Agenda item - DRAFT REVENUE BUDGET 2018/2019

REPORT OF THE HEAD OF FINANCE, PERFORMANCE AND ASSET MANAGEMENT

To consider the Draft Revenue Budget for 2018/2019.

RECOMMENDED TO COUNCIL:

(1) That the expected Central Government funding levels be noted;

(2) That the estimated position on the Collection Fund and how this will be funded be noted;

(3) That a 2.99% increase in Council Tax for 2018/19 be approved;

(4) That the position relating to the General Fund reserve be noted and, that due to the risks identified, a minimum balance of £2.15 million is recommended;

(5) That the reduction in the 2017/18 working budget of £682,000 be approved, and the expected impact in 2018/19 of a £82,000 reduction in budget be noted;

(6) That the requests for the carry-forward of budgets that total £198,000 from 2017/18 to 2018/19 be noted, subject to further review of the carry forward relating to Area Committee Budgets at the end of the 2017/18 Financial Year;

(7) That the inclusion of the efficiencies and investment proposals, as set out at Appendix 2 to the report, in the General Fund budget estimates for 2018/19 be approved, subject to the following amendments:

· Efficiency E9 (Cessation of Area Committee Grants) – amendment to show a 30% reduction in grants available to Area Committee;

· Efficiency E16 (Apprenticeship Scheme) – to be removed from the list of efficiency savings;

· Efficiency E20 (Waste Contract Lot 2 Award) – removal from the list for 2018/19 as it was expected that the savings attributable to this item would be zero;

(8) That the amendments to previously agreed efficiencies, as detailed in Paragraph 8.5.3 and Table 8 of the report, be approved;

(9) That the proposal that any revenue savings arising from the capitalisation of waste vehicle costs are transferred to a specific reserve be noted;

(10) That the savings targets for future years be noted; and

(11) That the estimated 2018/19 net expenditure of £14.6Million, as detailed in Appendix 1 to the report, as amended, be approved.

REASON FOR DECISION: To ensure that all relevant factors are taken into consideration when arriving at the proposed Council Tax precept for 2018/19; and to ensure that the Cabinet recommends a balanced budget to Council on 8 February 2018.

The Executive Member for Finance and IT presented the report of the Head of Finance, Performance and Asset Management in respect of the Draft Revenue Budget 2018/2019. The following appendices were submitted with the report:

Appendix A – Budget Summary 2018/19 – 2012/22;

Appendix B – Revenue Efficiencies and Investment proposals; and

Appendix C – Budget Risks for 2018/19.

The Executive Member for Finance and IT advised that this was the final opportunity for the Cabinet to make recommendations to the budget and the underlying strategy before formal recommendation to Council.

The Executive Member for Finance and IT stated that, whilst Local Authorities had to operate in an environment where they had to show their auditors that they were operating a balanced budget on a year to year basis, they also had to consider the operation of their finances on a medium term basis. Hence, NHDC had a Medium Term Financial Strategy (MTFS) that set out he Council’s approach for operating its finances over a five year period, and also why when presenting the proposed budget figures it tried to estimate the potential position of its funds over a similar period.

The Executive Member for Finance and IT commented that the impact of local government finance on NHDC was a matter of considerable uncertainty. It was not his intention to detail the very significant reductions in funding that the Council had dealt with over the last seven years, but he drew attention to Table 1 in the report which clearly showed that over the next two years NHDC faced a further reduction in funding of more than 40%.

The Executive Member for Finance and IT advised that it was a sad inevitability that the Council was now at the stage where it had to seriously consider cuts to the provision of front line services or find alternative ways to finance its operations. He found the whole concept of “negative” Revenue Support Grant (RSG) a total anathema. Whilst it might be appropriate for the Government to say that NHDC did not need general financial support, it could not be appropriate to require residents of North Hertfordshire to contribute to the provision of services in other Local Authorities. In this context, whilst he welcomed the Minister’s budget announcement that the question of negative RSG would be examined, there was no certainty that there would be any significant changes.

