12(9)

[JG1]

North Somerset Council

REPORT TO THE Executive

Date of Meeting: 19th December 2006

Subject of Report: Draft Revenue and capital Budgets for 2007/08

Town or parish: All

Officer/Member presenting: Mike Bell, Executive Member for Finance & PHIL HALL, DIRECTOR OF FINANCE & RESOURCES

Key Decision: Yes

RECOMMENDATIONS

That the Executive:

i. Approves the draft revenue and capital budgets for 2007/08, including the use of reserves, and refers the draft budget to Council for comment.

ii. Notes that the budget is based on a notional council tax increase of 4% and provides a level of contingency to meet risks and current uncertainties, but commits to achieving a council tax rise of less than 4%, if possible.

iii. Refers the draft revenue and capital budgets for 2007/08 to the Council’s Policy & Scrutiny Panels in January 2007, based on the detail contained in this report.

1. Summary of Report

The report sets out the current draft revenue and capital budgets for 2007/08, for approval by the Executive. The report highlights the key financial pressures, risks and decisions faced by the Council in arriving at this budget, which if approved would provide for a notional Council Tax rise of 4% for the North Somerset Council element of the Council Tax bill.[J2]

2. Policy

The Council’s budget should ensure that resources are planned, aligned and managed effectively to achieve the corporate aims and objectives of the Authority. [J3]

3. Details

Report to the Executive 24^th October 2006

The budget strategy for 2007/08 was presented to the Executive on 24^th October 2006. The budget figures presented, although at an early stage, showed that the Council would need to make significant savings if it was to achieve an affordable council tax and one which would not leave the council open to Government capping. The revenue budget “problem” was attributed to:

· High level of cost inflation, running at nearly 5%

· Severe demographic demand pressures, notably in Adult Social Care

· A relatively low level of cash increase in government grant, at only 2.3%

The table below showed the further savings that would need to be generated depending upon the level of council tax increase [extract from Budget Strategy consultation document, October 2006].

Council Tax increase	Band D Council Tax	Collection Fund requirement	Savings required
	£	£000	£000
5%	1,101.24	81,682	4,207
4%	1,090.75	80,904	4,985
3%	1,080.26	80,127	5,762
2%	1,069.78	79,349	6,540

Therefore, it was evident that urgent work was necessary if the council was meet its service needs and recommend an affordable budget. Achieving additional savings of £4 - £7M would be challenging, if essential services were to be maintained.

To set a structured approach to the above challenge, in section 7 of the consultation document, the Executive set out its outline budget strategy. In preparing its draft budget, each of the major points of the strategy are considered, in turn:

Lobbying of Government

·Government grant figures already announced for 2007/08 are:

·An extra £951k of Formula Grant (the new name for Revenue Support Grant and National Non-Domestic Rates) which is an increase of only 2.3% and will mean considerable pressure on service budgets for 2007/08.

The council’s grant entitlement will actually be £1.1M more than it actually receives, but the Government will withhold this sum under its “ceiling” arrangements to protect councils with declining grants.

· An extra £951k of Formula Grant (the new name for Revenue Support Grant and National Non-Domestic Rates) which is an increase of only 2.3% and will mean considerable pressure on service budgets for 2007/08.

· The council’s grant entitlement will actually be £1.1M more than it actually receives, but the Government will withhold this sum under its “ceiling” arrangements to protect councils with declining grants.

· An extra £5.7m of Dedicated Schools Grant which will mean an average increase of around 6.4% in schools’ budgets.………. BudgetAn extra £5.7m of Dedicated Schools Grant which will mean an average increase of around 6.4% in schools’ budgets. The schools budget covers more than schools themselves and includes Special Educational Needs, EOTAS, early years, insurance, and Pupil Referral Units. The 2007/08 schools budget is in the second year of the multi-year period and was agreed in consultation with Strategic Schools Forum (SSF) at its meeting in July 2006 using the indicative pupil numbers for January 2007. Schools themselves have been given indicative allocations for 2007-08 to help them plan ahead. Once the actual January 2007 pupil numbers are known the SSF will finalise their budgets for 2007/08 at its meeting in February.

· decisions regarding the allocation of the DSG will be taken by the Strategic Schools Forum.

On 24th October 2006, the Leader of the Council wrote to the Secretary of State to highlight key issues which are having a serious effect on the level of Government funding support received by North Somerset. As well as requesting a meeting the Council also offered the Government the opportunity to use North Somerset as a case study, for further understanding major financial pressures such as Adult Social Services.

On 3rd November 2006, the Council received a reply to the above letter from Phil Woolas, Minister for Local Government and Community Cohesion, who acknowledged the letter and its contents but explained that ‘given the fact that there is no intention of re-opening the 2007//08 settlement, I can see little point in meeting to discuss the issues you raise at this stage. I can assure you that we will fully consider all written representations we receive during the 2007/08 settlement consultation period, and final decisions will take account of all the representations received’. The Leader of the Council has written to the Minister to ask him to reconsiderexpress disappointment at his decision not to meet with this Aauthority.

On 28^th November 2006, the Government presented its final settlement figures, which confirmed the provisional settlement figures included in the October executive report. In a published statement, Local Government Minister Phil Woolas said:

"This is a good settlement for local government. With multi-year settlements, Government is providing local authorities in England with stable and predictable funding. There should be no more hikes in council tax levels or talks of cuts in services. Councils should be able to better plan over the longer term, using the increased investment in local government funding to address local service priorities.”

