Waverley Borough Council Committee System - Committee Document
Meeting of the Executive held on 11/01/2005
Budget Strategy 2005/2006
Summary & Purpose
This report updates the Executive on the latest position regarding the General Fund Budget. It contains proposals for reductions in expenditure including staffing reductions and also some increases in income. The Executive is requested to give consideration to these measures in order to reduce the Budget shortfall resulting mainly from the Government’s capping regime compounded by the adverse Financial Settlement.
The proposals from the Executive will be the subject of consideration by meetings of the Overview and Scrutiny committees during January and February. The Executive will give final consideration to the Budget on 7th February, including the comments reported from the Overview and Scrutiny meetings, before making recommendations to Council on 22nd February.
Quality of Life Implications
Prevention and Control
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The Estimates contain budgets to enable the delivery of Waverley’s E-Government Strategy
Resource and legal implications
There are no specific legal implications as a result of this report. Resource implications are contained throughout the report.
1. The draft 2005/2006 General Fund Revenue Estimates were presented to the Executive on 7th December 2004.
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. The provisional Revenue Support Grant Settlement for 2005/2006 was announced on 2nd December.
3. The Government stated that the minimum increase for each shire district is 2.5% and this increase in the Revenue Support Grant for Waverley on the adjusted 2004/2005 figures is £155,000. However, this will be offset by the loss of Waverley’s transitional grant estimated at £110,000.
4. The consequence of the provisional Settlement is that the Government is saying that they have given all District Councils at least a 2.5% increase in their funding. However, in reality, Waverley is receiving additional grant of just £45,000, which is less than 1%.
5. It is also noteworthy that the Government is claiming that the increase is in excess of inflation; whereas, currently, the Retail Price Index is 3.4%.
Fees and Charges
6. Generally, increases in charges in line with delegated authority have been allowed for within the draft Estimates. These are summarised at
to this report. However, in some cases higher increases are now suggested and these will be subject of consideration during this Committee cycle.
7. Revised Car Park charges to take effect from 1st February 2005 were agreed by Council on 14th December. Additional income generated for 2005/2006 is estimated at £285,000.
8. Planning and Building Control fees are largely determined by statutory Government guidelines. Although the actual fees have not yet been announced, the Government has stated that Planning fees will be increased significantly from 1st April 2005 and the estimated income has been increased by £90,000 to allow for this.
9. Officers implemented Budget reductions (including extra income) of some £200,000 in the course of compiling the Base Budget for 2005/2006. These are listed at
. These reductions were included in the figures reported in the last Committee cycle.
10. In addition, reductions of £146,000 were made to the initial upward Budget Variations. Since the meeting of the Executive on 7th December, the Variations have been reduced by a further £30,000. Running costs of Information Technology have reduced following the reduction to the Capital Programme; the Countryside Habitat Management and Car Pound variations have been removed; and the cost of the High Lane Pavilion has been offset by a £3,000 contribution for use made of the community facility by the Housing Revenue Account. The revised Variation List is shown at
11. There have been several recent changes to the rents from Industrial Sites and Miscellaneous Properties at Farnham. Although some issues remain to be finalised, the net increase in property income is estimated to be £15,000.
12. Audit Commission fees were initially reduced by £19,600 to reflect the ‘lighter touch’ adopted following the ‘good’ rating achieved from the CPA assessment. It is now anticipated that a further reduction of £5,800 can be achieved.
Further Potential Reductions
13. Since the meeting of the Executive on 7th December, the Portfolio Holders have examined with Chief Officers the estimates for which they have responsibility. This detailed examination has included the staffing and central support elements of each Budget. A considerable number of suggestions have arisen and several matters are the subject of further examination. At this stage, proposals for consideration by the Executive are shown at
Annexes 4 and 5
. Annexe 4 relates to service cost reductions including additional income; and Annexe 5 relates to staff budget reductions with the addendum containing an impact assessment. The Chief Officer Group has examined these proposals from Members and advised on the amounts that are considered to be achievable.
Dealing with Redundant Posts
14. Waverley does not have a formal ‘no compulsory redundancies’ policy. However, it does have a strong ‘no compulsory redundancies’ understanding with its staff.
15. When the need to carry out particular work reduces or is removed, Waverley's approach is to work with the postholder(s) to identify suitable alternative work within the Council’s service. Where this requires retraining and/or the learning of new skills, appropriate support is provided.
16. Where necessary, this may involve an element of salary protection.
17. If there is no suitable alternative and if the employee signals a willingness to accept redundancy terms, then the dismissal of the employee on grounds of redundancy may follow if it is in the Council’s interests to do so. This results in a cost to the Council that, depending upon the circumstances of the individual(s) concerned, could be significant and on-going.
18. In summary, the ‘no compulsory redundancies’ understanding is not breached if:
a. a member of staff accepts redundancy terms; or
b. an employee whose post is redundant is redeployed into another post.
19. Scenarios could be identified under which it would be impossible for the Council not to have to breach the understanding. However, that has, so far, been avoided in Waverley's history principally because the understanding has been considered essential to a positive and productive ‘employee relations’ climate.
Planning Delivery Grant
20. Waverley received Planning Delivery Grant (PDG) of £75,000 in 2003/2004 and £96,250 in the current year. There is some optimism that the amount awarded for 2005/2006 could be considerably higher, but the position will not be known until after the Budget setting process has been completed. The Council is required to credit this grant to the Planning service, but it is not ring-fenced so it may be used either to pay for additional Planning expenditure or to reduce Planning costs that are already budgeted for.
