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Item EX5E

EXECUTIVE - 14 JANUARY 2004

DRAFT BUDGET and MTFP 2004/05 to 2008/09 FOR SCRUTINY

Report by the Leader and Deputy Leader of the Council

Introduction

  1. This Draft Budget and Medium Term Financial Plan is issued for consultation and to provide Corporate Governance Committee with an opportunity to consider alternative budget scenarios and to provide advice on priorities and Council Tax levels to the Executive.

  2. The Draft Budget is in four parts:

    1. A Minimum Budget and MTFP 2004/05 to 2008/09 showing a consistent Council Tax rise of 4% per annum over the plan period. This demonstrates the impact arising from setting a Council Tax increase in what the government describes as "low single digits". This includes an indication of the three key constituents, namely:

      1. The increase in Council Tax

      2. The resulting Contingency (ie what is available to spend) and

      3. The balance on general reserves

      This part also identifies some of the consequences of setting a 4% Council Tax incrdease. The detailed Minimum Budget and MTFP is shown at Annex 1 (download as .xls file).

    2. A summary of key spending priorities not included in 2(a) above. These items are shown at Annex 2 (download as .xls file) and Annex 3 (download as .xls file).

    3. A listing of key outstanding information that is still awaited with a risk assessment where appropriate.

    4. A summary of the outcome of the Community Budget Consultation Workshop held on Saturday 10 January (with details at Annex 4 (download as .doc file).

    Minimum Budget and MTFP 2004/05 to 2008/09

  3. This is included at Annex 1 (download as .xls file).. Key statistics from the Budget are:

    4.  

    2004/05

    2005/06

    2006/07

    2007/08

    2008/09

    Council Tax increase (%)

    4.0

    4.0

    4.0

    4.0

    4.0

    Amount of contingency to spend (£m)

    9.1

    6.8

    5.7

    4.2

    5.1

    General Reserves at end of period (£m)

    6.6

    9.8

    12.8

    12.9

    13.4

  4. Annex 1 (download as .xls file). shows the key components that make the Minimum Budget at 4% pa Council Tax rise:

    1. Inflation has been held at 3% for schools’ pay and prices but reduced to 2.5% for all other pay and 2% for other prices (excluding special cases/contracts). This has been done in each year of the plan period. An additional £1 million has been added to reserves in 2004/05 to hold the risk of higher inflation centrally.

    2. Only the very highest priority expenditure pressures have been included.

    3. The requirement to passport funds to schools has been respected.

    4. Council Tax increases have been held constant over the five years at 4% pa.

    5. The Contingency to spend in the future years ranges from a high of £6.8m to a low of £4.2m, a substantial reduction to the published MTFP. It should be noted that each year’s contingency is dependent on realising an annual savings target of £5 million which is cumulative. In years where the contingency amounts to approximately £5 million, this is wholly dependent on securing the planned savings.

    6. General reserves have increased from £2.5m estimated as at 31st March 2004 to £13.4m by the end of 2008/09, an increase of about £11m. This is consistent with the advice of the Head of Finance and the District Auditor although the rate of increase is not as fast as they have recommended.

    Key spending priorities not included in budget at 4% Council Tax increase

  5. Annex 2 (download as .xls file) sets out high priority items totalling £7.6m that have not been included in the 4% Minimum Budget. Many of these are high priority expenditures, required to raise the quality of service provision or to meet emerging needs. An additional £7.6m would take the Council Tax increase to 7.9%.

  6. High priority issues not included in the 4% Minimum Budget are:

    1. Schools block – Key Stage 3 funding previously met by clawback; extension of SEN index ands the Forces factor.

    2. Learning & Culture – extension of library opening hours; a range of small but important educational and cultural developments including Foundation Stage – Partnership/Sustainability Fund for Pre-schools; Pupil Information Project Phase 2; replacing cessation of Drugs & Alcohol Standards Fund grant; Youth Service and implementation of Scrutiny Museums Review.

    3. Social & Health Care – additional fieldwork staff in Children & Families; Foster Care Allowances; Carers Services; 17% of Market Capacity funding for Older People and 100% for Learning Disability

    4. Environment & Economy - Revenue funding to gear up Transport Network review and work on Local Transport Plan; 35% of the abnormal inflation on public transport revenue support; Ridgeway rights of way repairs.

    5. Community Safety – Radio replacement scheme.

    6. Resources and Chief Executive – 50% of cost of roll out of SAP to schools; 50% of the resources to strengthen HR; 50% of asbestos remediation; £313k of amount to strengthen Accountancy and Finance; two thirds of the resources required to ensure that urgent property repairs do not reduce spending on planned maintenance; social inclusion £50k.

    7. Further Expenditure Proposals – £0.5m of the Job Evaluation costs putting on pressure on Directorates, particularly Learning & Culture and Social & Health Care.

  7. Annex 3 (download as .xls file). sets out slightly lower order priority items totalling £0.9m not included in the 4% Minimum Budget. An additional £0.9m would take the Council Tax increase to 8.3%.

  8. A full list of spending proposals is shown in document EX5B circulated with the agenda.

    9. Outstanding information

  9. There are still some pieces of outstanding information which will impact on the final budget proposals. Learning & Culture are still working on the final sum to be added to the Schools’ delegated budget to achieve the 4% minimum guarantee. They are also working to determine the cost of the teachers’ pay award (2.5% nationally) for Oxfordshire Schools.

