APPENDIX 2A

Budget

Bishop's Stortford Town Council Budget 2014-2015 V2.0 - Notes for Town Council Meeting 3rd February 2014

Note

These notes are supplemental to the Notes attached to the Budget presented to the Finance and General Purposes Committee which was circulated to all members.

INTRODUCTION– please read carefully

The efforts to contain operating expenses have continued, the majority of line items kept at or below previous level despite the effects of inflation. We have benefitted from a major reduction in insurance premiums and audit fees. In addition there have been other savings. Furthermore, with the benefit now of three years of solid ‘actual’ results in the financial reporting format introducedin 2010, it has beenpossible to budget more tightly in some areas, particularly staffing costs.

At the same time Council has instigated a much more ambitious capital improvement programme. It has resolved to undertake major works on Sworders Field, the Paddling Pool, Market Square Toilets, and the construction of a new Cemetery, as well as several smaller projects, requiring in total £365,000 in addition to funds already allocated. Furthermore Councillors are already proposing additional projects. Because of the efficiencies in recent years and the tighter budgeting for 2014-2015 we can make major inroads into this accumulated project pipeline, without increasing the net budget. We cannot, however, complete themin a single year without a significant budget increase; it is envisaged that they will be phased over three years[1].

This very positive financial position willdeteriorate dramaticallyduring 2015-2017due to the fall off of carried-forward under-spend and technical changes in the way Council Tax Welfare Benefit is paid (the ‘Local Council Tax Support Scheme’ – LCTSS). The latter, government imposed, change will penalise us by approximately £62,000 annually. The change includes grant funding to District Councils intended to compensate Parish and Town Councils for the effect, but East Herts District have defied the Government request to pass this funding on[2]effectively imposing a budget cut. Cumulatively these effects will result in the money available to Council[3] reducing (relative to 2014/2015) by approximately £96,000 in 2015/2016 and £146,000 in 2016/2017.

Furthermore the Government has clearly signalled a desire to extend to Parish/Town Councils what amounts to a cap on Council Tax[4]. If this occurs, as seems increasingly likely, the Council will lose the freedom to adjust Council Tax as it sees fit.

Against this background the Chief Executive Officer presentedto the Finance and General Purposes Committeewith a choice between a FLAT NET BUDGET(resulting in an increase in Council Tax of approximately 4p per week for a band D household)and a FLAT PRECEPT (resulting in a budget cut of £30,839). Taking into account particularly the effect on future years, the Chief Executive Officer recommended a FLAT NET BUDGEThowever this recommendation was not endorsed by the Finance and General Purposes Committee.

Finance and General Purposes Committee recommendation

The Finance and General Purposes Committee agreed to RECOMMEND to Council that the ‘Flat Precept’ option be adopted with the following amendments

  1. £10,000 be allocated to the redesign of the Monastery Park
  2. Additional funds be allocated to for a public bench (£500) and the addition of missing names to the War Memorial (£500) as set out above
  3. An additional £11,000 to be transferred from reserves to fund items 1 and 2
  4. The Chief Executive Officer to present a further recommendation to Council to accommodate the shortfall

Chief Executive Officer Recommendation - REVISED

For the reasons outlined above the Flat Precept option recommended by the Finance and General Purposes Committee amounts to a budget cut of £30,839. A further cut of a similar amount will be necessary next year if Council wishes to achieve the same precept in 2015/2016.

Against this background The Chief Executive Officer has re-visited the figures in the budget with the benefit of Quarter 3 results,which were not available at the time the budget recommendation was prepared, and comments from members. The following changes have been made:

Line item / Presented to F&GP / Presented to Council / Change in
Net Budget / Note
Income – Commercial Lettings and Service Charges / 47,448 / 53,848 / -6400 / This income is heavily weighted towards the first 6 months of the year due to Zizzi and Sworders Field. A more precise calculation has been done in the light of q3 actual results not available at the time that the recommendation to F&GP was prepared
Interest received / 7,500 / 12,560 / -5060 / Recalculated based on latest available rates
Transfer to New Homes Bonus reserve, for future use on strategic projects / Equal to new homes bonus received / Equal to New Homes Bonus received less 19379 / -19379 / 19,379 allocated to the strategic projects to be completed during the year
TOTAL / -30,839

In summary the budget saving of £30,839 has been achieved by

  1. Increasing the estimated income by £11460 following a review in the light of Q3 figures
  2. Assigning £19,379 of the New Homes Bonus to the Strategic projects planned during the year

In addition to the above the Chief Executive Officer considered whether it would be appropriate to increase the estimate for Cemetery Income. However the actual results to December 2013 (which were not available at the time the estimate was prepared) do not support this, indeed if anything they suggest that Cemetery income may be less even than that budgeted. He also reviewed estimates for spend and concluded that, on balance, the figures recommended remained ‘best estimates’ given the information to hand.

The Precept

The table below shows the total precept and the tax base for recent years, all in £.

Year / Net Budget / Tax Base* / Mitigating Grant* / Band D Precept
2007/2008 / 1,139,076 / 14,849 / 0 / 76.71
2008/2009 / 1,152,350 / 15,260 / 0 / 75.52
2009/2010 / 1,119,885 / 15,101 / 0 / 74.15
2010/2011 / 1,118,909 / 15,122 / 0 / 73.99
2011/2012 / 1,093,869 / 15,122 / 0 / 72.34
2012/2013 / 1,034,139 / 15,223 / 0 / 67.93
2013/2014 / 1,039,762 / 14,392 / 65,563 / 67.69
2014/2015 / 1,008,923 / 14,421 / 32,781 / 67.69

*The reduction in Tax base (ie the amount of money we raise for each £ of precept) is due to the introduction of the Local Council Tax Support Scheme. The Mitigating Grant is funded by Government but paid to District and intended to mitigate the effect of the LCTSS on Parish/Town Councils. East Herts District Council have decided to pass on only half in 2014/2015, and none at all in 2015/2016, as explained above.

CASH and RESERVES

The following table shows the cash and reserves position at end of Q3 and the expected reserves position at end of the 2013/2014 and 2014/2015 financial year, based on the above recommendation.

The general reserve, equal to approximately 6 months gross budget, lies comfortably within the range of 3-13 months gross budget recommended by the Audit Commission. It is predicted to increase slightly (by £9000 approximately) by March 2015 due to the return to general reserves of an underspend on Cemetery storage buildings.

Figures Attached

All members were circulated with version 1 of the budget (prior the F&GP meeting). This included three ‘views’ of the same data. In the attached version 2 of the budget (A3 paper) the Summary by Type of Expense view, amended to reflect the recommendation of the Finance and General Purposes Committee, has been shown. This is the one referred to by the Committee. The amended detailed view by Cost Centre/Type of Expense, to which the only changes are those detailed above, is available on request.

Notes - 1

[1] Based on the ‘flat precept’ option recommended by F&GP

[2] EHDC are passing on half the required amount in 2014/2015 and none at all in 2015/2016. The Local Government finance statement included the following: “we have been clear that we expect billing authorities to carry on passing on support to town councils and parishes to help mitigate any reduction in their taxbase due to the local Council Tax support scheme.”

[3] For a given Council Tax charge and making reasonable assumptions about the increase in tax base due to new property build.

[4] Mandatory Council Tax referendums currently apply to authorities, other than Parish Councils, who wish to raise Council Tax by more than 2%. The Government has signalled a desire to extend this to Parish/Town Councils. The loaded question which is asked, the cost, and the complex process means that there is almost no practical circumstance in which a referendum could be held and won by BSTC. The regulation therefore amounts practically to a cap.