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ITEM CA6
CABINET
– 20 SEPTEMBER 2005
SERVICE
AND FINANCIAL PLANNING 2006/07 – 2010/11
Report by
Director for Resources
Introduction
- This report is
the first in a series that will inform members on the service and financial
planning process and issues for 2006/07 and the medium term. The report
sets out the current Medium Term Financial Plan (MTFP) as amended by
Cabinet on 5 July and provides the latest information on the Council’s
financial position. It also sets out the County Council Management Team’s
(CCMT’s) budget management proposals for 2006/07, outlines some of the
risks within the proposals and other areas of uncertainty and provides
a proposed timetable for the budget process.
- A Financial Strategy
for the Council was produced for the period 2003/04 to 2006/07. The
document provides an overarching statement about how the Council intends
to conduct its finances. This was adopted by the Executive in October
2002 and has been reviewed on an annual basis to ensure its accuracy.
The strategy has now been in place for three years and has been updated
by the Head of Finance & Procurement for the period 2006/07 to 2008/09.
The updated strategy is presented at Annex 1 (download
as .doc file).
- The Head of Finance
& Procurement will publish a series of short fact sheets to accompany
each report on the budget, which will provide all members with easily
accessible and up to date key facts and data. The first fact sheet,
backing up this report, will be issued separately to all members. Seminars
on the budget for 2006/07 and medium term will be held in the Autumn
and New Year to help keep members informed and to answer queries.
- The following
annexes are attached:
Annex
1: Financial Strategy 2006/07 to 2008/09 (download
as .doc file).
Annexes
2a-b: Revised Medium Term Financial Plan
(Annex 2 (a) - download as .xls file)
(Annex 2(b) - download as .xls file)
Annexes
3a-b: Assumptions behind the Medium Term Financial Plan (download
as .xls file) (Abbex 3(a) - download
as .doc file) (Abbex 3(b) - download
as .xls file)
Annex
4: Updated Risk Register (download
as .xls file)
Annex
5: Service & Financial Planning Administrative Timetable for
2006/07 (download as .xls file)
Executive
Summary
- The Council’s
current Financial Plan for 2006/07 includes an increase in expenditure
of 3.5%, increased government grant of 3.2% and an increase in Council
Tax of 4.375%. The increase in expenditure of £20.7m (3.5%) includes
pay and price inflation of £15.3m, ongoing policy and budget plans of
£1.0m, and £0.2m for other agreed variations. A sum of £9.2m is also
available to allocate, although this is dependent on £5.0m of efficiencies
and savings being achieved.
- CCMT have agreed
proposals to meet the efficiencies and savings target of £5m in 2006/07,
a proportion of which will be delivered through the Efficiency Savings
Strategy adopted by CCMT on 4 May 2005. Savings through this strategy
are expected to come from procurement efficiencies and income generation.
Service Heads have been asked to come forward in early October with
their suggestions on how to achieve the balance of savings required.
It is not possible to identify the extent of the savings until this
exercise is complete, and the savings through the Efficiency Savings
Strategy are verified. Any savings or service reductions will be subject
to a risk assessment prior to agreeing the proposals.
- The report sets
out the latest known position on potential calls against the sum available
to allocate. This comes to £9.2m. At this stage, it appears that the
planned contingency of £9.2m could be fully utilised. It should be borne
in mind that this sum is dependent on achieving the full £5m efficiencies
and savings. Further work is being undertaken to determine an up to
date position. All the potential spending pressures will be subject
to a review involving independent advisers.
- The Capital Programme
has an overall surplus of £1.1m by 2008/09. For a three-year programme
to be agreed, a further year (2008/09) will need to be added to the
programme. Capital proposals will be considered by the Capital Steering
Group and then brought forward against the anticipated capital resources
available.
- The capital cash
flow shows a surplus of £21.8m for 2005/06 reducing gradually to a surplus
of £1.1m by 2008/09. These unutilised resources are being invested as
part of the Council’s cash balances and earning interest, estimated
to be £2.0m above budget by the year-end.
