Agenda item

Report of the Corporate Director Resources.

The Committee received a joint report of the Corporate Director, Resources and the Assistant Chief Executive which provided an update on the development of the 2016/2017 budget and the Medium Term Financial Plan 2916/17 to 2019/20 (MTFP(6)) that took into account forecasts from the Chancellor of the Exchequer’s Spending Review published on 25 November 2015. The Committee also received a second report on the MTFP(6) 2016/17 to 2019/20 and the 2016/17 Budget following the Government’s Local Government Finance Settlement announcement on 17 December 2015 (for copy see file of Minutes).

The Head of Finance – Corporate Finance provided a summary of the key messages from each report.  In relation to the Local Government Finance Settlement he advised that the Government had taken steps to ensure that the financial settlement was fairer and overall the settlement was slightly better than forecast. However, total clarity would not be available until all specific grant allocations were received. The Council would continue to face significant challenges.

Members were invited to ask questions in relation to the first report.

Councillor R Bell in referring to paragraphs 44 and 45 in the report asked about the Government’s consultation on changes to the local government finance system to pave the way for implementation of 100% business rate retention scheme. He asked if the Government was committed in principle to equalisation.

The Head of Finance explained that the 100% business rate retention scheme would be allied with a review of how local authorities were financed and the Government would transfer new responsibilities to local government. Where the business rates baseline exceeded an authority’s funding baseline, that authority paid the difference to Central Government. This was then used to pay for a ‘top-up’ for authorities whose funding baseline was less than its business rates baseline. Durham was a ‘top-up’ authority.  There was a clear expectation that this arrangement would continue and Durham would receive the ‘top-up’ even if the Revenue Support Grant was phased out.

He expected that the majority of the income from business rates would be directed into the local economy. It was not known whether there would be any further adjustment when the proposals were implemented. He anticipated that this would be a contentious area for local authorities.

Councillor R Bell considered that it would be useful to receive an update on the consultation in due course. 

Councillor J Armstrong commented that the Committee’s role was to provide advice to Cabinet on the MTFP and the budget. However at this late stage no decisions had been announced on some grants, including Public Health, Better Care Fund and New Homes Bonus, and in view of the timescales the Committee had no time to properly scrutinise, and was being reactive when it should be proactive. He felt that the lateness of the settlement was not good enough and there was a need to keep pushing for clarity. The Member also referred to the proposals to give local authorities the flexibility to increase council tax by a further 2% to raise additional income for Adult Social Care which he considered to be unacceptable.  Residents would see this as being levied by the Council and not Central Government. He believed that the proposed new formula was aimed at shifting funding from deprived areas to wealthier local authority areas where health statistics showed that residents lived longer and would therefore be in greater need of social care.

The Head of Finance confirmed that details of the specific grant settlements, including the Public Health Grant had not yet been received. The Council was pushing DCLG for a decision and would continue to do so. 

Councillor Armstrong continued that the Local Government Association and the CC Network were pushing for decisions to be made in a more timely manner in future. 

Councillor Wilkes referred Members to the savings proposals for 2016/17 and 2017/18 detailed in Appendix 3 of the report and considered that the Committee should be provided with details of how the savings would be achieved for each of the areas listed. Gateshead Borough Council provided this information and he recommended that in future an information sheet be included in the report for each of the savings proposed in individual service areas which would enable Members to question and challenge budget proposals.

Councillor Armstrong made the point that this information was reported to the Scrutiny Sub-Committees.       

Councillor Stradling stated that it was difficult to forecast in year 1 of the MTFP what savings would be required in subsequent years without the prescribed settlement being known.

Councillor Martin advised that at budget setting time it was clear that all savings had been identified for the following year based on estimates. If the settlement was less than expected those savings were still required to be made.  Officers were working months in advance to identify savings, even if the specific detail was not finalised. For example next year there would be a review of back office functions yet at no point had scrutiny members been asked to consider this in advance. 

Councillor Lethbridge in noting the points made by Councillors Martin and Wilkes was of the view that Members were not in a position to examine the proposals when grant settlements were not known.

Councillor Stradling agreed that at times Members could benefit from more information, and that without it there was no opportunity to challenge. He further commented that it was testament to Officers that the Council was successfully managing the budgets within the constraints it faced.

In agreeing with the comments made by Councillor Armstrong that the Committee was being reactive, Councillor Shield was of the view that Members should have access to the level of detail that Gateshead Council provided to enable Members to effectively challenge budget proposals. 

A number of questions were asked by Members in relation to the second report.

Following information presented on the new methodology which would mean a fairer approach to cuts, Members commented positively on this change but wanted to know what would happen if all settlement information hadn’t been confirmed by the final Cabinet report. The Head of Finance confirmed that if necessary addendums could be issued.

Following questions from Councillor Martin about the flexibility given to local authorities to increase Council Tax by an additional 2% the Head of Finance confirmed that the additional income generated must be spent on Adult Social Care. Section 151 Officers had been asked to demonstrate that spend on Adult Social Care would be lower without the 2% increase. Councillor Martin considered that there was a risk that if the Council pursued this option, existing users may expect to see an increase/improvement in the service they already received.

Councillor Wilkes reiterated the comments he had made in respect of the first report and that for 2016/2017 there had been no challenges to the budget proposals. Therefore it was not possible to know what these savings would mean for residents in reality. The Member suggested that a recommendation be made to Cabinet that a single page budget sheet explaining savings proposed in 2017/2018 be presented for consideration by the Corporate Issues Overview and Scrutiny Committee at its September 2016 meeting. This would allow the Committee to more effectively challenge budget proposals in advance. The Member was informed that this may not be practical in view of the timescales for budget setting and he therefore asked that the information be received in sufficient time to allow the Committee to scrutinise proposals.  

The Member also expressed concern at proposals to reduce each AAP budget by £20k. With £220m in reserves and a whole raft of savings identified which may be achieved earlier, he asked if the proposed savings to the AAP budgets could be delayed a further year. 

The views of Councillor Wilkes were shared by Councillor Martin and their comments were noted.

The Head of Planning and Performance advised that the final budget report would be submitted to Overview and Scrutiny Management Board on 12 February 2016 to which all Members of this Committee would be invited. The views of Members had been noted and a summary of the headline issues raised by the Committee would be presented to Cabinet.

Resolved:  

That the comments of scrutiny be formulated into a response and forwarded to Cabinet.