STRATEGIC PLANNING SUSTAINABILITY AND TRANSPORT COMMITTEE

8 SEPTEMBER 2015

Is the final decision on the recommendations in this report to be made at this meeting?

No

 

BUDGET MONITORING 2015/16 AND

MEDIUM TERM FINANCIAL STRATEGY 2016/17 ONWARDS

 

Final Decision-Maker

Council: 2 March 2016

Lead Head of Service

Head Of Finance & Resources

Lead Officer and Report Author

Paul Riley

Head Of Finance & Resources

Classification

Public

Wards affected

All

 

 

This report makes the following recommendations to this Committee:

1.   That the Committee note the outturn for 2014/15 and the position for 2015/16 as at the end of June 2015.

2.   That a reference is made by this Committee to Policy & Resources Committee confirming agreement with the decision of the Policy and Resources Committee on the strategic revenue projection and the capital programme, in so far as it affects this Committee’s budget.

3.   That the Committee requests an informal meeting with relevant officers to discuss budget pressures and opportunities to provide savings to support the medium term financial strategy and that the results of that informal meeting be reported to the next meeting of the Committee for consideration.

4.   That the Committee also requests that potential capital projects be informally discussed at that meeting and that the results of that informal meeting be reported to the next meeting of the Committee for consideration.

 

 

This report relates to the following corporate priorities:

The medium term financial strategy and the budget are a re-statement in financial terms of the priorities set out in the strategic plan. It reflects the Council’s decisions on the allocation of resources to all objectives of the strategic plan.

 

 

Timetable

Meeting:

Date:

Strategic Planning, Sustainability and Transport Committee

        8 September 2015

Policy & Resources Committee

      23 September 2015

Policy & Resources Committee

       16 December 2015

Strategic Planning, Sustainability and Transport Committee

          12 January 2016

Policy & Resources Committee

         24 February 2016

Council

               2 March 2016



BUDGET MONITORING 2015/16 AND

MEDIUM TERM FINANCIAL STRATEGY 2016/17 ONWARDS

 

 

 

 

1.        PURPOSE OF REPORT AND EXECUTIVE SUMMARY

 

1.1     This report provides a financial analysis of the recent outturn for 2014/15, the current performance in the first quarter of 2015/16 and the recently agreed draft medium term financial strategy for 2016/17 onwards. The information is provided where these three issues affect the Strategic Planning, Sustainability and Transport Committee.

 

1.2     The intention of the report is to inform the Committee of the current financial position to enable the Committee to consider options for supporting the Council’s need to make saving in future years and the Committee’s need to resolve any current budget pressures.

 

 

2.        INTRODUCTION AND BACKGROUND

 

Outturn 2014/15

 

2.1     The revenue outturn for the financial year ended 31 March 2015 was reported to Policy & Resources Committee on 29 July 2015. That report detailed financial performance during 2014/15 for all services. The report required a contribution of £22,000 from balances to be agreed so that all actions previously agreed by Council and Cabinet during 2014/15 could be completed. No underspend was available to carry forward, beyond the sums that had received prior approval by Cabinet in April 2015.

 

2.2     The financial information set out in that revenue outturn report can be summarised by committee as set out in table 1 below:

 

Committee

Estimate

£

Actual

£

Variance

£

Policy & Resources

11,664,440

10,749,096

915,344

Communities, Housing & Environment

8,816,010

9,165,320

-349,310

Heritage, Culture & Leisure

590,710

682,171

-91,461

Strategic Planning, Sustainability & Transport

113,730

-228,634

342,364

Use of Balances & Reserves

-2,068,140

-1,229,060

-839,080

 

19,116,750

19,138,893

-22,143

Table 1: 2014/15, outturn compared to budget analysed by service committee.

 

As can clearly be seen from the table, the Strategic Planning, Sustainability & Transport Committee reported an overall positive variance of £342,264 against a net budget of £113,730. This means the Committee’s services ended the year in net surplus.

 

2.3     The report detailed the major services that contributed to the adversely to the variance for this Committee as follows:

 

a)   Land Charges – The service has made payments against claims for backdated refunds following legislative change. The total cost was in excess of budget and the service ended the year with an over spend of £49,000;

 

b)   The Conservation service failed to achieve its income target ending the year with a shortfall of £21,000;

 

c)   The MK Planning Support shared service was reported regularly to Members during the year and, as expected, ended the year with an over spend of £61,000.