Revised
Medium Term Financial Plan
- The new Administration’s
manifesto gave a pledge for a decreasing level of Council Tax increases
compared to those in the Medium Term Financial Plan (MTFP). The MTFP
agreed by Council on 15 February 2005 assumed Council Tax increases
of 4.5% each year from 2006/07 to 2009/10. At its meeting on 5 July
2005, the Cabinet selected its preferred level of Council Tax for the
purpose of its budget planning for 2006/07 and subsequent years. An
increase of 4.375% in 2006/07 reducing by 0.125% in each of the following
years was agreed. The revised MTFP is set out in Annexes 2a-b.
2006/07
Net Expenditure and Funding
- The following
table sets out the starting point for the 2006/07 budget as set out
in the revised MTFP.
Gross
Budget 2005/06
Less:
Specific
Grants 2005/06
Income
2005/06
Equals:
Budget Requirement 2005/06
Add
new 2006/07 items:
(i)
Inflation
(ii)
Previously Agreed Policy Plans
(iii)
Other Variations Agreed in MTFP
(iv)
Available to Allocate to Council Priorities
(v)
Efficiencies and Savings
Equals:
Budget Requirement 2006/07
Funded
by:
Total
Formula Grant (assuming 3.2% increase)
Council
Tax (including surpluses) (assuming 4.375% increase)
Total
Funding
|
£m
777.5
123.9
69.6
584.0
15.3
1.0
0.2
9.2
-5.0
604.7
367.2
237.5
604.7
|
- Additional resources
already built into the MTFP for 2006/07 total £16.5m (items i to iii).
The assumptions behind these are detailed in Annexes 3a-b. Items iv
and v are explained below.
Available
to Allocate to Council Priorities
- The sum available
to allocate to Council Priorities of £9.2m is the amount of funding
available within the constraints of a 4.375% Council Tax after taking
into account items already agreed (items i to iii). This sum is dependent
on achieving £5.0m of efficiencies and savings as shown in the table
above (item v). It should be noted that the sums already agreed can
be reviewed as part of the budget process to ensure they are still relevant
and required.
- Potential calls
against this sum relating to pressures have already been identified,
which currently total £9.2m. Some of these pressures were identified
as part of last year’s budget process and need reviewing. Inevitably
there will be changes to these, some may not materialise and some could
be met within directorates. The potential pressures are listed in the
table below.
|
£m
|
|
|
Cross
Directorate
|
|
(a)
Pensions revocation
|
1.2
|
|
|
Learning
& Culture
|
|
(b)
Schools Passport/Dedicated Schools Grant
|
1.3
|
(c)
Premature Retirement Compensation
|
0.8
|
(d)
County Facilities Management
|
0.5
|
|
|
Social
& Health Care
|
|
(e)
West Oxfordshire Strategy
|
1.0
|
(f)
Market Capacity
|
2.0
|
(g)
Domiciliary Care
|
0.8
|
(h)
Supporting People
|
0.6
|
|
|
Environment
& Economy
|
|
(i)
Waste Management Contracts
|
0.5
|
|
|
Community
Safety
|
|
(j)
Fire & Rescue
|
0.5
|
|
|
TOTAL
|
9.2
|
- Items (a), (d)
and (h) have been identified as potential pressures based on the 2004/05
outturn or latest information and are discussed in more detail below.
Item (b) relating to the Dedicated Schools Grant is also further updated
below.
- Heads of Service
have been asked to identify by the end of August any pressures they
feel cannot be met within their Directorate, including reviewing those
identified in the table above. These will be subject to considerable
scrutiny involving independent advisers, to try and identify alternative
sources of funding or different methods of responding to them.
(a) Pensions
Revocation
- In July, the Office
of the Deputy Prime Minister issued amended Regulations effective from
1 April 2005 for the Local Government Pension Scheme. The effect of
the new Regulations is to revoke the Regulations previously agreed,
which came into effect on 1 April 2005. Those initial Regulations had
the effect of raising the earliest age at which a pension was payable
from 50 to 55 (except in the case of ill-health), and removing the so-called
85 year rule. This allowed individuals to receive an unreduced pension
if they retired before 65 where their service plus age equalled or exceeded
85, and in the case of officers below the age of 60, if they had their
employer’s consent.
- The Oxfordshire
Pension Fund’s Actuary was able to take account of the financial impact
of the new Regulations in producing his 2004 Fund Valuation report.
It was his estimate that the introduction of the Regulations reduced
the cost to the Pension Fund to the value of 1.5% of pensionable pay
per year, reducing the budget pressure from the pension liabilities
by £1.5m per year. Of this sum, £0.3m relates to schools.
- The Pensions Fund
Committee on 26 August 2005 asked the Actuary to informally provide
the increase in contribution rates arising from the revocation. The
Government have indicated that the costs should not fall on the Council
Tax payer. However, we have not had any indication of how this will
be achieved. Until this advice is available and can be considered we
will have to assume that the costs will have to be met by the County
Council. For the purposes of planning, a budget reserve of £1.2m should
be set aside from 2006/07.
(b) Schools
Passport/Dedicated Schools Grant
- The Government
has announced that it is to proceed with implementing a ring-fenced
Dedicated Schools Grant (DSG) from April 2006. The baseline for 2005/06
will be the total of the Schools budget of £267.8m, which is £1.5m higher
than Formula Spending Share.
- Consultation on
the method of distributing the DSG for 2006/07 and 2007/08 is ongoing,
but it is sufficiently advanced to make some reasonable assumptions.
In 2006/07 and 2007/08, the DSG is set to increase by around 6% over
the 2005/06 baseline, with a minimum increase of 5% per pupil. The Minimum
Funding Guarantee is to continue for 2006/07 and 2007/08, details of
which will be announced in the Autumn. A 6% increase from the 2005/06
baseline is £16.1m.
- Pressures and
commitments arising within the Schools block in 2006/07 will need to
be met from within the DSG increase. These are set out in the table
below.
|
£m
|
£m
|
|
|
|
Estimated
increase in DSG (6%)
|
|
16.1
|
|
|
|
Less
commitments (included in MTFP):
|
|
|
Inflation
(at 3%)
|
8.1
|
|
Previously
Agreed Policy Plans
|
0.4
|
|
Share
of previously agreed Policy Plan for Job Evaluation
|
0.1
|
|
|
|
8.6
|
Less
estimated pressures:
|
|
|
Share
of pensions revocation cost
|
0.3
|
|
Early
Years Grant (extension of entitlement)
|
1.2
|
|
Energy
costs (based on contract price increases)
|
1.5
|
|
Fees
to Independent Schools (estimated growth)
|
0.4
|
|
|
|
3.4
|
Total
commitments and pressures
|
|
12.0
|
|
|
|
Uncommitted
sum remaining
|
|
4.1
|
- Known commitments
and pressures account for £12.0m of the estimated DSG increase. This
leaves £4.1m currently uncommitted, equivalent to real terms growth
of approximately 1.5%. If the DSG increase is only 5%, in line with
the minimum increase per pupil, the cash increase would be £13.3m, leaving
only £1.3m uncommitted.
- From 2006/07 the
issue of achieving the schools passport will no longer be relevant.
The issue for the Council will be the loss of grant arising from the
transfer of schools spending out of Formula Spending Share (FSS). Nationally
expenditure on schools is £210m above FSS, and as the DSG will be based
on actual schools expenditure, it is currently assumed that in additional
to losing Schools FSS, the Council will also lose its pro-rata share
of the £210m. This is calculated to be £2.8m. As we currently spend
£1.5m above FSS, the real terms loss will be £1.3m. It should be noted
that until further information is available the identified loss is only
speculative. It is possible that the loss in grant could be more or
less than the sum identified.
