Agenda item

Report of Chief Finance Officer.

Cabinet lead member: Councillor Gill Mattock.

(1) Draft budget proposals agreed for consultation.

(2) Approach to dealing with changes in expected resources available for the 2017/18 budget (para. 5.3 of report) agreed.

(3) Subject to there being no material change in the government settlement, cabinet minded to propose council tax rise of 1.9% for 2017/18 to make a band D charge £232.92 for council services.

(4) To note that a lot of announcements are yet to be finalised by government and that currently the proposed budget is showing a gap of £91,000 between the resources available and the draft budget.

(5) Strategy to close the gap (paragraph 5.3. of report) agreed.

53.1 Councillor Freebody addressed the cabinet and asked whether the proposed 2017/18 budgeted costs for software and levy administration costs to support the proposed business improvement district would be recoverable and funded in due course through the levy receipts.

53.2 Cabinet considered the report of the chief finance officer summarising the main elements of the emerging 2017/18 revenue budget and capital programme that had arisen from the corporate and service financial planning process to date.  Each year the council consulted a range of stakeholders on its detailed draft budget proposals for the following financial year.  This followed consultation on the corporate plan and medium term financial strategy (MTFS).  Cabinet was asked to give initial responses to the consultations at this meeting and finally on 8 February 2016 in order to recommend a final budget and additions to the existing capital programme for 2017/18 to the council on 22 February 2016.

53.3 The council’s medium term financial strategy (MTFS), agreed in July 2016, modelled the overall reduction in government support by 30% to 40% over the life of the current parliament (2016/20).  The incoming government’s ‘stability budget’ in July appeared to confirm this projection, subject to the comprehensive spending review taking place this autumn covering the period to 2020.  At the time of writing the report neither the chancellor’s autumn statement nor the resulting local government settlement was available, however there had been a ministerial announcement that an overall 30% reduction in government funding for the Department of Communities and Local Government (DCLG) had been agreed.  Whilst the Council has elected to a fixed settlement for the period to 2020 DCLG had yet to announce figures for:-

·         Business rates retention (general reward based retention).

·         New homes bonus (general reward allocation based on new homes).

·         Specific grants (e.g. housing benefit administration grant).

53.4 The council was, with other East Sussex authorities, part of a single business rates pool which allowed the council to increase its business rates retention over and above the national scheme (worth approximately £100,000 in 2015/16 and projected at £200,000 per annum thereafter).  The additional retention supported growth initiatives in the council’s capital programme.

53.5 The MTFS strategy set out a further 4-year rolling programme with savings targets of £2.7m recurring by 2019/20 (in addition to over £6m of recurring savings achieved in setting the 2011-2016 budgets).  The overarching ‘DRIVE’ programme formed the basis of councils efficiency agenda and the sustainable service delivery strategy (SSDS) was a major component of the programme, which would deliver savings over the life of the current MTFS.  The council’s move towards shared services and integration with Lewes District Council was set to contribute a further £1m of savings over the next 3 years.  These savings, together with savings from procurement and ‘channel shift’, provided the main emphasis of the current SSDS.  The service and financial planning process was a rolling 3-year period to reflect the MTFS, which as well as providing £500,000 per annum to reflect growth in the capital programme was well developed to meet the overall target of £3m over the current plan to 2020.

53.6 Once the budget proposals had been adopted in February, service plans would be updated and resource allocations reviewed in the light of any changes required by corporate plan priorities or the budget.  The council’s performance management systems would be used to monitor progress with quarterly reports to cabinet.

53.7 The current strategy set out a rolling 3-year plan to:

• Deal with the anticipated reduction in the government support of a further 30% from the 2016/17 level.
• Integrate fully the service and financial planning process with the main change programmes under joint transformation programme.
• Deal with unavoidable growth in service demands.
• Maintain front line services to the public.
• Make further recurring savings of £3m per annum by 2019/20.
• Maintain at least a minimum level of reserves of £2m.
• Use surplus reserves in the medium term for:

-Invest to save projects.

