8. Update on the Medium Term Financial Plan 2011/12 to 2015/16

District Executive – 5th August 2010

8. Update on the Medium Term Financial Plan 2011/12 to 2015/16

Executive Portfolio Holder: / Robin Munday, Finance and Support Services
Chief Executive: / Mark Williams, Chief Executive
Assistant Director:
Service Manager: / Donna Parham, Finance and Corporate Services
Amanda Card, Finance Manager
Lead Officer: / Jayne Beevor, Principal Accountant Revenue
Contact Details: / or (01395) 462320

Purpose of Report

To update members of the current position of the Medium Term Financial Plan (MTFP) and the impact of recent government announcements and consultation papers.

Forward Plan

This report appeared on the District Executive Forward Plan with an anticipated Committee date of August 2010.

Public Interest

This report gives an update of SSDC’s expected budget position for the next five financial years in light of recent government announcements. It also gives details of the possible impact of current consultation papers.

Recommendations

1. Members are RECOMMENDED to:

(a) Note the current position of the Medium Term Financial Plan.

Background

2. Members agreed at the District Executive meeting in July that regular monthly updates on budget issues would be useful over the coming months as the new Government’s agenda emerged.

In Year Impact

3. The table below shows the current picture of in-year cuts to South Somerset as well as an indication as to whether those cuts will impact on 2011/12 budgets. As well as the government announcements a letter has been received from DEFRA regarding personal land charge search fees – advising the authority to cease the £22 charges from immediate effect. Charging was ceased on the 30th July 2010.

Service / Amount / Budgeted for
Y/N / Impact / Notes
Housing
Reduction in funding for social housing provision / Not yet known / Not yet known / Will impact on provision of affordable homes and also further improvements to gypsy sites. / £230 million has been removed from housing schemes country wide
Housing
Supporting people funding / Not yet known / Not yet known / Supporting people funding has been reduced by £365,000 at County level. We do not yet know if schemes in South Somerset will be affected
Regional Improvement and Efficiency Partnership (REIP) / N/A / Y / Impact not yet known but key funding for Milford Hall (£234,000) agreed and £130,000 received. Still awaiting further information on the Somerset wide Strategic Housing Partnership
Economic Development and Regeneration - abolishment of Regional Development agencies / Not yet known / Not yet known / RDA’s to be abolished by April 2012 at the latest and replaced by Local Enterprise Partnerships but these will not be given any core funding – SWRDA currently reviewing all contracts regarding future financial provision could impact on the ACI site in Chard, Yeovil Innovation Centre and funding for Yeovil Regeneration.
Community Safety / £3,750 / Can be found through a temporary vacancy / Community safety funding has been reduced by £52,000 at County level. Somerset County Council are requesting a further contribution from South Somerset of £3,750 for 2010/11. A bid will be submitted for future funding for 2011/12 as funding from SCC will be reduced.
Eco Town Funding / N/A / N / Funding halved – will reduce project scope
Legal – Land Charges Personal Search Fees / Approx £8,000 / Y / Will impact on the budget for 2011/12 by approx £17,000. The authority will also need to review potentially refunding the fees where charged in the past possibly as far back as 2005. Currently an inescapable commitment has been requested for £200,000 to cover the loss of income for personal search fees and the impact of the economic downturn for 2011/12 / Letter dated 27/7/10 from DEFRA (Department for Environment Food and Rural Affairs). Legislation will come into force 17/8/10.
VAT / At least £10,000 from car park charges in year. Most services will increase charges in line with increase. / Y / There will be an impact on budgets if VAT is not raised to 20% in January of next year on some income streams.

Consultations

4. Consultation papers have now been distributed for the Revenue Support Grant settlement for next year. The biggest impact for South Somerset will be the transfer of concessionary fares to the County Council. The consultation outlines four possible options but all include the transfer of what it costs to South Somerset to finance the concessionary scheme rather than the grant it has received. The options range from the authority saving £200,000 on current budgets to being worse off by £100,000 on budget. In terms of where these options are compared to grant South Somerset will permanently lose between £671,000 and £971,000 of South Somerset tax payers funds that have been found from savings in others services to fund the scheme.

5. A consultation paper has been distributed to all members regarding “Local referendums to veto excessive council tax increases.” The consultation paper lays out how the government wishes to scrap the capping regime and pass the powers to the community to decide increases above a certain set level. This is likely to include the town and parish councils for the first time. Any referendum will need to be paid for by the precepting authority but carried out by the billing authority. The deadline for responses is the 10th September 2010.

Future Budgets

6. The current position is shown below with most of the inescapable commitments now received and also managers are beginning to feed through savings proposals and over £400,000 of savings proposals have been received so far:

2011/12 / 2012/13 / 2013/14 / 2014/15 / 2015/16
£’000 / £’000 / £’000 / £’000 / £’000
Base budget / 20,310.1 / 19,665.4 / 19,363.8 / 18,907.8 / 18,757.9
Additional payroll requirement / 454.1 / 349.2 / 445.5 / 592.3 / 529.5
Inflation allowance on other expenditure / 229.2 / 233.8 / 238.5 / 243.2 / 248.1
Inescapable Commitments / 1,419.3 / 1,223.1 / 1,055.2 / 718.0 / 727.2
Corporate Plan Bids / 73.6 / 70.0 / 30.0 / 70.0 / 30.0
Efficiency Savings / (308.9) / 0.0 / 0.0 / 0.0 / 0.0
Increased Income / (107.0) / 0.0 / 0.0 / 0.0 / 0.0
Risks/other / 400.0 / 400.0 / 400.0 / 400.0 / 400.0
Other Savings / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
Revenue effects of Capital Programme / 110.4 / 129.8 / 20.0 / 25.0 / 20.0
Increase in LSP expenditure / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
Contribution to Balances / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
Once-Off Expenditure / (461.3) / 0.0 / 0.0 / 0.0 / 0.0
Growth available / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
Total Budget Requirement / 22,119.5 / 22,071.2 / 21,553.0 / 20,956.3 / 20,712.6
Financed by:
Formula Grant (@ 5% p.a. reduction / 10,571.3 / 10,042.7 / 9,540.6 / 9,063.6 / 9,063.6
LSP / 48.0 / 48.0 / 48.0 / 48.0 / 48.0
Surpluses on Collection Fund / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
Council Tax (@ 0% 2011/12 and 2012/13) / 9,046.0 / 9,273.1 / 9,319.2 / 9,646.3 / 9,887.7
Use of revenue balances
- Previously Approved / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
- New / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
Total Income / 19,665.4 / 19,363.8 / 18,907.8 / 18,757.9 / 18,999.3
Budget Shortfall / (2,454.2) / (2,707.4) / (2,645.2) / (2,198.5) / (1,713.4)

Assumptions

Council Tax – 0% for two years and then 2% - no allowance as yet for central government assistance, which would refund £90,000 for each 1% of council tax.

Revenue Support Grant – a cut of 20% over 4 years, which is equal to 30% in “real terms”.

Pay – 1% allowance for pay on the basis that this may also be deducted from Revenue Support Grant. Each 1% that SSDC could retain would reduce the savings figure by £150,000.

Fees and Charges – 2% increase across the board as well as an increase to cover the VAT increase that will occur in January 2011.

Price Increases – 2% in line with inflation expectations

Employer Pension costs – 1% increase

Targets

7. Members approved the strategy for financing the Medium Term Financial Programme in May of this year. The table below shows the current activity against those targets

Target
£’000 / Achieved to Date
£’000 / Notes
4% Savings / 800.0 / 422.7 / Managers have a deadline of the end of September to submit savings.
Joint Procurement / 50.0 / 0 / Currently reviewing contracts
Lean / 250.0 / 0 / £169,000 has already been added for 2011/12 from work completed last year. Proposals for new savings will be presented to Management Board at the end of August.
Asset Management / 100.0 / 0 / Savings will be found once tenants are found for 80 South Street and Garrett Road.
Partnership Working with East Devon / 655.0 / 96.1 / Further proposals will be made to the Joint Integration Committee on the 28th October and District Executive of the 4th November.
Other / 0 / 0 / Other areas are being considered across the authority for savings and staff have been invited to put forward suggestions.
Total / 1,855 / 518.8

8. An updated timetable is shown below:

9th September / Joint Integration Committee considers shared service business cases for the first eight work streams
20th October / Government announces Comprehensive Spending Review
28th October / Joint Integration Committee considers shared management arrangements
29th October / Joint Scrutiny reviews shared management proposals
4th November / District Executive reviews budget and all proposals
18th November / Council reviews proposals from Executive
2nd December / Budget update to District Executive
6th January / Budget update to District Executive
3rd February / District Executive approves 2011/12 budget and recommend to Council
17th February / Council approves budget and tax setting for 2011/12

Risk Matrix

CY/CP/CpP / F/R

Likelihood

8. Update on the Medium Term Financial Plan 2011/12 to 2015/16

District Executive – 5th August 2010