Meeting documents
Cabinet
Wednesday, 11th January, 2006
APPENDIX 1 - The Report
1. The Provisional Financial Settlement
1.1 The Government announced the provisional financial settlement for 2006/07 and 2007/08 for consultation on 5th December 2005. The deadline for responses to ODPM is 11 January 2006 and a suggested outline response is included at Appendix 2.
1.2 The key headlines within the financial settlement are:
The new formula to decide local authority grant bears little relationship to previous settlement calculations. For example, there is no Formula Spending Share for service areas and no direct way of knowing the level of Council tax increase which has been built in by the Government.
The settlement is for 2 years and will eventually become a 3 year settlement.
The Council's non-schools grant for 2006-07 is up 1.2m or 3.9%. The increase is 6.6% in 2007-08.
The Council's underlying grant increase under the new formula is4.6m. The change in formula has produced winners and losers. The Government has guaranteed the losing Councils a 2% increase in grant. This is paid for by the winners like Bath & North East Somerset. Instead of receiving an extra4.6m indicated by the new formula, the Council is receiving an increase of 1.2m, a shortfall of3.4m. This shortfall is equivalent to 5.4% in Council Tax.
The shortfall of 3.4m makes it difficult to meet unavoidable cost increases.
The Government now provides a separate grant to fund schools directly - the Dedicated Schools Grant. This is `ring fenced' - it can only be spent on schools.
The increase in the Dedicated Schools Budget is 4.6m (5.8%) for next year and4.7m (5.6%) the year after.
The Government expects Council Tax increases of less than 5% for each of the next 2 years.
The Government is warning that capping rules may be tougher. (In 2005-06 Councils with a Council Tax rise more than 5BD% and a budget rise of more than 6% were subject to some form of capping).
1.3 The implications of the settlement are explained in the main report.
2. The Current Financial Plan
2.1 The Council agreed a Corporate Plan in February 2005, which also contains the Council's financial plan. The financial plan is based upon the "containment" of pressures with services keeping to cash limits in their budget planning and the tempering of growth within Education and Social Services. For 2006/07 and future years, services are continuing to plan to meet the targets set within that plan. One issue as the current Corporate and Financial Plans are reviewed and updated is to develop targets for 2008/09 (Year 3 of the updated plan). The current financial plan targets are set out in broad terms in Figure 1 overleaf.
Figure 1: Financial Plan Targets
|
Revenue Target |
Performance / Service Standards Target |
Indicative % change over 3 years |
Services |
|
Increase |
Improvement |
2.0% |
Public Transport |
|
Slight Increase |
Improvement |
1.0% |
Waste Management |
|
No change |
Improvement |
0.0% |
Customer Access & E Govt, Corporate Training, Major Projects and specific Services according to circumstance (contracts etc) |
|
Tempering of growth |
No change, achieved by productivity gain |
-5.0% |
Social Services (aim to reduce excess spending against FSS from 18% to 10%) |
|
Tempering of growth |
No change, achieved by productivity gain |
-3.0% |
Education (aim to reduce excess spending against FSS from 8% to 4.5%) |
|
Reduction |
No change, achieved by productivity gain |
-3.0% |
Most Services |
|
Larger reduction |
May involve some lowering of standards in lower priority services |
-5.0% |
Some Youth & Community budgets, Car Parking, Economic Development, Environmental & Consumer Services (exc. Voluntary grants), Planning Mgt & Administration and DC Administration, Emergency Mgt Unit, Legal Services, Property Services, Revenues & Benefits, some Arts budgets |
2.2 The Financial Plan targets focuses on tempering growth in the two major areas of spend within the Council's budget i.e. Education and Social Services. The introduction of the DSG removes the Council's discretion to temper growth within the schools budget. The new formula does not have any Formula Spending Shares (FSS) for service blocks. Figure 2 below therefore shows budgeted spend against FSS in 2005-06.
Figure 2: Budgeted Spend v. FSS 2005-06
|
Service Block |
2005/06 FSS £k |
2005/06 Net Budget incl recharges £k |
£k above/(below) FSS |
% above (+)/ below (-) |
|
Personal Social Services |
39,217 |
43,434 |
4,217 |
11% |
|
Highways |
5,962 |
6,576 |
614 |
10% |
|
Other Services |
34,159 |
25,674 |
(8,485) |
-25% |
|
Capital Financing |
7,694 |
5,870 |
(1,824) |
-24% |
|
Education |
84,835 |
89,327 |
4,492 |
5% |
|
Total |
171,867 |
170,881 |
(986) |
-1% |
2.34 The report to the Executive of 7th September 2005 discussed many of the capital and revenue pressures facing this authority, as did the report on the capital programme to Council on 17th November 2005. It also identified and recognised that there was a risk in revenue and capital and sought to build reserves to meet them. The original financial plan created headroom in the financial plan of £1.6m in 2006/07, to be allocated for investment in improvement priorities and/or reducing the level of council tax rise. This reduction of the reserve made of £1.6m to a minus £1.1m deficit was explained in that report.
2.4 The existing plan has now been updated for technical changes, including:
The full Dedicated Schools Grant (DSG) (84.859m in 06/07 & 89.472m in 07/08) has to be 93passported94 to schools without alteration by Council. It is anticipated that these figures may reduce as a result of updating pupil numbers.
Concessionary Fares funding in settlement (0.714m in 06/07)
Social Services grants (Preserved Rights and Residential Allowances) rolled into Formula Grant (0.667m in 06/07)
Miscellaneous other transfers
2.5 The Revenue Budget for 2006-07 currently stands at 183.430m and would result in a Council Tax Rise of 6.71%. This work-in-progress budget includes:
|
All Services meeting financial plan cash limits except Social Services (200k) |
|
|
Further savings (Car Park Income 250k and Planning Income 50k) |
-300 |
|
15m capital receipts to reduce the cost of unsupported borrowing |
-1,425 |
|
A change from local to regional flood defence committees which requires the costs across the region to be apportioned to individual authorities |
95 |
|
The additional cost of utilities/excess inflation |
360 |
|
The repayment of reserves in respect of Spa Claims costs |
230 |
|
Provision for the PCT Integration project |
100 |
|
Provision for the WorkSMART Save to Invest proposal (see Appendix 3) |
192 |
2.6 The major service implications of the budget to date are outlined in Section 3 of this Appendix.
2.7 In order to achieve a Council Tax rise of under 5% (say 4.95%), further savings of 1.1m are required. Directors, Heads of Service and Executive Members will develop options to achieve this level of savings which will be reported to the meeting of the Council Executive on 8th February 2006.
3. Key Issues and Pressures
3.1 For 2006/07 onwards there are several issues that are putting the Financial Plan under pressure and will involve some difficult choices to balance national and local priorities, performance and Council Tax.
3.2 The major issues are:
Single status (2007-08).
Pensions.
Social services.
Continuing service pressures.
Inflationary pressures, particularly to fuel costs.
Major projects, the capital programme and unsupported borrowing.
3.3 Balances as already indicated are likely to decrease in 2005/06 following Council spending decisions and may fall to inadequately low levels if the ODPM do not allow the Council to capitalise Spa claims costs.
3.4 Figure 4 shows in financial terms the pressures and savings already identified. The detail can be found in individual draft autumn Service Plans.
