Meeting documents

1 THE ISSUE

1.1 This report provides the Executive with updated information concerning the financial issues and pressures facing the Council in 2007/08 and future years and the work being undertaken to meet the financial plan targets as set out in the September 2006 Executive report. It is part of a process which enables the Executive to consider issues and options as preparation for recommending a financial plan and budget to Council in February 2007.

2 RECOMMENDATION

2.1 The report be noted as background information in their consideration of key issues and options as preparation for recommending a financial plan and budget to Council in February 2007.

2.2 in conjunction with the Executive member, Strategic Directors individually brief their relevant Chairs of Council Overview & Scrutiny panels.

2.3 the Strategic Director of Support Services holds a budget briefing for all Councillors before Christmas.

2.4 it reinforces its current policy on replenishment of general reserves to an acceptable level

2.5 Council be recommended to create (as part of the budget report in February 2007) an exceptional risk reserve as set out in appendix 1, section B

2.6 the Strategic Directors Group continue work to close the budget gap for 2007/8, by shifting resources to priority areas, ensuring that ongoing pressures are understood and mitigated, seeking efficiencies, and by fully reviewing the capital programme, and by active management of both the capital programme and the Council's property assets.

2.7 The Strategic Directors Group seek to undertake the further work to achieve budget balance in future years, as outlined Appendix 1 Section D

2.8 It reaffirms the decision of 7^th December 2005 to agree to fund the purchase and refurbishment of the Flax Bourton site for the Avon Coroners Service subject to the funding of essential works only.

2.9 the proposal from the Coroners' service for the new public and forensic mortuary for the Avon Coroners Service is included in their recommended budget in February 2007. This will be subject to Council agreeing the financial plan proposal to include £100k in 2007/08 for the increased cost of mortuary fees as part of the budget report in February 2007.

2.10 the timetable as set out in Appendix 2 is noted.

3 FINANCIAL IMPLICATIONS

3.1 This is a financial report and the financial implications are integral to this report.

4 COMMUNITY STRATEGY OUTCOMES

4.1 The proposed framework for service and financial planning aims to ensure that scarce resources are aligned to corporate priorities and improving the delivery of services and cross-Council priorities. Many of the cross-Council priorities are reflected in the Community Strategy.

5 CORPORATE IMPROVEMENT PRIORITIES

5.1 The service and financial planning process aims to ensure scarce resources are aligned to corporate priorities and improving the delivery of services and cross-Council priorities, linking performance with resources and value for money.

6 CPA KEY LINES OF ENQUIRY

6.1 The proposed process contributes towards the "Prioritisation of ambitions" KLOE by ensuring that all objectives and targets are an appropriate reflection of priorities as set out in the corporate plan.

7 THE REPORT- BACKGROUND

7.1 Financial plan targets for 2007/08 were originally set in the financial plan for 2006/07. This envisaged a Council Tax increase of 4.95% in line with maximum government targets, as cost and service need pressures were such that to achieve lower levels would mean a substantial reduction in revenue or capital spending on services.

7.2 The achievement of this plan was dependent on a number of key risks which were identified at that time to the Council's financial position, and it was specifically pointed out that the level of contingency reserves on both Capital and Revenue were not sufficiently high as to allow the Council, any relaxation of its very tight financial management arrangements. The advice of the Council's s151 officer at the time stated

7.3 Since that time, the very tight nature of the financial position has been proven, and the report elsewhere on the agenda on the current year financial position points out that, taking account of savings on capital financing, this years budget is likely to balance, the current service pressures will result in some £2.4 million of additional annual costs in future years.

7.4 Risks and pressures have also been identified which, if anything, are somewhat exacerbated on those existing last year. These include:

New "Change for Children" legislation requirements which is forecast to cost around £235k from 2007/08.

Abnormal inflation increases including contract inflation on Highways Maintenance, Street Lighting energy costs and other utilities price inflation (£635k)

Waste Services - A review and market test of waste collection services is being undertaken with new arrangements to be introduced from April 2007. The service review will also formalise the response to compliance with the Landfill Allowance Trading Scheme, where the Council is required to reduce its disposal to landfill or purchase additional permits at greater cost. It is projected additional expenditure on new recycling services will partly mitigate the higher costs expected, but there will still be a rise in overall costs from the present position.

