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ITEM EX5A
EXECUTIVE
- 1 OCTOBER 2002
DRAFT BUDGET
STRATEGY AND MEDIUM TERM FINANCIAL FORECAST
A Financial
Strategy 2003/04 – 2006/07
- Background
1.1
Where we want to get to
1.1.1.
Raising our performance is a four year organisational strategy for
Oxfordshire County Council. It sets out a vision for an authority
that has a clear sense of direction and is committed to achieving key
priorities, is outward looking and influential, provides excellent services,
and is therefore nationally recognised as a leading edge authority.
1.1.2
Implementation of this improvement strategy will require sound financial
management and investment. We want to be in a position of strength with
robust finances, which mean we have enough in balances to respond comfortably
to pressures or opportunities arising in year. We need to have enough
headroom and flexibility in the budget to enable us to plan for and achieve
an ambitious programme of change to modernise and improve our services.
We want to build capacity and expertise in the Council so that we can
empower our workforce to deliver that programme of change.
1.1.3
All of this will require investment in our property, our technology and
our workforce. However, our financial situation is weak. We need to increase
our stability and strengthen our capacity to invest.
1.1.4
Oxfordshire has a net revenue budget in 2002/03 of £451m, a capital programme
of around £94m, and uncommitted balances of around £3m (less than 1% of
revenue expenditure) to cover all unexpected expenditure pressures arising
in year. In 2001/02, budget overspending in Social Services reached £6
million. The District Auditor has recommended that balances should be
set at a minimum of 1% of revenue expenditure.
1.1.5
The budget has various earmarked funds, including the New Technology Fund
and the Modernisation Fund; these are inadequate to deliver our agenda
for change.
1.1.6
Over the last four years our Council Tax has risen by an average of 10.7%
a year, and we have been asked to justify the rate of increase on successive
occasions by central Government. The Council Tax for 2002/03 represents
a 9.8% increase over the previous year (with planned reductions in provision
of social services of £9m) and increases of 7%, 6% and 5% in subsequent
years. Pressures are already apparent for 2003/04. It will be a significant
challenge to keep within these parameters.
1.1.7
Short term measures to capitalise revenue expenditure have been employed
to help the budget in 2002/03 and allow the Council to invest in the implementation
of broadband/Oxfordshire Community Network (OCN) and to accommodate the
pressures on Social Services – but this requires repayment in future years,
and therefore creates only a temporary solution to financial investment.
1.1.8
The tradition of devolution to services has led to under investment in
activity that supports the fabric of the County Council and to varying
degrees of investment between services in areas such as ICT.
1.1.9
For these reasons Raising Our Performance commits us to:
- build alliances
with other south eastern counties and public sector partners such as
Health and Police Authorities, to convince the Government of the need
to correct under funding of services in the south east of England
- exploit new opportunities
for additional funding, such as Public Service Agreements, building
the Government’s confidence in our performance so that we can obtain
both new grant and new flexibility to borrow for investment
- explore the potential
for levering in private sector investment, for example in property and
IT. This should include an assessment of the potential for Private Finance
Initiative funding
- restore our balances
to a level above 1% and up rate the scale of our current Innovation
Fund, giving it better support so that it can become a major source
of investment funding
- tighten financial
management where this is needed
- ensure that we
extract efficiency savings to offset the cost of investment – for example
as we invest in a call centre or in greater access to computers
- challenge the
organization to meet the Government target of identifying annual 2%
efficiency improvements for reinvestment in organizational priorities
- review our approach
to service budget management
- develop a four
year financial strategy which will boost the authority’s external funding,
tighten financial management controls and achieve efficiencies, so that
we can invest in key priorities.
- How we intend to manage
our finances
2.1
Restoring Balances
2.1.1
The Council’s net budget is £451m in 2002/03 and forecast £482m for
2003/04. It has been the recent policy of the Council to hold balances
at a minimum level, 1% of the revenue budget. This was approved by the
District Auditor. It has become increasingly evident given our recent
budgetary problems in Social Services and other unbudgeted pressures,
that it is untenable to maintain balances at the lowest level. Risks are
unacceptably high. Balances have fallen below 1% in the face of service
pressures and our position has been criticised by the District Auditor.
The effect on the organisation is to divert the focus of the County Treasurer
to maintaining financial stability as opposed to pursuing a more proactive
financial strategy.
2.1.2
The Council needs to have a secure and robust level of balances that ensures
it can be effective and sure-footed when it comes to managing its resources
and responding to unexpected pressures. An overall assessment of all the
financial risks currently facing the Council is in excess of £10m. Public
Services are at the top of the public agenda, and the pace of change is
rapid. We need to protect ourselves against sudden adverse change such
as unforeseen service pressure, for example from asylum seekers or bed
blocking fines, from new legislation, or new Government funding formulae.
We also need the security of healthy balances to have the confidence to
invest in opportunities for service improvement. Analysis of our current
financial situation, allowing for all known risk factors suggests that
a level of 2% or £10m would place the Council where it needs to be, in
terms of secure finances.
Action:
We will
- restore balances
to a level of £10m over the period 2003/04 to 2007/08.
2.2
Creating Headroom
2.2.1
The Council’s budgetary difficulties have restricted our ambitions and
ability to modernise our services. We need to create headroom in the budget
to meet the challenges we face, and the priorities we have set ourselves
in The Oxfordshire Plan and Raising our Performance.
Efficiencies.
2.2.2
We have submitted our proposal for a Public Service Agreement to the Government.
This includes a target to achieve a 2% productivity improvement across
all our services. The newly formed Executive drew up its first budget
strategy in November 2001. This called for productivity improvements that
are cash releasing, service enhancing or performance improving. For 2003/04
services have identified efficiencies of £3.4m that are cash releasing
and absorb the increased cost of employer’s NI.
