Title of Report: / The Council’s Budget Framework 2017/18 – The Mayor’s Final Revenue Budget Proposals, Medium Term Budget Strategy to 2019/20 and Council Tax Setting Proposals
Name of Meeting: / Council / Date of Meeting: / 27hFebruary 2017
Report Author(s): / Stephen Ashley
Service Area: / Finance
This Report is:
A Key Decision (Yes/No): / Yes
Currently listed on the Forward Plan (Yes/No): / Yes
A Policy Framework document (Yes/No) / Yes
An ‘Exempt’ Report, or will have exempt appendices (please specify): / No
The following Members and non-officer consultees have been considered in the preparation of this report: / Name(s) / Date of meeting(s)/ clearance
Lead Executive Member(s): / Lester Hudson
Ward Members and Community Lead Councillor (via the Influential Councillor Scheme):
Young Mayor (as appropriate): / n/a
Overview and Scrutiny Committee (All policy framework documents must be submitted to the Committee before consideration by the Executive) / Budget Working Party / January and February 2017
Local Strategic Partnership via the Newham Partnership Board (as appropriate)
Consultation with citizens, stakeholders and service users (list as appropriate):
The following officers have been considered in the preparation of this report: / Clearing Officer / Date clearance received
Financial comments/implications (in consultation with relevant Departmental Head(s) of Finance): / Deborah Hindson / 07/02/2017
Legal comments/implications (in consultation with Legal Services): / Ian Chisnell / 07/02/2017
Democratic Services (Please send all draft reports to Democratic Services) / James Martin / 08/02/2017
Links to Plans and Strategies (in consultation with Head of Corporate Planning and Partnerships): / n/a
Head of Public Policy and Research / David Morris / 08/02/2017
Procurement implications (in consultation with the Strategic Procurement Unit): / David Pridmore / 02/02/2017
Property/Land implications (in consultation with the Head of Property and Development): / n/a
Human Resources implications (in consultation with the Head of Human Resources): / Jan Douglas / 08/02/2017
Communications / Gary Bird
Please confirm that the following has been completed: / Yes / No
Part A of the report is no longer than 4 pages long. / Yes
List of Background papers (this is a legal requirement):
When submitting final reports to Committees and Partnerships, links to background papers or the documents themselves should be attached (labelled as background documents). / Yes
Relevant exclusion paragraph if the report or any appendices are Exempt: / n/a
Urgency paragraph for latereports (if appropriate): / n/a
Report authors (or their representative) will be asked to attend the Resources Board meeting which meets two weeks before the meeting to introduce their report. This is a meeting of Senior Officers from Legal, Risk, Finance, Procurement, HR etc. to discuss reports and advise report authors. A meeting invitation will be sent to the report author.This report has been seen and cleared for submission to the meeting by:
Head of Service / Executive Director / Deborah Hindson, Director of Financial Sustainability
Date: / 7th February 2017
The ED/DD must take responsibility for long reports. If Part A of the report is longer than 4 pages, please justify why this is necessary:
The information contained in this report is complex and wide-ranging and therefore cannot be conveyed over four pagesContents / page
Purpose of the Report / 6
Executive Summary / 6
Recommendations / 7
List of Appendices / 9
Report – Part A / page
- Introduction and Background
- Key Considerations
- Service Delivery
- 2017/18 Provisional Local Government Finance Settlement
- Emerging Pressures/Risks
- Government Funding Beyond 2017/18
- Council Tax
- 2016/17 Budget Performance
- Capital Programme
- Housing Revenue Account and Rent Increases
- Financial Implications
- Risk Management
- Comments of the Finance Officer
- Comments of the Legal Officer
- Report – Part B
Appendix A / Overview and Scrutiny’s Consideration of the Mayor’s Budget Proposals 2017/18 / 63
Appendix B / Medium Term Financial Strategy 2017/18 to 2019/20 / 70
Appendix C / Efficiency Savings / 73
Appendix D / Budget Pressures and Mayoral Priorities / 74
Appendix E / Letter from the DCLG Confirming the Multi-Year Settlement Offer / 75
Appendix F / Flexible Use of Capital Receipts / 76
Appendix G / Forecast Balance Sheet / 79
Appendix H / Resolution to Set Council Tax 2017/18 / 80
Appendix I / Month 9 Revenue Budget Monitor 2016/17 / 82
Appendix J / Provisions and Reserves Policy / 83
Appendix K / Medium Term Capital Programme – Summary / 86
Appendix L / Full Capital Programme – Summary / 87
Appendix M : / Proposed Schools Capital Programme / 97
Appendix N : / Equalities Impact Assessment on the Budget / 100
Appendix O / Equalities Impact Assessment - HRA Rent (summary) / 110
Appendix P / Chief Officer Pay Policy Statement 2017/18 / 115
LONDON BOROUGH OF NEWHAM
COUNCILIs it a key decision? / No
Is it in the Forward Plan? / Yes
Date report published / 08/02/2017
Date of meeting / 27/02/2017
Subject:The Council’s Budget Framework 2017/18 – The Mayor’s Final Revenue Budget Proposals, Medium Term Budget Strategy to 2019/20 and Council Tax Setting Proposals
Source:Resources - Finance
Purpose of Report
The report details the Council budget strategy for the 2017/18 financial year and beyond. The report details the General Fund revenue budget, the capital programme and the Housing Revenue account.