Reduction of Planning Delivery Grant in 2007/08 of £170k.

Planning & Transportation development work in support of the Local Development Framework and Bath Vision (£300k).

Mental Health - pressures on purchasing budgets for adults with mental health problems, including a small number of high cost placements. It is high risk that this overspend will continue into 2007/08. The 2006/07 pressure is currently £432k with projected ongoing pressure of £250k.

Learning Difficulties - difficulties in achieving saving targets based on known and anticipated number of placements. The 2006/07 pressure is £279k with projected ongoing pressure of £593k.

Children's Services - Fostering Placements - pressures arising due to the increased number of independent fostering placements since 2005/06. The 2006/07 pressure is £237k with projected ongoing pressures of £530k.

Education Access - Home to School Transport - pressures due to inflationary increases in provision of transport services to pupils, annual costs have increased by 9.8%. There has also been increased cost due to new routes required due to the changing pattern of pupil locations, parental preferences for schools and increased special education needs requirements. The 2006/07 pressure is £334k with projected ongoing pressures of £370k.

Concessionary Fares - this is a statutory obligation which is a demand led budget, the uptake of free off peak bus travel by eligible customers has exceeded expectations leaving the Council having to fund the excess cost over the amount the government funds through grant. The 2006/07 pressure is £654k with projected ongoing pressures of £400k.

Car Parking - shortfall on ticket sales and fines income. The 2006/07 pressure is £619k with projected ongoing pressures of £600k.

Coroners - increase in mortuary fees. The 2006/07 and ongoing pressure is £100k.

7.5 In light of this background, in September the Executive agreed a framework which was designed to ensure objectives and targets are an appropriate reflection of priorities and to link performance with resources and value for money.

7.6 To assist this process, the officer timetable was brought forward. Since August officers have been working within the new framework and have been drawing up proposals for services in 2007/08 and onwards and including within these measures to keep service targets in line with financial planning parameters.

7.7 Financial plan parameters and proposals for service delivery planning have been updated and the latest position is outlined in Appendix 1, Section A. The progress to timetable is outlined in Appendix 2.

7.8 Appendix 1 section A summarises the overall total of pressures and the actions being considered to meet them. Overview & Scrutiny Panels are reviewing first draft outline Service Plans to assess/challenge for VFM and service and community impact in November and December. Executive Members are also participating in rigorous examination of the current service/budget plan proposals in the last month. The overall service pressures from cost increases, and service needs total over £14m, whilst currently proposals for savings, efficiencies, & additional income within service plans do not fully meet those pressures. .Further work is expected to close the gap over the next few months, but it is clear that this is by no means an easy task, and some very difficult choices will need to be made.

7.9 Options are being drawn up to allow some alternatives to be considered in meeting the overall targets in a different way.

7.10 For instance, the current and emerging capital programme is causing considerable additional pressure on the Council's revenue position and risk, and it is imperative that all consideration of capital should be taken in the full light of its impact on revenue. To this end, services have been given targets which include the cost of their own capital commitments, and are required to make choices between their capital and revenue programmes. This is a fundamental principle which needs to be reinforced by Council and scrutinised by O&S panels. When looking at these choices however, managers and Members should bear in mind that whilst a capital project or programme may appear affordable in the light of the current funding position of the service, the commitments made will continue for many years.

7.11 In addition however, many of the current and emerging needs for new infrastructure and buildings are not service specific, and cannot be accommodated in this way. The Council embarked upon a full review of its commercial estate earlier in the year to determine whether it were possible for the extensive estate to be better utilised to either facilitate or support the growing cost of re-development and infrastructure for the Council area. This review is not yet complete, but it is clear that a more `active' management strategy needs to be adopted which takes account of the need for substantial capital receipts in addition to revenue income, which must be fully integrated into the financial planning process, and used to support the overall objectives of the Council. This is being progressed actively.

7.12 At the same time, the Council also needs to ensure value and efficiency within its final determined programme, and be pragmatic about the extent of work it can both afford to support within the financial plan timeframe; the strain on the management and technical resources of the Council, and the impact of any programme on the overall risk profile of the Council.

7.13 Other initiatives are also being pursued. The WorkSMART programme has now been agreed and implementation is underway. If successful, this programme has the potential to deliver savings for the Council in all areas of service well above those which are required to cover the cost.

7.14 Feasibility studies on various other corporate savings initiatives are also currently being considered.

7.15 An update on the current level of revenue reserves was included in the Financial Plan report to the Executive in September, the table below compares the latest projections with the target range set in the 2006/07 Budget report. After agreed drawings, mainly in relation to the Bath Spa Project and related claims strategy, the latest estimated level of reserves at the end of 2006/07, with no overspending in 2006/07, is £5.8m. This is below the target level and the financial plan includes phased increases in reserves to bring the level back into the target range by the end of 2008/09. The current corporate risk assessment, which provides the basis for the target level of reserves, has got marginally worse since the last review, so it is important that there is no relaxation of reserves policy in the next 2 financial years. In addition, it is suggested that an exceptional risk reserve needs to be established to close off specific risks. In the main this can be achieved by `switching' one off revenue expenditure into capital, and by earmarking the PSA grant which is due to be paid in 2007/8 Appendix 1, section B details these changes which it is suggested should be referred to Council in February 2007 as part of the budget report to create an exceptional risk reserve.

7.16 The corporate capital contingency position was also reported in September, and no further drawings have been made since that report. The table below provides the latest position. With the information that is available at the present time, the corporate capital contingency should be sufficient to cover the remainder of 2006/07. The level of the contingency over the three year period will be re-evaluated as part of the annual budget setting process.

7.17 Appendix 1, section C also gives an update on the latest position regarding the Avon Coroners service. In last year's budget a proposal was made for the purchase and refurbishment of the Flax Bourton site. The Executive recommended that only essential works were funded. It is recommended the Executive reaffirms its decision on this issue again now.

7.18 Appendix 1 Section C also outlines the proposals for Bristol City Council to enter into a contract to build a new public and forensic mortuary. It is recommended that the Executive agree to the proposal on the basis that the scheme will offer marginal savings over the current mortuary provision via hospitals. This is subject to Council agreeing the financial plan proposal to include £100k in 2007/08 for the increased cost of mortuary fees as part of the budget report in February 2007.

7.19 Appendix 1 Section D highlights the issues that will maintain budget pressure upon the Authority in 2008/09 onwards including the results of the Comprehensive Spending Review where government funding for all services other than schools and health related budgets is expected to tighter than it has been in recent years.

7.20 The position faced by the Council still remains challenging, and it is critical that the Executive is able to maintain financial discipline, including control of additional capital and revenue spending proposals, to underpin this strategic approach.

8 RISK MANAGEMENT

8.1 The report author and Lead Executive member have fully reviewed the risk assessment related to the issue and recommendations, in compliance with the Council's decision making risk management guidance.

9 RATIONALE

9.1 This report sets out:

The current known background and context as part of the review of the financial plan leading to the proposal of a budget to Council in February 2007.

The high level timetable for the service and resources planning process as required under the Council's constitution.

10 OTHER OPTIONS CONSIDERED

10.1 This report contains information about the Council's financial outlook. The service and resources planning process continues to explore alternative options to meet the Council's priorities within available financial resources.

10.2 Corporately, the options considered at the time of setting the 2007/08 budget will be concerned with balancing the level of Council Tax with the level of services provided by the Council.

11 CONSULTATION

11.1 Executive Councillor; Section 151 Finance Officer; Chief Executive; Monitoring Officer. (Specific to this report)

11.2 Appendix 2 of this report provides details of the consultation undertaken with other audiences as part of the Service Delivery and Resource Planning process.

12 ISSUES TO CONSIDER IN REACHING THE DECISION

12.1 The report deals mainly with corporate issues, but the Service Delivery Plans will address a wider range of issues including Social Inclusion; Customer Focus; Sustainability; Human Resources; Property; Young People; Equality (age, race, disability, religion/belief, gender, sexual orientation); Human Rights; Corporate; Health & Safety; Impact on Staff; and Other Legal Considerations.Select from: Social Inclusion; Customer Focus; Sustainability; Human Resources; Property; Young People; Equality (age, race, disability, religion/belief, gender, sexual orientation); Human Rights; Corporate; Health & Safety; Impact on Staff; Other Legal Considerations.

13 ADVICE SOUGHT

13.1 The Council's Monitoring Officer (Council Solicitor) and Section 151 Officer (Strategic Director - Support Services) have had the opportunity to input to this report and have cleared it for publication.