(d) County
Facilities Management
- An ongoing potential
pressure relating to County Facilities Management (CFM) was identified
as part of the 2004/05 outturn. The overspend in 2004/05 was met from
accumulated balances. However no further reserves remain and the overspend
is likely to continue if the service continues to trade on the existing
basis. A Best Value Review was undertaken earlier in the year and is
due to report to the Children’s Services Scrutiny Committee in September
with an assessment of options to address the situation. Information
recently received from the Department for Education & Skills indicates
that some grant funding will be available both this year and the next
two years, which should help the position. The impact of this is currently
being assessed.
(h) Supporting
People
- The level of Supporting
People grant in 2005/06 has reduced by £1.5m compared with 2004/05.
Further grant reductions of approximately £0.9m per year are expected
in both 2006/07 and 2007/08. Achieving the reduction in spending to
match the reduction in grant is difficult in the short term due to contracting
requirements set by the Office of the Deputy Prime Minister. Consequently
achieving a financial balance with reductions in services is only likely
to be achieved by 2007/08. This results in a pressure of approximately
£0.6m in both 2005/06 and 2006/07.
CCMT Proposals
for Integrating Service and Financial Planning
- Last year CCMT
developed a budget strategy that sought to encourage managers to take
more responsibility for financial management. This year CCMT’s proposals
build on this and move forward in developing an integrated approach
to service and financial planning.
- It was recognised
that achieving the goal of integrating service and financial planning
is a significant challenge and that it will take some time. The approach
approved by CCMT comprises four stages as set out below:
- Stage 1:
Directorates have reviewed their management structures to ensure that
they reflect corporate expectations of the role of managers and service
requirements. This establishes the basic service structure of
the County Council. This stage was completed at the end of August 2005
for review by CCMT in early September.
- Stage 2:
Services will define the services that are delivered currently in terms
of outputs and outcomes (not inputs). This establishes current
service levels. This stage is due to be completed by the end
of September 2005.
- Stage 3:
Services should develop medium term service plans that show how
service outputs and outcomes may need to change over the next 3 years
(2006/7 – 2008/9). The plans should be completed (after consultation
with staff, within Directorates and with stakeholders) by the end of
January 2006.
- Stage 4:
In the longer term, all services should be reviewed from first principles
to establish what resources are required. This is a major exercise that
will require considerable input by service managers and resource advisers
(finance, HR, ICT and possibly property). Over the next five years,
all services should be subject to this fundamental review. Fundamental
reviews will not be carried out this year, the focus instead will be
on developing the approach to apply it from April 2006 onwards. However,
those services facing financial difficulties, which mean that they will
struggle to live within next year’s budget after taking account of efficiency
savings, will be subject to limited reviews.
Efficiency
Savings Strategy
- The Efficiency
Savings Steering Group (ESSG) proposed an Efficiency Savings Strategy
for 2006/07 and 2007/08, which was agreed by CCMT on 4 May. The objectives
of the strategy are to meet the savings target in the Medium Term Financial
Plan (MTFP), meet the requirements of the Annual Efficiency Statement
(AES) and to maintain continuous improvement in the overall level of
service delivery and efficiency.
- The objectives
and targets will be achieved by a range of organization wide work streams
comprising:
- Shared corporate
services
- Improving corporate
services under SAP revitalisation
- Procurement
strategy
- Income generation
- Various directorate
and service specific projects
- Work on the procurement
element of the efficiency savings strategy has identified potential
savings next year of between £1m and £2m. There may also be some potential
for increasing income but that will be less than £0.5m. Further work
needs to be undertaken to identify how this will be achieved.
- As part of the
2005/06 budget process, CCMT agreed a protocol for calculating savings
on a broad brush but fair mechanism. This protocol stands, and CCMT
have agreed that the balance of savings required, currently estimated
to be between £2.5m and £3.5m should be allocated out to Heads of Service
on a pro-rata basis. £3.5m equates to 1.3% saving for each Service.
As last year, Services are expected to focus initially on the scope
for making further efficiency savings on top of those achieved this
year.
- Firm targets are
expected to be issued to Heads of Service in early September. Services
will then need to identify exactly how they intend to meet these targets
with responses expected in early October.
