EHDC Committee Library Report: Revenue Budget 2002/03

Report No: R.37/01 - 05 December 2001 - Final Copy

Cabinet
Revenue Budget 2002/03
Report of Corporate Director (Business & Economy)

For Decision

Purpose of Report:

To present the draft revenue budget 2002/03 for agreement prior to consultation. To show its impact on the Council's overall financial strategy.

Recommendations:

That Cabinet agree -

i) the proposed draft revenue budgets for 2002/03;

ii) the consultation process.

Resourcing Implications:

There are no direct resourcing implications arising from this report, other than minor costs arising from the consultation exercise which can be met from existing budgets within Financial Services. If the proposed budgets were presented to Council, unchanged, in February, they would give rise to a budget requirement of £11.34m for 2002/03, with a contribution of £144k to the Community Initiatives Fund financed by £6.015m in Government support, £81k for Collection Fund surpluses forecast for 2001/02, and a precept charge of £5.148m on the Collection Fund.

Body of Report:

1.0 INTRODUCTION

1.1 This report sets out the draft revenue budget for 2002/03 and compares this with the budget targets agreed by Cabinet in September 2001.

1.2 Once agreed by Cabinet, the revenue budget proposals will then be put out for consultation leading to a further report to Cabinet in February 2002, before a final submission is presented to Council on 22nd February 2002.

1.3 The proposals allow for the provisional Local Government Financial Settlement and the latest forecasts on investment returns, both of which may change before final submissions are made in February.

1.4 Overall, the report will show that the Council's financial objectives will still be achieved, albeit with a lower contribution to the Community Initiatives Fund than that forecast in September.

2.0 SERVICE BUDGET SUBMISSIONS

2.1 To comply with the financial strategy spending limits agreed by Council in September net service budgets need to total no more than £12.418m. Budget submissions from services total £12.43m and fall just outside the target by £12k. In addition, the financial strategy assumes a further saving of £100K to arise from vacancy savings thoughout the year. This saving has not been reflected in the budget submissions from each service area. However, budgets will be reduced where actual vacancies arise throughout the year, as monitored by Corporate Management Team. Brief commentary on the budget submissions is given below and a more detailed financial analysis is shown in Appendix A(1) and A(2).

2.2 Planned Savings

2.2.1 The spending limits agreed in September required savings of £100k from top management re-structuring and £115k from efficiency gains, a total of £215k. However additional spending pressures as identified below required further savings if budgets were to remain on target. The results of the exercise produced a total saving of £360k, leaving £145k to help finance spending pressures after allowing for the planned savings target of £215k. This was achieved without the need for service cuts in any area.

2.3 New Spending Pressures included within the budget submissions

2.3.1 The spending pressures, totalling £157k, which were not foreseen when the base saving targets were set, are listed below :

Citizens Advice Bureaux - increase in grant support - £28k
Reduction in Land Charges Income - £14k
War Widows & War Disablement Pensions - £11k
Implementation of Alternatively Weekly Collection - £39k
Green Waste Scheme - £45k
Planning Review - short term costs - £20k

2.3.2 Citizens Advice Bureax - Cabinet will be requested to increase grant aid to CABx by £28k per annum. The budget submissions have assumed that this increase can be met from within existing one off grant aid budgets. Current year trends show underspends in this budget . Furthermore, one off grant requests could be met from the Community Initiatives Fund.

2.3.3 Land Charges Income - current year forecasts are showing a downward trend in the number of property search requests. It is anticipated that this trend will continue with 2002/03 resulting in a forecast loss of income of £14K.

2.3.4 War Widows Pensions - in October 2001 Cabinet resolved that a 100% disregard be applied, from April 2002, to War Widows and War Disablement Pensioners, when assessing entitlement to Housing and Council Tax Benefits. This will result in additional costs of £11K in 2002/03.

2.3.5 Alternate Weekly Collection - Alternate Weekly Collection (AWC) - this is the subject of a report elsewhere on today's agenda, (Ref. HE17/01). The operational savings have been absorbed within the refuse/recycling service budget submissions. However, the AWC implemention costs are greater than originally forecast. The costs in the current year are expected to be accommodated within the approved Council budget and the earmarked reserve, set aside for this purpose, will meet most of the costs in 2002/03, leaving a net one off expenditure requirement of £39k.

2.3.6 Green Waste - In addition, there are proposals to bring in a phased green waste scheme alongside the implementation of AWC. If the option to charge for the sale of garden sacks is approved this will enable most of the costs to be met from sales income, leaving a shortfall of £45k in 2002/03 and £79k in a full year. This is on the basis of a 30% take up. To breakeven in a full year would require a take up of around 49%.

2.3.7 Planning Review - a report elsewhere on today's agenda (Ref. D94/01) details the findings of the review of Planning Services and proposes an improvement plan to develop these services further. In the short term there is a need for additional staffing resources estimated at £20,000 to facilitate delivery of the improvement plan and this sum has been included in the base submissions. Additonal costs may arise in the longer term for which no provision has been made in this report as the full picture on the future direction of the service is not likely to be known before next July.

