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Agenda Item 8 - Appendix C

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  • 1. AGENDA ITEM 11.1 STAFFORDSHIRE MOORLANDS DISTRICT COUNCIL Report to Cabinet 28th October 2008 TITLE: 2009/10 Budget Strategy and Medium- Term Financial Plan (MTFP) Update PORTFOLIO: Finance & Resources OFFICER: Corporate Director and Chief Finance Officer WARD: Non-Specific 1 Recommendations 1.1 That the 2009/10 Budget Strategy as attached at Appendix A is recommended to Council for approval. 1.2 That the updated Medium-Term Financial Plan as attached at Appendix B is recommended to Council for approval. Reason for Recommendations: - In order to ensure that the Council sets a balanced budget in line with overall priorities 2 Executive Summary 2009/10 Budget Strategy (Appendix A) 2.1 In order to set the 2009/10 budget in line with statutory requirements, the process needs to commence at this stage with agreement of an overall Budget Strategy. 2.2 The inflationary projections for 2009/10 made in the Medium-Term Financial Plan agreed by Cabinet on 29th July 2008 have been updated. A total of £514,380 needs to be added to the 2008/09 base budget to cover inflation before any further changes are made. 2.3 The 2007/08 outturn and current spending levels have been analysed in detail and there are some service areas where there is a clear change in the level of budgetary demand. This results in a net increase in budgetary demand of £51,530. 118
  • 2. 2.4 A further spending review has been completed of all service areas. The review focussed upon areas where there was known potential for reducing expenditure without impacting on service delivery. A number of areas were identified where it is proposed that further service budget reductions be made. These total £123,700. 2.5 The Medium-Term Financial Plan (MTFP) presented to Cabinet on 29th July 2008 included a number of items of budget growth aligned to specific commitments made in the Corporate Plan. Heads of Service have also had the opportunity to submit further proposals. The final list of growth items recommended for inclusion in the 2009/10 Budget Strategy total £240,720 and are detailed below: Portfolio/Service Detail Growth 2009/10 £ Communities Community Safety CCTV Enhanced Monitoring 20,000 Environment Public Conveniences Public conveniences improvements 37,000 Environment Services Additional Priority Spend (Street Cleansing) 61,500 – Strategic Alliance Sustainability Climate Change initiatives 10,000 Leisure, Sport & Culture Leisure Free Swimming Provision 32,220 Planning, Development & Property Regeneration LDF costs 60,000 Property Services Promotion of Public Markets 20,000 Total Budget Growth 240,720 2.6 Provision for the revenue consequences of capital expenditure, as highlighted in the MTFP in July 2008, have been revised to reflect key cash flow changes anticipated in 2009/10. The revised figures, which result in a net additional cost of £52,040 are as follows: • Loss of interest due to capital investment - £90,830 • Net revenue contribution from committed projects - (£38,790). 2.7 Estimated potential has been identified to raise a further £175,000 (over and above inflation increases) from fees and charges. Specific areas of attention at this stage include Trade Waste, Cemeteries, Bulky Waste, Clinical Waste and Pest Control. Other areas are likely to emerge as work progresses. 119
  • 3. 2.8 Substantial efficiency savings have been developed totalling £611,850. This includes savings from the Strategic Alliance and the Council’s VFM/prioritisation review programme. These are summarised in the table below: Efficiency 2009/10 Saving £ Procurement Support Services (10,000) Process Improvement Increased Use of Digital data (15,000) BPR Reviews (35,000) Electronic Service Delivery (25,000) Waste Collection Productive Time (120,000) HR Strategy Sickness Reduction (10,000) Home Remote Mobile Working (25,000) Staff Travel Costs (10,000) Management Overheads (15,000) Shared Services Strategic Alliance (241,850) Staffordshire Connects (15,000) Value For Money / Prioritisation VFM Improvement (50,000) Asset Management Energy Use (10,000) Asset Rationalisation (30,000) Total (611,850) 2.9 After providing for an adequate level of reserves, £75,080 is available to support revenue spending in 2009/10. 2.10 The Budget Strategy shows that a balanced budget can be achieved for 2009/10 with a Council Tax increase of 2.5% and it is recommended that it be approved with this assumption. It should be noted that the final level of increase would not be fixed until the completion of the detailed budget exercise in January 2009. 120