Beyond
2006/07
- Other areas where
there are known pressures in future years are Landfill Tax for 2009/10
and 20010/11 and the cost of administering the County Council Elections
in 2009. The Government announced in 2002 that Landfill Tax would rise
by at least £3 per tonne each year from 2005/06 indefinitely. The current
MTFP allows increases up to 2008/09, further costs need to be built
in for the following years, currently estimated to be £0.8m per year.
The next County Council elections will take place in 2009. One-off costs
of administering the elections, estimated to be £0.4m, should be built
into the MTFP for 2009/10.
- The Government
has announced its intention to carry out a council tax revaluation exercise
which will be effective from 2007/08. Nationally the total amount that
Councils receive from taxpayers and the government should remain unchanged.
However, if house prices in Oxfordshire have gone up by more than the
average for England then Oxfordshire council tax payers will face increases
in their bills that are not related to increases in expenditure of the
local authorities in Oxfordshire, unless the Government introduces regional
banding of council tax levels or some other transitional device. Whilst
this cannot yet be factored into the MTFP. Members should be aware of
this future change.
- The Spending Review
for 2006 is to be postponed and will now take place a year later, in
the summer of 2007. We already have figures up to and including 2007/08
from the 2004 Spending Review. Government departments (and presumably,
local authorities) will be required to stick to these existing plans
for the 2006/07 and 2007/08 financial years. The 2006 Spending Review
would normally have confirmed the figures for 2007/08 and issued new
spending plans for 2008/09 and 2009/10. It would normally have issued
broad FSS control totals and local authority grant figures for these
two extra years. The Spending Review in 2007 will now issue figures
for 2008/09, 2009/10 and 2010/11. This change will mean that the council
tax revaluation (due to be implemented from April 2007) will not be
in the middle of a Spending Review. The delay could also be used to
address the overlap problem that occurs if schools funding is to be
provided on an academic year basis rather than a financial year basis
from 2008/09.
- The Council entered
into a contract in 2002, which transferred the Council’s Homes for Older
People to the Oxfordshire Care Partnership (OCP). There were two financial
streams to the contract. Firstly, the Council’s revenue costs increase
due mainly to the capital investment required to improve/rebuild the
homes; secondly, a capital stream of payments to provide new sites and
capital receipts/capitalised leases arising from the project. It was
anticipated that in the early years of the contract the increased revenue
costs would be covered by surpluses on the capital account. The last
reported position showed the increased revenue costs being fully funded
from capital until 2006/07, with a final contribution of £1.6m from
capital in 2007/08. The Council has recently agreed the West Oxfordshire
Homes Strategy, which has impacted on the capital cash flows. Additionally
ongoing negotiations with OCP have brought other changes to the capital
elements of the contract. The updated position on capital now shows
that there is unlikely to be a contribution to the revenue budget in
2007/08, creating a potential pressure on the 2007/08 budget of £1.6m.
This will be kept under review.
Balances
and Reserves
- The Financial
Monitoring Report elsewhere on the agenda identifies that balances at
31 July were £13.3m, an increase of £1.0m since the last report and
in line with the plan to achieve 2% of budget requirement by 2006/07.
- Included in this
sum is £2.0m in relation to a predicted surplus on strategic measures
(an increase of £0.7m since the previous report). It has not yet been
determined how this is to be allocated and it may need to be diverted
for other purposes.
- Calls on balances
to date total £0.3m and relate to the extra costs of the Fire-fighters
pay award, an additional cost on Fire-fighters pensions, pension fund
revaluation costs relating to County Facilities Management and a number
of small overspends on budgets which are deemed to be outside the control
of Directorates. Further calls on balances of £0.25m relating to non
achievement of telecommunications procurement savings are requested
in the Financial Monitoring Report, and £0.65m relating to Supporting
People has also been identified as a possible future call. In total
these amount to £1.2m. The 2005/06 budget assumes calls on balances
could be up to £1.5m. The areas of risk detailed in paragraph 72 below
need to be monitored closely to ensure the projections on balances remain
in line with those set out in the MTFP.
