Transcript BUDGET AND SERVICE PLANNING AWAY DAYS

Budget & Medium Term Financial Plan
2012/13 – 2015/16
Clive Heaphy / Mick Bowden
Finance and Corporate Services
Budget & Finance Overview & Scrutiny Committee
8th November 2011
Economic Update
•
Economic predictions are gloomy and universally negative
•
Recovery has ground to a halt – GDP predicted 0% in 2012
•
Inflation remains high at 5% but predicted to fall
•
Interest rates remain low at 0.5% and not predicted to rise
•
Households reluctant to spend – fear of jobs; falling real income; high
inflation on basic goods and services
Uncertain times ahead – requires tough longer-term decisions
GDP Recovery: A long, slow haul
• Downturn deeper than
previous recessions
• Recovery slower to get
started
• End is a long way off
• Policy impact of
projections :
employment, interest
rates and consumer
confidence
• 2015/16 marks the
end – Political
implications
Inflation vs. Wages : A widening gap
• Severe gap opening up
between Wages and
Inflation
• Even if inflation falls
(as predicted), gap
only likely to narrow
rather than reverse
• Impacts on consumer
confidence and
spending behaviour
• Public sector worse hit
than private sector
SR10 – 20th October 2010
COMPOSITION OF THE TIGHTENING IN 2014-15
£ billion
October 2010
Spending Review
Tax
29.8
Spending
80.5
Investment spending
17.0
Current spending
63.5
Of which:
Debt interest
10
Benefits
17.7
Public services
35.7
Total tightening
110.3
% Spending
73
% Tax
27
© Institute for Fiscal Studies
General Coalition Objectives
 Elimination of structural deficit over 5 years
 Reduction in local government funding from £29.7bn to £24.2bn over 4 years –
a reduction of 26% in real terms
 Introduction of Universal Credit and Housing Benefit Reforms – “it pays to
work”
 Priorities – NHS, Schools, Infrastructure (Crossrail, London underground, HS2)
 Dependency on strong continuing economic growth
 Public sector pensions - commit to a form of defined benefits and increased
employee contributions
 Banking Levy £2.5bn annually
Local Government Policy impact
 Headline 7.1% pa real terms reduction in formula grant in 2011-12; Less ringfencing
of LG revenue grants (except simplified schools grants, public health grant)
 Council Tax Benefit: reduce by 10% - localise CTB from 2013-14
 Household benefit caps £500/£350 p/w from 2013
 Borrowing from PWLB 1% more expensive – although rates have now fallen by 1%
 Schools budget up 0.1% per annum (including pupil premium) - numbers up 0.7%
 Additional £2bn by 2014-15 to support social care
 Community budgets pilots in 16 areas
 New homes bonus / Tax increment financing / Business Rate reform
 Funding to freeze council tax in 2011-12 – support for 4 years - now extended
Themes - 2012/13 to 2015/16
 Continuously reducing budgets
 On-going demand pressures in key areas
 Unable to make small efficiency savings – looking increasingly to transformation
changes or to stop providing services
 Need to have absolute clarity about what Brent in 2015/16 will look like
 Smaller in spend terms and headcount
 Targeted rather than universal spending / Controlled demand
 Clear priorities – do what we do well; stop doing things that are not a priority or
affordable
 More commissioning than provider?
Efficiency or Transformation
Where savings come from over 5 years
120%
100%
80%
60%
40%
20%
0%
1
2
Efficiency
3
Transformation
4
Total Savings
5
Funding Gap – 2011/12 – 2015/16
Revised Financial Forecast 2012/13 - 2015/16
2011/12
£'000
Gross spend requirement
2012/13
£'000
2013/14
£'000
2014/15
£'000
2015/16
£'000
291,388
294,336
302,810
319,100
335,704
(294,894)
(282,816)
(281,241)
(269,871)
(267,556)
(3,506)
11,520
21,569
49,229
68,148
2,500
1,006
2,239
0
0
0
0
0
0
0
Net Cumulative Funding Gap / (Surplus)
0
13,759
21,569
49,229
68,148
Net Annual Deficit / (Surplus)
-
13,759
7,810
27,660
18,919
Gross resources
Gross Cumulative Funding Gap / (Surplus)
Contribution to/(from) Balances
Deficit / (Surplus) on Collection Fund
Central Items – Reasons for the increase
 £4.1m provided over four years for additional capital financing charges
 £3.8m provided over four years for increases in levies predominantly the fixed
element of the West London Waste levy
 £3.9m provided over four years for increases in Concessionary Fares. The
Concessionary Fares budget for 2011/12 is £13.8m and there is provision for a 9%
increase in 2012/13 and 5.5% in subsequent years.