 

2.4     The major positive variances were as follows:

 

a)   Development control income exceeded the budgeted figure, with a positive variance of £200,000 at the end of 2014/15; and

 

b)   Income from on and off street parking has also continued to exceed targets, with a combined variance totalling £300,000 from these services.  However, it should be noted that this income is ring fenced so this does not represent a general underspend.

 

2.5     The positive variance includes a surplus reported on some parking activities where income is ring fenced to the provision of certain services. As such the Committee is unable to utilise this money for alternative purposes.

 

2.6     The Outturn Report to Policy & Resources Committee recognised the risk that the variances represent to the Council and these services will be closely monitored as part of that Committee’s quarterly budget monitoring work.

 

First Quarter Results and Forecast 2015/16

 

2.7     Attached at Appendix A is a report on the current budget and the position in relation to the first quarter of 2015/16, to June 2015. The appendix details net budget per cost centre for this Committee. The full analysis of all services will be reported to the next meeting of the Policy & Resources Committee.

 

2.8     The columns  of the table in the Appendix show the following detail:

 

a)   The cost centre description;

b)   The value of the total budget for the year;

c)   The amount of the budget expected to be spent by the end of June 2015;

d)   The actual spend to that date;

e)   The variance between expected and actual spend;

f)    The forecasted spend to year end; and

g)   The expected significant variances at 31 March 2016.

 

2.9     Appendix A shows that of an annual budget of -£491,340 (surplus) the expectation is that £361,175 (deficit) would be spent in the first quarter of the year. Seasonal budgets in the shared service and car parking mean that the overall budget is not evenly allocated throughout the year.

 

2.10 At this point in time the budget is reporting an under spend of £144,151 and the forecast for year-end shows that this continues to be the likely outcome at 31 March 2016 with a forecasted positive variance of approximately £175,000.

 

2.11 The key budgets that are likely to require careful attention during the year are the MK Planning shared service, which will be affected by workload and future service levels, Development Management Applications, as service levels and related costs grow care should be taken to keep income levels high enough to ensure affordability.

 

Strategic Revenue Projection 2016/17 to 2020/21

 

2.12 The Policy and Resources Committee on 29 July 2015 also considered an initial report on the medium term financial strategy for the period 2016/17 to 2020/21. The Policy & Resources Committee’s decisions are set out at Appendix B to this report and the full report can be viewed on the agenda for that meeting.

 

2.13 Based on the decisions of the Policy & Resources Committee, this report asks the Committee to consider the factors as they relate to the Committee’s services and respond to Policy & Resources Committee’s request for feedback.

 

2.14 The report to Policy & Resources Committee requested the approval of a strategic revenue projection to enable budget planning to progress. The officer recommended projection was approved and it took into account the following factors in relation to the Council’s available resources:

 

a)   Business Rates: That the Council would continue to be a member of the Kent Business Rates Pool, an arrangement that is likely to benefit the Council by enabling the retention of up to £400,000 of business rates growth that would otherwise have been transferred to central government;

 

b)   Revenue Support Grant: Following the Chancellor of the Exchequer’s emergency budget it is clear that local government can expect renewed pressure on resources as part of the continued austerity programme. The assumption is currently that the Council can expect to lose a further £1m from its revenue support grant in 2016/17 with the grant falling to zero by 2019/20;

 

c)   Council Tax Levels: The current prediction is for there to be a 2.49% increase in council tax each year. This is the aggregate of a 1.99% increase in the council tax charge and a 0.5% increase in the tax base (chargeable dwellings);

 

d)   Locally Derived Income: This has been held at the current level in the projection although there is an expectation in the Council’s policy on fees and charges that there will be appropriate consideration of an increase at least in line with inflation, where appropriate.

 

2.15 It should be noted at this point that the services provided by this Committee are fully funded by the locally derived income generated by those services. In the main this is income from car parking and income from planning application fees, because of this fact there is no allocation of Council Tax and other income from taxation to the services provided by this Committee.

 

2.16 In addition factors that create budget pressures were also taken into account in developing the strategic revenue projection. Where those pressures create implications for this Committee the details are as follows:

 

a)   Employee costs – In the emergency budget the Chancellor of the Exchequer announced actions that will have an impact on the employee costs of the council. The two main issues impacting the council are:

 

·         Funding for a 1% annual increase in public sector pay over the period of the current parliament; and

 

·         An increase in the national living wage to £9 per hour by 2020. This included an increase to £7.20 in 2016/17.

 

These two issues will cause a budget pressure for all committees and officers are reviewing the longer term implications of the increase in the national living wage to £9.00. Policy & Resources Committee approved a planned increase in employee costs of 1.7% to allow for both factors and the potential cost of incremental increase for some employees.