- At its meeting
on 19 July, the Cabinet agreed that underspends on Environment
& Economy of £0.7m relating to Public Transport (£0.071m), Strategic
Policy & Economic Development (£0.371m) and Waste Management (£0.282m)
would be returned to Council balances and held against a risk-assessed
schedule of potential commitments as identified by the Directorate.
It was also agreed that in the future, fortuitous and unplanned income
occurring in year should be returned to balances in the first instance
where it could be requested for specific purposes. This is a change
to current practice and may result in a higher level of balances being
held in the short term.
- An analysis of
estimated balances for 2005/06 to 2009/10 is set out in Annex 3a. An
update on the position in respect of reserves will be provided in a
later report.
Potential
Function and Grant Changes
- Changes to Fire-fighter
pension arrangements are likely from 2006/07. It is expected to be funded
from specific grant rather than through Formula Spending Share (FSS).
The current cost to the Council is £2.4m and it is possible that this
change will affect the budget due to distributional effects.
- The Social &
Health Care grant for Residential Allowance of £1.9m will transfer into
FSS in 2006/07; in addition the Preserved Rights grant is gradually
being reduced and transferred into FSS. Approximately £0.5m should be
transferred into FSS in 2006/07.
- Changes to Area
Cost Adjustment are expected with an estimated loss in grant of around
£2.0m. It is envisaged that any change should not have a significant
impact on funding, as the grant increase we are assuming in the MTFP
should be around the level of the grant floor for 2006/07.
- A Settlement Working
Group is currently considering a number of alternative grant systems
and the implications of producing grant figures for future years as
part of three-year settlement. It is not possible to say with any certainty
at this stage what the effects would be for Oxfordshire of any proposed
changes to the grant systems, although it is probable there will be
some effect. Forecasting grant funding two or three years into the future
will mean that estimates have to be used and a simpler grant system
may be applied. We may have to give a firm indication of the council
tax level that we plan for 2007/08.
Capital
Programme
- The capital programme
has been updated and is included in the Financial Monitoring Report
elsewhere on the agenda.
- The programme
overall has a surplus of £1.1m by 2008/09. The capital cash flow shows
a surplus of £21.6m for 2005/06 reducing gradually to a surplus of £1.1m
by 2008/09.
- The capital programme
reported in April 2005 showed a surplus of £1.8m with a commitment of
£1.5m to Schools, leaving £0.3m available for allocation. The updated
position shows a surplus of £1.1 with an over commitment of £0.3m to
schools. When the over commitment to schools is resolved £1.4m is available
for allocation.
- The main reason
for the improvement in sums available for allocation is a change in
funding source for loans to foster carers. These are now to be financed
from borrowing under Prudential Guidelines releasing £0.9m for reallocation.
- The Cabinet on
22 June endorsed a report on Implementing the Manifesto Pledges. Within
that report was a proposal to implement a new scheme to provide grants
for community youth facilities through a new Youth Facilities Fund.
It is now recommended that £0.1m per year be added to the capital programme
from 2006/07 to 2008/09 in order to provide the funding for those grants.
This will be subject to approval of an appropriate scheme by the Cabinet.
- At 31 March 2005
the Council had unutilised capital resources of £19.7m represented by
capital receipts of £16.1m and the capital reserve of £3.6m.
- These unutilised
resources are being invested as part of the Council’s cash balances
and earning interest. It is anticipated that the Council’s outturn position
on strategic measures in 2005/06 will show a £2.0m surplus against the
budget. This is being held in general balances and is referred to in
paragraph 45 above. Of this surplus some £0.8m is generated from these
capital resources. It would be possible to add £0.8m to the capital
resources held which would help to retain their purchasing power. The
impact of inflation on planned projects in the capital programme could
otherwise mean that the Council would not be able to deliver all the
planned projects in its forward programme. However Council should defer
making the decision until the overall resources position on both revenue
and capital becomes clearer.
- The Council in
February 2005 agreed a three-year capital programme, which utilised
most of the resources available up to 2007/08. For the Council to agree
a three-year programme in February 2006, a further year (2008/09) will
need to be added to the programme. To enable a programme for that year
to be agreed Directorates will be asked to bring forward capital proposals
against the anticipated capital resources available. Bids for Schools
and Transport should be in line with resources approved by the DfES
and the Department for Transport (DfT).
- For other service
areas it is anticipated that the Council will receive around £1m of
supported borrowing approvals from the Government. Other likely available
resources will come from a review of the available capital receipts.
Local
Transport Plan (LTP)
- The Council has
received a consultation paper on the LTP capital allocations for the
next five years. The consultation sets out baseline figures for the
allocations, which are some £2m per year less than the Council has assumed
(on the basis of Government indicative allocations) in its forward capital
programme. The impact would be that the capital programme would have
to be scaled back in line with the reduced allocations. Given the interchange
ability between revenue and capital for funding some activities, this
may create pressures on the revenue budget. The baseline figures could
also increase or decrease dependent upon the Council’s rating for its
LTP submission and Annual Performance Report. The allocations will be
announced as part of the LTP settlement in December.
Prudential
Borrowing
- The Council has
included the borrowing costs for £4m of prudential borrowing in its
budget for 2005/06. This amounts to £0.112m. Currently no account has
been taken of any savings arising from this borrowing, so the costs
of borrowing are included in the budget but will not be required since
any borrowing, approved must be covered by savings. Those savings will
be identified when business cases come forward to the Cabinet for approval,
and will be reported in future monthly monitoring reports.
- The Executive
on 19 April 2005 agreed a business case for Energy Conservation measures.
The payback periods for projects undertaken will vary dependent upon
the type of project. A schedule will be maintained to ensure that full
recovery of the borrowing costs is achieved over the payback periods.
- The Executive
on 19 April 2005 also agreed the capital programme of £25m for backlog
maintenance on the Council’s buildings covering the period 2005/06 to
2010/11. Funding will be through prudential borrowing, with schools
being asked to contribute some devolved formula capital towards the
costs. A programme of works totalling £2m has been identified for 2005/06.
Schools are being consulted on the arrangement to ensure that a robust
system is put in place to deliver the project and that savings can be
delivered to meet the borrowing costs of the project.
- The Capital Steering
Group on 10 June 2005 recommended that the loans to Foster Carers, Kinship
Carers and Adopters should be met through Prudential Borrowing and the
borrowing costs be covered from the Social & Health Care Budget
from 2006/07. Cabinet are asked to agree this.
- Other projects
that may be considered for funding via prudential borrowing are the
review of property assets and a modern work style project for central
offices. Details of these will be brought forward to Cabinet in due
course.
Parking
Charges
- The introduction
of free parking at the County Park and Ride sites (Thornhill and Water
Eaton) is estimated to lead to a reduction in income of around £150k
per year.
- The estimated
reduction in car parking income as a result of offering free on-street
parking in Oxford in the evenings and on Sundays is around £500k in
a full year. Currently a pilot is being developed to commence in the
Autumn.
- Potentially the
parking accounts could suffer a loss of revenue of £650k per year as
a result of fully implementing the proposals. This would reduce the
sums available for further investment in future years.
City Schools
– Meeting with DfES
- A meeting was
held with DfES to consider the repayment of some £8.8m in respect of
additional capital receipts achieved on the sale of surplus sites arising
from the City Schools reorganisation project. The DfES have asked for
further information before reaching a final decision on the repayment.
This information is currently being collated. Cabinet will be updated
as negotiations progress.
- The repayment
is currently programmed for 2005/06. Dependent upon the method of repayment
required by the DfES, there may be a delay in making the payment until
2006/07. This would increase further the capital surplus in 2005/06
by the £8.8m.
Invest
to Save Budget
- The Council has
submitted two Expressions of Interest for the Government’s Invest to
Save Budget. The first bid is for a Creative Credits Project to promote
social inclusion through the arts and to limit the number of young people
carrying out criminal or anti-social acts. The bid is for £1.35m over
three years. The second bid is for "Placement Matters", to generate
efficiency savings in the Children’s Services Budget. The bid is for
£0.325m over two years. An announcement on successful bids is expected
in October.
