Meeting documents

Cabinet
Tuesday, 20 September 2005

CA200905-06

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ITEM CA6

CABINET – 20 SEPTEMBER 2005

SERVICE AND FINANCIAL PLANNING 2006/07 – 2010/11

Report by Director for Resources

Introduction

  1. 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.
  2. 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).
  3. 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.
  4. The following annexes are attached:
  5. 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

  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. Revised Medium Term Financial Plan

  12. 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.
  13. 2006/07 Net Expenditure and Funding

  14. The following table sets out the starting point for the 2006/07 budget as set out in the revised MTFP.
  15.  

     

    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

  16. 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.
  17. Available to Allocate to Council Priorities

  18. 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.
  19. 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.
  20.  

    £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


  21. 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.
  22. 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.
  23. (a) Pensions Revocation

  24. 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.
  25. 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.
  26. 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.
  27. (b) Schools Passport/Dedicated Schools Grant

  28. 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.
  29. 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.
  30. 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.
  31.  

    £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


  32. 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.
  33. 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.
  34. (d) County Facilities Management

  35. 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.
  36. (h) Supporting People

  37. 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.
  38. CCMT Proposals for Integrating Service and Financial Planning

  39. 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.
  40. 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:
  41. 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.
  42. 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.
  43. 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.
  44. 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.
  45. Efficiency Savings Strategy

  46. 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.
  47. 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

  1. 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.
  2. 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.
  3. 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.
  4. Beyond 2006/07

  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. Balances and Reserves

  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. Potential Function and Grant Changes

  16. 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.
  17. 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.
  18. 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.
  19. 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.
  20. Capital Programme

  21. The capital programme has been updated and is included in the Financial Monitoring Report elsewhere on the agenda.
  22. 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.
  23. 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.
  24. 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.
  25. 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.
  26. 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.
  27. 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.
  28. 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).
  29. 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.
  30. Local Transport Plan (LTP)

  31. 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.
  32. Prudential Borrowing

  33. 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.
  34. 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.
  35. 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.
  36. 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.
  37. 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.
  38. Parking Charges

  39. 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.
  40. 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.
  41. 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.
  42. City Schools – Meeting with DfES

  43. 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.
  44. 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.
  45. Invest to Save Budget

  46. 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.
  47. Risk Analysis

  48. 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.
  49. 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.
  50. 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).
  51. 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.
  52. 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.
  53. 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.
  54. Budget Process and Timetable

  55. A proposed timetable for the 2006/07 service and financial planning process is attached at Annex 5.
  56. RECOMMENDATIONS

  57. The Cabinet is RECOMMENDED to:
          1. note the report;
          2. approve the updated Financial Strategy 2006/07 to 2008/09 as set out in Annex 1 to the report;
          3. approve the CCMT budget management proposals set out in the report;
          4. approve the funding of loans to Foster Carers, Kinship Carers and Adopters through Prudential Borrowing;
          5. 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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