"By the end of this spending review we will have delivered an above inflation grant increase to local government for the tenth successive year. Given this substantial investment, we expect to see the average council tax increase in England to be below 5 per cent.”

"Local government should be under no illusions; if there are excessive increases, we will take capping action - as we have done over the last three years. Councils know that we are prepared to take even tougher action if that proves necessary."

Keep Public Informed

A series of articles within North Somerset Life, explaining budget and operational pressures faced by the Council signalled the start of this year’s consultation. The aim of these articles was to provide stakeholders with base information prior to engagement in the formal consultation process.

Additionally in November, the Budget Strategy document presented to the Executive was circulated to representatives of the local business community, community groups, such as Senior Citizens Forums, and other precepting authorities including all Parish and Town Councils.

In late November, the Executive Member of Finance, together with finance officers, held a series of informal public meetings around the district. Nine sessions were held over a period of three days. Key messages from the members of the public who attended the sessions were:

· Any increase in Council Tax should be no more than general inflation indicators and the increase in state pension, and that the Council should continue to protest at the current system of local government financing;

· The Council should maintain its current assets and infrastructure, prior to investing in new and additional schemes:

· The Council needs to lobby Government for changes in the Local Government pension scheme, so as to reduce the ongoing and increasing burden on the employer and the taxpayer;

Any service suggestions and queries received by officers in these sessions have been forwarded to service managers for response.

Further, a suggestion and comments box was located at each of these sessions. Following review of the many replies, an article responding and highlighting the action being taken by the Council will be featured in the FebruaryJanuary edition of North Somerset Life.

The Council website has had an exclusive section reserved for budget consultation. This page has also contained the budget reports presented to date, including this item.

Keep Focused

The proposed draft budget, as attached at Appendix 1, delivers a sustainable and affordable budget in difficult circumstances. This has only been achieved by sticking to a strict disciplined process, with the opportunity to discuss and challenge being central to the process.

A number of service pressures are now included within the draft budget, but mainly where equivalent directorate savings have been clearly matched to the growth item. From the outset, given the budgetary position faced by the authority, Directorates were informed that only corporate pressures would be allowed within the draft budget. Any service pressures would need to be mitigated by re-direction of resources within the directorate. Other service pressure items included are base budget shortfalls. However, approximately £0.761m1.1m?? of identified service pressures remain outside the budget, unless equivalent savings are identified. If all of these pressures were included in addition to the current proposed budget, a council tax rise of just under 5% would be necessary, providing there are no other further changes.

The draft budget delivers savings across all directorates of £8.5416.490m, details of the major items will be explained in later sections.

Since the October report, work on the proposed taxbase has been completed and presented to the Executive at its meeting of 5^th December 2006. The taxbase of 74,694.68 band D equivalent properties represented an increase of 1.71% above the 2006/07 figure.

This increase is significantly above the assumptions included in the initial budget calculations which formed the basis of the October Executive report.

In addition, current estimates predict that the Collection Fund will make a £250,000 surplus in the current year. Together with the additional taxbase, these two items have improved the October position by approximately £813,000, a saving of 1% on the Council Tax bill.

At this stage, the summary position is:

	£000
Council Net Revenue Budget 2006/07	119,131
Use of Reserves (one off in 2006/07)	1,142
	120,273
“Corporate Growth” Current Projections:
Inflation (average 4.6%)	5,734
Demographic pressures	2,500
Strategic risks	262
Full year effect of previous decisions	632
Legislative requirements – “new burdens”	475
Implementation of agreed strategies and capital programme decisions	1,006
Contingency for planning purposes / uncertainties	339
Service Pressures	2,719
Service Savings	-8,541
Total Budget Projection for 2007/08	125,399
Less Government Financing (Formula Grant)	-42,868
Use of Reserves, Collection Fund surplus and other items	-1,058
Collection Fund Requirement Projection for 2007/08	81,473
Projected Taxbase	74,694.6852
Band D Council Tax Projection (£)	1,090.76
% Increase in band D Council Tax	4.00%

Attached at Appendix 2 to the report are a series of commentaries produced by Directors. These commentaries highlight the budget process undertaken, and, whhere as a result of the draft budget, service pressures will be hardest felt.

The table below shows the movement of base budgets between years. The table highlights the significant effect on the budget of the service pressures being experienced in Adult Ssocial Sservices.

	Adjusted Base Budget 2006/07 £000	Budget for 2007/08* £000	% change
Children and Young People	22,460	23,209	3.3
Adult Social Services and Housing	39,011	41,708	6.9
Development and Environment	31,471	32,837	4.3
Corporate Services**	4,850	5,107	5.3
Finance and Resources	12,041	12,173	1.1
Capital Financing	9,151	8,523	-6.9
Other, including Non –Service	1,289	1,842	42.9
Total	120,273	125,399	4.3

Notes

* before virements

** includes one-off costs of election (3.7x.x%)

Improvement Priorities are Central

The budget consultation document presented to the Executive in October referenced the 7 key improvement priorities and how any investment would need to come from funding opportunities such as use of new grants, or use of the housing transfer receipt, as opposed to new funding pressures in the base budget.

Mitigate cost pressures wherever possible

The consultation document drew attention to three significant areas of cost pressure: