Meeting documents

            Meeting: Cabinet (County Hall, Durham - Committee Room 2 - 29/01/2009 10:00:00 AM)

                  Item: A2 Budget 2009/10

         

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Report of Stuart Crowe, Corporate Director, Resources [Cabinet Portfolio Member for Corporate Resources, Councillor Michele Hodgson]

Purpose of Report

Purpose and Structure of the Report

1 The purpose of the report is to provide information to enable Cabinet to make recommendations on the 2009/10 Budget to the County Council meeting on 27th February 2009.

2 The report is divided into 14 sections

Section A - Background and Summary of Recommendations

1 This report considers the first Budget for the new Unitary Durham County Council incorporating services from the former County Council and the seven “District” authorities following the review of Local Government in County Durham.

2 The County Council has determined a range of priorities to improve outcomes for local people. The budget proposals are built around those priorities.

3 A Budget Strategy was agreed by Cabinet in August 2008 and work has been ongoing since then, including consultation and discussion to bring forward proposals to this meeting. However, work started much earlier in 2008 bringing district and County Budgets and plans together. Initial work was based on the Bid document but as a result decisions on structures, following extensive consultation, related to Service groupings further work has been necessary. A range of Workstreams have been considering Service provision and proposals for the new authority related to the amalgamation and reorganisation of services. Proposals are made to invest a total of £17.505m in services in 2009/10.

4 Significant savings are anticipated as a result of the review - £13.763m in 2009/10 and a further £6.771m in 2010/11. However, other savings are necessary to balance the budget. Service Savings of £10.522m are proposed.

5 The County Council will determine Council Tax levels across the County this year for County and District Services and will need to undertake functions in Council Tax determination that previously would have been undertaken by Districts. Other issues also need to be addressed.

6 The original strategy was based on a council tax increase for planning purposes of 5%. Equalising council taxes across the County at District/County level reduces that increase to an average 3.19%. More up to date financial information is now available and Members have an opportunity to reflect on planning assumptions and make final recommendations to the County Council.

7 The Housing Revenue Account will need to be taken into account and some decisions are needed in respect of rent levels.

8 The budget consultation process has involved meetings with the Trade Unions, National Non-Domestic Ratepayers, Overview and Scrutiny, the Citizens Panel and the Schools Forum.

9 The Final Local Government Finance Settlement was announced by the Government on 21st January 2009 which was the second of a three year spending review series. Grant increases for Durham are as anticipated. Area Based Grants have been increased in 2009/10.

10 Risks have been identified and considered.

Summary of Recommendations

Section B Priorities

It is recommended that Members note the priorities around which the budget proposals are made.


Section C - Consultation responses

That responses from consultees are considered as Members determine their budget recommendations to Council.


Section D - Local Government Finance Settlement

It is recommended that Members note the Settlement.


Section E - Area Based Grants

That Cabinet approves the flexibility in the use of Area Based Grants.


Section F - Housing Revenue Account and other associated issues

Mortgage Interest Rate

The calculations for each Authority are shown in the table below.

District Council	Local Average Rate (including administration)	Standard National Rate	Rate Chargeable
Durham City	8.21%	5.07%	8.21%
Easington	7.14%	5.07%	7.14%
Wear Valley	5.48%	5.07%	5.48%
Combined Districts	5.02%	5.07%	5.07%

The new rates will be communicated to mortgagees upon confirmation by the Council.

Recommendations

It is recommended that the rates as displayed above are implemented from the 1st April 2009, to be reviewed at six monthly intervals.

Housing Revenue Account (HRA)

· The Housing Revenue Account Budget set out in Annex F1 be approved. · Rent increases be applied as follows: · Garage rents and other charges be increased by 5%. · ALMO management fees be inflated in accordance with existing contracts:

East Durham Homes	-	2%
Dale and Valley Homes	-	1%

Sedgefield Borough Homes

· Members note the requirements for the County Council to set the rents for Sedgefield Borough Homes for 2009/10 and

· a separate report be presented to Council dealing with the LSVT of Sedgefield’s housing stock and associated rent setting issues.

Housing Land Sales

It is recommended that with immediate effect, all capital receipts from housing land sales be applied to projects falling within the following definitions of affordable housing and/or regeneration where:

¨ the land, or a building on the land is vacant, unused, under-used, ineffectively used, contaminated or derelict, and
¨ the works or activities are carried out in order to secure that the land or building will be brought into effective use;
Section G - Revenue Budget

Revenue Budget 2009/10

It is recommended that Members approve the service investments and savings detailed in this report subject to proposals being considered to balance the budget.

It is recommended that Members determine the recommendations to the County Council to close the gap and balance the budget.

In considering this recommendation Members will need to have regard to the cost of varying the council tax increase from the planning assumption of 5%. Details of this are to be found in Section L of the report.

Financial Reserves

Set aside sufficient sums in earmarked reserves as it considers prudent to do so. The Corporate Director of Resources will be authorised to establish such reserves as are required, to review them for both adequacy and purpose on a regular basis reporting appropriately to the Cabinet Portfolio Member for Resources and to Cabinet. Aim to maintain, broadly, a level of general reserves between 3.5% and 4.5% of the budget requirement or about £16m to £20m.


Section H - Capital Budget

It is recommended that the Council establish a small group of Members to review existing proposals and make recommendations for new projects to be accommodated within existing resources.


Section I - Prudential Code and Treasury Management

It is recommended that Members note this Section of the report will be completed as the Service budgets are finalised.

Section J - Dedicated Schools Grant

It is recommended that Members note the position of the Dedicated Schools Grant.


Section K - Durham Charter Trust

It is recommended that the Corporate Director Resources be authorised to prepare a detailed estimate, for consideration by the County Council, in consultation with appropriate Members and Officers, of costs for 2009/10 for the Charter Trustees. (The County Council would be asked to determine an interim precept in accordance with the Regulations.)


Section L - Council Tax and other issues

Council Tax Levels

It is recommended that Cabinet determine a council tax increase level to be considered by County Council on 27th February 2009, taking into account all the issues raised in this report.

Council Tax Base

It is recommended that the amount calculated by the County for the year 2009/10 as the Council Tax Base is 153,774.7.

Estimated Collection Fund Surplus / (Deficit)

It is recommended that Members approve the estimated Collection Fund.


Section M - Risk

It is recommended that Members note the Risks.


Section N - Section 25 Report

It is recommended that Members note the Section 25 report.

Section B - Priorities

1 The Council will work closely with key partners to improve outcomes for local people and make County Durham a better place to be now and in the future.

2 There are two major influences on the medium term priorities for the new council from 2009/10 onwards. The first is the new Local Area Agreement (LAA) for 2008 - 2011, which has been agreed with partners and was signed off in June 2008. The second is the transformational agenda for the new council from April 2009, the framework for which is set out in a high level blueprint agreed by the Council.

Working in Partnership

3 The Council will develop its approach to strategic and community leadership with reference to the wider partnership framework. We will take a strong and leading role in working with partners to achieve the targets set out in the LAA and the long term goals and priorities set out in the Sustainable Community Strategy for the following seven key themes: § Economic wellbeing - a modern, dynamic and diverse economy; an enterprising and entrepreneurial society; improved employability and skills in the workforce; improved economic competitiveness of our major towns; and a reduction in poverty. § Achieve - improved attainment in education and work for people of all ages; more young people involved in employment, education or training; and increased levels of adult education and skills. § Physical place - a high quality clean, green, attractive environment; provision of sustainable residential accommodation across all tenures; enhanced choice and access to sustainable and integrated transport networks; and a reduced impact on climate change. § Health and wellbeing - all residents leading long and healthy lives. § Safe - everyone is safe and feels safe. § Enjoy - culture, leisure and sporting opportunities to meet the needs and aspirations of the community. § Positive contribution - strong cohesive communities and a vibrant and sustainable voluntary and community sector.

4 Agreement of the new LAA (2008 - 2011) involved engagement with a broad range of stakeholders with consideration of information and evidence from a number of sources. The LAA is the short term delivery mechanism for the most pressing priorities for improving outcomes in the County. It has received support from a wide range of partners and has 3 year targets for 35 National Indicators, 8 local indicators and 16 statutory education and early years indicators in line with the above seven themes.

5 Since the LAA was agreed additional evidence has been taken into account, including the following: § The Joint Strategic Needs Assessment - a significant new joint assessment for health and social care which was subject to wide public and stakeholder consultation
§ A review of the Children and Young People’s Plan which has taken account of the results of our second survey of children and young people across the County
§ A new Economic Development Strategy for the County which is being finalised following a major consultation exercise and updated to take account of the latest economic position.

Our Priorities

6 The LAA does not cover all of the priority areas of work that the Council is engaged in, either as an organisation or in key partnerships, where work is ongoing to deliver longer term strategies, but our priorities are aligned to the longer term goals in the SCS and more closely aligned to the LAA. We will take action and set targets to achieve:

§ Healthier communities
§ Safer communities
§ People enjoying, achieving and making a positive contribution
§ Economic well being
§ An improved environment 7 Our transformation agenda will include the improvements in service design and delivery that will be necessary for the new council to achieve the required efficiencies for reinvestment, improve outcomes and meet the Government’s expectations of becoming a flagship authority within the next two years. The following key themes will steer the way that the new council operates in the future: § Customer focus
§ Community engagement and empowerment
§ Modern and flexible services
§ Efficient and effective use of resources
§ Improved outcomes

8 In the planning and delivery of our priorities we will continue to consider the impact of our decisions in relation to fair and equal access to services for all sections of the community, services for rural communities, sustainable development and climate change.


Recommendation

9 It is recommended that Members note the priorities around which the budget proposals are made.

Section C - Consultation Responses


Citizens’ Panel focus group - 15th January 2009

1 A focus group of representatives from the Council’s Citizens’ Panel were given an outline of the Council’s priorities and the key elements of the current budget position, including information about the range of proposals for investments and savings. They were also given details of possible Council Tax options, starting with 5%, which was the basis for the budget proposals.

2 Given the complexities of the budget position the focus group were not asked to give views on the detail of the budget but were asked for their general views and reaction to the overall position and in particular on the balance between investments and savings and on the Council Tax options.

3 The main points raised by the focus group were:

§ There is a public perception that the creation of the new unitary council would save money and would result in lower council tax bills for most of the County because bills were being equalised down to the level of the lowest district’s council tax. The focus group asked for more information on this. In their view any announcement of council tax increases will need to be well explained and communicated.
§ In setting the council tax level the Council should keep any increases as low as possible and take into account the other financial pressures that people are facing, such as higher food bills and fuel costs.
§ Given the difficult economic position could reserves be used to ease some of the investment pressures with a view to building reserves back up at a later date?
§ Rather than have council tax increases the Council should:
o Look at the balance between statutory and discretionary services and only do the things that are really necessary.
o Think about reducing standards or levels of service, such as grass cutting and flower beds or refuse collection arrangements.
o Cut down on street lighting costs by switching lights off after a certain time or in certain locations, and reduce lighting of public buildings at night.

Report of Feisal Jassat, Head of Overview and Scrutiny

Purpose

1. To outline for Cabinet the response by Overview and Scrutiny to the Budget process for 2009/2010.

Introduction

2. At a Cabinet meeting on the 28 August 2008 a strategy and work Programme was agreed for the preparation of the budget and Medium Term Financial Plan (MTFP). The County and District Councils have been working extensively on bringing budgets together, dealing with Local Government Review (LGR) financial proposals and the savings and investment issues that all eight authorities would have needed to consider in a normal budget cycle.

Background and Context

LGR Savings & Investments 3. The LGR bid suggested that £20.53m could be saved and delivered over a two year period. This figure was based upon a range of assumptions in relation to levels and patterns of spending, particularly in District Councils and about prospects for savings by bringing the 8 authorities together. 4. Whilst it is anticipated that the Bid savings will be delivered in full over the two years, 2009/10 and 2010/11 they may not be delivered as precisely anticipated. Currently £13.67m is being sought in savings during the financial year 2009/10 with an additional £6.77m in 2010/11. 5. With reference to the report considered in August, the expectation was that, of the proposals contained in the Bid, £9.55m would be needed for investment in relation to Area Action Partnerships (AAP’s) and Budgets for Members. 6. A figure of £250,000 has been included in planning assumptions for each of the 14 AAP's which will cost £3.50m. In addition, current plans also assume that each member would have a revenue budget of £50,000 for local spending, which in total would cost £6.30m.

7. Current plans assume that each Member would have a revenue budget of £50,000 for local spending. This will cost £6.30m with the additional cost over and above the current Members' Initiative Fund of £2,000 per Member is £6.05m.

8. No assumptions have been made about varying the resources currently allocated to Members for highway related schemes, currently £6,000 per member. In total this costs £756,000 per annum. If Members were so minded this figure could be subsumed within the overall proposed £50,000 per member. 9. The cost associated with the proposal to equalise the former County and District Council's tax levels would amount to £3.23m. Base Budget and Inflation 10. Assumptions have been made about bringing together and rolling forward the existing budgets from County and District (the base budget and sums needed for inflation). 11. It is proposed to add £29.14m to the existing budget for inflation and base budget adjustments. 12. The general increase factored into planning assumptions is 2.5% for both pay and prices with inflation pressures above 2.5% and additional base budget pressures identified. 13. The additional inflation in the main relates to the cost of fuel and energy,
however it is forecast that these costs will reduce next year although costs are currently significantly higher than 12 months ago. 14. Decisions will need to be taken about whether to allow for these additional costs. If we do not, then services will need to absorb the costs by finding other savings or reducing service provision. 15. However, if it is agreed that the costs can be added to the base budget then in order to prepare a balanced budget, other savings will need to be found. 16. Work to date is based on the planning assumption of a 5% increase in Council tax. This would result in an average increase in Council tax across the County of 3.19% as a result of equalisation. 17. In relation to Government grant, it was anticipated that announcements confirming the position for 2009/10 would be made towards the end of November, 2008. Service Investments and Savings 18. As in previous years, it is necessary to consider as part of the budget process a range of proposals for investment and savings to ensure that the Council responds to the needs of customers and service users whilst acknowledging the need to reduce costs to enable Council tax increases to be contained within Government expectations. 19. Corporate Directors have identified investment proposals totalling £8.37m and have been asked to identify savings to enable a balanced budget to be determined.

Housing Revenue Account (HRA) 20. This is a ring fenced account primarily financed through tenants' rents. Within the County four of the existing Districts operate a HRA. 21. A provisional forecast for the combined HRA for the County has been prepared for 2009/10. Forecasts for 2009/10 have been based upon a set of assumptions around housing subsidy, rent increases, changes to management fees and direct costs, such as repairs and maintenance expenditure requirements. The figures suggest a stable financial position on the combined HRA, however a separate report is being prepared on the forecast combined HRA position plus the impact of the draft subsidy determinations. 22. The new Authority will be required to determine rents for 2009/10. Capital Programme 23. Bringing together eight authorities provides challenges and as part of the Council's budgets for 2008/09 a number of authorities approved capital spending into 2009/10. The total of the current programme across the County is £112m which is supported by a range of funding including capital receipts however the estimates for capital receipts were determined around 12 months ago and since then land values have fallen significantly. Although it is suggested that the existing combined programme is maintained as far as possible in the short-term a review of the existing programme is underway to test the extent to which it can be delivered in the current economic climate. A strategy and scoring system for proposed capital investment has been developed which will provide a structured and rational framework. Area Based Grants 24. In 2009/10 Area Based Grants totalling £61.12m are expected to be paid to the County Council, however this may be amended in the provisional grant announcement. Fees and Charges 25. It is proposed to equalise Statutory and Regulatory fees and charges, rationalise concessions across all services and review certain charges (not necessarily equalised) in relation to car parking, crematoria, warden visiting services and disabled parking charges.

Local Average Rates of Mortgages 26. The County Council will inherit a range of mortgages and will need to set a 'Local Average rate'. The Authority must on an annual basis review and set the interest rate it charges to any mortgagees. The rate is set at the same time as the budget to allow for notifications to be issued, however given the different starting points and the County Council's low CRI (average rate of interest paid on external borrowing of the Council) position, this will mean some significant percentage changes to individual mortgages.

Transition Costs 27. Transition costs were estimated in the bid document at £12.45m just over half of which was likely to be redundancy costs associated with early retirement. 28. Transitions costs are being monitored and it is anticipated that the costs will initially be met from reserves and will not have an impact on the Revenue budget of the New Council. Risk 29. There are a number of risks which may have a financial impact during 2009/10. These are related to the existing risks of the County Council and Districts and risks arising from the Local Government Review programme. 30. These various risks are being managed but they do add a significant degree of uncertainty to the budget. OVERVIEW AND SCRUTINY PROCESS IN RESPONSE TO THE BUDGET PROPOSALS

31. As mentioned previously, this budget has been a far more complex process as a result of the Local Government Review bringing together County and District Budgets, focusing on financial proposals, savings and the investment issues that all eight authorities would have needed to consider in a normal budget cycle. There was therefore a need for more flexibility in the setting of budgets for ‘Service Groupings’ as a result of the complexities of Local Government Review (LGR.)

32. In addition the complexity of the process has resulted in the schedule for the budget process running much later than in previous years resulting in Overview and Scrutiny having a much shorter ‘time frame’ in which to consider and make recommendations in relation to the various service departmental budgets and the Budget of the Authority.

33. The six new Directorates of the Authority as follows:

· Children and Young People’s Services
· Adult, Wellbeing and Health Services
· Regeneration and Economic Development
· Neighbourhood Services
· Corporate Resources
· Assistant Chief Executive's Office

all attended specially convened ‘Budget Working Group’ meetings where they presented information in relation to Overview of the Departmental Budget Service income, Service expenditure, Service pressures, potential budget savings options, giving a detailed explanation/rationale for each.

34. The respective Budget Working Groups considered each of the presentations; however they raised the following general issues in relation to each of the Directorates:

GENERAL RECOMMENDATIONS

35. General recommendations from Overview and Scrutiny for consideration by Cabinet as follows:

· That there was limited information available to Overview and Scrutiny members as a result of ‘pulling together’ the respective budgets from the Seven District Authorities and the County Council. Members note the complexity and difficulty with such a process. However the kind of information that would have helped Overview and Scrutiny members in their deliberations should have included :- · That the early engagement of Non-Executive Members in the budget process is essential if Overview and Scrutiny is to contribute meaningfully to the budget process. · That due to the complex nature of this particular budget, Cabinet should consider a standstill budget for 2009/10 thereby avoiding any significant cuts in front line services but maintaining a level of service that continues to meet local need. · That the County Council continues to make efficiency savings wherever possible and continues to work on the principle of invest to save strategies.

36. In addition, Overview and Scrutiny made the following specific responses in relation to the various Directorates following discussions at the respective Budget Working Group meetings.

SPECIFIC CONSIDERATIONS

Children and Young People’s Service
Summarised Spending, Investment and Potential Savings Options

37. The total revenue budget in 2008/09 is £102.7 m of which £83m is managed by the Corporate Director of Children and Young People’s Service with the remainder managed by other Chief Officers in relation to central costs. Dedicated Schools Grant (DSG) and other devolved grants come to £318.3m.(Final DSG for 2008/09 £274,436,000).

38. There is also additional grant for Surestart totalling £16.9 m.

39. In relation to service improvements/investments, subject to availability of funds, the following two areas were identified;

· Subsidised Transport - £1.23 m - to allow young people subsidised travel ‘off peak’ and weekends plus cost of initial travel card.

· Empowering Young People - £1 m - over 1,500 young people are participating in a government funded pilot that gives £30 per month credits in support of the ‘Places to Go and Things to Do’ priority. The grant ends on 31st March 2009.

40. With reference to savings, 10 areas were identified which were deliverable with minimum impact on service provision for example BSF with reduced development costs spending ;with an additional 2 more difficult savings options identified for example reduction to grant aid for Community organisations.

41. Members have identified the following recommendations in relation to the Children and Young People’s Service Budget proposals for consideration by Cabinet.

· The Working Group would suggest that there is a need to determine Partners' contributions to the delivery of the Children and Young People's plan. Examples of Partners contributing to the Children and Young People's plan are given below: o In 2008 a successful Family Pathfinder bid was made to DCSF that will attract £780,000 grant over three years. Over the period, £600,000 of contribution has been agreed by the PCT and CYPS and Adults will channel about £1.5m into the project. In kind contributions from a range of agencies such as Job Centre Plus, and Substance Misuse Services will also be included. This will allow 3 pilot projects to take place in Easington, Sedgefield and Derwentside focusing on those families with the most complex demands who were likely to have required intensive specialised support from all agencies. This should bring added value and demonstrate the benefits of partnership working. In the medium term, we will be looking to demonstrate a consequential demand on some of the most costly and highly pressurised support services. o By the end of February 2009, a bid will be submitted to DCSF that is aimed at increasing the take up of schools meals. Matched funding is required and it is expected that this will include contributions from schools, the PCT, the main catering contractor and the County Council, that will allow kitchens and dining areas to be improved. It is hopeful that this joint bid will attract as much as £1m of DCSF grant. · That as a result of LGR a range of activities funded by the District Councils will transfer to the Children and Young People's Service. Some of these relate to 'youth' activities with an estimated budget requirement of £0.6m. It is essential to ensure that the budget provision for these activities in District Councils transfers to the Children and Young People's Service budget. · That no reduction of grant aid be made in relation to Community Associations, presented as a proposed saving namely £194,000. Adult, Wellbeing and Health Service
Summarised Spending, Investment and Potential Savings Options

42. The revenue budget for 2009/10 is £161,354,000 with a capital budget for 2008/9 of £12.6 million.

43. A number of budget pressures were identified for the Directorate in relation to demographic change, inflationary pressure, emerging new priorities and preventative services (Government wants local authorities to invest more heavily in preventative services.)

44. With reference to investments for 2009/10, the service identified the following areas:

· Additional demographic demand - (Learning Disabilities; Mental Health and Older People · Day Service Improvement, New Centre at Sedgefield · Deprivation of Liberty Team (one-off investment) · Home Care Re-enablement - double running (one-off investment) · Travellers sites - (Capital Investment) 2009/10 · Sky Bowl (Capital Investment) 2009/10 · Libraries (Capital Investment) 2009/10 45. In relation to Budget Savings, 25 were identified (“Category 1” for example running costs and general office expenses) which could be achieved with minimum effect on services and no/little political impact. Two areas of savings were identified which are more difficult to achieve and would have an impact on service provision (“Category 2” for example reduce marketing and information supplies budget.)

46. The Directorate also identified 9 areas of savings (“Category 3” for example closure of Clayport Library on Sundays) which would be difficult to achieve and would have a political or service provision impact.

47. Members have identified the following recommendations in relation to the Adult, Wellbeing and Health Budget proposals for consideration by Cabinet:

· The Working Group would recommend the approval of the savings outlined in Category 1. Examples of the savings in this category included contributions to care packages from the Health Service, review of care packages (Learning Disabilities), continuing care review (review of longstanding learning disability and mental health packages), reduced communities fund (Community Development Officers have a small budget), home care savings linked to block contracting and support staff reductions.

· That in relation to the proposed savings to be achieved via libraries which included the reduction in the range of service provision, closure of libraries and no Sunday opening at Clayport, it was highlighted that an Overview and Scrutiny review is currently being undertaken in relation to library provision. There was consensus that the proposed library savings should be removed from the savings options. In addition it was suggested that the Overview and Scrutiny Library Working Group look at the impact of a reduction in library opening hours and library usage by the public as part of its evidence gathering.

· The Working Group recommended that the proposed saving option where funding for the Community Development Team is taken from the AAP budget, should be rejected. It was felt that other services would make similar calls upon the AAP budget and this was not appropriate. The Budget Working Group accepts that there is a need to review the arrangements of the Community Development Support unit including further consideration of the proposals for staffing reductions e.g. the deletion of three Community Development posts. · In relation to the proposed residential homes closure savings, the Budget Working Group made reference to the previous Overview and Scrutiny investigation report and recommendations for the retention and improvement of existing care homes which had been accepted by Cabinet and were now Council Policy. However, it was accepted that future arrangements for provision were ultimately a matter for Cabinet to determine.

· The Working Group was opposed to reductions in care funding linked to changing the eligibility criteria. The Group required further information about the difference between ‘critical’ and ‘significant’ designations and the likely numbers of people that would be impacted upon by any resulting change.

Regeneration and Economic Development Service
Summarised spending, Investment and Potential Savings Options 48. The total net base budget for Regeneration and Economic Development in 2008/09 is £33,110,000.

49. A number of budget pressures were identified for the Directorate in relation to the Housing Revenue Account, reduction in Planning Application Fees, loss of rental income from industrial sites, use of Budget Support Funds and miscellaneous.

50. In addition a number of areas were identified for investment as follows:-

· County Economic Assessment - Additional Staff and Consultancy Services · Integrated Regional Strategy - Consultancy Service · City Regional Partnership Working · Loss of Single Programme Funding · Loss of Planning Delivery Grant · Social Regeneration - Local Housing Allowance

51. With reference to savings achievable through efficiencies 8 areas were identified for example reduction in supplies and services, with a further 6 areas identified for proposed savings which were achievable with difficulty for example planning service reduction in staffing.

52. A further 2 areas of savings which were identified, if taken, would result in undermining of the service and/or be politically sensitive for example further reduction in staffing for the planning service .

53. Members of the Working Group identified the following recommendations in relation to the Regeneration and Economic Development Budget proposals for Cabinet’s consideration:

· That any reference to the Modern Apprenticeship scheme be removed from the proposed savings list. The Budget Working Group felt that the Authority should be extending not diminishing the Scheme.

· That the proposal (savings which undermine the service) to reduce the contribution by the Authority to the Dales Centre be opposed.

Neighbourhood Service

54. The net base budget for Neighbourhood Services in 2008/09 is £92.424m.

55. A number of budget pressures were identified for the Directorate in relation to Energy inflation, Highways Maintenance Term Contract, subsidised bus services, Landfill Tax, Concessionary Fares, Housing Revenue Account, reduced income streams and staffing pressures not budgeted.

56. In addition a number of areas were identified for service investment as follows:

· Waste project - resources to deliver solution
· Public transport - subsidised services
· Electricity at Work Regulations - testing of underground cables
· Bus Strategy - demand responsive transport

57. In relation to LGR savings for the first year totalling £1,022,000 were identified (recreation and Sport Management, Open Spaces Management, Environmental Health/Consumer Protection, Street Cleansing, waste collection and waste disposal).

58. With reference to savings achievable through efficiencies 20 areas were identified for example waste recycling initiatives; with a further 10 areas identified for proposed savings which were achievable with difficulty for example not painting street lighting columns.

59. A further 11 areas of possible savings were identified which if taken would result in the undermining of the service and/or be politically sensitive for example Trading Standards reduction in staffing.

60. In relation to Neighbourhood Services, the Budget Working Group made the following recommendations in relation to the Budget proposals for consideration by Cabinet:

· The removal from the proposed savings of any reference to Highways related savings, as it was considered by members that Highways are a priority and therefore investment should take place to ensure that the same level of service is maintained e.g. winter maintenance. · That in relation to some identified savings proposals i.e. disabled access ramps it was suggested by the Working Group that Member budgets could be utilised to contribute to the provision of such a service. It was noted that this is a statutory requirement.

Corporate Resources

61. The revised based budget for Corporate Resources for 2009/10 is £25,188,000 with transition costs (met from reserves) totalling £6,211,000.

62. In addition the Service had identified a number of LGR Bid savings (various staff reductions together with Member allowances) totalling £10,060,000.

63. The Service had identified 2 areas of investment as follows:

· LGR Bid
· Other
64. With reference to proposed savings options for Corporate Resources, they fell into the following categories:

· Rationalisation of staffing
· Indirect employee costs
· Premises
· Supplies and services
· Other support services
· Increased fees and charges
65. Members have identified the following recommendations in relation to Corporate Resources Budget proposals for consideration by Cabinet.

· At a Joint Meeting of the Overview and Scrutiny Management Committee and the Corporate Issues Scrutiny Committee, on the 16 January 2009 it was agreed by a majority of members that Members’ Revenue Budgets be allocated on the basis of £50,000 per electoral division with a view to increasing this figure in the 2010/2011 budget process · Members of the Working Group remain cautious of the potential “perceived” implications by local communities of resources being allocated specifically to Members set against “perceived” service reductions. · That the existing allocation of £6,000 per member for Highways related schemes (total cost £756,000 per annum) should continue. · That the proposal for a sum of £2,000 within each AAP budget for small grant schemes be supported.

Assistant Chief Executive's Office

66. The revised base budget for the Assistant Chief Executive’s Office for 2009/10 is £11,827,000 with transitional costs (met from reserves) totalling £1,524,000.

67. In addition the service had identified a number of LGR bid savings (various staff reductions) totalling £1,579,000.

68. With reference to investments, the service had identified one area, Area Action Partnership Budgets.

69. In relation to proposed savings options for the service they fell into the following categories:

· Corporate Policy & Communications
· Rationalisation of staffing

70. Members of the Working Group identified the following issues in relation to the Assistant Chief Executive’s Office Budget proposals:

· The Working Group accept the need to adequately resource the Area Action Partnerships however the establishment costs of £3.5m may well be used in a phased approach over the next twelve month period (the Working Group identified the possibility of slippage in this budget which could be redirected). Recommendations

(a) That in future budget cycles it is essential to ensure the early engagement of Non-Executive Members to allow for a full and detailed response to be prepared by Overview and Scrutiny.

(b) That Cabinet agree the specific budget recommendations contained in the report in relation to each of the Service Directorates.

(c) That as a result of the complex nature of this particular budget Overview and Scrutiny would recommend that Cabinet consider a standstill budget for 2009/10 thereby avoiding any significant cuts in services but maintaining a level of service that continues to meet local need.

(d) That Members Revenue Budgets be allocated on the basis of £50,000 per electoral division with a view to increasing this figure in the 2010/2011 budget process.

Contact: Feisal Jassat Tel: 0191 383 3506

No formal responses have been received by me from other consultees.

Recommendation
That responses from consultees are considered as Members determine their budget recommendations to Council.


Section D - Local Government Finance Settlement

1 The Provisional 2009/10 Local Government Finance Settlement was originally announced on 6th December 2007 as part of the first three-year settlement along with the Provisional 2008/09 and 2010/11 allocations.

2 For Durham County Council, the affect of Local Government Review on the Settlement is that existing Formula Grant allocations for the County Council and the District Councils are added together.

3 Members may need to have regard to the Minister’s statement that the Government expects to see average council tax increases in England in 2009/10 substantially below 5%.

4 The headlines changes between the Provisional 2009/10 Settlement as detailed in February 2008 and November 2008 are:
§ No change for any authority in Formula Grant allocations, between the 2009/10 settlement announced in February and November (except for those authorities reorganising);
§ No increase in the total amount of Formula Grant allocated;
§ No change to the relative block sizes
§ No change to the damping mechanism
§ No further transfers in/out of the 2008/09 baseline; and
§ No Amending Report issues. 5 The headline changes between the Provisional 2009/10 and the Final 2008/09 are:
§ Average 2.8% increase in Formula Grant across England 6 The key elements of the provisional settlement are:
§ Formula Grant 2009/10 £224.165m - This is a cash increase of £7.938m over 2008/09 or 3.7%. When 2008/09 has been adjusted to reflect changes in specific grants this shows an increase of £8.099m or 3.75%.
§ The average increase in formula grant for Shire Unitaries without Fire responsibilities is 3.3%.
§ The County Council's contribution towards the floor to support other Shire Unitaries is £14.074m.
§ Formula Grant 2010/11 £231.341m - This is a cash increase of £7.176m over 2009/10 or 3.2%. When 2009/10 has been adjusted to reflect changes in specific grants this shows an increase of £7.238m or 3.2%.
§ The average increase in formula grant for Shire Unitaries without Fire responsibilities is 3.0%.
§ The County Council's contribution towards the floor to support other Shire Unitaries has not been calculated by Government. 7 The Final Local Government Finance Settlement was announced on 21st January 2009, and no changes to the figures contained in the Provisional Settlement were made.

8 It is recommended that Members note the Settlement.

Section E - Area Based Grants

1 For 2008/09 Government increased local authorities’ flexibility over the use of their resources by transferring a number of previously ringfenced grants into a new Area Based Grant (ABG) and transferring some into Revenue Support Grant, both of which are non-ringfenced. This move minimised barriers to local authorities focussing the mainstream resources to support Local Area Agreement priorities where they wished to do so.

2 Whilst local authorities were free to use these non-ringfenced grants to support the delivery of local, regional and national targets Government Departments issued circulars for many of the funding streams indicating the purpose of the funding and setting out expectations.

3 ABG will for 2009/10 be paid to the County Council. Cabinet acknowledged in November 2008 that it would be sensible to expect District Councils, through their Local Strategic Partnerships, to continue to commit a proportion of ABG spend in 2009/10 in advance of the start of the year so that projects could continue.

4 Out of a total of £16.3m AGB in 2009/10 originally allocated to Districts for Working Neighbourhoods Funding in 2009/10 £14.7m is expected to be committed by existing Districts. This leaves a balance of £1.6m available to the County Council to allocate to projects. In the budget, it is assumed that expenditure will match the grant income.

