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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 10/01/2006
FINANCIAL STRATEGY 2006/2007 – 2008/2009
DRAFT GENERAL FUND REVENUE ESTIMATES 2006/2007



Summary & Purpose
This report updates the Executive on the latest position regarding the General Fund Budget. It contains proposals for reducing the Budget shortfall for which the Executive is requested to give consideration.

The proposals from the Executive will be the subject of consideration by meetings of the Overview and Scrutiny committees during January. The Executive will give final consideration to the Budget on 7th February 2006, including the comments reported from the Overview and Scrutiny meetings, before making recommendations to Council on 21st February 2006.

APPENDIX B.1
Waverley Borough Council

Executive - 10TH JANUARY 2006


Title:
FINANCIAL STRATEGY 2006/2007 – 2008/2009
DRAFT GENERAL FUND REVENUE ESTIMATES 2006/2007
[Wards Affected: ALL]


Summary and purpose:

This report updates the Executive on the latest position regarding the General Fund Budget. It contains proposals for reducing the Budget shortfall for which the Executive is requested to give consideration.

The proposals from the Executive will be the subject of consideration by meetings of the Overview and Scrutiny committees during January. The Executive will give final consideration to the Budget on 7th February 2006, including the comments reported from the Overview and Scrutiny meetings, before making recommendations to Council on 21st February 2006.


Environmental implications:

There are no direct environmental implications as a result of the recommendation of this report. However, the estimates do include services that do have very significant environmental benefits.

Social / community implications:

There are no direct social/community implications as a result of the recommendation of this report. However, the estimates do include services that do have very significant social/community benefits.

E-Government implications:

The Estimates contain budgets to enable the delivery of Waverley’s E-Government Strategy.

Resource and legal implications:

There are no direct legal implications as a result of the recommendation of this report. Resource implications are contained throughout the report.




Introduction

1. The draft 2005/2006 General Fund Revenue Estimates were presented to the Executive on 6th December 2005. Members are requested to refer to the detailed Estimates contained at Annexe 1 to the Budget Item for that meeting and to bring these papers to the meetings in January.

The Revenue Support Grant Settlement 2. As reported to the Executive on 6th December, Waverley’s provisional Revenue Support Grant Settlement for 2006/2007 was received earlier that day. The key figures and an updated Budget Summary was distributed at the Executive.

3. The details of the Settlement are:-

The Settlement is for two years Waverley receives an additional 3% in Government Grant for 2006/07 and 2.7% for 2007/08 Council Tax capping remains – The Government expects increases to be below 5% for 2006/07 and 2007/08 A new system of allocating grant based on Relative Needs Formula has been introduced Waverley is now 520,000 below the floor following this change.
Planning Delivery Grant

4. For 2005/06 Waverley’s share of Planning Delivery Grant is 480,000, of which 25% has to be spent on capital items, with the remaining 360,000 covering revenue expenditure. Council has approved expenditure during 2005/06, which is covered by the grant of 360,000. This level of expenditure is included in the base budget for 2006/07 and likewise the existing level of grant was originally assumed. However, the main tranche of Waverley’s Planning Delivery Grant for 2006/07 has now been announced and Waverley’s share has reduced by 120,000 for revenue and by 40,000 for capital despite improved Planning Service performance.

5. The reduced figure has been included in the updated Budget Summary, thereby increasing the Budget shortfall by 120,000. Possible administration savings within the Planning Department are referred to elsewhere in this report. A detailed examination of Waverley’s Planning costs relative to other authorities is currently being carried out Budget Summary 6. The latest Budget position is shown on the Budget Summary at Annexe 1.


Proposed Service Variations

7. The list of variations is attached at Annexe 2. Annexe 3 gives an explanation from the Budget Officers for the request of each variation item.

The Edge Sports Centre

8. The report at Appendix H details the likely outcome of the contract review at The Edge. The most likely outcome is an increase in cost to Waverley of 9,000 in 2006/2007. This has been treated as a late variation item and thereby taken into account in the updated Budget Summary.

Fees and Charges 9. Generally, increases in charges in line with delegated authority have been allowed for within the draft Estimates.

