ITEM CA6 Supplement
CABINET - 15 JANUARY 2008
SERVICE AND RESOURCE PLANNING 2008/09 – 2012/13
Report by Cabinet Member for Finance
Introduction
1. This report is to be read in
conjunction with the report from the Assistant Chief Executive & Chief
Finance Officer and sets out the Cabinet’s proposals for the 2008/09 budget and
the Medium Term Financial Plan (MTFP) for 2008/09 to 2012/13. In making these
proposals the Cabinet have considered the Directorates’ budget priorities and pressures
and the efficiency savings and service reprioritisation to fund their
priorities andpressures. 2. This report has also considered the comments on the draft budget proposals from individual Scrutiny Committees held in December 2007 as well as the outcome of the public consultation on the budget, which was undertaken on the 8 December 2007. A report from Ipsos MORI summarising the outcomes will be circulated separately when available. The proposals in this report take account of the latest financial information outlined in the report by the Assistant Chief Executive & Chief Finance Officer.
Comprehensive Spending Review
3. The Comprehensive Spending Review (CSR) which allocates the Revenue Support Grant to Local Authorities, was postponed by the Government from 2006 to 2007 and they only issued national planning totals in October with individual authorities allocation being announced in December, this delay has made the planning of these budget proposals extremely difficult. It was therefore decided not to make any prior allocation of the budget headroom before directorates’ proposals were considered by the Star Chambers in November.
4. The figures announced in December for the next three years allocate grant increases to this Authority of 2% for 2008/09, 1.75% for 2009/10 and 1.5% for 2010/11. This is a decision by Ministers as Oxfordshire County Council is a floor authority and only receives the minimum increase. The Government has changed the arrangements in the formula by the removal of the damping grant relating to the relative needs element for younger adults, although in the short term this increases the general damping. As these increases are all below the Government’s assumed inflation of 2.75% for the next three years, this is a real terms cut in resources available to the council. The transfer of four specific grants into the formula although transferred at their previous allocation, will be subject in future years to the below inflation increase in revenue support grant as determined by Government Ministers as long as Oxfordshire County Council remains a floor authority.
Council Tax Base & Collection Fund
5. Provisional figures from District Councils, to be confirmed by the 31 January 2008 indicate an increase of 0.64% in the Council Tax base from 2007/08 however, the MTFP assumed an increase of 1.1%, this means a reduction of Council Tax income of £1.2m based on a 4% Council Tax increase. An assumption is made that the housing growth forecasts will be delivered in future years and the increase in the MTFP (1.1%) is retained from 2009/10 onwards.
6. Any collection fund surplus or shortfall has an effect on funding available for one-off investment, provisional figures from the District Councils could be around nil. The MTFP assumed income of £1.25m but if a zero figure is confirmed the amount to allocate for one-off purposes will be reduced by £1.25m.
Strategic Measures
7. The strategic measures budget includes the financing element of capital expenditure but also includes interest earned on money market investments on temporary surpluses and interest added to reserves. Assumptions have been made regarding a lower bank base rate and changes by the Government to schools and transport capital allocations, which are reflected in the amount to allocate in the revenue budget.
Pensions & Insurance
8. In the MTFP £2.1m had been included for the predicted cost of the triennial review of the Pension Fund employer liabilities, the recent review indicates that this is more than is necessary and that £0.966m can be used in the revenue budget. It also means the pension fund reserve of £2.25m is no longer required and it is recommended that £1.5m be used for one-off funding and £0.75m be transferred to the Insurance Fund in the light of the recent calls on this fund due to the July floods.
Sum to Allocate Ongoing
9. Having considered the directorates’ ongoing investment bids of £5.8m (set out in Annex 2 of the report by the Assistant Chief Executive & Chief Finance Officer), the budget priorities and pressures (£15.7m) and their efficiency savings and reprioritisations (£13.0m) leaving unmet pressures of £2.7m (as set out in Annex 3 of the report by the Assistant Chief Executive & Chief Finance Officer), and savings which would be difficult to deliver of £0.9m which together total approximately £9.4m, we make the following proposals to allocate the £7.7m the sum available identified in paragraph 25 in the report by the Assistant Chief Executive & Chief Finance Officer (See Annex 1 £7.4m and further details in Annex 2) and a reduction in the Council Tax increase from 4% to 3.875% (£0.3m). These proposals are summarised below.