5 Local Enterprise Growth Initiative (LEGI) grant and the Safer Stronger Communities Grant (SSC) were passported to partners during 2008/09 and Cabinet have agreed that this continues to be the case in 2009/10. A proportion of ABG will be used to support the Voluntary and Community Sector infrastructure across the County in line with decisions taken by Cabinet on 4th December 2008.

6 For 2008/09 County Services were allowed to retain ABG with the exception of the “top slice” for the Community and Voluntary Sector and “passport” grant for Service spend. Whilst for 2009/10 a number of grants have been increased and others have been reduced. It is suggested that County Services are limited to utilise ABG increases only where they are required by Government to deliver increased outcomes.

7 This provides a more flexible use of resources as envisaged by the ABG programme.

Recommendation

8 That Cabinet approves the flexibility in the use of Area Based Grants.

Section F - Housing Revenue Account (HRA) and other associated issues

Mortgage Interest Rate

Historically district councils were required to provide mortgages to purchasers of Council Houses. It is no longer a requirement to provide this facility and gradually the portfolio has reduced to such an extent that the six district councils have only 48 mortgagees and the balance outstanding is around £160,000.

It is a requirement under the Housing Act 1985 Section 438 and schedule 16 to re-determine six monthly the local average rate of interest to be applied to sums left outstanding on mortgages in respect of Council owned dwellings.

The local average rate means that rate declared under paragraphs 3(a) and (b) of schedule 16 to the Housing Act 1985, and the “average annual rate of interest calculated in accordance with proper practices, payable on the date of the declaration on the amount outstanding, by way of money borrowed by the Authority other than short term borrowing”, the Consolidated Rate of Interest (CRI) plus 0.25% for administration costs.

In addition the Secretary of State periodically declares a Standard National Rate (SNR) taking into account interest rates charged by building societies in the United Kingdom and any movement in those rates, the current rate in force is 5.07%.

Authorities must charge whichever is the higher of the SNR or the local average rate.

It is necessary for the County Council to agree the rate to be charged from the 1st April 2009.

Three of the district councils are still operating a Housing Revenue Account and as the Housing Subsidy regime is still in place for those Authorities for 2009/10, it is suggested that the calculation for those districts be as in previous years to be consistent with Housing Subsidy Regime.

The calculation for the remaining three districts ( Sedgefield, Derwentside and Teesdale) will be based on the debt of those authorities together with the debt of the County Council.

The calculations for each Authority are shown in the table below.

District Council	Local Average Rate (including administration)	Standard National Rate	Rate Chargeable
Durham City	8.21%	5.07%	8.21%
Easington	7.14%	5.07%	7.14%
Wear Valley	5.48%	5.07%	5.48%
Combined Districts	5.02%	5.07%	5.07%

The new rates will be communicated to mortgagees upon confirmation by the Council.

Recommendations

It is recommended that the rates as displayed above are implemented from the 1st April 2009, to be reviewed at six monthly intervals.

Housing Revenue Account (HRA)

At 1st April 2009 three of the former District areas (Durham City; Easington and Wear Valley DC) have housing-stock. Therefore the County Council will have to prepare a Housing Revenue Account (HRA). It is assumed that the transfer of the former Sedgefield BC housing stock to a newly established Registered Social Landlord - Sedgefield Borough Homes takes place as planned prior to 31 March 2009.

Arms Length Management Organisations (ALMO) exist within the former Easington (East Durham Homes) and Wear Valley District areas (Dale and Valley Homes), whereas there is direct service provision in the Durham City area. Separate management agreements and service level agreements are in place with East Durham Homes and Dale and Valley Homes. However, statutorily, the new authority must maintain, for reporting purposes, a single consolidated HRA.

As at 1st April 2009 the County Council is responsible for approximately 19,000 Council dwellings and is required to determine its rents using the national rent-restructuring model and approve the HRA in line with the usual budget setting process.

The HRA is “ring-fenced” i.e. it must be funded only from Rent, housing related charges and Government grant - (housing subsidy) and must not be cross-subsidised by the General Fund or visa versa.

Government support for social housing is called housing subsidy. Annual determinations are made for allowances per dwelling, for guideline rent, management and maintenance costs and major repairs allowances, plus indicative sums for debt management costs and allowances for capital charges (notional interest and premiums / discounts on previous rescheduling exercises).

These determinations are based on a national notional HRA, which aims to redistribute resources between authorities throughout the Country. However, increases in allowances for expenditure in 2009/10 are below inflation and are particularly disappointing. Guideline rents have been increased above the rate of inflation. Changes have also been introduced to the nationally prescribed rent-restructuring scheme, with rent convergence extended to 2023/24. Average rent increases have been capped at 7% in 2009/10. The average rent increase across the County arising from these proposals is 6.03%.

Significantly, the Government have published, as a transitional measure, three separate subsidy determinations, one for each of the former District areas. This protects the County Council from an unintended consequence of LGR arising from the treatment of external loan debt charges that will be chargeable to the HRA in a single subsidy regime. However, this single subsidy regime will be implemented in 2010/11 and additional costs of £1.264m will need to be accommodated. Members should note that in addition to the costs to the General Fund in 2010/11, the Housing Revenue Account will lose £0.319m in subsidy payments with the Government gaining by the aggregate of these two sums in 2010/11.

The retention of the three separate subsidy determinations in line with the former three District areas has meant that the 2009/10 HRA budget has been prepared in line with how it would otherwise have been had the three Districts continued in 2009/10. The impact of the subsidy determinations for 2009/10 is that net payments into the national notional HRA pool will increase from £0.292m in the current year to £2.008m in 2009/10, a loss of £1.716m resources out of the HRA budgets next year. The prescribed rent restructuring model results in an average rent increase of 6.03% in 2009/10 across the three HRA stock areas.

The HRA budget includes provisions for inflationary pressures within the HRA but no further growth. ALMO Management Fees have been inflated in accordance with existing contracts. Garage rents and other charges have been increased by 5%.

Direct Revenue Financing of £1.508m has been included in the budgets for 2009/10, to bring about the required “balanced position” on the HRA, pending further discussion on capital resource requirements to fund housing capital expenditure. Members should note however, that HRA capital resources can only be used to finance HRA related capital expenditure.

Central support charges to the HRA have been left at 2008/09 levels. However, an estimated £1m of costs have been identified as requiring review with a possibility that some or all may need to be charged to the General Fund. The draft HRA budget builds in the year one costs of a four-year strategy proposed to unwind these recharges.

There is no planned use of HRA reserves in 2009/10. Forecast HRA reserves (including sums held by the two ALMO’s) are £5.005m at 1st April 2009, excluding any balance held by Sedgefield BC on its HRA. Sedgefield BC forecast that its HRA would hold a balance of £1.4m at 1st April 2009.