Figure 4: Net Effect of Savings and Pressures by Directorate
|
Director |
Pressures/Priorities £'000 |
Savings £'000 |
Current Balance
£'000 |
Required Balance (per 2.4) £'000 |
|
Resources Director |
1,750 |
-1,750 |
0 |
0 |
|
Corporate Director |
1,287 |
-1,287 |
0 |
0 |
|
Education Director |
405 |
-405 |
0 |
0 |
|
Social & Housing Services Director |
1,641 |
-1,267 |
375 |
200 |
|
Operations Director |
3,904 |
-3,904 |
0 |
0 |
|
Total |
8,987 |
-8,612 |
375 |
200 |
3.5 Figure 4 shows that to date pressures (above inflation) of £9m are being contained by savings of £8.6m, leaving a shortfall on current financial plan targets of £0.4m. In order to achieve a Council Tax rise of under 5% further savings of £1.1m are required (para 2.6), but this requires Social Services to manage its pressures to a balance of £200k. This is proving difficult and the latest position on Social Services shows a current variance of £375k. This means that the target savings required to achieve a Council Tax increase of under 5% rises from £1.1m to £1.275m.
3.6 The major service improvements, totalling £3.1m, included in the pressures are shown in Figure 5. These are based on current Financial Plan targets.
Figure 5: Major Service Improvements/Pressures
|
Service |
Pressure / Priority |
Current Budget 2005/06 £'000 |
Growth £'000 |
Service Impact |
|
Customer Services, Libraries & Information (& CAP) |
Customer Access Programme (currently not funded in Financial Plan) |
3.5m (for whole service) |
140 |
Requested as per CAP funding paper. Some costs will be managed in 2006/07 by slippage in the programme, subject to further review by the Executive in September 2006 of financial needs for 2007-08 based on actual expenditure & progress in 2006-07. |
|
Planning services |
Joint Waste strategy (joint UA's) |
4.647m (for whole service) |
33 |
Failure to deliver the appropriate planning framework will result in a delay to the building of operational facilities & 4 UA's will incur increased fines as a result. The delivery of joint facilities will realise economic & environmental benefits. |
|
Education |
Home to School Transport |
2.8m |
420 |
Increases on number of routes required to support pupils requiring transport coupled with an increase in the cost of transport contracts and a large number of school days in the financial year. The budget for 2005-06 is already overspent as reported in the budget monitor. |
|
Social Services |
Withdrawal of access and Systems Capacity Grant |
126 |
126 |
This grant was predominantly used to support the domiciliary care budget which is currently overcommitted with significant management controls to redress this. The eligibility criteria were also tightened in 2005/06 to reduce the growth in spend. This is a growing area with increases in the older population and a requirement to keep people in their own home. If this grant is not built back in there will be a requirement to reduce still further (some are already planned see savings impact table 6) the numbers receiving domiciliary care which will impact on PI's. |
|
Social Services |
Withdrawal of Safeguarding Children Grant |
194 |
135 |
A number of key child protection projects: "Keepsafe" "Locate" and "Childsafe" - and the independent chair of child protection conferences are funded through this grant and will therefore be at risk. |
|
Social Services |
Home Care Purchasing |
2.36m |
400 |
The budget is currently £420,000 overcommitted. Panels were introduced earlier in the year to reduce spend and revised eligibility criteria have been introduced. It will take time for this to have an impact. |
|
Service |
Pressure / Priority |
Current Budget 2005/06 £'000 |
Growth £'000 |
Service Impact |
|
Social Services |
Learning Difficulties Growth in Placements |
9.7m |
500 |
There are a known number of new people who will require residential, nursing or supported living placements in 2006/07. These are younger people leaving school and also older adults living with family. There will be a requirement to meet the costs of care for any placements that meet the eligibility criteria. |
|
Social Services |
Independent Sector Fees Inflation |
22.4m |
340 |
Failure to negotiate a rate with providers that is workable in 2006/07 could mean a shortage of beds, delayed hospital discharges with associated fines. On the spot price negotiation leading to less overall manageable and predictable spend with a high risk of overspending. |
|
Transport & Highways |
Statutory expansion of concessionary Fares scheme for disabled elderly from half price travel to free travel. This will be supported by additional government grant, but as this has been assessed partly on levels of deprivation, this is insufficient to meet projected demand. |
796 |
134 |
Currently this is a joint sub regional scheme. The only options within existing budget are to fund increase by removing travel tokens. Greater impact on disabled and rural users than on urban and able-bodied users - mitigation through expansion of dial-a-ride and taxi bus type schemes is not proposed because other budget pressures give no scope for this. |
|
Transport & Highways |
Bridge Maintenance |
127 |
123 |
Undertaking minor maintenance work to brickwork, stonework and street work prevents structural deterioration and significantly larger future capital costs. |
|
Transport & Highways |
Park & Ride |
673 |
123 |
Current operator has returned contract as unprofitable and new tenders submitted will likely to show large price rise. |
|
Transport & Highways |
Term Maintenance contract supervision |
439 |
130 |
Internal Audit report has identified shortcomings in the ability to supervise this contract due to minimal resources. Improved supervision will help to achieve better timing of works, quality and necessity to have repeat visits. |
|
Transport & Highways |
HSE risk assessment of paving flags manual lifting of paving flags |
295 |
50 |
Mechanised working required for all paving flag lifters. |
|
Leisure Services |
Crematorium Capital charges |
460 Net Income |
100 |
Arises from cremator replacement capital purchase. |
|
Service |
Pressure / Priority |
Current Budget 2005/06 £'000 |
Growth £'000 |
Service Impact |
|
Waste Services |
Organics tonnage have increased plus charging mechanism need to be established for bin renewals |
566 |
173 |
Assumes £25 p.a. charge introduced (current charge is £37 for 3 years). |
|
Waste Services |
Waste Procurement Project Team, to develop methodology review, recycling and other collection contract re-letting |
4647 |
170 |
Project PID and other major contract re-letting |
3.7 Figure 5 excludes major pressures such as pensions and inflation to maintain the current level of services.
3.8 Savings identified within Directorates to meet current Financial Plan targets may have an impact on service delivery. Only the most significant implications totalling £3.1m are summarised in Figure 6.
Figure 6: Highlighted Service Impacts of Savings (other savings are shown in service plans)
|
Service |
Savings |
Total Budget £'000 |
Saving £'000 |
Service Impact |
|
Social Services |
Review Application of Fair Access to Care (FACs) Criteria (all Services) |
25m |
200 |
This will mean that some people currently receiving services no longer receive a service following review. This relates mainly to people with lower levels of need. |
|
Social Services |
Provide Brokerage for Domestic Care only rather than provide services |
2.46m |
150 |
This will mean that service users contract with and pay direct to the provider for any "domestic care", and may pay a higher charge than currently. The Council charges either £7.60 or £12.60 per hour whereas independent providers can charge from £12 to £14 per hour approximately. |
|
Social Services |
Commission 5% less in-house home care |
2.6m |
100 |
This will mean that vacant hours in the in-house service would be deleted and the service would be reduced. Some sickness and holiday cover will have to be commissioned from the independent sector. |
|
Social Services |
EPH Reprovision |
2.3m |
150 |
An EPH will need to be closed in-year to ensure the site is ready for phase 3 of the EPH reprovision scheme. This will bring some "one-off" savings during the year. |
|
Social Services |
Restructuring of LD service as part of establishment of Pooled Budget |
9.7m |
609 |
Establishment of the pooled budget will enable more efficient and effective use of joint health and social care budgets. There is a programme of service remodelling that is taking place which will cause change and potential disruption to people but will lead to an improved as well as more efficient service. Other initiatives include the maximisation of income through the independent living fund. This is however an extremely challenging target. |
|
Social Services |
Adult Mental Health Services |
2.4m |
100 |
This is ensuring negotiations about price for medium and high cost residential and nursing placements are more robust and lead to the best price for the Council but may involve some individuals transferring placement which can be disruptive. In addition this service area has £365k unachieved savings for 03/04 &04/05 to find which when identified will have potentially a bigger impact. |
|
Heritage |
Reduction in cost base (including staff) |
Net profit: £3 Million; Gross non commercial spend: £1.9 M |
215 |
Will require significant (c. 11 %) reduction in all expenditure not directly supporting commercial activities, and will mean reductions in staff. This is on top of additional reductions of £211k made in the current financial year (2005/06), i.e. a total of £427k p.a. in 2006/07. This does not provide for the recovery of shortfalls against profit targets in previous years. |
|
Service |
Savings |
Total Budget £'000 |
£,000 |
Service Impact |
|
Transport & Highways |
Cycle Training |
83 |
25 |
Increased risk of accidents, fewer children will cycle to school - increased school run congestion |
|
Transport & Highways |
Park & Ride Bus Fare increase |
1268 (income) |
100 |