Risk Analysis
- The Financial
Monitoring report to Cabinet elsewhere on the agenda expresses concerns
surrounding the achievement of budgeted savings in areas of the Learning
& Culture and Social & Health Care Directorates. Reference is
also made to the risk surrounding the non-achievement of corporate efficiency
savings allocated across Directorates for telecommunications procurement
savings. The report recommends that a supplementary estimate is approved
to reinstate the savings of £0.25m (referred to in paragraph 44 above).
The achievement of other savings relating to 2005/06 will need to be
monitored carefully including any impact there may be on future years.
Should these concerns be justified, an alternative source for the required
savings will need to be found.
- Other areas of
risk in 2005/06 arising in the report include pressures in Learning
& Culture relating to Premature Retirement Compensation (PRC) and
County Facilities Management (CFM). Pressures within Social & Health
Care relate to Learning Disabilities, potential cuts in Health expenditure
in 2005/06 and the Children’s Placement Strategy, although this is expected
to be in balance by 2007/08. A further potential overspend in Supporting
People is also possible. Most of these have already been identified
as potential pressures for 2006/07 as shown in the table at paragraph
14 above.
- As predicted in
the Revenue Budget & Capital Programme report of 16 November last
year, there has been a significant increase in the cost of energy contract
renewals during 2005. The estimate back in November was a 40% increase
on both gas and electricity. The actual increases are 60% for gas and
35% for electricity. In addition the cost of both metered and un-metered
water increased by 18% from April. Whilst the price rises emphasise
the need to manage energy and water effectively, there will undoubtedly
be a pressure on Directorates’ budgets, estimated to be £0.5m (excluding
schools).
- Other inflationary
pressures may emerge in relation to the Baxter Index of construction
prices, which is based in part on petrol prices. Inflation on petrol
and oil was 9.8% in July. The Index is applied to Developer Contributions
and also has an impact on road maintenance. In respect of Developer
Contributions, a 1% increase will cost an additional £0.35m.
- The main risk
on the Capital Programme is around slippage. Potential causes include
delays in obtaining planning permission and unforeseen problems on site.
The Council receives some resources from Government in the form of borrowing
approvals which are available for use only in the years they are given.
If there is significant slippage on the programme the Council may not
be able to use all the borrowing approvals in 2005/06. This would mean
a loss of resources to fund the forward capital programme which would
have to be scaled back accordingly. Slippage also impacts on operational
risks, such as new facilities not being available as soon as they could
be to improve service delivery. Some schemes may have to be deleted
from the programme or deferred until further resources are allocated.
The Cabinet receives regular monthly monitoring reports on the capital
programme. These should highlight any potential risks around slippage
on the programme so that early action can be taken to mitigate those
risks.
- As part of the
risk analysis process, directorates have recently updated their Risk
Registers. Details of the financial risks are attached at Annex 4. Risks
that are quantifiable currently total £5.3m. This could be met from
within existing balances although it would seriously deplete the level
held and hinder achievement of balances equivalent to 2% of the net
budget by 2006/07. These will be reviewed as part of the on-going budget
process.
Budget
Process and Timetable
- A proposed timetable
for the 2006/07 service and financial planning process is attached at
Annex 5.
RECOMMENDATIONS
- The Cabinet
is RECOMMENDED to:
- note
the report;
- approve
the updated Financial Strategy 2006/07 to 2008/09 as set out
in Annex 1 to the report;
- approve
the CCMT budget management proposals set out in the report;
- approve
the funding of loans to Foster Carers, Kinship Carers and Adopters
through Prudential Borrowing;
- approve
the allocation of £0.1m per annum within the capital programme
from 2006/07 to 2008/09 to provide grants for community youth
facilities, subject to Cabinet approval of an appropriate scheme.
JOHN
JACKSON
Director for
Resources
Background
papers:
Contact
Officers:
Lorna Baxter Strategic Financial Planning Manager Tel. 01865 816087
Mike Petty Strategic
Finance Manager (Capital & Treasury Management) Tel. 01865 815422
September
2005
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