Meeting documents

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A £7.8m or 4.5% increase in the total revenue budget on a like-for-like basis.

A £3.2m or 3.4% increase in the non-schools budget on a like-for-like basis.

A £4.6m or 5.8% increase in the schools budget on a like-for-like basis.

A reduction of £36m in the Council's reliance on unsupported borrowing to£29m against a planned £65m by limiting the capital programme while new capital resources are made available and linking the cost of unsupporting borrowing to services ability to pay for that borrowing, and stretching targets for capital receipts.

A 4.95% Council Tax rise that continues the policy of meeting Government guidance.

A reserves strategy to increase reserves to c.£8m by 2008/09 in accordance with the recommendations of the Resources Director.

Doing this within the context of a tough financial position and a period of heightened financial risk in addition to everyday risks over the next 3 years.

The recommendations are conditional upon the Council, the Council Executive, Directors and Heads of Service:

A recognition that the financial position in future years is as challenging as 2006/07.

Increased employer pension contributions are absorbed by services. (This is assumed at an additional 1.8% p.a. over 3 years).

Service pressures are absorbed by services, within existing planning targets.

A further £1.4m of savings to reach a Council Tax increase just below the Government's expectation of 5%.

Absorbing increased pension costs within services;

Inflation rises above the normal measure of price increases, particularly energy;

Increasing demand for services and improving standards;

New responsibilities which are not always fully funded at a local level, for example, free bus travel for the over 60s;

Pressures within Social Services;

A current capital programme that relies on substantial unsupported borrowing and is experiencing falling housing capital receipts;

A grant settlement that has clawed back £3.4m of a £4.6m grant increase in 2006/07 under the Government's new funding formula; and

The Government's expectation that Council Tax rises will be on average less than 5% in each of the next two years. The Local Government Minister has stated: "We have provided a stable and predictable funding basis for local services. We expect Local Government to respond positively as far as council tax is concerned. 85.. we expect to see average council tax increases in each of the next two years of less than 5%. There is, following today's announcement, no excuse for excessive increases. Local Government should be under no illusions; if there are excessive increases, we will take capping action - as we have done over the last two years."

The cost of approved major projects.

The probability of having to charge Bath Spa claims management costs to revenue in 2005-06 and in future years.

The reliance on £15m of receipts in 2006-07 to reduce unsupported borrowing.

The potential costs of single status in 2007-08 both in terms of back pay and ongoing costs.

The Council cannot afford that it would wish to do both in terms of its services and the development of the area.

The Council needs to address and recognise the major risks within the revenue and capital budgets.

The Council needs to strike a difficult balance between the interests of service users, visitors, those who work in the area, residents and the Council Tax payer.

Reducing the level of services in some areas.

Adjusting the current capital programme and adding only schemes that are unavoidable or that provide the minimum level of development activity until additional capital resources are available.

Requiring all services to meet financial plan targets plus a further£1.4m reduction to meet the Government expectation of a 5% Council Tax rise.

Developing contingency plans to cover the major risks associated with anticipating£15m of capital receipts and Spa Claims management costs.

Increasing reserves to help deal with the heightened period of risk during the next 3 years.

A £10.3m or 5.98% cash increase in the total budget including schools. On a like-for-like basis (adjusting for transfers of funds and funding for new responsibilities.) the increase is£7.8m or 4.5%.

a £4.6m or 4.9% cash increase in the non-schools budget over the equivalent budget in 2005/06 which is£63.2m or 3.4% on a like-for-like basis.

a £5.7m or 7.2% cash increase in the schools budget over 2005/06, which is£4.6m or 5.8% on a like-for-like basis.

A 4.95% Council Tax increase of £48.99 p.a. for a Band D property (or 94 pence per week) which excludes Police, Fire and Parish precepts..

Any cost of single status.

The transitional revenue costs of the WorkSMART initiative.

The waste strategy.

Absorbing service pressures (which in 2006/07 amounted to£9m).

Continuing to improve performance in the key priorities of the Council.

For future years, the costs of defending and/or pursuing claims is difficult to estimate as it depends as much on the actions of third parties as well as the Council. It is proposed that:

The level of revenue reserves be increased at every opportunity, including the revenue savings arising from the proposed adjustments in the capital programme (which will add£251k in 2007-08 and £473k in 2008-09 to resources).

Any draw down on reserves for Spa Claims Management Cost in excess of the above amounts be repaid to reserves over 3 years beginning in the year after drawdown and that this is added to savings targets for services in future years.

The Council make no further calls on the revenue reserves except to fund major risks identified in the revenue and capital budgets where these cannot be dealt with through management or policy actions.

£5.2m p.a. between 2006-07 to 2008-09 of general receipts and£1m of Housing Receipts.

£15m of exceptional receipts before 31 March 2006 to reduce unsupported borrowing. This represents a major risk.

If sales of £5.2m p.a. are not achieved for any reason the capital programme will have to be adjusted further to our proposals in Section 2 below.

The contingency plan if the £15m of exceptional receipts are not achieved is for the Council to use a revenue reserve of£806k for IT replacements, to capitalise the IT spend and to use £620k of reserves for one year only while alternative receipts are identified and achieved during 2006-07 and reserves restored in 2006/07 and 2007/08.

Section 2 - The Capital Budget for 2006/07

An ambitious capital programme over a short period of time.

Falling housing capital receipts (and the unanticipated requirement recently notified to the Council that 75% of Right to Buy receipts need to be returned to the Government - "pooling" from 2004-05).

A relatively high level of unsupported borrowing compared to other unitary councils.

The Council's Prudential Indicators.

At a minimum, not to increase unsupported borrowing above its current levels and to reduce unsupported borrowing wherever possible although, given the Council's commitments, the scope for reducing unsupported borrowing on the current capital programme is limited.

To limit new commitments to the absolute essential items until significant additional resources become available.

Where net savings are reflected in the revenue budget through these measures, to increase the Council's contributions to reserves in order to maximise reserves over the heightened period of risk the Council is facing over the next 3 years.

Integrating the cost of unsupported borrowing within services' revenue budgets and financial plan targets.

Although the capital provision for certain activities is not provided for corporately this does not mean the activity will not continue if the relevant service can fund the revenue effects of the borrowing. This applies to WorkSMART, highways maintenance, Headroom and Income Generation/Sustainability.

In certain instances the Council can achieve the same objective via different means, for example, affordable housing being achieved through development.

Those schemes that are recommended and included in the proposed programme;

Those schemes that are recommended in principle on the condition that the service meets the capital financing costs of unsupported borrowing (at£95,000 per £1m borrowed in a full year for 25 years).

Those schemes and programmes that need further options appraisal; and

Those schemes that are not recommended at this stage.

The WorkSMART project needs to identify up-front savings over and above those built into the financial plan to proceed.

Heritage Services will need to demonstrate the ability to fund unsupported borrowing and to maintain its income within current budgets and some tough targets for reductions.

Operations - there are a number of schemes that are subject to the cost of unsupported borrowing being met within current budgets and financial plan targets

The aspirations of the Council in relation to Education projects being contained within Government allocations plus a£600k p.a. provision for planned maintenance.

Proposals for efficiency savings/additional income that require related capital investment being funded from revenue savings.

The revenue costs of service aspirations for capital investment being funded from revenue budgets and financial plan targets or additional capital receipts.

Provision for development work is sufficient to keep projects ongoing and any further significant investment is subject to additional capital receipts or other capital resources, the use of which will need to be balanced with service capital needs and reducing unsupported borrowing.

Investment in Waste Services needs to balance performance against penalties, additional capital receipts and an options appraisal including alternative forms of provision.

Having the will to realise major capital receipts to achieve its ambitious programme subject to this always being consistent with best consideration.

Limiting future commitments unless significant additional receipts or other capital resources are achieved and even then that the use of such resources are balanced with reducing debt.

We recommend the Resources Director's report on the adequacy of reserves which provides a reserves strategy to increase non-earmarked General Fund reserves from £5.2m in 2005/06 to £7.7m-£8.0m by 2008/09 as shown in Table 3 below.

Table 3: Projected Non-Earmarked Revenue Reserves

Take every opportunity to maximise reserves.

A reconciliation of reserves is contained in Annex 5.

Capital Risk Contingency

In the last financial plan, the need for around £20m in capital risk contingency was identified, although some of this was included in the capital programme and a large proportion relied on the sale of additional capital assets should the need arise. The Resources Director is advising the Council that a capital contingency of around £15m would be prudent over the plan period of which £10m does not need to be cash backed at this stage. The plan currently allows for some £5m to be included in the capital programme over the period. In addition the major projects programme includes contingencies of £5m for general schemes and £34m for the Combe Down Stone Mines. The latter contingency is within English Partnerships funding for the scheme and as such is not a Council resource.

The Local Government Act 2003 contains a duty on the statutory finance officer to report to the Council, at the time the budget is considered and the council tax set, on the robustness of the budget estimates and the adequacy of financial reserves. The report of the Resources Director on this subject is included as Annex 6 to this report and is recommended to the Council. We have drawn upon the report in putting our budget proposals to the Council. The conditions of the report by the Resources Director are an integral part of our recommendations.

Section 4 - Additional Information

Social Services and Education spending

The original Corporate Plan contained strategies for creating Financial and Organisational Headroom and Capacity, including financial targets for education and social services that will, over time, reflect a tempering of the rate of growth so that the gap between spending and the government's Formula Spending Share is narrowed to enable local income to fund local priorities.

Social Services

As with Education, the Corporate Plan envisaged a tempering in the rate of growth in Social Services so that, over time, the gap between spending and the government's norm (93FSS94) is narrowed. With the demise of FSS this is difficult to measure.

Particular and significant local circumstances; and /or

A conscious decision to spend more to achieve better performance against local and national priorities, and that this performance is achieved.

Reported to the Council Executive by July 2006.

That the outcomes of the review inform the budget and service planning for 2007/08 onwards in the context of the various initiatives of the Council.

That the focus of the review identifies high cost services and links cost to higher performance in priority services. If this is not the case the Council will need to focus its planning on services that are high cost and/or medium/low performing and/or low priority.

This Council collects Council Tax on the behalf of the parishes, Fire and Police Authorities and the final bills issued will include the Council Tax they have requested this Council to collect. These will form part of the Council's overall budget-setting resolution.

1. That the Council approve:

a) The General Fund revenue budget for 2006/07 of £182.182m and the associated Council Tax increase of 4.95%.

2. That the Council include the Local Precepts of Town and Parish Councils and those of the Fire and Police Authorities in its Council Tax setting.

3. That the Council acknowledges the Section 151 officer's report on the robustness of the proposed budget and the adequacy of the Council's reserves (Appendix 3, Annex 6) and approves the conditions upon which the recommendations are made as set out throughout Appendix 3.

4. That in relation to the capital budget the Council:

a) approves a capital payments budget of £42.206m for 2006/07 (excluding further slippage from 2005/06) as shown in Appendix 3, Annex 4, including the adjustments proposed in Appendix 2 (Table 2) and the additions to the programme proposed Appendix 3, Annex 3.

5. The Council approves a high level review of the cost and performance of services be carried out and reported to the Council Executive in July 2006 to inform consideration of value for money and service and financial planning for 2007/08 onwards.

6. That the Council instruct Executive Members to finalise their revenue and capital budgets for 2006/07 within the cash limits and amounts set by Council, for inclusion on the weekly decision list no later than April 2006 (as part of the approval of Service and Resource Plans).

7. Authorise the Interim Head of Finance and Resource Planning, in consultation with the Executive Members (Resources) and the Leader of the Council, to make presentational improvements to the draft Budget Proposal prior to submission to Council and to include an update on the EPH programme as required by the Council at its meeting in November 2005.

8. That the Council request the Council Executive and the Resources Overview and Scrutiny Panel to consider how Councillors can be more involved in developing the budget in the context of the Council's Corporate and Financial Plan.

Annex 3 to Appendix 3 Additions to the Capital Programme

1: New items recommended to be added to Capital Programme

2: Recommended for inclusion in capital programme if revenue capital financing costs covered by service areas

3: Items requiring preparation of a full Business Case, alternative options appraisal and review of alternative service provision before being considered for inclusion in capital programme.

4: Items not recommended

APPENDIX 3 Annex 4 (i) Indicative 2006/07 Capital Programme & Funding Sources

APPENDIX 3 Annex 4 (ii) Indicative 2007/08 Capital Programme & Funding Sources

APPENDIX 3 Annex 4 (iii) Indicative 2008/09 Capital Programme & Funding Sources

Annex 6 to Appendix 3

Chief Financial Officers' Opinion on Adequacy of Balances and the Robustness of the Budget

Summary Report of the Resources Director (as Chief Finance Officer for the Authority)

I have examined the budget proposals contained in this report, and believe that whilst the spending and service delivery proposals contained within are even more challenging than ever before, they are nevertheless achievable and deliverable given the political will to implement the changes, good management, sound financial and performance monitoring, and initiatives to support and enable more efficient working practices are delivered. I am satisfied that the requisite management processes exist within the Council to deliver this budget, and to identify and deal with any problems which may unexpectedly arise throughout the year.

However, the corporate and financial plan relies to a much greater degree on the delivery of strategies and action plans within individual service and financial plans and it will therefore be necessary to give much higher priority to the monitoring and review of these plans in the performance management processes of the Council.

The level of exposure and commitment in our capital programme in the coming years remains particularly challenging. Solid monitoring, review and programming of schemes will need to be enhanced, as will individual project management processes in order to properly manage and control the whole programme within financial tolerances.

On the matter of general reserves, I have continued to adopt the approach to evidence the requisite level by use of internal risk assessment. The 2006-07 budget contains no reliance on the use of unallocated reserves. The Council was advised to take a rigorous and critical approach to any further requests for uses of unallocated reserves during 2005-06 to maintain the reserves strategy. Despite this, £0.8m was used from reserves in 2005-06. It is essential that reserves in 2006-07 and the foreseeable future be used ONLY if risks materialise AND cannot be contained by management or policy actions. This is due to the heightened level of risk the Council is exposed to over the next 3 years over and above what can be considered the normal year to year service and budget risks. Even then, in the event that reserves must be used, the Council must put in place arrangements in future years' budgets to recover the level of reserves within 3 years which will place more pressure on revenue and capital budget.

From 2001/2, the Council adopted a risk management approach, which assesses the level of reserves required against a corporate assessment of the risk being carried. The assessed risk has increased from £7m to around £8M on the normal year to year risks and the Executive are advised to bear this figure in mind when recommending the use or replenishment of general reserves over the planning period. In addition, the Council faces a heightened risk from some exceptional issues, including:

Bath Spa Claims Management Costs after 31 March 2006 which may be chargeable to revenue. While I am able to fund up to£2m in 2005/06 costs by extinguishing some earmarked reserves and the use of an IT replacement revenue reserve (by substituting IT spend for claims management costs in the Capital Programme), future years costs remain a concern and a major revenue budget risk. The Council and the Executive are advised to take every opportunity to add to reserves from budget underspends and savings from the preliminary Capital Review. Future costs may need to be a draw on revenue reserves and must be paid back from future years' budgets over 3 years, putting serious pressure on funding for services.

Single Status Ongoing Costs. No provision has been made for additional ongoing costs and, to the extent offsetting savings are not found from 2007/08, the costs will need to be funded from reductions in services and/or increased fees and charges in addition to financial plan targets and savings required to keep Council Tax rises below 5% each year.

Single Status Back Pay. I will need the Council's support to minimise these costs. This may still leave a significant cost and a commitment in future years' budgets to replenish reserves over a 3 year period which will put considerable pressure on future budgets.

Capital Receipts. The capital and revenue budgets rely on a challenging set of targets for receipts(£5.2m p.a. ongoing, £15m one off in 2005-06 and/or early 2006/07 and specific receipts for capital schemes). The Council and Council Executive will need to exercise great discipline to limit capital programme commitments and to achieve this level of receipts which are only deliverable within such a climate. All receipts will be subject to optimising value for money and best consideration and will not be proposed on the basis of a "quick fix" but rather to meet the aspirations of a demanding capital programme.

These are serious exceptional risks which if they crystallise could eliminate the Council's reserves and leave its financial standing seriously in question.

My recommendation that the budget is reasonably robust and reserves are adequate are on condition that the Council and the Council Executive:

Recognise in the planning approach that the level of reserves and corporate risk assessment need to be regularly reviewed in the light of changing circumstances and that it may not be possible to match the two at any single point in time. This plan needs to show the Council's commitment to bring the level of reserves up to a level which should cover most identified risks during the planning period. This approach is pragmatic, and shows a clear commitment to prudent contingency planning. It must be noted however, that this sum does still leaves the Council exposed to the exceptional risks identified and, if those crystallise, to reserves being inadequate.

Limit its capital commitments so that unsupported borrowing is not increased above the level in the proposed and indicative programmes and ideally reduced further as a result of additional capital resources.

Apply a robust approach to capital receipts included in the plan consistent with optimising value.

The Council Members, Directors and Heads of Service achieve their cash limits for 2006/07.

Taking every opportunity to maximise reserves

Rejecting any further calls on reserves other than for those for risks that have been identified or are unforeseen and cannot be dealt with through management or policy actions.