 

b)   Inflation Increases – For the majority of service budgets and for over a decade the Council has set a policy of zero inflation in order to ensure a regular pressure on all services to promote efficiency. Where there are contractual or unavoidable commitments that include inflationary increases then these values are specifically set as a budget pressure. For this Committee this would include contractual arrangements within the parking service.

 

c)   Single Tier Pension Arrangements – From the commencement of the tax year 2016/17 the government is changing the state pension arrangement. As set out in previous medium term financial strategies the intention is to pay a single tier pension to all contributors. This will increase national insurance contributions for the Council as an employer and for all employees as the ability to “contract out” of some national insurance because of the local government pension scheme will be removed

 

2.17 These pressures have been set against the current resources utilised by this Committee’s services and the current budget for those services. Set out at Appendix C to this report is a strategic revenue projection that approximates this Committee’s share of the overall shortfall in resources that was reported to Policy & Resources Committee.

 

2.18 This shows that this Committee will utilise more resources than its allocation in future years. The need to find savings for the Council as a whole and the approximation of the share that can be expected on an apportioned basis from this Committee is set out in the table below:

 

 

2016/17 £,000

2017/18 £,000

2018/19 £,000

2019/20 £,000

2020/21 £,000

Total £,000

Council Savings Target

1,632

791

713

526

103

3,765

Apportioned to SPST

123

78

79

81

82

 443

Table 2: Apportioned savings target per financial Year

 

2.19 When considering these figures and the actions that might be taken to resolve the need to identify savings, the Committee should bear in mind that the Council will look to support areas that are its key priorities and expect greater contributions from other areas. The priorities that are directly provided by this Committee’s services include one of the two highest priorities, based on public opinion. The public consultation on the Strategic Plan 2015 – 2020 showed that key priorities for the public are:

 

·         Providing a clean and safe environment; and

·         Securing improvements to the transport infrastructure of our borough.

 

However this priority is not a specific service provided by a district council directly and as such is mainly funded by allocations through the capital programme.

 

2.20 In any circumstance it is essential that the Council is prepared for the future loss of financial resilience as set out in this report and in more detail in the report to the Policy & Resources Committee. For this reason all service committees have been requested to consider the strategic revenue projection and provide views back to the Policy & Resources Committee on its accuracy and options to balance expected resources and expenditure.

 

Capital Programme 2016/17 to 2020/21

 

2.21 The capital programme, also considered by the Policy & Resources Committee on 29 July 2015, includes schemes that provide additional assets for this Committee.

 

2.22 Funding for the programme remains consistent with previous decisions of Council in that the majority of resources come from the New Homes Bonus receipts available to the Council along with a small grants budget and a small number of receipts from asset sales. Previous decisions of Council and Cabinet have focused the use of New Homes Bonus on infrastructure projects where these are required by the infrastructure delivery plan that forms part of the Local Plan.

 

2.23 The current programme includes resources for various categories of infrastructure that appear in previous drafts of the infrastructure delivery plan. Resources currently identified for infrastructure works over the five years of the draft programme total £14.2m.

 

2.24 The Policy & Resources Committee wishes to consider schemes that service committees may wish to propose, where these schemes meet strategic priorities and a suitable business case exists. Should the Committee wish to consider any future schemes they may put them forward for consideration.

 

 

3.        AVAILABLE OPTIONS

 

3.1     In its decision the Policy & Resources Committee approved the strategic revenue projection for the whole Council and the projection set out at Appendix C is extracted and apportioned to this Committee’s services from that overall projection. The Committee also requested that the service committees review the medium term financial strategy and feedback their views of the resources and budgets available. Of special interest to Policy & Resources Committee are proposals from services committees on how to find savings of £1.6m in 2016/17 and in total £3.8m over the five year period 2016/17 to 2020/21.

 

3.2     The Committee should consider the requests of Policy & Resources Committee to review the factors set out in the revenue and capital budget assumptions.

 

3.3     In addition the Committee should consider its approach to identifying contributions towards the savings requirements as set out in table 2 in paragraph 2.17. It is possible for the Committee to put forward no options for savings but the pressure on the Council as a whole is considerable and it is in the interests of the Committee to be in control of the consideration of its options to make savings both immediately and in the medium term (up to five years).