Increase Park & Ride prices beyond inflation (20% i.e. current standard fare of £1.70 becomes £2). This could reduce passengers, inconsistent with transport policies being pursued to gain development funding. |
|
Transport & Highways |
Reduction in Highways Maintenance Work Programme. |
2741 |
150 |
Reducing the length of the network being gritted by a ninth (9 routes to 8), i.e. approximately 35kms, saving 40K Reduce patching to safety intervention only. 50K saving. Will result in poorer appearance of network and increase future costs through undertaking smaller repairs and emergency repairs usually following bad weather. Reduce cleaning of signs. 10K once every two years. Do not replace advisory signs, require alteration. Reduce drainage schemes. Will result in repeated flooding problems when broken pipe work is not repaired and persistent blockage will occur. Possibly10 schemes per year - 50K. |
|
Transport & Highways |
Further reduction in Highway Maintenance work programme |
2741 |
100 |
30K drainage schemes. These are areas, usually rural, where the existing drainage system has failed. The result is flooding the highway in heavy rainfall and standing water for significant period of time following end of the storm. 10K Street Lighting - reduction in column replacement will result in 10 less columns replaced per year. 20K reduction in maintenance of rural roads and footway. Edge failures especially following vehicle overrun on verges will result in increased insurance claims and impact on BVPI224a. 40K Surface Dressing pre-patching. Pre-patching will be reduced, which will reduce the length of the carriageway that can be treated within the Capital Programme. Similar to (3), this will impact on BVPI224a & BVPI224b. |
|
Service |
Savings |
Total Budget '000 |
,000 |
Service Impact |
|
Transport & Highways |
Cash limit Supported Bus Services to existing budget level |
836 |
223 |
Potential to reduce access to services and restrict employment and leisure opportunities for elderly, young and rural population e.g. removal of service 379 providing peak hour/commuter link from Radstock Midsomer Norton to Bristol; loss of all services to Holcombe, Wellow and Combe Hay; loss of Sunday and Bank Holiday services between Bath and Midsomer Norton via Peasedown, Radstock, Timsbury and Paulton and similar links to Bristol; loss of school services to Ralph Allen school for children not entitled to free school transport. Impact on BVPIs public transport passengers and satisfaction with local bus services. |
|
Transport & Highways |
Further reduction in Supported Bus Services below existing budget level. |
836 |
137 |
See above plus loss of early evening services linking Bath and MSN, Radstock, Paulton, Timsbury, Culverhay school services and similar links to Bristol. Impact on BVPIs public transport passengers and satisfaction with local bus services. |
|
Transport & Highways |
Vacancy Management / Staff Cuts |
2400 |
235 |
No scope for further supervision unable to meet internal audit recommendation. Further reduction in transportation & traffic management services - with reduced service provision impact (KPIs, public reaction) |
|
Waste Services |
Domestic Waste Collection from kerbside (not back door) |
1826 |
50 |
Standardisation of service. Reduced Staff Costs. Reduced Health & Safety risks. |
|
Education |
Home to school transport - route reviews and renegotiation of transport management fee |
2856 |
150 |
Renegotiation of management fee will only achieve savings if an overall reduction in resources actually employed can be achieved by better co-ordination between education and commercial services. |
|
Education |
Reorganisation of several teams and more efficient use of some grants to generate budget reductions |
1249 |
110 |
Impact anticipated in several teams creating additional workload and creating difficulties in achievement of BVPIs. Possibility of negative comments on any inspection reports. |
|
Customer Services, Libraries & Information (& CAP) |
Increase in fines / loans etc. Recruitment freeze and posts that have fallen vacant will not be replaced. |
3.5m (for whole service) |
170 |
Income generation designed to be socially inclusive but may face negative publicity and administration costs. Staff posts lost will create operational difficulties and will be carefully managed. |
|
Planning Services |
Increase in discretionary fees & charges |
579 (gross planning fee income) |
50 |
Already approved by Executive member. Income to be used to improve the Service. |
|
Service |
Savings |
Total Budget '000 |
,000 |
Service Impact |
|
Leisure Services |
Crematorium Price Review |
701 |
76 |
Helps fund revenue impacts of capital reinvestment. Charges still comparable with market rates. |
|
Leisure Services |
Do not continue passport to health schemes |
0 |
25 |
If funding not available from third parties / grants, will need to re-prioritise. |
3.9 The total of these major reductions is 3m, close to the
total the Council has had its new grant entitlement reduced by
(3.4m) to pay for Council's who have lost under the formula.