That where there is a draw down on reserves this is paid for within 3 years which will put further pressure on revenue budgets

That the council puts arrangements and resources in place to consider value for money in preparation for future years' budgets.

Processes

Budget estimates are exactly that - estimates of spending and income made at a point in time. This statement about the robustness of estimates cannot give a guarantee about the budget but gives members reasonable assurances that the budget has been based on the best available information and assumptions available at the time.

In order to meet the requirement on the robustness of estimates a number of key processes have been put in place, including:

The issuing of clear guidance to Directorates on preparing budgets.

The development of Council wide risk assessment.

The use of budget monitoring to identify risks.

The Council's s151 Officer providing advice throughout the process of budget preparation and budget monitoring.

The Directors' review of their budgets and budget sensitivities.

Directors reporting on the robustness of estimates to the relevant Overview and Scrutiny Panels.

Notwithstanding these arrangements, which are designed to test the budget throughout its various stages of development, considerable reliance is placed on the Directors and Heads of Service having proper arrangements in place to identify issues, project costs, service demands, to consider value for money and efficiency, and to implement changes in their service plans. This is supported by appropriately qualified financial services.

Corporate and departmental processes will continue to be improved in future years. Improvement in these processes will assist in prevention or earlier identification of issues to be dealt with in the budget and Financial Plan. Nevertheless in preparing such a complex budget unforeseen issues may arise throughout the year and the period of the Financial Plan.

Robustness of Estimates

The 2006/07 budget and service planning process continues the need to link financial resources to corporate priorities and risks. In addition to improving efficiency, there are clearly choices for the Council in this respect:

To increase financial resources to meet demand and reduce risk; or

To reduce (where possible) service levels and standards, frequency of service delivery, and eligibility for services.

As part of developing the budget, Members of the administration have considered these options and they are reflected in the proposed budget.

Most notably the Council has had to address major cost increases and pressures as well as corporate priorities including;

Pensions.

Single Status - a key issue in 2007/08.

Waste Strategy.

The reliance on unsupported borrowing and falling capital receipts within the capital programme. While some steps have been taken to reduce the impact of these factors, the capital review will need to continue to improve planning, phasing of costs, monitoring, and reducing unsupported borrowing.

The cost of Major Projects.

Given the risks facing the Council I have introduced further arrangements to assist in taking a view on the Robustness of Estimates and the adequacy of reserves.

The factors and risks taken into account in developing the draft budget and recommendations on reserves are contained in the Directors' Review of the Robustness of Estimates and Risk/Sensitivity Analysis Statements.

In reports to the Overview and Scrutiny Panels during January 2006 all Directors have, with the support of their financial services, assessed the robustness of their budgets and the achievability of savings, income and reductions. These reports constitute a vital part of my report.

These assumptions and potentially changing circumstances will require the forecasts for future years to be reviewed early in each financial year leading to more detailed budgets being prepared for the next financial year and the medium term during the autumn of each financial year.

Given all these factors I, as the Council's Section 151 Officer, consider the estimates for 2006/07 to be sufficiently robust, challenging and conditional for approval by the Council.

Over the medium term, the Financial Plan reflects the continuing impact of the draft budget and only minimal growth in relation to issues that are unavoidable. Within the tight financial climate over the medium term it is very likely that service improvement and reasonable Council Tax levels, without key service reductions, will only be achieved through improving efficiency and clear prioritisation.

The Capital Budget

Projects, included in the capital programme, were prepared by Heads of Service and managers in line with financial regulations and guidance. All projects were agreed by the relevant strategic director and Executive Member and are fully funded.

Projects have been costed at outturn prices with many subject to tender process after inclusion in the programme. This may lead to variance in the final cost.

Directorates are required to work within the given cash envelope so any under or over provision must be found within these limits.

In addition, I will require a clear commitment from the Council to:

Minimise further commitments on the capital programme without any further capital income and/or reprioritisation of the proposed programme.

Very carefully consider and balance the use of capital receipts over and above those planned in terms of reducing unsupporting borrowing, new service based schemes and development projects to keep the capital programme sustainable.

Directors Review of Robustness & Risk areas

The extent of the Directors Review is to identify;

The key assumptions in the proposed budget and to give a view of the robustness of these assumptions (i.e. financial impact if circumstances change),

The key risk areas in the budget and budget changes to assess the adequacy of reserves.