21. The current budget position is that grant at an assumed level of £96,250 is allowed for in the base estimates for 2005/2006 and equivalent expenditure has also been included. The variation list includes additional posts amounting to at least £194,000, subject to PDG being available. The variation list also includes £66,000 for additional Planning Posts and other costs that currently contribute to the Budget shortfall, which would therefore reduce if these costs were also covered by additional PDG.
Defra Waste Performance and Efficiency Grant
22. The Government have announced a three-year Waste Performance and Efficiency Grant and have allocated Waverley £41,000 in 2005/2006. This grant is designed to support new and more efficient ways to deliver waste reduction and increase recycling and diversion from landfill. The Government’s circular states ‘The un-ringfenced Grant will enable local authorities to plan such activity with certainty over a three-year period.’ While there are no specific requirements to invest the funding in a particular way, the Government strongly encourages county-district and Joint waste Disposal Authority areas to consider joint investment to meet common goals.
23. The Council will therefore need to take a view on the use of the Waverley’s grant allocation.
24. The Executive agreed the first stage of the Budget Strategy for 2005/2006 as part of the Financial Strategy item on 2nd November 2004.
25. The latest Budget position is summarised at
. After taking account of additional income, the reductions to the variations list, and allowing for the service cost reductions at Annexe 4, a Budget shortfall in the region of £470,000 will remain before any allowance is made for the new contract prices and the pay settlement.
26. The existing contracts total around £5 million in value and, therefore, there is considerable potential for tender prices to vary by significant amounts. As part of the Financial Strategy, the bids requested for the new contracts include the flexibility to adjust levels of service – so that the Council has the option to do so if it so wishes when the bid prices are received. Additionally, it is noted that several high-calibre contractors have expressed an intention to tender and it is hoped that this will enable competitive tender prices to be selected.
27. As part of the Budget Strategy, officers have been requested to investigate how total staffing costs can be kept within the 2004/2005 cash budget, with no allowance for inflation, while protecting services to the public. It may be noted that the list of possible staff budget reductions at Annexe 5 totals £312,000. Potentially, the cost of any pay award could therefore be offset by part or all of this figure before determining any effect on the Budget shortfall.
28. In February, the Budget shortfall of £470,000 will be updated to take account of developments regarding the above issues and also the effect of the final Revenue Support Grant Settlement.
29. The shortfall may be closed by a combination of the following measures:
Further savings, which the Overview and Scrutiny Committees may suggest;
Extra Council Tax, to the assumed limit of 5%;
The use of Prudential Borrowing as an alternative source of financing that part of the Capital Programme currently financed from Revenue Contributions;
Changing the profile of the use of the Revenue Reserve Fund.
30. The impact of using Prudential Borrowing and changing the profiled use of the Revenue Reserve Fund will be considered in detail in February. Whilst both options could fund any Budget shortfall, avoiding further use of the Revenue Reserve Fund will tend to maximise flexibility because it can be used for both revenue and capital purposes, whereas Prudential Borrowing may only be undertaken for capital purposes.
31. Further analysis on the other options will also be presented to Members in February.
Council Tax Levels
The Budget shortfall figure is based on a notional council tax increase of 2.5%. If, in the light of the adverse Grant Settlement, Members decide to raise Council Tax to fund more of the Budget shortfall, they should note that £70,000 equates to a 1% increase in Council Tax.
Council Tax Capping
33. The announcement accompanying the Local Government Finance Settlement states that for 2005/2006 the Government expects to see average Council Tax increases lower than last year and below 5%. Members will need to consider this statement when they set the Council Tax in February 2005.
34. Analysis of last year’s rules showed that a Council would be capped if
its council tax increased by more than 8.5%; and
its spending went up by more than 2%; and
its net expenditure exceeded the District Council average of £137.
35. It is not known whether similar rules to this apply for 2005/2006. However, in February Members will need to consider the position carefully if Waverley is to avoid the effects of capping. These include a re-billing cost reportedly in the order of £100,000, together with significant cash-flow losses and collection difficulties.
36. 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 £1m.
37. The General Fund Balance at 31st March 2004 was £1,031,000. During the current year this is due to reduce by the original planned use of £60,000, approved slippage of £41,000 carried forward from 2003/2004, and supplementary estimates of £175,000. At the year end a transfer of £245,000 from the Revenue Reserve Fund will be required in order to maintain the General Fund Balance at £1m.
38. On the basis of the existing Financial Strategy, as amended by the adjustment of £245,000 referred to above, the Revenue Reserve Fund balance will stand at £1,834,000 at 31st March 2006, £1,254,000 at 31st March 2007 and reduce to £1,004,000 by 31st March 2008.
39. The Overview and Scrutiny Committees will give further consideration to the Budget at their meetings in January and February. Comments made at these meetings will be reported to the next meeting of the Executive on 7th February, which will agree final recommendations to Council on 22nd February 2005.
It is recommended that the Executive:
1. gives further consideration to the General Fund Budget for 2005/2006 ;
2. considers the list of suggested Budget reductions at Annexe 4 and 5, which will be discussed by the Overview and Scrutiny Committees; and
3. gives final consideration to the General Fund Budget for 2005/2006 at its meeting on 7th February.
Provisional Local Government Finance Settlement 2005/6; Financial Strategy 2005/6 – 2007/8 Finance Seminar slides; draft Service Plans 2005/6; Community Strategy; Revenue Budget 2004/5.
G/finance/admin/mfoste/paulwenham/budget/2004-06/Executive report 11-jan-05.doc