4 Adequacy of Reserves & Robustness of the Budget
4.1 The Council Executive was updated on the Council's revenue and capital spending position in 2005/06 at its December meeting. The latest figures for April to November project a £0.7 million service overspend. However, this does not include a potential under spending on capital financing costs which is being assessed as part of the capital review. This may be in the order of £1m-£1.5m.
4.2 Unallocated General Fund Reserves as at 31 March 2005 were £5.850 million. Figure 7 below projects the reserves to 1 April 2006 if the actions listed below are taken and there are no further approvals made by Council.
Figure 7: Projected General Fund Non-Earmarked Reserves
|
£'000 |
|
|
Unallocated General Fund Reserves as at 31 March 2005 |
5,850 |
|
Uses approved by Council since March 2005 |
290 |
|
Temporary Use of Reserves to Fund Up-Front costs of Senior Management Restructure (to be repaid from savings over 5-6 years from 2007/08) as agreed by Council in November 2005. |
Up to 400 |
|
Project Unallocated G.F. Reserves as at 31 March 2006 before any use to cover risks that may materialise or any net under/overspend in 2005-06. |
5,160 |
|
Current contribution planned to balances in 2006/07 financial plan. |
400 |
4.3 However, this excludes the impact of not being able to capitalise Spa Claims Management Costs which has been rejected for the second time by ODPM. A meeting is being arranged to pursue the matter and the outcome will be reported in February. A fallback position would be to fund these costs from reserves and to reinstate the reserves over 5 years. This would reduce reserves in 2006-07 to between £3.1m and £2.5m against a prudent minimum level of £5m and an optimal level of £7m.
4.4 This would be an unacceptable level of reserves compared to the risks the Council is facing.
4.5 The Council's Section 151 Officer (the Resources Director) is required under the Local Government Act 2003 to report on the adequacy of the Council's reserves and the robustness of its budget for 2006/07 and the period of the Financial Plan.
4.6 Directors will formally review the robustness of their budgets and the risks within those budgets. The results of these reviews will form a part of the information used by the Resources Director to report on the adequacy of reserves and the robustness of budgets.
4.7 The appropriate level of capital contingency will be reported in February as part of the Capital Review.
5. Process
5.1 The Executive has already considered the financial situation and the challenges this will bring to the Council prior to receiving the provisional financial settlement. This report updates the position for the latest service plans and the provisional settlement.
5.2 This report indicates significant service issues to meet current financial plan targets and a shortfall of £1.1m to meet a 4.95% Council Tax rise.
5.3 Further work now needs to be carried out to meet this shortfall and to cover risks within the budget. This will be carried out in January. The Executive will then make its recommendations to Council in February 2006.
5.4 The process (see timetable in Appendix 4) also includes scrutiny of the proposals by Overview and Scrutiny panels before any decisions are made by the Council.