-Smooth the requirement for savings over the cycle of the MTFS.

-Invest in one off service developments in line with the corporate plan.

• Benchmark fees and charges against the service standard where possible.
• Reinvest in value adding priority services when headroom is created.
• Set council tax rises at the level of target inflation (CPI target 2%).
• Maintain a strategic change fund to finance the DRIVE programme in order to increase efficiency.

·         Maintain a strategic change fund to finance the transformation programme in order to increase efficiency.

• Maintain an economic regeneration reserve to finance external interventions that promote economic activity.
• Use borrowing to support the capital programme only on a business case basis. 
• Continue the process of priority based budgeting to target investment and differential levels of savings targets at services according to priority.
• Identify new income streams to supplement diminishing resources.

53.8 The final settlement in respect of revenue support grant (RSG) and retained business rates for 2017/18 were not yet known, together with numerous other grant announcements not yet made.  The following assumptions were made in the draft budget:-

53.9 The service and financial planning had culminated in the four service areas presenting their plans to the cabinet and shadow cabinet in November.  In response the challenge set out in the MTFS, the service and financial planning process had identified proposed savings of £1.140m (7% of net spend) (shown in appendix 1 to the report).  These were categorised as:-

A total of £0.653m of service growth was proposed categorised as follows (as shown in appendix 2 to the report):-

53.10 The draft budget assumed a rise in council tax for 2017/18 of 1.9% consistent with the MTFS.  The proposals also included £546,000 of non-recurring service investment to be financed directly from reserves (shown in appendix 2 to the report).  The requirement to hold a referendum might apply if any proposed tax rise were 2% or greater (the government might announce cap on council tax rises as part of settlement) or £5 per annum.

53.11 The proposal also included £0.497m of non-recurring service investment to be financed directly from general reserves as well as £0.646m to be financed from the Devonshire Park reserve (as shown in appendix 2 to the report).

53.12 The following summarised the effect of the proposed changes:-

53.13 It was recommended that should the resources allocated by way of retained business rates and RSG differ from the assumptions, the suggested strategy would be to make the additional resources available to the capital programme.  Should the resources be less than the assumptions then they should first reduce the addition to the capital programme resources, then reduce the contingency by up to £100,000 and beyond that, a further review of the service and financial plans would be required to identify additional savings/reduced growth.

53.14 The council currently financed its capital programme from capital receipts and grants and contributions.  There was currently £0.5m of internal identifiable capital resources available for the next 4 years.  It was intended that any headroom created by the 2017/18 revenue budget would be reinvested in the capital programme.  In addition to these resources, borrowing was permitted on a business case basis where savings or new income generated from a scheme could repay the capital costs.  Additional individual schemes to be added to the capital programme linked to priorities would be developed as part of the development of the corporate plan in December/January and contained in the final budget and capital programme proposals to be agreed by the full council in February.  It was also noted that unlike the council tax, the capital programme could be varied at any time and that there were duties under certain schemes to consult with those affected before schemes were commenced.  As well as schemes financed from internal resources, the corporate plan would include schemes financed from external resources.

53.15 Resolved: (key decision): (1) That the draft budget proposals be agreed for consultation.

(2) That the approach to dealing with changes in the expected resources available for the 2017/18 budget, as detailed in para. 5.3 of the report, be agreed.

(3) That, subject to there being no material change in the government settlement, cabinet is minded to propose a council tax rise of 1.9% for 2017/18 to make a band D charge £232.92 for council services.

(4) To note that are a lot of announcements yet to be finalised by government and that currently the proposed budget is showing a gap of £91,000 between the resources available and the draft budget.

(5) That the strategy to close the gap, as shown in paragraph 5.3. of the report, be agreed.

(6) That the leader of the council write to the local member of parliament seeking her support in opposing any move by government to transfer the benefit of the new homes bonus from district to county councils.