Action:
We will
- identify cash
releasing savings of £3.4m in 2003/04 and ask services to absorb the
additional 1% cost in employers NI;
- continuously
improve our services and achieve efficiency gains of 10% over the next
5 years.
Re
–examining our service priorities
2.2.3
The corporate performance assessment of the authority has highlighted
the weak integration of our services and financial planning processes,
which has made it difficult to realign resources to match priorities.
Our incremental approach to budgeting needs to be reviewed and a planned
approach taken to review and prioritise all of our expenditure.
Action:
We will
- implement a
programme of review to realign our resources to match our corporate
priorities;
Budget
management arrangements
2.2.4
The Council has a strong history of devolved decision making and financial
management to departments. This has led to a fragmented approach to, for
example the set up and funding of departmental ICT systems, and has left
the corporate centre weakened in terms of its ability to direct and control
essentially devolved investment.
2.2.5
The budget process and budget management arrangements have allowed departments
inflation, abnormal inflation, demography and other allowed variations,
as well as carry forwards, to be added to their budgets automatically
at year end. There has been little by way of challenge to the way in which
departments have managed their resources, or any mechanism for asking
them to surrender balances not used for the purposes intended. This has
meant that any ‘headroom’ has been held in departmental budgets and has
not been transparently available to meet council priorities.
Action:
We will
- review our
budget process and budget management arrangements for 2003/04 and subsequent
years to maximise effective use of resources and create headroom for
our priorities;
Procurement
2.2.6
The Council has not had a procurement strategy designed to ensure value
for money and economies of scale. Procurement expertise is devolved within
services and activity is fragmented. Following the recent secondment of
a senior civil servant to Oxfordshire to advise on a way forward, a procurement
strategy will be drawn up.
Action:
We will
- develop a procurement
strategy in 2003/04 that will maximise corporate value for money and
achieve identifiable savings.
Best
Value Reviews
2.2.7
In the light of lessons learnt, we have radically reshaped the original
five year plan to reduce the number of reviews. The programme now concentrates
on cross-cutting reviews that seek to identify opportunities for step
change by challenging historical methods of service provision. More attention
needs to be paid to the implementation of Best Value Review conclusions
and to the achievement and monitoring of the potential savings identified.
Action:
We will
B
- conduct best
value reviews that support the priorities in The Oxfordshire
Plan and Raising our Performance and seek to identify opportunities
for step change by challenging historical methods of service provision;
- seek demonstrable
efficiency gains and monitor their delivery.
- Investing in our Services
3.1
It is important to invest in our services in order to achieve improvements.
We therefore need to exploit opportunities for levering in investment
from a variety of sources.
Action:
We will
- Invest to Save.
We will pursue invest to save opportunities. We are already
through to the second round of bidding for Invest to Save grant for
a Contact Centre approach. We will set ourselves targets for income
generation, through grants (Invest to Save, New Opportunities Fund,
Lottery, Local Business).
- PFI.
We will aim to secure the opportunities offered through PFI. We are
currently pursuing a PFI for a new school build and expansion project,
and we are actively exploring others in the areas of, modern work
style (improving and rationalising accommodation, ICT and records
management) and waste reduction and management.
- Public/Private
partnership. We will actively pursue partnerships with
public and private partners to enable us to move forward in implementing
major projects such as the Oxfordshire County Network and the Guided
Transit Express.
- RTIA.
We will take the opportunity offered by the abolition of capital Receipts
Taken Into Account to maximise the funds available for our capital
programme.
- Prudential
Guidelines. We will take advantage of the opportunity provided
by the Government’s planned relaxation of prudential guidelines to
maximise our borrowing from 2004/05, in order to address our capital
priorities and to invest to save.
- Financial Administration
and Management Information
4.1
We need to manage our financial resources effectively and ensure that
we have robust systems in place. In order to be effective we need to strengthen
our financial control. We are investing in a new Management Information
System and we need to ensure its effective implementation and that we
extract the efficiency gains that will come from investment.
Actions:
We will
- review and
improve our financial control;
- improve our
monitoring information and join up our financial and performance data
so that they are complementary;
- improve our
information systems so that our monitoring is more effective;
- extract efficiency
savings ( from 2003/04) from the investment in MIS and other ICT by
ensuring that we maximise the benefits of our investment and can demonstrate
this;
- promote a campaign
of plain finances, and improve and streamline financial reporting, so
that our staff, members and the public have a clearer understanding
of our finances.
5. Managing
Property
5.1
The Council owns 1000 properties with a market value in excess of £1 billion.
There is a backlog on assessed need of repair and maintenance of the Council’s
buildings of around £50m, most of which relates to schools. We need to
be able to demonstrate through our capital strategy and corporate asset
management plan that we are effectively managing our property and assets,
that we are releasing resources for reinvestment, improving our working
environment and access to our services. Investment in ICT and adoption
of modern workstyle practices should allow us to make more efficient use
of our buildings.
Actions:
We will
- undertake a
Best Value Review in 2002/03 to review our property portfolio against
our needs and develop a capital investment strategy;
- rationalise
our property portfolio to release resources for reinvestment;
- ensure that
we have a medium term strategy from 2002/03 to address the assessed
need backlog on repair and maintenance.
- pursue a modern
work-style approach to our future property management;
- Delivering Change
6.1
If we are to succeed in raising our performance we need to get the best
out of all our resources – our finance, our property, our ICT and our
staff. The creation of a new resources Directorate will help us to make
essential links between these areas and develop a coherent improvement
programme for all of our resources. This financial strategy contributes
to that wider programme.
RICHARD
SHAW
Chief Executive
CHRIS GRAY
Director
for Business Support & County Treasurer
Contact
Officer: Jenny Hydari Telephone 815401
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