the agenda. As a fall back, the Treasury Management Strategy assumes that Cabinet will recommend to Council a fallback borrowing provision of £4m. Cabinet are aware that, at this stage, no provision has been made in the Revenue Budgets for the revenue consequences of such borrowing. Pessimistically, in a full year, the revenue costs of a £4m borrowing facility would be £0.3m. As the borrowing, if necessary, in 2009/10 would reasonably be anticipated to be at the end of the year, the revenue consequences would be minimal in that year. It will be necessary for this situation to be very carefully monitored and managed during 2009/10, taking into account the final outturn for 2008/09, and for the ongoing consequences to be taken into account in the Medium Term Budget Strategy Projection, which would normally be presented to Cabinet in July 2009.
Medium
Term Financial Strategy
Appendix
H of the Report of Management Team is the Medium Term Financial Strategy. The
Strategy incorporates overall strategic issues considered in the Report of
Management Team, such as delivering a budget to avoid capping and delivering a
broadly balanced budget with at least the minimum level of balances.
The
Strategy is required to complement the overall strategic planning of the
Authority and to assist Members in delivering the Strategic Plan. The Medium
Term Financial Strategy is, therefore, specifically aimed at identifying issues
for the following three financial years but is based on a five year financial
projection so that issues beyond the three years may be taken into account, if
appropriate. As the Strategic Plan and the Sustainable Community Strategy are
not yet fully developed or approved, it will be necessary for the Medium Term
Financial Strategy to be reviewed at the July Cabinet meeting when the Budget
Strategy for the period beyond March 2010 will be considered.
In accordance with these requirements, Appendix I of the Report of Management Team is a revised projection for the next five financial years. The basis of this appendix is the projection that was agreed by the Cabinet at its meeting in December 2008. The projection does show a requirement for future savings, in particular for 2010/11. This is in line with the projection considered and agreed by Council in February 2008. The Medium Term Financial Projection is based on the following broad assumptions:-
a) An overall level of inflation of 2.5%
b) A Council Tax increase in the region of 5%.
c) A reduction over the medium term of Government Grant, potentially resulting from future Government consideration of public funding through the Comprehensive Spending Review process.
d) A potential increase in employee costs over the medium term following the next actuarial review of the pension scheme and the introduction of increased National Insurance contributions as a consequence of the Government’s response to the current economic downturn.
e) A provision in each financial year for new initiatives to be implemented.
f) The ongoing consequences of current initiatives and pressures such as concessionary fares.
g) An assumption that the efficiency agenda within the Authority will deliver £0.4m worth of efficiency savings per annum in 2010/11 and thereafter.
The assumed efficiency savings is based on the projected outcomes from a number of efficiency initiatives including:-
a) Joint Working
b) Best Value Reviews
c) Business Transformation
d) Invest to Save
e) Investigations resulting from the Price Book initiative.
f) Procurement
g) Review of the Asset Portfolio
The overall efficiency agenda has been very successful in contributing savings to the overall Budget Strategy. Nationally, the Government placed great emphasis on the efficiency agenda in the 2004 Comprehensive Spending Review with the introduction of the Gershon agenda for efficiency savings. This included a target for each Authority and to deliver cashable and non-cashable savings and this was reported to Government annually. This Authority exceeded its target on an annual and cumulative basis. The Gershon efficiency agenda was replaced in the 2007 Comprehensive Spending Review by a much more focused emphasis on cashable savings only and an annual 3% efficiency target for all of the public sector. Individual targets were not set for each Local Authority but the consequences of the efficiency target are felt in the annual Government grant received by this Authority. In 2008/09, this Authority submitted an estimated efficiency return of £0.99m based on the work undertaken through the Budget Strategy process. Similarly, a projected efficiency total of £1.03m is to be submitted to the Government. Additionally, for the first time, efficiency information is to be made available to the general public on the face of the Council Tax bill, and in more detail, in the Council Tax Leaflet.
These initiatives will be managed by the Value for Money Working Group which is chaired by the Chief Executive and includes the Leader as a member of the group.
The assumption based on the Medium Term Financial Projection will need to be assessed on an annual basis at least and reported to Cabinet as an integral part of the budget planning process.
