We recognise that the limited responses (approx 10%) make it difficult to draw quantitative conclusions from this consultation. It did, however, confirm our view that the above themes are very important to local people, and that local people do want action in these areas.

A more deliberative style consultation, conducted through four small focus groups, produced a wide range of suggestions for possible future service developments, within our four themes. These groups were particularly concerned to see better and more facilities, especially for the young and the elderly, a better maintained and better managed infrastructure, better public transport and more support for local/community activity. A need for more visible surveillance and monitoring by police, wardens, inspectors and Neighbourhood Watch schemes also emerged. And for the elderly, free or cheaper services, including bus travel.

We are committed to delivering safer communities, a cleaner and greener environment, improved lives for our older people, and tackling traffic congestion and improving public transport. And we intend to allocate additional resources to initiatives and projects which directly reflect these priorities over the next four years, in a sustainable way.

Section 3 - Specific Issues

We have been asked by full Council to address certain key issues within this Plan Review. These are:

· An outline plan with options for appreciably reducing, over a 5-year period, the Council's current excess Social Services spending compared to its Standard Spending Assessment

· A standard definition that will be consistently applied for the measurement of repairs backlogs, with options for enabling the satisfactory maintenance of all the Council's property assets, including options for retention and disposal where appropriate.

· A plan for addressing the shortfall in capital resources of funding for the medium term following the end of the Council's debt-free status.

The thinking of the Council Executive on these issues is set out below.

Social Services spending

Council asked that we have an outline plan for reducing, over time, the Council's excess social services spending compared to its Standard Spending Assessment. This would help to reduce the burden on Council Taxpayers and release funds for other services.

We note that, at a stroke, the Government has, through its "resource equalisation" changes, reduced our excess spending from 28% to 13%. Yet this has been done without a penny of extra government grant and therefore represents a sleight of hand. The burden on the taxpayer remains unchanged.

We have sought options for reducing this percentage further, but are conscious that social services represent key services to people, many of whom are vulnerable. We have therefore considered very carefully proposals to curb spending and would wish to shift spending only over a reasonable period of time. For the short-term, the level of pressure imposed on these services by government is so severe that we see no option but to assume that social services spending will grow in line with the SSA growth - but we wish to see that as a cap, requiring social services to manage its significant pressures within that level.

The Director of Social & Housing Services has produced a separate report "Re-Shaping Social Services" setting out a plan for achieving the limitation of spending within this cap (see elsewhere on the January Council Executive agenda).

Maintenance of Assets

The introduction of asset management planning has led to repairs and maintenance works being assessed using standard condition grading and priority criteria. These have been defined by the DfES and DTLR and form the basis of returns the council has to make as part of the asset management process (see Appendix 2 for details). The condition of properties ranges from A (good) to D (bad) and a priority grading is assessed on seriousness and urgency, from 1 (urgent) to 4 (long-term).

In the short-term we note with concern that there is no capital provision within the plan to provide investment in schools. This was not our decision but a consequence of the original Council 3-year plan. We feel that a longer-term solution is needed to tackle the backlog in schools' investment but in the short-term we recognise that some additional funding is required. We are addressing this in the context of the Council's overall capital resources for 2003/04 and we will bring forward a proposal in our draft Budget for 2003/04.

Capital Resources Plan

We are now approaching the end of our "debt-free" period and expect to begin to borrow to finance capital spending in 2004. At that time we also expect the government to introduce a new set of rules for capital investment that will give all councils more freedom to plan and finance their investment. However at the same time other changes are likely to reduce the amount of resources we can plan with.

In the longer-term the Council has committed to a number of major projects and through our financial plan we will need to secure, by working with others, the capital resources to deliver them:

· Regeneration of under-developed land in the Western Riverside area of Bath and in Norton Radstock

· The reprovision of the Council's elderly persons' residential care homes to modern standards

· The stabilisation of the old stone mines under the Combe Down area of Bath

· The construction of a new park and ride facility to the east of Bath

· The rationalisation of our office accommodation to improve value for money

Despite the recent relatively high level of capital spending, the Council is aware of significant outstanding spending needs. These include bringing the Council's roads and buildings up to a reasonable standard of repair. The total cost of fully removing the repair backlogs on these assets is estimated to be many millions of pounds, which clearly would require concerted effort over a number of years.

We have concluded that the new capital investment rules do provide a good opportunity for the Council to borrow to address some of its acute spending needs. With interest rates at a low level, borrowing represents a better option than the sale of income-bearing commercial properties. But borrowing will still have consequences for our revenue spending and we must ensure that our plans remain affordable. We have therefore assumed that extra borrowing is raised to finance our EPH reprovision plans and to provide for a modest level of additional spending in future years, to be targeted at our key themes. But we recognise that such investment by itself is insufficient and will need to work with others, such as social landlords and private companies, to help fill the gap. The detailed Capital Resources Plan will be discussed at our February Council Executive meeting.

Section 4 - Emerging Requirements for Future Spending

We have already discussed emerging requirements for future spending in the preceding sections on legislation, local needs and specific key issues.

As part of this financial plan review, we have considered all spending pressures and identified those that must be resourced within this revised financial plan. Appendix 3 provides a full list. The net funding requirement from the financial plan is an extra £2.3M in 2003/04, of which approximately £1M can be directly attributed to legislative and other external requirements, with the remainder relating to a range of unavoidable cost pressures. While we have asked for the cost of each item to be reviewed and all possible sources of funding considered, we must ensure that our financial plan is robust and that key spending requirements are properly addressed. We also recognise however that those spending requirements place a significant burden on the financial plan and restrict the opportunity for additional spending to address our local needs.