It is recognised that the Directors cannot give a 100% guarantee of the estimates but rather that the budgets have been based on appropriate but challenging assumptions.

Summary of Potential Range of Risks

The overall summary of total budget sensitivity identified by each of the Directors under normal circumstances, which could impact upon the future years' budgets is as follows:

This total financial risk has been analysed using the following categories:

This would indicate an underlying prudent level of unallocated reserves of £8m to be achieved pragmatically over time under normal circumstances (and in addition to school balances).

However, the further exceptional risks identified may have a potential call on reserves which may reduce reserves to NIL within 2-3 years. The Council is advised to be cautious about these risks and commit to restoring any draw down on reserves within a 3 year period.

In these circumstances, I will require the Council, Directors and Heads of Service:

To remain within their service budget for 2006/07 and within financial plan targets for future years with a strict adherence to recovering overspends within future years' financial plan targets (i.e. services will need to absorb on overspends, pressures and service plan targets).

Repayment to reserves over 3 years should these risks materialise.

Direct any savings/underspends to reserves, including any savings from the continuing Capital Review.

Estimated Available Revenue Reserves

Earmarked Revenue Reserves

A detailed review of the Council's earmarked revenue reserves has been undertaken by each of the Departments and is reflected in Annex 5 of this Appendix.

Non-Earmarked (General) Revenue Reserves

Detailed in the table below is the estimated level of non-earmarked revenue reserves that will be available to support the General Fund revenue budget in future years.

Assessment of Adequacy of Reserves

Under the Local Government 2003 Act the Secretary of State has reserve powers to set a minimum level of reserves. The most likely use of this power is where an authority is running down its reserves against the advice of their s151 Officer.

Determining the appropriate levels of reserves is not a precise science or a formula e.g. a %age of the Council's budget. It is the Council's safety net for risks, unforeseen or other circumstances and must last the lifetime of the Council unless contributions are made from future years' revenue budgets. The minimum level of balances cannot be judged merely against the current risks facing the Council as these can and will change over time.

Determining the appropriate levels of reserves is a professional judgement based on local circumstances including the overall budget size, risks, robustness of budgets, major initiatives being undertaken, budget assumptions, other earmarked reserves and provisions, and the Council's track record in budget management.

The consequences of not keeping a minimum prudent level of reserves can be serious. In the event of a major problem or a series of events, the Council would run a serious risk of a deficit or of being forced to cut spending during the year in a damaging and arbitrary way.

The recommendation on the prudent level of reserves has been based on the robustness of estimate information and the Corporate Risk Register. In addition, the other strategic, operational and financial risks taken into account when recommending the minimum level of unallocated General Fund reserves include:

There is always some degree of uncertainty over whether the full effects of any economy measures and/or service reductions will be achieved. Directors have been requested to be prudent in their assumptions and that those assumptions, particularly about demand led budgets, will hold true in changing circumstances.

The Bellwin Scheme Emergency Financial Assistance to Local Authorities provides assistance in the event of an emergency. The Local Authority is able to claim assistance with the cost of dealing with an emergency over and above a threshold set by the Government.

That the accumulated shortfall in income within Heritage Services as at March 2006 will be covered by otherunderspends.

The risk of major litigation, both current and in the future.

Risks in the inter-relation between the NHS and Social Service authorities.

The risk of losing subsidy arising from outstanding Housing Benefit and Council Tax Benefit Subsidy Claims.

Unplanned volume increases in major demand led budgets, particularly in the context of high and accelerating growth.

The need to retain a general contingency to provide for any unforeseen circumstances, which may arise.

The need to retain reserves for general day-today cash flow needs.

The recommendations of the Council's s151 Officer are:

The Council maintains an absolute minimum prudent level of General Fund reserves (excluding schools) of£5.2m at the end of any financial year from 2005/06. The minimum level is designed to cope with risk and unforeseen circumstances that cannot be addressed by management or policy action within the year. Management and policy action should be the first actions taken before any resort to reserves.

That an optimal level of general fund reserves is £8m under normal circumstances and should be achieved by 31 March 2009. The optimal level of reserves is designed to allow the Council to withstand a measure of changes in circumstances during the year or minor variations in projected resources or spending over the period of the Financial Plan.

That the Council faces a period of heightened risk and must therefore take every opportunity to increase reserves, and must restore reserves used to meet risks that crystallise within a period of 3 years.