The report makes recommendations for Full Council, including Newham’s Council Tax for 2017/18 the budget strategy and framework, and the Capital Programme.
The report recommends agreement of the Council revenue budget of £231.531m for 2017/18It also recommends no increase in Newham’s element of Council Tax for 2017/18 and that the offer of the Adults Social Care precept for 2017/18 is declined.
The report recommends a 1% decrease on rents for social housing and sheltered accommodation, and apply an increase of CPI+0.5% to PFI properties, and for agreement to the Dedicated Schools Grant to be passported in full to the schools.
The report also makes recommendations on the Council Capital Programme for 2017/18 and beyond and sets out the level of Council Tax for each band of Council properties.
Council is asked to:
- agree the Council’s General Fund Budget Requirement for 2017/18 to be set at £231.531m as set out in paragraph 3.1 and appendix B of the report.
- agree the net budget savings of £18.8m to be delivered through greater levels of efficiency and cost effectiveness of service as set out in paragraph 3.4 and appendix C of the report.
- agree the growth as a result of budget pressures and investment in Mayoral Priorities that meet the needs and requirements of the residents of the borough amounting to £5.937m in 2017/18 as set out in paragraph 3.9 and appendix D of the report.
- agree to decline the Government’s offer to set an Adults Social Care Precept on Council Tax in 2017/18 as set out in paragraphs 4.29 to 4.32 of the report
- agree that the provisional level of the Dedicated Schools Grant (DSG) has been set at £399.2m, an increase of £13.66m or 3.5% and to agree that the Dedicated Schools Budget is set at the level of the DSG and that the entire allocation of the Pupil Premium is passported to schools as set out in paragraphs 4.35 to 4.39 of the report.
- agree a zero increase in Council Tax for 2017/18 as set out in paragraph 7.3 of the report.
- agree the Capital Programme, comprising:
- The four-year Capital Programme set out in appendicesK and L, and confirm the capital ambition of the Council to cover all potential areas of capital investment as set out in paragraph 10.8
- that a corporate feasibility budget of £500k for the development of capital schemes, be set up and to be funded from Flexible Use of Capital Receipts, and the use of the feasibility budget be delegated to the Corporate Director of Financial Sustainability as set out in paragraphs 10.24 and 10.25 of the report
- Aprovision of working capital, within the Budget Strategy,to Red Door Ventures of up to £20.7 million. Release of working capital will be delegated to the Director of Financial Sustainability subject to agreement of the Red Door Ventures Business plan and conditions required as part of the approval being met as set out in paragraphs 10.26 to 10.32 of the report
- agree to recommended the inclusion within the capital programme and budget strategy from 2017/18 £5m per annum contribution for three financial years to enable Newham Legacy Investments to discharge its obligations as a partner in E20 as set out in paragraphs 10.33 and 10.35 or the report
- The Housing Capital Programme of £47.5mwith the allocation of funding to specific HRA programmes being delegated to the Director of Commissioning (Community and Environment, and Community Infrastructure) after consultation with the Lead Member for Housing and Customer Services, Director of Financial Sustainability and Mayor, as set out in paragraphs 10.42and10.43 of the report
- the Schools Capital Programme set out in paragraphs 10.44to 10.50 and appendix M.