  • 4. Updated Medium-Term Financial Plan (Appendix B) 2.11As part of the Council’s Financial Planning Framework the Medium-Term Financial Plan is revised three times throughout each financial year. 2.12 This update to the MTFP primarily provides members with the financial picture over the next three years (i.e. 2009/10 to 2011/12). However, a look is also taken at the longer-term financial picture for both revenue and capital. 2.13 At the outset, the key national policy and legislation issues that will or may impact on the Council’s spending plans in the medium-term are highlighted including: • The Local Government White Paper • Pension costs • Concessionary travel • Planning reform • Housing reform • Waste and recycling • Climate change • Core Government funding; and • The efficiency agenda. 2.14 Local spending influences and spending priorities are also considered including: • The Community Strategy • The Corporate Plan • Fees and charges • The Staffordshire Partnership (LAA) • Other partnerships • Shared services • Value for money; and • Consultation. 2.15 The changes recommended in the 2009/10 Budget Strategy have been used to update the revenue element of the MTFP. Provisional investment demands and business efficiencies have also been identified for 2010/11 and 2011/12. The MTFP will be further updated throughout the detailed budgeting preparation exercise. However, at this stage, a cumulative budget deficit is forecast by the end of 2010/11 (£109,400) and by the end of 2011/12 (£349,330). Further savings will need to be produced in order to maintain the Council Tax rise at the level of inflation. 121
  • 5. 2.16 Capital investment plans have also been updated since the MTFP was presented to Cabinet in July 2008. It is now forecast that £13,392,000 (net) will be spent on capital schemes up to, and including, 2011/12. This would leave remaining capital resources of £244,000. However, a further update to the Capital Programme will be included within the February 2009 update of the MTFP. 2.17 The anticipated scale of inflation, and pressure for revenue growth to deliver Council priorities in 2010/11 and 2011/12, demonstrates that, significant efficiencies will be required to achieve a balanced budget and peg Council Tax increases at the level of inflation. The process will be undertaken in line with the MTFP, with the cashable savings of £490,000 and £275,000 planned in 2010/11 and 2011/12 respectively, which includes projected savings from both the Strategic Alliance and the VFM / prioritisation process. 2.18Potential long-term factors (i.e. that will or may impact from 2012/13 onwards) are also considered. These include consideration of known demographic and health statistics. Other notable factors include: Revenue • The potential long-term impact of the current global financial crisis could have a substantial and long-lasting impact on pensions costs • The sustainability of inflation-level Council Tax increases; and • The long-term impact of smaller revenue support grant settlements Capital • Existing capital resources will eventually be exhausted leading to a borrowing requirement. Further capital investment will need to financed from prudential borrowing • Current arrangements for the receipt of “Right To Buy” (RTB) capital receipts from the sale of the former housing stock will end in 2011/12, which will eliminate a currently valuable source of capital funding; and • Innovative methods of supporting the provision of affordable housing need to be developed. 2.19 Finally, potential risk factors including the requirement to carry contingency reserves are also considered. 3 Evaluation of Options / Risk Assessment 3.1 There are a number of options in terms of meeting a balanced budget. The Strategy contained within this report provides a balanced budget that will ensure that the Council’s priorities are met. 122
  • 6. 3.2 Both the 2009/10 Budget Strategy and MTFP contain a risk analysis. The main financial risks to the Council at this stage can be summarised as follows: Revenue Risks • Inflationary assumptions • Economic downturn • Interest Rates/Treasury Risk • Housing benefits • Increased capital expenditure (leading to lower interest receipts) • Fees and charges • Level of external support • Council Tax collection • Financial benefits from partnerships / shared services • Concessionary Travel Costs • Impact of the LAA • Pension Costs • Planning reform • Housing reform • Waste & Recycling expenditure • Climate change • Decriminalised parking enforcement • Income from land charges; and • Income from planning applications Capital Risks • Interest rates (especially when existing capital resources are eventually exhausted) • External funding • Capital receipts • Capacity to deliver capital programme • Project overspend • Project overrun • External factors (e.g. planning objections, judicial reviews etc. leading to project delay) • Housing Finance; and • Treasury Risk. 3.3 In addition, there are however a number of specific risks associated with the projections made that need to be highlighted to Members as follows: • Concessionary Travel - The Concessionary Bus Travel Act provides that everyone aged 60 and over, and disabled people, in England, gets free off peak travel on all local buses anywhere in England from April 2008. Previous statutory entitlement allowed these groups to travel for free, but only on buses within their local authority area. Government is providing funding of £212 million nationally per annum to support the national concessionary fares scheme. This is in addition to £350 million already provided in 2006 to enable the change from half fare waiver to full fare 123