In respect of the detail of the report, the Executive Member for Finance and IT commented as follows:

· Table 1 showed a 42% reduction in general Government funding (excluding specific grants to cover such matters as housing and Council tax benefit, which were detailed in Table2);

· There were still many hundreds of Business Rate appeals outstanding from the 2010 revaluation, and these would ripple through into the final 2017 revaluation exercise. Most of the top 10 businesses in North Hertfordshire had outstanding appeals. This made forecasting difficult. This was compounded by the uncertainty surrounding the proposed retention of business rates by local authorities;

· In respect of the Council Tax Collection Fund, he was pleased to report that the Council expected eventually to collect over 99% of all Council Tax due, and the in-year collection rates of over 98% placed the Council amongst the top preforming authorities in this field;

· The MTFS indicated that the Council would charge Council Tax at the maximum level to which the Government permitted without the need for a referendum. For 2018/19, he recommended a proposed increase of 2.99%, as detailed in Table 3;

· CIPFA guidance indicated a minimum of 5% of general expenditure as reserves, as set out in Table 5. Added to this would be the specific reserves that the Council made against certain risks, which were set out in Table 6 and in Appendix C to the report. He asked the Cabinet to note Risks FR23 and 24 in Appendix C, where the actual amounts and likelihood figures relating to planning functions had been increased, in order to allow the Council to operate effectively and protect the District and its environment;

· He therefore recommended that the General Fund minimum balance should be set at £2.15Million;

· Table 7 detailed the variances to the current budget at the end of November 2017, together with a forecast of the year end position. In respect of the Vacancy Control Target, he clarified that it was not the Council’s intention to run 20 vacant posts, but rather that this figure mostly related to the time lag between losing staff and being able to replace them;

· Also in Table 7, he drew attention to the position on Area Committee Grants. If it was the case that the Council was receiving fewer grant applications then he was loathe to simply allow a carry over of the underspend in this area. If, however, it could be attributed to delays in actually accessing allocated amounts then this was a different matter. Following advice from the Head of Finance, performance and Asset Management, it was recommended that this matter be reviewed at the end of the current financial year;

· Table 8 detailed the savings items previously agreed by the Council and thus to recommend to Council that they be either reversed for the future or deferred for the time being. He recommended a further adjustment to this table regarding Efficiency E16 (Apprenticeship Scheme). Whilst it had previously been indicated that this Scheme was to be kept under review, he had been persuaded that that there were significant benefits to the Council in continuing to operate the scheme, and he therefore recommended that it was deleted as a saving going forward;

· In respect of the previously discussed efficiencies set out in Appendix B to the report, he had received many representations regarding Efficiency E9 (Cessation of Area Committee Grants) and the Finance, Audit and Risk Committee had made a recommendation in this regard. He reminded Members that the proposed savings on Area Committee operations had been deferred for a further year, as had consideration of a local lottery, which might impact on Area Committee grant funding. He had come to the conclusion that it was probably most sensible to leave the existing mechanism in place, with revenue grants being dispersed through Area Committees. He therefore recommended a further amendment to the list of savings to amend E9 to show a 30% reduction in grants available to Area Committees for 2018/19;

· In respect of Efficiency E20 (Waste Contract Lot 2 Award), as it was confirmed that it was now expected that the savings attributable to this item would be zero, he recommended that the item be removed from the list; and

· The projected budget figure of £14.6Million in 2018/19 may need to be amended in the light of some of the aforementioned changes, and it was proposed that up to date figures would be available for consideration at the Council meeting on 8 February 2018.

Returning to the generality of the report, the Executive Member for Finance and IT explained that the figures in Appendix A to the report still showed a need for further budget savings to be identified by 2021/22. In the light of the relatively small amount, it could perhaps be argued that the level of proposed general reserves that the Council was carrying was not necessary. However, he had already referred to the general uncertainty surrounding Local Government finance and had alluded to the need for the Council to find new ways of financing its activities, such as commercialisation. He therefore perceived the need to be able to support such activities through their early years until they were able to deliver a regular income flow for the Council.

The Executive Member for Finance and IT felt that this further militated in favour of the proposed higher level of reserves that he was recommending. Even if he was wrong and the future was considerably more rosy than current expectations, he would much rather be in a position where the Council could revisit its funding needs because it had over-reserved, rather than be in a position where it had to take an axe to staff and services because the risks had been underestimated. The proposed level of reserves was still significantly below the maximum CIPFA recommended level.

The Cabinet supported the recommendations made by the Executive Member for Finance and IT.