10. Revised Car Park charges to take effect from 1st February 2006 were agreed by Council on 13th December. Additional income generated for 2006/07 is estimated at 90,000 and is taken into account in the budget figures. 11. The Chief Officer Group consider that this year there is very limited scope to reduce the Budget shortfall by increasing fees and charges further in any areas.
Analysis of Shortfall

12. The following table provides an overview of how the shortfall of some 375,000, as reported to the Executive, has arisen:

,000
Net Expenditure 2005/2006
12,500
Shortfall funded from Balances 2005/2006
650
Net Inflation items
528
Proposed Variations
547
Free Bus Travel for over 60s
390
Loss of Planning Delivery Grant
120
Less Budget Variances
-480
New Net Expenditure 2006/07 **
14,255
Funded By:
Balances
580
Revenue Support Grant (including increase to cover Free Bus Travel)
5,728
Council Tax (assuming 3% increase)
7,572
Shortfall *
375
Superannuation

13. Officers have been advised that proposed changes to the superannuation scheme, which remove the 85 year rule and changes which allow for commutation of pension

income for extra lump sum should secure savings that will offset potential additional costs arising from the deferral of the 85 year rule’s withdrawal. The next formal revaluation will be in April 2007 to take effect in the 2008/2009 Budget

Further Potential Reductions

14. Following the Executive of the 6th December, the Chief Officer Group commenced the process of examining the draft Budget for further possible reductions. The list of potential reductions is shown at Annexe 4, together with an appraisal of the impact of these reductions at Annexe 5. The list totals approximately 380,000. 15. However, within the list, the Chief Officer Group have identified 136,800 variation items where the service improvements are considered to justify fully an increase in council tax beyond 3%. The Chief Officer Group advise that the Executive should consider increasing council tax by 4.9%, which will generate an additional 140,000, rather than deleting these service improvements

Housing Benefit Subsidy

16. In 2004/05 the Government made changes to the Housing Benefit Subsidy system and began to reimburse Local Authorities effectively for 100% of their expenditure as a specific grant, rather than in part through the Revenue Support Grant. 17. However, subsidy claims are made on the basis of the gross expenditure in the benefits system, which can differ substantially from the amount passed to the financial accounts as this excludes overpayments. 18. It is therefore possible for subsidy recovered to amount to more than 100% of the cost shown in the financial accounts. This has proved to be the case in 2004/05, the first year of the new system, for which the Audit Commission is just about to sign-off Waverley’s subsidy claim. 19. The volume of Housing Benefits paid by Waverley is extremely large and so even a very low change in the effective subsidy rate can result in a substantial net amount. 20. For technical reasons in the first year of the new system there was a greater impact and in 2004-2005 prior-year adjustments are some 300,000.

21. However, it does seem that there is likely to be an ongoing revenue effect, which could result in a saving in the region of 200,000 from the figures currently included within the draft Budget. A definitive sum will be reported to the Executive in February once the audit of the 2004-05 subsidy claim is complete.

Budget Strategy

22. The reductions suggested by the Chief Officer Group will achieve the reported shortfall figure of 375,000. If further close examination confirms that it will be reasonable to budget for increased subsidy on Housing Benefits, it will be possible to consider making a revenue contribution in 2006/2007 towards financing the capital programme; or to take a more sustainable approach by reducing or removing the contribution of 250,000 from the Revenue Reserve Fund thus enabling the capital funding from the Revenue Reserve Fund to increase.

23. If the 250,000 contribution to General Fund Revenue is removed and the Chief Officer Group recommendations for reductions are accepted, this will leave a shortfall of 44,000 on the General Fund Revenue Account and reduce the shortfall on the Capital Programme to 336,000. These figures may be regarded as realistic targets for achievement at this stage of the Budget process.

Council Tax Capping

24. The Government capped 9 authorities in 2005/2006 and have stated that they intend to use capping powers in 2006/2007 and 2007/2008, if increases are above their criteria. Last Year’s criteria will not necessarily be repeated. So far the Minister has stated that increases below 5% for both years are expected.

Balances

25. It is an essential part of the Financial Strategy that the General Fund Balance and the Revenue Reserve Fund should both retain a minimum amount of 1 million. 26. The General Fund Balance at 31st March 2005 was 1,451,420. During the current year this is due to reduce by approved carry forward of 95,250 from 2004/2005 and supplementary estimates of 246,000 offset by the predicted underspend identified in the November Budget Monitoring report at Appendix E. The balance should therefore be maintained above the minimum level at 1.2m or higher.

Conclusion

27. The Overview and Scrutiny Committees will give further consideration to the Budget at their meetings in January. Comments made at these meetings will be reported to the next meeting of the Executive on 7th February 2006, which will agree final recommendations to Council on 21st February 2006.

Recommendation

It is recommended that the Executive:

1. gives further consideration to the General Fund Budget for 2006/2007 ;

2. considers the list of suggested Budget reductions at Annexe 4, which will be discussed by the Overview and Scrutiny Committees; and

3. gives final consideration to the General Fund Budget for 2006/2007 at its meeting on 7th February 2006.



Background Papers (DoF)

Provisional Local Government Finance Settlement 2006/07; Financial Strategy 2006/07 – 2008/09; Finance Seminar slides; draft Service Plans 2006/07; Community Strategy; Revenue Budget 2005/06.



CONTACT OFFICER:

Name: Brian Long Telephone: 01483 523253

E-mail: blong@waverley.gov.uk



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