 

 

4.        PREFERRED OPTION AND REASONS FOR RECOMMENDATIONS

 

4.1     It is recommended that the Committee approve the factors used in the agreed strategic revenue projection as they are the best estimates available from the information known to date. During the remainder of this financial year, as the strategy develops and more accurate information becomes available, it is possible to amend the factors and the overall plan up until the Policy & Resources Committee meeting on 24 February 2016, which will agree the budget for recommendation to Council on 2 March 2016.

 

4.2     In considering options for savings the Committee should be aware that while proposals will be put forward for consideration they may need to be considered confidential in nature and may not gain full support from all committee members. For this reason it is recommended that the Committee meets informally with service managers to consider options for savings that will improve value for money service delivery or reductions in non-priority service delivery. Once the Committee is satisfied with the proposals that it wishes to submit they can be considered formally by the committee and referred to Policy & Resources Committee.

 

4.3     Finally the Committee should request proposals from officers for capital projects that it may wish to then put forward for inclusion in the developing capital programme.

 

 

5.       CONSULTATION RESULTS AND PREVIOUS COMMITTEE FEEDBACK

 

5.1     This report is an initial stage report in the development of the medium term financial strategy and the budget for 2016/17. From this report information will be provided to Policy & Resources Committee for inclusion in their consideration of the public consultation plan. Once this is complete public consultation will commence late October 2015 or Early November 2015.

 

5.2     This Committee’s final opportunity to consider the medium term financial strategy and budget for 2016/17 will be on 12 January 2016 and feedback from consultation and other stakeholder’s views will be included in that report along with final details relating to approved savings proposals.

 

 

6.       NEXT STEPS: COMMUNICATION AND IMPLEMENTATION OF THE DECISION

 

6.1     Information on this decision will be passed back to the Policy & Resources Committee for their consideration when preparing the budget consultation for this year.

 

6.2     If the recommendations are agreed this Committee will work with relevant officers to develop savings and growth proposals to submit to a later Policy & Resources Committee so that all final proposals can be considered in the light of the Chancellor of the Exchequer’s autumn statement and the local government finance settlement in December 2015.

 

 

7.       CROSS-CUTTING ISSUES AND IMPLICATIONS

 

 

Issue

Implications

Sign-off

Impact on Corporate Priorities

It is the purpose of the medium term financial strategy (MTFS) to allocate resources to the priorities in the strategic plan, including the allocation of resources to other plans and strategies developed to achieve those outcomes.

 

Head of Finance & Resources

Risk Management

Matching resources to priorities in the context of the significant pressure on the Council’s resources is a major strategic risk. The MTFS is improved each year to enhance its resilience and effectiveness. The MTFS is considered by Policy & Resources Committee, all service committees, the Audit Governance & Standards Committee and Council.

 

Specific budget risks and opportunities are identified in the main body of the report, especially the consideration of the factors in the strategic revenue projection.

 

Head of Finance & Resources

Financial

The budget strategy and the MTFS impact upon all activities of the Council. The future availability of resources to address specific issues is planned through this process. It is important that the committee gives consideration to the strategic financial consequences from the recommendations in this report.

 

Head of Finance & Resources

Staffing

The process of developing the budget strategy will identify the level of resources available for staffing over the medium term and the proposals include adequate resources to meet current plans.

 

Head of Finance & Resources

Legal

The Council has a statutory obligation to set a balanced budget and development of the MTFS and the strategic revenue projection in the ways set out in this report supports achievement of a balanced budget.

 

Head of Finance & Resources

Equality Impact Needs Assessment

The report sets out a policy that will have a positive impact as it will enhance the lives of all members of the community through the provision of resources to core services. In addition it will affect particular groups within the community.

 

It will achieve this through the focus of resources into areas of need as identified in the Council’s strategic priorities.

 

Head of Finance & Resources

Environmental/Sustainable Development

No specific issues arise

Head of Finance & Resources

Community Safety

No specific issues arise

Head of Finance & Resources

Human Rights Act

No specific issues arise

Head of Finance & Resources

Procurement

No specific issues arise

Head of Finance & Resources

Asset Management

Resources available for asset management are contained within the strategic revenue projections and capital programme set out in this report.

 

Head of Finance & Resources

 

8.        REPORT APPENDICES

 

The following documents are to be published with this report and form part of the report:

Appendix A: First Quarter 2015/16 Budget Monitoring Report

Appendix B: Decision of Policy & resources Committee 29 July 2015

Appendix C: Strategic Revenue Projection 2016/17 to 2020/21 – Strategic Planning, Sustainability and Transport.

 

 

9.        BACKGROUND PAPERS

 

None