Agenda item

Report of Deputy Chief Executive (Chief Finance Officer).

The committee considered the report of the Deputy Chief Executive and Chief Finance officer setting out the general fund revenue budget proposals for 2016/17 and a 3-year capital programme 2015/19.  The medium term financial strategy (MTFS) had been revised in July 2015 and the cabinet had agreed a draft 2016/17 budget proposal last December.  The MTFS and resulting draft budget had been subject to extensive consultation and previously reported to cabinet and members of the scrutiny committee. 

The budget proposals included:

·         An increase in the council tax in 2016/ 17 of 1.9%; the first increase for five years.

·         Overall savings/new income totalling £0.6m (4% of the net budget).

• Efficiency savings of £0.5m (3% of the net budget)

·         Inflation and unavoidable costs of £0.8m (5% of the net budget)

·         Other recurring service growth of £0.1m.

·         Non recurring service investments of £0.6m.

·         General reserves averaging in excess of £4m (against a minimum recommended of £2m).

·         Capital receipts of £0.4m invested in new capital schemes.

The budget represented management of financial risks by:

·         Building on a favourable outturn position.

·         Balancing the base budget requirement without needing to use reserves for recurring expenditure.

·         Identifiable and deliverable savings with accountability and no general unidentified targets.

·         Reserves well above the minimum level.

·         Zero basing of minor reward grants.

·         Providing the funding required for the DRIVE change programme to deliver the future savings required by the MTFS via the strategic change fund.

The underlying methods of local government financing had changed significantly in recent years including the wrapping up of grants in the base “Standard Funding Assessment” notably:

·         The council tax freeze grants (2011-15)

·         Some new burdens grants

·         Homelessness grant

For Eastbourne the headline figures of the government settlement were:

·         A further reduction in revenue support grant of £0.9m (30%) to £1.8m (reduced from £10.4m in 2010).

·         Partially offset by new homes bonus and section 31 grants (additional £0.2m in 2016/17).

·         Eastbourne would receive the second largest reduction in “spending power” of all local authorities in the 4 year period to 2020.

·         The government headline figure was a reduction of 16.4%; however this took into account the ability to raise council tax, predicted growth in the tax base as well as increases in the new homes bonus.

The government had announced that the council would receive £1.2m in total of new homes bonus (NHB) due to the growth in housing in the area.  The grant was paid in tranches for six years.  The 2016/17 figure included all 6 tranches.  The funding was not guaranteed beyond the 6 year horizon for each tranche.  The government was financing the additional NHB from reductions in rate support grant (RSG), therefore, whilst volatile, it was currently the preferred method of distribution of resources.  A further proposal to limit future awards to 4 years was currently under consideration.  At the time of writing, retention of an element NHB/RSG had been made that could equate to £100,000 for the council.

The government had asked local authorities to say whether they wished to have a four year settlement from 2016/17.  There was a requirement to publish a four year efficiency statement that could only be varied by the full council.  Current advice was that the efficiency target element of the MTFS would suffice in this respect and cabinet was recommended to accept the proposal.

It was proposed that council tax increase by 1.9% for 2016/17; which would result in a band D rate of £228.51.  This would be the first increase for 5 years. The council was required to give an indication of likely future council tax rises.  Within this context, for 2016/17, the council would raise £7.7m from its share of the council tax.  In addition, there would be a distribution of £180,000 payable by the council to the collection fund due to a small collection fund surplus.

In order to achieve a balanced budget without using reserves, the council would need to set a net expenditure budget for 2016/17 of £15.2m.

The detailed budget proposals were set out in appendix 1 to the report.  Details of proposed growth and savings were given in full in appendix 2 to the report.  The proposals set out in the report would allow full council on 17 February to approve a balanced budget in line with available resources and without the need to use reserves.

The report detailed the principal financial risks the council was likely to face, as follows:

·         Housing benefit performance.

·         Inflation on goods and services.

·         Income from services linked to customer choice (theatres, tourism; sports centres, car parking).

·         Legal challenges.

·         Savings being delayed.

·         Excessive demand for services.

·         Failure to realise capital receipts to finance the capital programme.

Comment was made on the scale of the £74 million capital programme and its proposed funding, including £29 million of capital receipts, £19 million of grants and contributions and £27 million of additional borrowing. The appropriate forum for a line by line review of this programme and the low levels of non- Devonshire Park capital expenditure after next year was also queried.  The Chief Finance Officer responded that the programme was dynamic and regularly reviewed with quarterly reports to Scrutiny in year new items are added to the programme annually with any substantive schemes subject to specific reports to Cabinet.    It was agreed to circulate the assumptions on available capital receipts to the Committee.

Members discussed the Homelessness Grant and the effect of recent Government cuts. The committee was advised that the process for reducing homelessness was robust and that were possible every effort was made to prevent homelessness.  The committee also considered the use of capital receipts, Future Model phase 2, and Eastbourne Homes Investment Company.

The Chairman queried the absence of a draft Housing Revenue Account (HRA) budget for presentation to the Scrutiny Committee. It was agreed that although it had not been presented in the past it would be appropriate to do so. The omission could not be corrected for this meeting but that the 2016/17 draft HRA budget would be circulated to members of the committee as it would be in future years.  The Chairman also requested a further breakdown of the headings contained within the capital programme of projects to help better understand the detail and the Chief Finance Officer confirmed that this would be done.

NOTED.