Presentations are being made to the Tenants Panels in each of the three Districts on the draft HRA and proposed rent increases. No issues have yet been raised.

Recommendations

It is recommended that:

· The Housing Revenue Account Budget set out in Annex F1 be approved. · Rent increases be applied as follows: · Garage rents and other charges be increased by 5%. · ALMO management fees be inflated in accordance with existing contracts:

East Durham Homes	-	2%
Dale and Valley Homes	-	1%

Sedgefield Borough Homes

It is anticipated that Sedgefield BC’s housing stock will be transferred to a newly established Registered Social Landlord (Sedgefield Borough Homes) under a large scale voluntary transfer. The transfer date anticipated is 30th March 2009. However, there will be a requirement for the County Council to set the 2009/10 rents for Sedgefield Borough Homes and this will be subject to a separate report, which will be presented to Council at the same time as the 2009/10 Budget report (which will incorporate the HRA). The County Council will need to oversee these arrangements during and after the setting up period

Recommendation

It is recommended that:

· Members note the requirements for the County Council to set the rents for Sedgefield Borough Homes for 2009/10 and

· a separate report be presented to Council dealing with the LSVT of Sedgefield’s housing stock and associated rent setting issues.

Housing Land Sales

The rules governing the use of capital receipts were changed significantly from 1st April 2004. Prior to that date a proportion of the various types of receipt could be used locally and the remainder had to be “set aside” to reduce loan debt: -

Type of Receipt	Use Locally	Reduce Loan Debt
General Fund	100%	-
Housing (HRA) Land	50%	50%
Right to Buy (Council Housing)	25%	75%

From 1st April 2004, whilst the percentage splits remain the same, instead of the above proportions being set aside to reduce loan debt, these elements were to be paid over to the Government, with one exception:-

Receipts derived from the Tenanted Market Value (TMV) under Large Scale Voluntary Transfer (LSVT) will, after meeting transfer and levy costs, continue to be split 25% to be used locally and 75% to be set aside to reduce loan debt. The rules regarding the making of payments direct to the Government applies rigidly to Right to Buy (RTB) receipts but, in the case of housing land, Councils have the opportunity to retain the full amount if they resolve to spend these receipts either on the provision of ‘affordable housing’: -

“the provision of dwellings to meet the housing needs, as identified by the local authority, of persons on low incomes, whether provided by the local authority or a registered local landlord …”

or ‘regeneration’: -

“any project for the carrying out of works or activities on any land where -

· the land, or a building on the land, is vacant, unused, under-used, ineffectively used, contaminated or derelict; and · the works or activities are carried out in order to secure that the land or the building will be brought into effective use.”

All the former District Councils subsequently passed the appropriate resolution to allow them to retain 100% of housing land sale receipts.

To enable the County Council to maximise the resources available it would need to approve a resolution allowing the use of receipts from the sale of housing land to fund both regeneration projects and affordable housing schemes.

Recommendation

It is recommended that with immediate effect, all capital receipts from housing land sales be applied to projects falling within the following definitions of affordable housing and/or regeneration where:

¨ the land, or a building on the land is vacant, unused, under-used, ineffectively used, contaminated or derelict, and
¨ the works or activities are carried out in order to secure that the land or building will be brought into effective use.

TO VIEW APPENDIX F PLEASE REFER TO THE PDF ATTACHMENT OR REFER TO HARD COPIES HELD IN CORPORATE SERVICES



Section G - Revenue Budget

Revised Revenue Budget 2008/09

1 Projected outturn figures for the County Council based on information as at 31st December 2008 indicate a potential overspend of £1.92m. In addition, transition costs relating to LGR are anticipated to be £3.598m by 31st March 2009.

2 The overspend is principally in Environment, Corporate Services, Children and Young People’s Service but there are compensating underspends in Adult and Community Services and Chief Executives.

3 It is therefore assumed that County Council’s General Reserves will reduce by that amount at the end of the year, taking the total to £15.614m.

4 District Reserves at 31st March 2009, are forecast by their Treasurers, to be £9.2m.

5 Taking these together with the County Council forecast General Reserve at 31st March 2009 would result in an opening General Reserve balance of £24.814m.

Revenue Budget for 2009/10

Introduction

6 The most challenging part of preparing the budget has been bringing Districts and County budget together, reallocating it in accordance with the structural design and determining where investments and savings can be made. All investments are in line with the priorities of the County Council and the Bid for a Unitary Council. The current economic climate has made the process more difficult. When the initial strategy was agreed in the summer of last year thoughts were that our inflation allowance was lower than might be needed and pressure on some budgets was significant as a result. However, whilst inflation pressure has reduced, opportunity to make a return on short-term investments has almost disappeared, causing a significant additional challenge.

The Budget Build

7 District and County budget requirements were brought together at the start of the process and total £406.276m for 2008/09. In the first instance proposed savings from the Local Government Review process have been deducted savings of £13.763m in 2009/10. Bid investments totalling £9.548m were added as were transition costs. It is assumed that transition costs however are all met from reserves thereby having no impact on the net revenue spend.

8 Inflation and other budget adjustments have been added to the base increasing it by £34.022m. Inflation for both pay and prices, including income from fees and charges, has been included at 2.5%.

9 Cabinet considered a report on 4th December which showed a funding gap of £16.035m. Corporate Directors had provided a range of proposals for investments and savings which were to be the subject of debate in Overview and Scrutiny during December and shared with other consultees. These savings were originally grouped into one of three categories. Investments were linked to priorities.

10 Further work has been undertaken by Directors which has the effect of amending the situation reported to Cabinet in December. The following paragraphs will detail this.

11 Cabinet Members recently met with members of Corporate Management Team and a number of adjustments have been made to proposals for savings.

12 The starting point is detailed in Appendix G1 to this report, which was Appendix 3 to the December report.

13 During the last weeks of 2008 interest rates for short-term investments effectively collapsed. Unless they start to recover during 2009/10, interest earned by the County Council could be as much as £10.4m less than was anticipated in the autumn of 2008.

14 Capital Financing is dependant on progress of the Capital programme and a calculation undertaken at the end of the year to provide resources to pay for outstanding debt. Costs could increase by around £1.000m.

15 Concessionary fares uptake has exceeded expectations and there is an additional cost associated with this of £0.500m.

16 LPSA Revenue Performance Reward Grant of £2.5m has been factored into the budget calculations. It is now anticipated that only £1.250m will be available.