- agree that in order to ensure the long term viability of the Housing Revenue Account it is proposed that the Council implement a 1% decrease on rents for social housing and sheltered accommodation, and apply an increase of CPI+0.5% to PFI properties, following a consultation with tenants.as set out in paragraph 11.11 of the report.
- agree the Chief Officer Pay Policy as set out in appendix P.
So that Council can consider and approve the Budget and Council Tax rate to be set for 2017/18.
Name of lead Officer:Deborah Hindson
Position:Director of Financial Sustainability
Name of Lead Member consulted:Sir Robin Wales and Lester Hudson
Position:Mayor andDeputy Mayor
Originator of report: Stephen Ashley
Tel no: 02033734955
Local Government (Access to Information) Act 1985
Background papers used in preparing this report:
- Notification of the confirmed Local Government Finance Settlement for 2016/17 published in February 2016
- Notification of the Provisional Local Government Finance Settlement for 2017/18 published in December 2016
- DCLG paper - Statutory Guidance on the Flexible Use of Capital Receipts (updated)
- The Mayor of London’s draft consolidated budget for 2017/18
Copies of Background documents can be obtained from:
Tel no: 02033734955
List of enclosures / Appendices:Appendix A / Overview and Scrutiny’s Consideration of the Mayor’s Budget Proposals 2017/18
Appendix B / Medium Term Financial Strategy 2017/18 to 2019/20
Appendix C / Efficiency Savings
Appendix D / Budget Pressures and Mayoral Priorities
Appendix E / Letter from the DCLG Confirming the Multi-Year Settlement Offer
Appendix F / Flexible Use of Capital Receipts
Appendix G / Forecast Balance Sheet
Appendix H / Resolution to Set Council Tax 2017/18
Appendix I / Month 9 Revenue Budget Monitor 2016/17
Appendix J / Provisions and Reserves Policy
Appendix K / Medium Term Capital Programme – Summary
Appendix L / Full Capital Programme – Summary
Appendix M / Proposed Schools Capital Programme
Appendix N / Equalities Impact Assessment on the Budget
Appendix O / Equalities Impact Assessment - HRA Rent (summary)
Appendix P / Chief Officer Pay Policy Statement 2017/18
Report - Part A
- Introduction and Background
- The report sets out the current MTFS position and how progress is being made in addressing the previously forecast budget gaps as set out in the Mid-Year Review Report 2016 presented to Full Council on 19th September 2016, and the Mayor’s Initial Budget Proposals 2017/18 that went to Cabinet on 15th December 2016. In addition it also provides a brief update on the current situation regarding savings and future budget gaps, and a summary of the 2016/17 budget performance up to month 9.
- The Mayor and Members have received reports and presentations during the year in preparation for the budget setting process. The report is written in light of a range of issues including the continuing reductions in local government funding, external cost pressures and the redirection of resources into locally identified priorities.
- The figures used in the report are the best available at the time and liable to change in light of decisions still to be made and other figures still to be reported.
Budget Strategy and Financial Objectives
1.4.The strategy aims to address residents’ concerns and wishes that have been identified through a variety of sources such as surveys and on-going contacts with residents. The 2017/18 budget sets out to support the delivery of the Council’s resilience aspirations and is underpinned by the following strategic financial objectives:
- To provide strong, robust financial management and control in order to deliver a balanced budget and a sound financial framework
- To continue to generate savings and secure value for money through measures aimed at greater efficiency in service delivery and management, including invest to save investments
- To ensure that the allocation of resources is policy and commissioning led, based on the most robust evidence available and strongly influenced by local residents’ concerns and aspirations and that it supports local residents and businesses through the current challenging economic climate
- To keep local taxation increases as low as possible
- To maintain balances at or above the minimum prudent level as determined by the Chief Finance Officer and to add to balances whenever the opportunity arises
- To comply with the prudential borrowing limits as set in the Treasury Management Strategy
- To undertake investment where a value for money case can be demonstrated
The Council’s Vision
1.5.Resilience is Newham’s blueprint for creating a fairer, more equal society. It is about building the capacity of our residents and our community to help people take control of their lives and seize the opportunities that come their way. Resilience is also an agenda for proactive local government, and means fulfilling more than our core statutory duties in order to address the biggest challenges facing residents in the coming years. To deliver this ambitious agenda and meet the financial challenge that we face, we know that this Council must also be a resilient and efficient organisation.