  10. There is a DfES requirement that the non delegated part of the Schools Block should not rise in percentage terms higher than the delegated part. The current proposals indicate that we do not meet this requirement and we may need to apply for exemption (deadline 13 February).

  11. Learning & Culture are awaiting confirmation from DfES that their plan on how to allocate £4.4m of Targeted Transitional Grant is accepted by the end of January. The grant is dependent upon this, but the risk is likely to be low.

  12. The final figure for implementing job evaluation in Learning &Culture( including in schools) is still outstanding.

  13. There are some potential risks in the Social & Health Care budget, in particular around Supporting People which need further clarification. The use of un-ringfenced grants to support on going revenue expenditure generally may be risky if the grant reduces or falls out in later years, so future planning needs to allow for this. Also, we need to be certain we are achieving the specific objectives associated with grants, like safeguarding children, before we decide to allocate the grant to support other expenditure.

  14. Any decision not to fund the costs of job evaluation in full must be accompanied by an action plan from Directorates about how they would manage this.

  15. We do not have final figures for all our grant allocations; only £34m out of the £109m is confirmed.

  16. We are still awaiting the Final Settlement figures, but any risk associated with this must be low. It is more likely that there could be movement on the assumptions for Council Tax bases and surpluses/deficits when this information is received from Districts by the end of January. We also may have better news on the benefits from second homes and empty properties. Both of these factors could potentially have a quite significant effect on the final budget.

  17. The Green Book pay award will not be known until March. However, the risk is low since the Executive is proposing to hold the difference between a 3% inflation assumption and a possible 2.5% award in general reserves.

  18. Final national announcements on our capital allocation and local determinations on all aspects of the capital programme will be considered at the 27 January meeting of the Executive. A full 5 year MTFP will also be presented to the meeting which will include pressures and savings in future years that will impact on the contingency in forward years, for example the costs of the pension fund revaluation from 2005/06.

    19. Community Budget Consultation Workshop

  19. Annex 4 (download as .doc file). sets out a short report prepared by MORI detailing the findings of the Budget Consultation Workshop held on Saturday 10th January 2004. In total, 30 Oxfordshire residents attended the OCC/ MORI discussion day with the primary issue being a ‘trade off discussion’ as to whether county residents would be prepared to pay higher Council Tax in order to meet a range of service improvements.
  20. Following a full day of briefings from the Council, small group discussions and a ‘Real Tax’ budget modeling exercise, participants opted for an increase in Council Tax between 6.6% and 7.5% in order to meet a range of service improvements. Participants were given £10 million spending options across 11 themes - which - if all were accepted - would result in an increase in Council Tax of 8% compared with a ‘standstill’ level of 3%.

  21. Overall, of the 11 themes presented, high priority areas for spend were: ‘improving social care provision’ and ‘stronger financial and management systems’. Medium priority areas were: ‘maintaining roads & pavements’, ‘improving the Fire & Rescue Service’, ‘helping children with SEN’ and ‘managing Oxfordshire’s waste effectively’. The least priority areas accorded by all groups were: ‘providing rural bus services’, ‘improving library opening hours’ and ‘improving cultural services’. Differing levels of priority were given to ‘early years education opportunities’ and ‘improving schools & other public buildings’ and additional areas for spend suggested by individual discussion groups were: ‘affordable housing’ and ‘family support (rather than early years)’.

    22. Conclusions

  22. This Draft Budget and MTFP shows a range in Council Tax increase for 2004/05 of between 4% and 8%. The figures for the succeeding four years hold the increase constant but demonstrate how tight the resulting finances would be. In later years, the Contingency is wholly dependent on the realisation of £5 million pa in efficiency savings. In any case, known calls on the Contingency are likely to be larger than a £5 million contingency.

  23. An increase of 4% in 2004/05 is clearly too little and 8% is too high. This Consultation seeks advice from the Corporate Governance Committee on the difficult balance between needs of individual service areas, the needs of the corporate centre, the pressures arising from improving our Comprehensive Performance Assessment and meeting our Public Service Agreement and restraining the rise in Council Tax.

  24. One aspect of this balancing act is the relationship between Council Tax rises across the five year period. The following table demonstrates a range of options:

    25. 2003/04

    2004/05

    2005/06

    2006/07

    2007/08

    2008/09

    13.4%

    4%

    4%

    4%

    4%

    4%

    13.4%

    5%

    5%

    5%

    5%

    5%

    13.4%

    6%

    6%

    5.5%

    5.5%

    5%

    13.4%

    7%

    6.5%

    6%

    5.5%

    5%

    13.4%

    8%

    7%

    6%

    5%

    5%

    Key Dates

  25. The remaining key dates for meetings on the budget are: 20 January Corporate Governance Committee comment on the draft budget; 27 January the Executive propose the budget; 10 February the Council approve the budget. There will be a budget seminar for members on the proposed budget on 4 February.

    26. RECOMMENDATION

  26. The Executive is RECOMMENDED to approve this Draft Budget and Medium Term Financial Plan 2004/05 to 2008/09 for consultation and to request Corporate Governance Committee to give specific and clear advice on the balance between needs of individual service areas, the needs of the corporate centre, the pressures arising from improving our Comprehensive Performance Assessment and meeting our Public Service Agreement and restraining the rise in Council Tax over the plan period; with the object that this advice from Scrutiny and from general public responses will inform the Executive in recommending a Budget to Council on 10 February.

 

Keith R Mitchell
Leader of the Council

Margaret Godden
Deputy Leader of the Council

January 2004

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