17 Service investments totalling £7.957m have been proposed by Corporate Directors. These are detailed in Appendix G2.

18 Service Savings totalling £10.522m have been proposed by Corporate Directors. These are detailed in Appendix G3.

19 The following proposals are put forward to reduce the funding gap in an attempt to produce a balanced budget:-

·	Inflation, grants “fall-out” and a range of relatively smaller issues have been considered to determine the extent to which reductions could be made in existing assumptions. Taking these out would reduce costs	Saving £1.113m
·	Reduce the suggested adjustment between the Housing Revenue Account and the “General Fund” to £250,000	Saving £0.75m
·	The sums for extra inflation for energy, additional salaries (increments) and “term maintenance” for Service Direct have been withdrawn.	Saving £1.630m
·	It is proposed to assume a 3% turnover or vacancy factor in the staff budget.	Saving £1.523m
·	Inflation is currently provided in the budget build at 2.5% for both pay and prices. Each 1% roughly equates to £4m. Assume 0.5% less provision for inflation	Saving £2.000m
·	Take savings proposed by Corporate Directors as set out in Appendix 4.	Saving £10.521m
·	Confirm the investment in LGR investment proposals at £50,000 per Ward *	Saving £2.898m
·	Of the £50,000, allocate £20,000 per Ward with capital (from PRG).#	Saving £1.260m
·	Assume reductions in staff numbers, over and above LGR savings, to generate annual savings of	Saving £2.000m

* Note that it has been assumed that the £2,000 currently available as the Members Initiative Fund will be maintained.

# This resource would be available as £30,000 revenue and £20,000 capital per ward. (NB To provide Members with £100,000 per Ward will cost an additional £3.150m.)

20 The budget gap is £5.490m as a result of the above proposals.

Recommendation

21 It is recommended that Members approve the service investments and savings detailed in this report subject to proposals being considered to balance the budget.

22 It is recommended that Members determine the recommendations to the County Council to close the gap and balance the budget.

23 In considering this recommendation Members will need to have regard to the cost of varying the council tax increase from the planning assumption of 5%. Details of this are to be found in Section L of the report.

Medium Term Financial Plan

In the strategy paper considered by Cabinet in August it was acknowledged that the main focus of this year would be the 2009/10 budget year. Once decisions are taken for 2009/10 work can begin to develop a 3 year financial plan. However, the budget for 2009/10 is not likely to be as precise as previous budgets either here in the County Council or in the former Districts. As a result, variances in 2009/10 of spend against budget are likely to be larger than usually seen. Medium term planning is likely to prove more challenging than would normally be the case, but work will begin in earnest almost immediately on refining budget proposals and developing a Medium Term Financial Plan.

Financial Reserves

Reserves are held -

·	As a working balance to help cushion the impact of uneven cashflow and avoid unnecessary temporary borrowing - this forms part of the general reserve
·	A contingency to cushion the impact of unexpected events or emergencies - this also forms part of General Reserves.
·	A means of building up funds, earmarked reserves, to meet known or predicted liabilities.

The new County Council will need to determine a level of general reserves it considers appropriate.

The current County Council reserves policy is, in summary,

To set aside sufficient sums in earmarked reserves as it considers prudent to do so.

·

·	Aim to maintain, broadly, general reserves of around 4.5% of the budget requirement.

Each earmarked reserve, with the exception of the schools reserve, is reviewed on an annual basis. The Schools’ reserve is the responsibility of individual schools with balances at the year end which make up the total reserve.

The LGR Bid assumed that general reserves would be utilised for transitional costs and that those reserves would ultimately be replenished by General Reserves transferred from Districts and from savings in future years.

It is currently assumed in the Bid that £8.851m will be used for transitional costs in 2009/10.

A LAAP Bulletin published in November 2008 (LAAP77) makes a number of recommendations relating to the determination and the adequacy of Local Authority Reserves. The guidance contained in the Bulletin “represents good financial management and should be followed as a matter of course”.

This most recent bulletin highlights a range of factors, in addition to cash flow requirements that Council’s should consider; these include the treatment of inflation, the treatment of demand led pressures, efficiency savings, partnerships and the general financial climate, including the impact on investment income. The bulletin also refers to reserves being deployed to fund recurring expenditure and indicates that this is not a long-term option. If members choose to use reserves as part of this budget process appropriate action will need to be factored into the medium term financial plan to ensure that this is addressed over time.

The Council, in addition to the normal risks associated with running an authority in the current financial climate is developing a new budget based on the budgets of eight very different authorities, the need to bring staff together and to deliver sufficient savings to enable investments to be made and to balance the budget. The risks associated with the preparation of the budget for 2009/10 needs to be recognised and reflected in appropriate levels of reserves. Further detail of risk is to be found in Section M.

The setting of the level of reserves is an important decision not only in the budget for 2009/10, but also in the formulation of the medium term financial strategy.

Appropriate provisions will be made as the accounts of the eight authorities are closed. General Reserves and earmarked reserves will need to be determined as part of both the budget process and closing the accounts.

The County and Districts have a range of earmarked and unearmarked (general) reserves. At 31st December 2008 the forecast general reserve for the year end is set out in the following table. Planned use of general reserve during 2009/10 is also set out in the table.

	£m
County Council balance as at 1.4.08	21.132
Less LGR transition costs (2008/09)
Actual 2.300m
Plus Forecast 1.298m	3.598
	17.534
Less County Council’s forecast overspend (to be met from General Reserve)	1.920
	15.614
Add back Districts General Reserves - forecast for 31.3.09	9.200
Balance as at 1.4.09	24.814
Less planned use of Reserves transition costs in 2009/10	8.851
	15.963

Bearing in mind the current levels of general reserves and the risks facing the County Council, it is suggested that the Council adopts a policy for reserves as follows:

· Set aside sufficient sums in earmarked reserves as it considers prudent to do so. The Corporate Director Resources will be authorised to establish such reserves as are required, to review them for both adequacy and purpose on a regular basis reporting appropriately to the Cabinet Portfolio Member for Resources and to Cabinet. · Aim to maintain, broadly, general reserve levels of between 3.5% and 4.5% of the budget requirement or about £16m to £20m.

Earmarked reserves will be established to provide resources for specific purposes. Protocols will be established for each new reserve and I will review the appropriateness of reserves on an annual basis.

Recommendation

It is recommended that the County Council will:

· Set aside sufficient sums in earmarked reserves as it considers prudent to do so. The Corporate Director of Resources will be authorised to establish such reserves as are required, to review them for both adequacy and purpose on a regular basis reporting appropriately to the Cabinet Portfolio Member for Resources and to Cabinet. · Aim to maintain, broadly, a level of general reserves between 3.5% and 4.5% of the budget requirement or about £16m to £20m.

TO VIEW THE REMIANDER OF THE APPENDICES AND ANNEXES PLEASE REFER TO THE PDF ATTACHMENT OR REFER TO HARD COPIES HELD IN CORPORATE SERVICES






Attachments

 budget Addendum.pdf;
 council tax increases - addendum.pdf;
 budget 2009-10.pdf