Agenda item

Report of the Assistant Chief Executive.

The Chairman thanked the Head of Finance - Corporate Finance, Jeff Garfoot who was in attendance to speak to Members in relation to the Medium Term Financial Plan (MTFP) 6, Council Plan, Service Plans 2016/17 - 2018/19 and Review of the Council's Local Council Tax Reduction Scheme 2016/17, plus an update to the Discretionary Rate Relief Policy 2015/16, with the Head of Planning and Performance to speak on some elements of the report (for copy see file of minutes).

The Head of Finance - Corporate Finance noted the report contained a lot of detail as regards MTFP 6 and added that the main issues were the result of the general election and the summer budget, noting that austerity would now continue through to 2019/20.  Members noted that this meant a period of 9 years of funding reductions now effectively halfway through the process.

Councillors learned that the forecast for 2016/17 was for a better position than originally thought, however, with the Chancellor announcing Government Departmental reductions of between 20% to 40%, then it would be prudent to predict a 30% reduction for Local Government, which would equate to an additional loss of around £80 million by 2019/20.  It was added that the Government’s Spending Review would now be announced on 25 November and the Council would then receive details of its financial settlement in December.  Members learned that savings that will have been realised since the beginning of austerity would be likely to be in excess of £260 million by 2019/20.  The Head of Finance - Corporate Finance explained that there had been considerable work to protect frontline services to make savings through other means such as back office services and that further austerity would likely mean that the significant challenge being faced would begin to affect frontline services.

Members noted that the Council had retained its Local Council Tax Reduction Scheme, one of only two Authorities in the region and it was explained that other issues to noteincluded: a 7% reduction in the Public Health grant; the impact of the National Living Wage on the Council; and the differential between public and private sector wage rises, affecting the cost of services the Council would procure from the private sector.

The Head of Finance - Corporate Finance explained that key adjustments being made to the budget included: prudent assumptions in respect of business rates and Top Up grant; and “net loss” in terms of New Homes Bonus, as this is top-sliced from the Revenue Support Grant (RSG), with it possible that this would continue beyond the Government’s original 6 year programme.  It was added other adjustments would be in respect of: Council Tax base and Business Rates, and the impact of the National Living Wage, being significant in terms of procured services.  Members noted that other budget pressures included: concessionary fares; energy prices; and staff being “auto enrolled” into the pension scheme.

The Committee noted that all Councils were facing pressure in terms of pension schemes, with low interest rates and low prices of stocks and bonds affecting portfolios and investments.

It was explained that taking into account the reduction in the Public Health grant the 2016/17 savings target would be for £27.188 million, with further reports to be presented to Cabinet and Council in this regard.

The Head of Finance - Corporate Finance noted that the MTFP 6 update for 2016/17 – 2018/19 would contain additional assumptions in terms of modelling, namely: a 2% increase in NHS budgets; a 1% increase in the Education budget; Defence and International Aid to increase; and for all unprotected Government Departments to receive the same percentage budget reductions.  Members were directed to the table within the report setting out a summary of the revised funding reductions and savings required, noting that the details as regards the assumptions were set out in Appendix 2 to the report.

It was reiterated that austerity would continue through to 2019/20 and that as there would be challenges going forward, there would be a need to consult with the public in order to establish priorities in terms of Council services, with a table within the report showing the re-profiled funding reduction forecasts, taking into account the additional year of austerity.  It was added that Durham County Council was in a strong position in terms of its current finances and its level of reserves to be able to have the necessary time to make measured decisions on how to manage funding reductions.  Members were referred to the timetable as regards budget setting, noting Cabinet and Council to receive reports in January 2016.

The Head of Planning and Performance referred Members to paragraphs 27 to 33 in the report that set out the approach to the development of the Council Plan and associated Service Plans, developed in parallel with the MTFP to ensure money available aligned with the plans to be put in place.  Members noted the proposals in terms of consultation, involving Area Action Partnerships (AAPs) and relevant partners in due course, noting workforce and equality implications to be considered prior to the reporting to Cabinet and Council as previously mentioned.

The Chairman thanked the Head of Finance - Corporate Finance and Head of Planning and Performance and asked Members for their questions on the report.

Councillor N Martin noted that he hoped interest rates would rise, in the context of helping as regards pension deficit, and wondered whether a base build-in of a 2% rise would be reasonable.  Councillor N Martin noted that a question had been raised at Parliament as regards the Council Tax exemptions on student houses, and as regards “compensation” that Authorities received in this respect, and that if this were removed by Government would this have an impact on the Council.  The Head of Finance - Corporate Finance noted that pension estimates were based upon information from the Council’s Actuary, noting the position was to make prudent assumptions.  In relation to Council Tax exemptions, the Head of Finance - Corporate Finance explained that in 2012, the baseline was frozen, with no formula changes until 2020.  The Head of Finance - Corporate Finance noted that in the past, formulae had been based upon need.

Resolved:

That the Committee note:

(i)              the forecast funding reductions for 2016/17 to 2018/19 resulting from the analysis of the Summer Budget.

(ii)             the requirement to identify £102.875m of savings across the 2016/17 to 2018/19 period.

(iii)           the approach to preparing the Council Plan and Service Plan.

(iv)           the high level MTFP(6) and Council Plan timetable.

(v)            the approach outlined for consultation.

(vi)           the proposals to build equalities considerations into decision making.

(vii)         that Cabinet recommend to Full Council that the Local Council Tax Reduction Scheme should remain unchanged for 2016/17, with a further review to be undertaken in Quarter 1 of 2016/17 to inform budget options for 2017/18 and beyond.

(viii)        the revisions to the Discretionary Rate Relief Policy agreed under delegated powers.