Meeting documents

            Meeting: County Council (County Hall, Durham - Council Chamber - 26/02/2008 09:30:00 AM)

                  Item: A3 (i) Budget 2008/09 - Report of County Treasurer under Section 25 of the Local Government Act 2003, (ii) Budget 2008/09 incorporating the Medium Term Financial Plan 2008/09 - 2010/11 - Recommendations of Cabinet

         

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Item 3(i)

Report of Stuart Crowe, County Treasurer

[Cabinet Portfolio Member for Resources , Councillor John Lethbridge ]

Purpose of the Report

1 The purpose of this report is to provide Members with information on the robustness of the estimates and the adequacy of reserves, so that Members have authoritative advice available when they make their decisions.


Background

2 Local Authorities decide every year how much they are going to raise from council tax. They base their decision on a budget that sets out estimates of what they plan to spend on each of their services.

3 The decision on the level of the council tax is taken before the year begins and it cannot be changed during the year, so allowance for risks and uncertainties that might increase service expenditure above that planned, must be made by:

a) making prudent allowance in the estimates for each of the services, and in addition;

b) ensuring that there are adequate reserves to draw on if the service estimates turn out to be insufficient.

4 Section 25 of the Local Government Act 2003 requires that an authority’s chief financial officer reports to the authority when it is considering its budget and council tax. The report must deal with the robustness of the estimates and the adequacy of the reserves allowed for in the budget proposals, so that Members will have authoritative advice available to them when they make their decisions.

5 Section 25 also requires Members to have regard to the report in making their decisions.


Robustness of Estimates

6 The budget process has involved Members, Chief Officers and their staff, and my own staff in a thorough examination of the budget now recommended to Cabinet.

7 Detailed reports have been completed by Chief Officers reviewing their services, explaining service pressures, identifying areas for savings and the need for resources to fund unavoidable service pressures in line with corporate priorities. From these, decisions have been taken to incorporate some of these areas into the budget for 2008/09 and the medium term financial plan.

8 In coming to the decision to include funding for investments and savings in the budget, risks have also been identified. It is anticipated that these risks can be managed using contingencies and if necessary, reserves.

9 The budget has been the subject of extensive consultation and challenge. Chief Officers have worked with Cabinet Members and members of the Overview and Scrutiny Committee. The Citizens Panel, Schools Forum, Voluntary and Community Sector, Investing in Children, the Business Sector, Trade Unions and the representatives of the National Non-domestic Rate-payers have also had the opportunity to comment on and challenge the proposals in a series of consultation meetings.

10 A consultation document, ‘Your Council, Your Say, was published on the County Council’s web-site and circulated, members of the public were invited to respond to questions on priorities, investment and savings in the document, and 133 replies were received.

11 In my view, the robustness of the estimates has been ensured by the budget process, which has enabled all practical steps to be taken to identify and make provision for the County Council’s commitments in 2008/09.

12 It is accepted that work for the years 2009/10 and 2010/11 has yet to begin in earnest.
Adequacy of Reserves

13 The CIPFA Local Authority Accounting Panel (LAAP) has issued a guidance note on Local Authority Reserves and Balances (LAAP Bulletin 55) to assist local authorities in this process. This guidance is not statutory, but compliance is recommended in CIPFA’s 2003 Statement on the Role of the Finance Director in Local Government. It would be best practice to follow this guidance.

14 The guidance however, states that no case has yet been made to set a statutory minimum level of reserves, either as an absolute amount or a percentage of budget. Each local authority should take advice from its Chief Financial Officer and base its judgement on local circumstances. A well run authority, with a prudent approach to budgeting should be able to operate with a relatively low level of general reserves.

15 The County Council has adopted a policy for reserves as follows:

· Set aside sufficient sums in earmarked reserves as it considers prudent to do so. The Treasurer 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 Member with responsibility for Resources and to Cabinet. · Aim to maintain, broadly, the maximum general reserve level to increase to 4.5% of the budget requirement or about £16m.’

16 The risk management process has identified a number of key risks which could impact on the County Council’s resources. In particular a number are likely to impact in the short-term.

17 The setting of the level of reserves is an important decision not only in the budget for 2008/09, but also in the formulation of the medium term financial strategy.

18 Earmarked reserves have been established to provide resources for specific purposes. Of these reserves, the use of schools balances is outside of the control of County Council but the Insurance and other reserves will be used as required.

19 In my view, if the County Council were to accept the Cabinet’s recommended increase in council tax, funding for unavoidable service pressures and investments, proposals for savings and for capital then the level of risks identified in the budget process, alongside the authority’s financial management arrangements suggest that the level of reserves is adequate.


Recommendation

20 It is recommended that:

a) Members have regard to this report when approving the budget and the level of council tax for 2008/09.


Item 3(ii) (This report should be read in conjunction with the Budget Book which is attached as a PDF)
(Please note this document is 200 pages)

Report of Cabinet

Purpose of the Report

1 The purpose of the report is to detail the recommendations of Cabinet.

2 The recommendations are referenced to the appropriate page, section, paragraph of appendix of the Budget document unless otherwise identified.

Recommendations

3 It is recommended that:

SECTION B - Priorities (pages 13 - 14) SECTION C - Consultation (pages 15 - 39) SECTION D - The Local Government Finance Settlement (pages 40 - 41)

SECTION E - Area Based Grant (pages 42 - 52)

(iv) Members:

a) Agree to the passporting of Connexions, LEGI & SSC funding to the relevant LAA partners to achieve priority outcomes (Section E, paragraph 12 a) page 43 ). b) Agree to initially top slice £100,000 of the ABG (excluding Connexions, LEGI and SSC) to be available to the Partnership Board to help alleviate the financial pressures faced by the VCS Infrastructure Bodies with the balance of the grant being allocated across County Council Services as set out in Section E, paragraph 12 b) on page 43.

SECTION F - Dedicated Schools Grant (DSG) (pages 53 - 57)

SECTION G, H and I - Medium Term Financial Plan (MTFP) (pages 58 - 126)

2007/08 Revenue Budget Recommendations (Revised Budget)

Revenue Budget Recommendations 2008/09
(viii) In determining the budget requirement, the County Council:

a) Notes the Treasurer’s comments on the robustness of the estimates and the adequacy of reserves and the risks in the budget.
b) Reaffirms the current policy for Reserves .
c) Authorises the County Treasurer to determine the most appropriate option for the calculation of the Minimum Revenue Provision (MRP).
d) Agrees to the fund the investments as set out in the Medium Term Financial Plan in Annex G1, pages 68 - 73.
e) Agrees to the proposals for savings and the use of reserves as set out in Annex G2, pages 74 - 82.
f) Determines accordingly a budget requirement of £320,575,804 which will result in a council tax at Band D of £1,024.38 (an increase of 2.9% over council tax for 2007/08).

SECTION J and K - Capital MTFP and Budget (pages 127 - 164)

Capital Budget Recommendations

(ix) Members:

SECTION L - Prudential Code (pages 165 - 168)

SECTION L - Treasury Management (pages 169 - 178)

(xi) The County Council approve the following:
Amount of projected borrowing that is fixed rate maturing in each period as a percentage of total borrowing that is fixed rate :-

	Upper Limit %	Lower Limit %
Under 12 months	20	0
12 months and within 24 months	20	0
24 month and within 5 years	30	0
5 years and within 10 years	50	0
10 years and above	100	0

 Budget.pdf;
 Budget Book.pdf;
 Budget 3ii.pdf