  • 7. waiver within their local area, which took effect in April 2006. This Council’s provisional allocation for 2009/10 is £227,000 (which follows on from an allocation of £221,000 for 2008/09). But it is too early to say with certainty that this will be sufficient to fund the additional costs of the scheme. A financial projection has been made on the basis of best available information but there is still some uncertainty as to the eventual financial impact of these changes at a local level. In addition, the financial terms of the revised scheme are currently the subject of an appeal by the bus operators. The outcome of these negotiations will impact on district council costs. However, the uncertainty surrounding concessionary fares has been known for some time. Accordingly an earmarked reserve of £180,000 remains available should costs exceed current projections • CCTV – The budget plans contain a commitment to enhance the Council’s CCTV provision and monitoring arrangements. Cabinet has resolved to achieve this through a partnership with High Peak Borough Council. An agreement with HPBC is currently being drawn up. Until this agreement is finalised there is a risk that the cost of monitoring will be more expensive than provided for in this strategy. • Vehicle Fuel Volumes – The new doorstep waste and recycling service has resulted in higher than expected vehicle fuel costs during the current financial year. This is partly due to the additional cost of vehicle fuel but also is associated with the higher than expected mileages covered by the vehicle fleet. The budget provisions included in this strategy assume that the mileages can be reduced as the waste round configuration is adjusted to improve operational efficiency • Strategic Alliance – This Strategy makes a provision of £241,850 savings to be realised from the Strategic Alliance with High Peak Borough Council during 2009/10. These savings are reliant upon the implementation of joint working arrangements for Property Services, Environmental Health, ICT, Procurement and Business Improvement. The work necessary to implement joint working in these service areas is currently in progress. Until this work is complete there is a risk that the savings will not be in line with expectations • Funding – The strategy provides for receipts of specific grants such as Housing & Planning Delivery Grant and LABGI Grant. The provision for income from these sources is based upon estimation. Until these grant allocations are finalised by central government there is a risk that the income received will vary from that provided for in the strategy • Existing Efficiency Programme – The budget strategy provides for a significant number of efficiency savings. These efficiency savings need to be developed further in order to ensure that they are realised • Public Markets – The Council’s public markets operations are currently operating outside the current budget provisions. This strategy assumes 124
  • 8. that this issue can be resolved and net spending can be realigned with the budget • Trade Waste – The additional fees and charges income provided for in this strategy include the expectation of a vast improvement in the financial performance of the Council’s Trade Waste operation. The improvements include exploring the options for making the service more commercially successful. A detailed review of options is currently being developed and until this is finalised the validity of the budget assumptions is unclear 3.4 These specific risks will be closely monitored during the compilation of the budget during the next four months. The final budget proposals will contain a greater understanding of these risks to allow appropriate budget adjustments to be made where necessary. 4 Implications 4.1 Community Safety None 4.2 Equalities This report has been prepared in compliance with the Council’s equal opportunities policy. 4.3 Employees Changes in budget levels often result in changes in staffing levels. Employees will be consulted about any changes in advance of them being made. 4.4 Financial Extensive (included in the report) 4.5 Legal: None 4.6 Sustainability: None ANDREW P STOKES Corporate Director and Chief Finance Officer Background Papers Location Contact Cabinet Report – Medium-Term Finance and Revenues Chris Hartgrove Financial Plan – 29th July 2008 Moorlands House Head of Finance and Revenues Tel: (01538) 395400 Ext. 4195 Budget setting working papers Decision: Reason: Interests Declared: 125