3.0 ADDITIONAL SPENDING PRESSURE

3.1 In addition to the spending pressures outlined above, the Council is faced with further pressures not reflected in the budget submissions. In particular the issues arising from the Corporate Action Plan seminar, held in November, have yet to be developed. Any additonal funding requirements will require equivalent savings in order to keep within the budgetary framework.

3.2 Leisure Management - Again, elsewhere on today's agenda, a report (Ref. COM52/01) shows that the Council would face an annual increase in Leisure Management expenditure of approximately £50k per annum. However, if the principle of a 'not for profit' option is accepted, the Council would secure additional funds arising from the awarding of rate relief to the 'not for profit' company, as reflected in a reduced management fee charged to the Council with any net surplus being transferred to a reserve account. In effect the impact on the budget would be neutral.

3.3 The Council's IEG statement was considered by the DTLR to be satisfactory and eligible to receive funding support to help meet the cost of implementing electronic government. It is anticipated that the Council will receive up to £250K which should be sufficient to meet expenditure demands in 2002/03 and thus there will be no additional call on the Council's revenue budgets. Further details are shown in a report, again on today's agenda (Ref. R39/01).

4.0 NET INVESTMENT EARNINGS

4.1 The Council's financial strategy assumes an average annual return of 5.7%. However, due to recent worldwide events and the downward trend in interest rates, the forecasts have been amended. Following consultation with the Council's external advisors, the projected rate of return for 2002/03 is now 4.75% resulting in a reduced income forecast of £1.23m from the original forecast of £1.4m.

4.2 Moreover there are cosiderable concerns as to the future direction of interest rates with world events in the next few months being critical to the prospects for 2002/03. Officers, together with the Council's external advisers, will be keeping a close watch on these issues, and will report on whether a further change to the forecast returns may be necessary, before the final budget submission is presented to Council for approval.

5.0 EXTERNAL FINANCE SUPPORT

5.1 Local Government Financial Settlement 2002/03

5.1.1 The provisional grant settlement for East Hampshire is expected on 4th December 2001, which is too late to show its effect on the Council's financial position in this report. However, a verbal update, including a revised financial statement will be given at the meeting. In the meantime the target grant figure of £6.015m has been used.

5.2 The Collection Fund Surplus has been amended to £81k reflecting the 2000/01 outturn position on the Collection Fund Account, to be accounts for as part of the Council's precept calculation, as reported to Cabinet last July (Ref R17/01).

5.3 The Council Tax base for 2002/03 will be greater than forecast, as reported to Council in November ( Ref. R36/01). Therefore, without changing the assumption of a 2.5% tax increase this will result in a higher precept income of £5.148m, as compared with the Financial Strategy forecast of £5.127m.

6.0 COMMUNITY INITIATIVES FUND

6.1 The Community Initiatives Fund (CIF) was set up in 2001/02 with an opening balance of £252K. Just under £10k of this fund has been committed to-date. The Council is budgetted to make a further £96k contribution in 2001/02. This gives an estimated sum available to spend of £338k up to 31st March 2003. It would, of course, be imprudent to make the transfer for 2001/02 or to commit any of the 2001/02 funds until after the end of the financial year when revenue outturn figures are known.

6.2 The financial strategy assumed a further contribution of £250K in 2002/03. Taking all of the above elements of the 2002/03 budget into account and keeping to the financial strategy principles of a balanced budget and a 2.5% Council Tax increase, the amount available for contribution to the CIF will be £144k, which is £106k less than forecast in the Financial Strategy.

7.0 ISSUES FOR CONSULTATION

7.1 Cabinet may wish to consider consulting on the following issues

Proposed Budget submissions - setting out the Council's proposed spending plans
Any additional spending pressures, if any, and how they are to be financed
Level of contribution to the CIF
Council Tax - the proposed increase and its effect on an average Band 'D' taxpayer, a 1% variation in tax level has an impact of £1.12 per annum on the average Band 'D' taxpayer and is worth approximately £50k to the Council.

To a large extent, of course, the above issues are inter-related.

7.2 The consultation process will consist of

this report being presented to the Overview and Scrutiny Committee in December, seeking that Committee's views;
a seminar in January with local businesses;
the report will be copied to all four Area Community Committees in January for comment.

8.0 CONCLUSIONS

8.1 The Council is able to maintain its course in achieving a balanced budget, despite being faced with a number of spending pressures not foreseen when targets were set in September. This is largely due to delivery of planned savings and other budget adjustments. Extra pressures arising from a fall in the predicted level of interest receipts is also a factor in determining how much funding can be made available for the Community Initiatives Fund. Consideration will still need to be given to other spending pressures not currently absorbed within the budget submissions, and any corresponding savings.

Consultation:

Background Papers:
None

Documents for Download:	Click here for App A(1) R3701.123 (7 Kb) Click here for App A(2) R3701.123 (9 Kb) Click here for APP A(1) R3701.pdf (10 Kb) Click here for APP A(2) R3701.pdf (10 Kb)

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