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ITEM CG10

CORPORATE GOVERNANCE SCRUTINY COMMITTEE – 27 JULY 2006

EFFICIENCY SAVINGS

Report by Head of Legal Services

1. As part of the work programme for Corporate Governance Scrutiny committee, the committee must monitor progress of the efficiency savings taking place across Oxfordshire County Council. Since the revised efficiency savings strategy has been produced there has been continuous progress in the identification of efficiency savings.
2. The purpose of this report is to explain the further work which has been done and for the committee to:

• Consider and comment to the Head of Legal Services on the progress of the Annual Efficiency Statement
• Note the work being carried out by the AES Working Group and Directorates.

3. Oxfordshire County Council’s approach to efficiency savings is detailed in the revised Efficiency Savings Strategy. The changes to the strategy were agreed by Councillors Shouler and Howell when the Efficiency Savings Steering Group (ESSG) was reorganised to take into account changes within the council including the Change Management Board and the Service & Resource Planning Working Group in 2005/06 respectively. The strategy reflects the moves towards integrated service and resource planning and the approach to cost centre management. The strategy also incorporates the new Value for Money dimension of the CPA, which links closely with efficiency gain, effective service delivery, benchmarking and service and budget planning. A copy of the strategy is attached in Annex 1.
   
   (Annex 2 - Developing Business Process Re-engineering (BPR) and Productivity Capacity in Oxfordshire)
   (Annex 3 - Changing the role of the Efficiency Savings Steering Group)
   (Annex 4 - Principles)
   
4. Directorates are now accountable and responsible for achieving efficiency savings and income generation. They must propose how they will allocate efficiency savings and revenue from income generation, within the context of integrated service and resource planning.
5. The Efficiency Savings Strategy is on target to deliver the savings for Oxfordshire County Council as evidenced by the Annual Efficiency Statement ))(AES). The AES has exceeded the target set by the ODPM, and all areas show significant progress in identifying the savings.

Work Undertaken

6. The primary target in the efficiency savings strategy is to meet the reductions in expenditure required by the MTFP by £5 million a year until 2008/09. The secondary target is to meet Annual Efficiency requirements set by the OPDM.
7. The target for the Annual Efficiency Statement (AES) is to make £8 million of savings per year, with at least £4 million being cash releasing. The rest of the target should then be made up of non-cash releasing savings. The cash releasing savings will generally count towards our MTFP targets.
8. Efficiency savings targets are contained within the overall budget targets established for each Directorate. No efficiency savings or income generation activity lies outside of Directorate budget arrangements.

Measuring Success

9. Oxfordshire County Council’s success in identifying efficiency savings is evidenced by the AES reports. The AES process requires local authorities to report on savings for each financial year until 2008/09. For each financial year a forecast (Forward look) is required and a ‘Mid-Year update’ six months into the year to ensure we are on track. A third report is then submitted on actual savings made at the end of each financial year (Backwards Look).

Targets

10. The overall extra AES savings required each year by the ODPM is 2.5% of our 2004/05 spending of £324m, which is just over £8m. The £324m excludes spending on schools, the fire service and magistrates courts, but includes capital spending.
    
    

Cumulative targets are (£m):

2005/06 8.140

2006/07 16.202

2007/08 24.304

At least half of the above figures must be found from cash releasing savings.

2005/06 Efficiency Savings

11. The Council reported performance against the 2005/06 AES targets in July 2006. This showed that £8.686m of AES savings had been achieved. The Council’s overall AES savings target for 2005/06 is £8.140m. Thus sufficient savings have been achieved in 2005/06 alone to meet the target.
12. For the purposes of meeting the AES target for 2005/06 however, savings achieved in 2004/05 can be included. The Council achieved £2.164m of AES savings in 2004/05, so overall £10.850m of AES savings count towards the target for 2005/06. Thus the Council achieved £2.710m (33%) more AES savings than required by the overall target for 2005/06.
13. Similarly, the Council has also exceeded the target to produce more than £4.070m of cash releasing AES savings in 2005/06 by £4.019m (99%). All these figures are summarised as follows in Table 1:

Table 1

Meeting the 2005/06 Target

	Total AES savings	Of which, cash releasing
2004/05 savings	£2.164m	£1.531m
2005/06 savings	£8.686m	£6.558m
Total savings counting
towards the 2005/06 target	£10.850m	£8.089m
2005/06 targets	£8.140m	£4.070m
Amount by which the
target has been exceeded	£2.710m	£4.019m
% above the target	33%	99%

Thus the Council has met both the AES total and cash releasing savings targets for 2005/06.

2006/07 Efficiency Savings

14. In April this year, the Council reported further savings planned for 2006/07. These are shown in detail in Table 2:

Table 2

AES 2006/07 Forward Look – Forecast savings

	Total £	Of which cashable £	Of which non-cashable £
Adult social services	5,003,118	3,247,800	1,755,318
Children's services	648,000	0	648,000
Culture and sport	182,988	87,000	95,988
Environmental services	442,000	442,000	0
Local transport (highways)	6,403	6,403	0
Local transport (non highways)	75,000	0	75,000
LA social housing (capital exp)	0	0	0
LA social housing (other)	0	0	0
Non-school educational services	492,770	17,000	475,770
Supporting people	660,000	660,000	0
Homelessness	0	0	0
Corporate services	244,230	204,363	39,867
Procurement	477,000	437,000	40,000
Productive time	328,793	105,000	223,793
Transactions	143,105	0	143,105
Miscellaneous efficiencies	125,000	125,000	0
Total 2006/07 (Forward Look)	8,828,407	5,331,566	3,496,841

15. AES savings countable towards the 2006/07 target include both those achieved in 2004/05 and 2005/06 and those planned for 2006/07. Hence the savings that count towards the 2006/07 target are as follows:
    
    

	Total AES savings	Of which, cash releasing
2004/05 and 05/06 savings	£10.850m	£8.089m
2006/07 savings	£8.828m	£5.331m
Total savings counting
towards the 2006/07 target	£19.679m	£13.420m
2006/07 targets	£16.202m	£8.101m
Amount by which the
target has been exceeded	£3.477m	£5.319m
% above the target	21%	66%

Thus the Council is on track to meet both of the AES total and cash releasing savings targets for 2006/07. Total savings should be £3.477m (21%) more than needed to exceed the overall target. Cash releasing savings should be £5.319m (66%) more than needed to exceed that target.

16. In future years, the council plans to sustain this success and identify more non-cash releasing savings. We also plan to improve the explanation, recording and monitoring of AES savings projects.
17. The AES target regime is likely to become more difficult to meet from 2008/09, when the requirements of the 2007 Comprehensive Spending Review will be introduced.

Conclusions

18. Both of the 2005/06 AES savings targets have been met. The Council is also on track to meet both of the 2006/07 AES savings targets.
19. The results of the AES reflect the success of the efficiency savings strategy and show that there is a monitoring process in place to ensure savings are achieved.

PETER CLARK
Head of Legal Services

Background papers: Efficiency Savings Strategy

Contact Officer: Nicola Brattle, Business Development Consultant Tel: 816320

July 2006

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