1.6.We have placed residents at the heart of our approach to meeting this challenge. In the summer of 2015, the Council undertook its biggest ever budget consultation, including a representative survey asking residents for their views on how the Council could manage cuts in government funding over the coming years. These findings guided the Council in its financial planning, and were used as a foundation for a New Deal for the borough, with commitment for additional investment in key priorities such as roads, environment and jobs.
1.7.The 2017/18 Budget and Medium Term Financial Strategy (MTFS) has been developed with reference to the priorities identified by residents and in line with the Council’s ambition to:
- build resilience and empower residents to help them transform their life chances
- actively take the initiative and develop new programmes and new ways of doing things to help and support residents
- seek out opportunities to generate resources, nurture business and investment that provide jobs and wealth.
- Key Considerations
- A key priority of the Council’s budget strategy is to fulfil the Mayor’s promises that reflect the concerns and wishes of the residents of the borough. These concerns and wishes have been identified through a variety of means including surveys and ongoing contact with residents directly and via their elected representatives.
- The Council’s statutory Section 151 officer is required under the Local Government Act 2003 to sign off balanced, sustainable budget proposals before the 11thMarch in any given year. This means the section 151 officer must be satisfied that the budget accurately reflects the level and extent of services to be delivered to residents and clients as well as delivery of the Mayor’s promises.
- An Equalities Impact Assessment (EqIA) has been prepared for the 2017/18 budget proposals to assess the individual and cumulative impact of the proposals including the impact on staff numbers.
- Service Delivery and Performance Issues
The Council’s General Fund Budget Requirement
3.1.The Council’s Medium Term Financial Strategy to 2019/20 is set out in appendix B and the Council’s Budget Requirement of £231.531m for 2017/18 is summarised below in table 1. The budget proposals reflect the cost of delivery of services for 2017/18including the impact of external cost pressures and the Council’s efficiencies and transformation programmes.
Table 1: Budget Requirement 2017/182017/18
Spending on Services / 232,996
Efficiency Savings / (18,800)
Pressures / 5,437
Mayoral Priorities / 500
Capital Financing / 38,207
Central Budgets / 41,781
Corporate Income / (68,591)
Collection Fund Surplus / (2,951)
Council Tax / (66,771)
Settlement Funding Assessment (SFA) / (160,474)
Social Care Precept 2016/17 / (1,335)
Total Income / (231,531)
Budget Gap / 0
Allowing for roundings
3.2.The Chief Finance Officer, under section 25 of the Local Government Act 2003, is required to include a statement of their view as to the robustness of the estimates made for the purpose of calculating the Council’s budget. This statement is set out in section 15. An explanation of the component parts of table 1 follows below:
Spending on Services
3.3.These are the mainstream budgets for services and are monitored monthly and reported to the Strategic Leadership Team (SLT). They are by far the most significant element of the Council’s budget and represent spending on services as in the Medium Term Financial Strategy (MTFS) shown in appendix B.
3.4.Since 2011/12, significant savings have been required to meet revenue grant reductions arising from reductions in funding for local government as part of the ongoing austerity programme. Since 2010/11 £155m of savings have been identified and another £18.8m of savings in the 2017/18 budget as shown in table 2 below (details set out in appendix C and paragraph 4.41 for Triennial Valuation). It is essential that savings targets are met, in particular the Transformation savings are vital to the delivery of a balanced budget. Any risk of slippage or failing to meet the stated savings target will need to be addressed as a matter of urgency.
Table 2: Savings2017/18
£000 / 2018/19
£000 / 2019/20
Establishment Savings / (1,100) / (1,100) / (1,100
Triennial Valuation / (4,000) / (4,000) / (4,000)
Service Transformation / (10,700) / (12,900) / (12,900)
General Fund VacancyFactor / (3,000) / (3,000) / (3,000)
Total Savings / (18,800) / (21,000) / (21,000)
3.5.A key priority of the Council’s budget strategy is the delivery of savings through efficiencies and transformation via the small business programme. Any reduction in the delivery of front line services will only be considered as a last resort. No service cuts have been sanctioned throughout this process.
3.6.The major driver behind these savings has been the efficiencies identified through the corporate options appraisal programme. Every service will be subject to a thorough review. The recommendations emanating from this process will determine the future make up of the functions delivered through the service and designed to dovetail in the council’s overall delivery model.