Section 5 - The Government Grant Settlement

As nearly 50% of our net income comes from the government, the grant settlement is critical to our plans. The 2003/04 Settlement was announced on December 5^th. For this Council the implications are difficult to analyse due to the extensive year-on-year changes made to the structure, method and terminology of financing by the government, but a summary of its implications is attached as Appendix 4.

In brief, this Council has received the maximum grant increase available to it, at 8.0%. However we must absorb a range of grants which were formerly ring-fenced, as well as new duties. Earlier in the year the government consulted on options for a major overhaul of grant methodology. In our response we argued strongly for options which favoured this Council. While it is difficult to draw direct comparisons, it appears that, overall, the methodological changes made have worked slightly to the benefit of this Council.

The most striking feature of the Settlement nationally is "resource equalisation" whereby the Government has recognised that Councils generally spend at a higher level than previously assumed through Standard Spending Assessments (SSAs). The Government has adjusted its SSA figures to bring them more in line with Councils' spending and actual funding via Council Tax to new figures called Formula Spending Share (FSS). So as a result of this change, next year's settlement creates a new "Average National Council Tax" (ANCT), which for a unitary Authority is around £948. For this Council the effect is to reduce our overall excess spending against SSA from 9% above SSA to around the same level as the new FSS.

In previous years the Government has indicated a guideline Council Tax increase figure for each Council. It has not done so for 2003/04 but background Treasury papers indicate a national assumption of a 7% increase. In the absence of other evidence, a guideline increase of 7% has therefore been assumed for this Council.

Section 6 - The Financial Plan Proposal

The information in our consultation document highlighted the Council's limited financial flexibility and the year-on-year uncertainty affecting our planning. We have to recognise the financial position when deciding how we wish to steer the Council's priorities.

It is also easy to focus on the short-term. However, the Council needs to take a medium term view so that we can plan ahead and make changes to provide the services that people want us to provide and the government requires us to provide. We know that staying the same is not an option.

The financial position next year is highly challenging as a result of the 7% government guideline Council Tax rise and the high level of spending pressures. We do not wish therefore to raise expectations about new spending because it may take time to secure the necessary resources. Indeed we are committed wherever possible to improving services without increases in Council Tax. To achieve this we will pursue existing initiatives and opportunities, including:

· The "Paris" Project, which aims to provide the Council with a strategic commercial partner to provide investment and skills to improve services using new technology

· The leisure improvement project, in which we have selected a partner to increase investment in our sports centres

· A Public Service Agreement, in which we agree targets for improvement in key local services and for which funding is provided by central government

· Pursuing wherever possible grants from outside bodies, whether they be government, lottery or commercial, where such grants assist us in meeting our objectives;

· And we will seek to produce a sustainable financial plan, one in which our resources against unforeseen risks are built up over time from their current relatively low level.

While wishing to develop services in priority areas, we recognise that our plans must be affordable to local people. This will be very challenging given that the government's grant system consistently requires an increase in Council Tax of over 5% each year - and for 2003/04 the guideline is even higher, at 7%.

The key features of our financial plan are listed in the commentary at Appendix 5 and 5b. At present, because of the grant settlement and the significant spending pressures affecting the Council, it shows a net revenue shortfall for 2003/04 of £5M - to be made up from a combination of cost reductions, increased charges and Council Tax rises. The appendix includes a summary of Plan outputs at Table 1, and the detailed Plan can be inspected on the Council Information Service at http://www.bathnes.gov.uk/resourcesplanning/FinancialPlan2002/base2003/Finplan0304base.htm .

At the time of writing we are still examining options available to us to reduce the impact on Council Tax payers, and the results of this work will be reported back in our draft Budget for 2003/04. We have to recognise, however, that scope for flexibility is limited. Given that the government guideline is 7%, we have to accept that the increase is likely to be, because of the government's financing assumptions, higher than the rate of inflation.

For future years we have incorporated a limited amount of extra spending in to our proposal in order to address improvements in priority services. We will continue to balance the need for service improvement against the impact on the Council Taxpayer and recognise the need to review and update those plans annually in the light of the Council's financial position.

Resource Equalisation

The most striking feature of the Settlement nationally is "resource equalisation" whereby the Government has recognised that Councils generally spend at a higher level than previously assumed through Standard Spending Assessments (SSAs). The Government has adjusted its SSA figures to bring them more in line with Councils spending and actual funding via Council Tax to new figures called Formula Spending Share (FSS). In the old system there was a "theoretical" Council Tax figure called "Council Tax at Standard Spend" which was around £712 for a Unitary Authority. But actually, as most Councils spent in excess of SSA, average actual Council tax nationally was around £893 and for this Council last year was £888. This difference in Council Tax effectively funded spending in excess of SSA.

Average National Council Tax

So as a result of this change, next year's settlement creates a new "Average National Council Tax" (ANCT), which for a unitary Authority is around £948. For this Council the effect is to reduce our overall excess spending against SSA from 9% above SSA to 1% below (and for 03/04 including pressures - to around the same level as FSS) and on social services from 28% to 13% above FSS in 2003/04.

It should be noted however that, except in Education, this uplift in totals from SSA to FSS is only an accounting adjustment. It brings no extra grant to this Council and just reflects that Council Tax was already funding service costs, particularly in Social Services, above the old SSA totals.

The table below attempts to strip out the effects of this adjustment from the new uplifted FSS totals.

7. The conclusion of the work on pressures is that there are a range of pressures over which the Council has little or no choice. To ignore these pressures would seriously compromise the robustness of the base plan and lead to overspending in future years. In total therefore £2.3M of spending pressures have been added to the base plan (listed in Appendix 3).

8. The financial plan provides a robust basis for future planning. It does however involve a high level of revenue shortfall in 2003/04, which will be addressed by options for further budget savings. There will be limited scope for Council to reduce the level of implied Council Tax rise significantly without reductions in service, particularly in the education and social services areas