Cabinet noted from the Medium Term Financial Projection that the projected savings requirements, including the assumption of savings from efficiencies, in future years are as follows:-
|
Year |
Savings £000 |
|
2010/11 |
1190 |
|
2011/12 |
590 |
|
2012/13 |
510 |
|
2013/14 |
540 |
Cabinet also noted that the Council, notwithstanding the current economic downturn, is still in a relatively strong financial position in which to address these medium term issues and the positive use of balances and other potential areas of income will facilitate the consideration of longer term strategic options for key services to ensure that any impact on services is minimised. However, due to the uncertainty over the length and depth of the current economic downturn, Cabinet has agreed to start consideration of the 2010/11 budget position and the potential impact on discretionary services at this early stage. Work is currently ongoing on this and will be the subject for debate including all Members.
Overall Spending Plan – 2009/10
The following is a summary of the maximum funding available to achieve a level of Council Tax which is below the assumed maximum allowable by the Government under Council Tax capping arrangements. This is based on the Governments Grant Support, the Council Tax Band D base of 59057.6 as agreed by the General Purposes Committee in January 2009, and the minimal contribution from the Collection Fund as approved by Cabinet in December 2008.
|
INCOME |
£,000 |
|
Council Tax Level at £218.07 (an increase of 4.99% on £207.72) |
12,878 |
|
Government Grant |
9,463 |
|
Collection Fund Adjustment |
17 |
|
TOTAL INCOME |
22,358 |
Cabinet are aware that the Government has been very strong and active in controlling the level of Council Tax increase for the past few financial years. For 2009/10 the Government has indicated strongly that they wish to see a downward pressure on the level of Council Tax increases with the average Council Tax increase to be substantially below 5% in 2009/10. However, at this stage, no indication has been given that the previous years maximum increase of 5% will be changed.
Based on the information contained in Appendices A and B of the Report of Management Team, subject to confirmation of the information contained in the Report of Management Team, the provisional budget estimate for 2009/10 is £22.273m. This equates to a Council Tax level of £216.99, an increase of 4.46%.
Consultation
with Non-Domestic Rate Payers
In
accordance with Statutory Requirements, this Authority is required to consult
Non-Domestic Rate Payers on budget proposals for the following financial year.
This requirement has been fulfilled by an exchange of correspondence with the
local Chamber of Commerce and Industry.
Any
comments from this source will be reported to Cabinet.
Consultation with Overview & Scrutiny Committee
The budget proposals agreed by Cabinet in December 2008 were reported to Corporate Services Overview & Scrutiny Committee on the 6th January 2009, in accordance with the Constitution. The Corporate Services Overview and Scrutiny Committee had requested a detailed breakdown of the proposed revenue savings 2009/10 and the Chief Finance Officer had provided this breakdown to the Committee. Cabinet noted the reference.
Council
Tax 2009/10
It
is a requirement of this Authority to resolve the level of Council Tax for the
area. In addition the precepts of Kent County Council, the Police Authority,
the Kent Fire Brigade and Parishes are also required. These will be
incorporated into a resolution to this Authority’s Council meeting on 25
February 2009.
At
that Council meeting it will be necessary for this Authority to resolve the
following:
a) Agree gross revenue expenditure, including Parish Precepts.
b) Agree gross revenue income.
c) Agree net revenue expenditure including Parish Precepts.
d) Identify Parish Precepts as “special items” to be levied on the tax base
as set out in Appendix J of the Report of Management Team.
e) Agree the level of Formula Grant (RSG and NNDR) to be received
and
the level of the Collection Fund adjustment.
f) Declare this Authority’s basic Council Tax rate i.e. c) above
less
e) above divided by the tax base previously agreed.
g) Declare this Authority’s tax rates for the urban and rural areas.
h) After receipt of the Precepts from Kent County Council, the Police Authority
and the Kent and Medway Towns Fire Authority, declare the
overall
tax rate for all parts of the area.
It
is the intention to collate the above decisions and incorporate them into the
necessary resolutions to achieve the above.
In
addition, it is necessary, under Section 25 and 26 of Part 2 of the Local
Government Act 2003, for the Section 151 Finance Officer to give his opinion to
Council, when setting the above requirements that the budget calculations are
based on robust estimates and that the level of reserves is sufficient for the
purposes of the budget exercise. Based on the process undertaken this year and
the information contained in the Report of Management Team, it is not
anticipated that this opinion will include any adverse comments.
Alternatives considered and why not recommended
The alternatives have been included above.
Background Papers
None
These documents are available at the Council offices.