10. Funding for investments £5m
· Increase educational attainment £0.7m · Adult social care £1.2m · Highway improvements £0.5m · Capital investment £1.5m. Prudential borrowing costs for £25m over 8 years · Cabinet priorities £0.5m delivering LAA2. · Revenue impact of ICT investment £0.6m
11. Funding unmet pressures £1.6m including
· Landfill tax increase £0.6m · Flood defence levy £0.5m (subject to confirmation of the figure required)
12. Savings difficult to deliver £0.8m including
· Do not reduce book fund £0.268m · Reorganise museum service including Cogges £0.025m · Withdraw support over three years to Victoria County History £0.010m · Do not reduction in repairs and maintenance budget £0.188m · Fund current pressure in print and design unit (options for change are being examined) £0.200m
13. Reducing Council Tax increase from 4% to 3.875%. £0.3m.
Balances
14. Year end forecast of balances is expected to be £18.6m, £1m higher than previously reported. It is proposed that this additional £1m is retained in balances to avoid the creation of the proposed budget reserve £1.1m in 2009/10 from deferring interest on developer contributions. Following a review of the risk assessment which identified that balances of £11.5m were commensurate with the risks, £4.5m can be allocated for one off funding in any year, the total that could be available in 2008/09 is £7m (paragraph 26 report by the Assistant Chief Executive & Chief Finance Officer.
15. It is proposed that £4.6m be allocated for one-off investments as set out in Annex 3, including adult social care £1.5m and £3m for ICT Strategy Investment Fund. Medium Term Financial Plan later years
16. Adult social care demography will be increased by £1.856m from 2009 onwards. This figure will be reviewed annually when the effect of the investment both ongoing £1.230m and one-off £1.535m made in 2008/09 can be assessed together with the changes in policy to develop Extra Care Housing and a network of Extended Day Centres.
17. Landfill Tax increases set by the Government are included in the MTFP and LATS fines from 2011/12 onwards are also included, these figures will need to be reviewed when the tonnage going into landfill reflects the introduction of a treatment plant and the success or otherwise of recycling programmes.
18. It is proposed to gradually withdraw funding from Cogges Museum and the Victoria County History over a three-year period so that by 2011/12 they will receive no financial support from this authority, this three-year period will enable them to seek finance from other sources.
Capital Programme
19. The Capital Programme is best considered as three separate programmes i.e. Schools, Transport & Highway Maintenance and Other Services.
· Capital allocation for schools has been received for the next three years and is part grant and part borrowing, the financing costs of the borrowing element can be accommodated within the MTFP.
· The Transport & Highway Maintenance allocation has also been announced as part grant and part borrowing, however the Government has increased the proportion of borrowing with the result that the financing costs are in excess of the amount of MTFP. The Cabinet agreed at its December meeting to limit expenditure so that the borrowing costs do not exceed the MTFP allocation, accordingly £6.5m capital expenditure will be removed from the programme over the three years.
· The capital programme for Other Services includes funding for new and refurbished libraries, youth centres, day centres in Social and Community Services, the Fire and Rescue Services and other services in Environment & Economy. Historically this part of the Capital Programme was funded by minor borrowing allocations and unallocated capital receipts plus when circumstances allowed, one off contributions from the revenue account. The Capital Strategy and Corporate Asset Management Plan indicated that over the next 10 years potential expenditure exceeded £50m and in order to make a realistic impact in delivering this programme the Cabinet have agreed in principle to use prudential borrowing for this purpose. The revenue budget proposals include £1.5m per annum to fund £25m expenditure over 8 years with the expectation that future capital receipts will also add to the programme. The report to Council in February will contain a list of projects for inclusion in the next 3 years programme on a provisional basis which will be dependent on the Council’s approval of the financing costs.
Conclusion
20. These budget proposals have the two major themes of Low Taxes and New Investment
· Low Taxes – for the third consecutive year this Conservative administration is proposing a lower rate of increase in Council Tax than the previous year. For 2008/09 a Council Tax increase of 3.875%, again demonstrating our manifesto commitment to low taxes.
· New Investment – investment for the future in Social & Community Services to make provision in the Adult Social care for the increasing number of people who will require Council services.
· New Investment – the ICT Fundamental Service Review highlighted the need for the Council to strengthen its ability to plan strategically for ICT across all directorates in order to improve the standards of customer service and to allow people to contact us and access our services electronically. In order to support this approach it is proposed to bring spending on ICT (including SAP) within a specific fund for ICT so that investment can be managed and directed in a coherent, consistent and strategic way. This budget therefore proposes a budget of £3m for 2008/09, rules for the way in which this ICT fund can be used will be agreed by the Cabinet in due course.
· New Investment – many public facilities such as libraries, youth centres, day centres and other services clearly need refurbishing or replacing with new buildings, the major policy change proposed to use prudential borrowing for this purpose will make a significant contribution for the provision of appropriate facilities for which the public have a right to expect.
Charles Shouler Cabinet Member for Finance
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