 £1.7m provided over four years for increases in a number of areas including South
Kilburn Development (£0.6m), Premature Retirement Compensation (£0.5m)and
Carbon Tax (£0.6m)
Demand and inflation – Reasons for the increase
 £5.0m provided annually to meet demand and loss of income pressures e.g. transfer
of social care clients to Adults, additional temporary accommodation charges
following the benefit changes, children’s social care legal costs and the loss of
Council Tax and HB grant
 £12.3m provided over four years for non pay inflation
 £5.6m provided over four years for additional contributions to the Pension Fund
 £7.8m provided for pay awards of 2% annually from 2013/14
 £1.3m provided over four years for national insurance and other changes
Council Tax Freeze Grant
•
Currently receiving £2.6m per year up to and including 2014/15 relating to 2011/12
freeze
•
Announcement 3 October 2011 - further £2.6m for 2012/13 only if Council Tax frozen in
2012/13
•
Not clear what level of Council Tax increase will be deemed “excessive” in 2012/13
•
Possible Option 1 – 3.5% / 2.1% / 0%
• Possible Option 2 – staggered – 0%, 3.5%, 2.1%
•
Possible Option 3 – staggered with no increase in 2014/15 – 0%, 3.5%, 0%
•
Each 1% raises £1m
•
Unless tax base grows, resources are lost permanently
Council Tax and temporary grant
£m
118.0
116.0
£12m real Gap by 2015/16
114.0
112.0
110.0
108.0
106.0
104.0
102.0
2011/12
2012/13
2013/14
Based on no increases in Council Tax
2014/15
2015/16
CT Increase 2.5% pa
Formula Grant (or equivalent)
£m
200.0
190.0
£47m real Gap by 2015/16
180.0
170.0
160.0
150.0
140.0
130.0
120.0
2011/12
2012/13
Grant Payable
2013/14
2014/15
Real grant increased at 2.5% pa
2015/16
BRENT COUNCIL - Medium Term Financial Projections 2012/13 - 2015/16
2012/13 2013/14 2014/15 2015/16
£m
£m
£m
£m
Council Tax Increase (Possible option 2)
0.0%
3.5%
2.1%
2.0%
Funding gap after identified savings
13.7
7.8
27.8
19.2
less Additional Council Tax Revenues
Adjustment for 2012/13 Council Tax Freeze Grant
0.0
-2.6
-3.6
2.6
-2.2
0.0
-2.2
0.0
Funding Gap after Council Tax increases
11.1
6.8
25.6
17.0
New Homes Bonus
Lower growth/inflation than assumed
New Central Savings identified in budget planning
Use of Redundancy Earmarked Reserve
-1.7
-2.0
-1.0
-2.0
-1.0
-2.0
0.0
-1.0
-1.0
-2.0
0.0
-2.3
-1.0
-2.0
0.0
0.0
Funding Gap after agreed adjustments
4.4
2.8
20.3
14.0
Risks
•
Level and complexity of savings
•
Low reserves - £9.5m in 2011/12 – Raise to £12.0m in 2012/13
•
2011-12 outturn position
•
Lack of clarity regarding future funding (Business Rate Retention)
•
Lack of growth of Council Tax base
•
Demand Growth
•
Lack of clear prioritisation
•
Pensions
•
Economic stagnation
•
Policy changes
Council Housing Finance Reform
 Allows LA landlords to support their own stock from their own (rent) income
 Self financing HRA from April 2012 / Abolish HRA Subsidy (£8.5m to Brent in 2011/12)
 One off national debt reallocation based on assessment of debt that can be afforded
over 30 years (receipt to Brent around £185m)
 National rent convergence policy continues
 Will lead to:– HRA Business Plans guided by local priorities;
– more money for Council Housing; and
– more transparency for tenants
HRA 2012-13
 National Rent policy for rent increase
– RPI (Sept 11) = 5.6% plus
– 0.5% real increase plus
– At least 1.1% uplift to target rent
 This equates to around a 7.1% average rent incease
 Draft forecast debt reallocation due in Nov 2011, and final due Jan 2012
 Feb 2012 Executive – agree HRA budget 2012-13 and rent increase
 28 March 2012 – Debt repayment day
Closing the gap
Immediate Actions
Maintain a strategic approach and use a variety of tools
•
‘One Council’ Programme continues to deliver 2/3 of the saving but at increased
pace
But we also need to:
•
Identify further savings through ceasing activities or scaling back their scope
•
Keep strict control of new commitments and match with corresponding savings
•
Take tough decisions early to deliver full year savings over the next three years
•
Ensure no overspends in 2011-12 – we must come in on budget
Closing the gap
Strategic Actions
•
Develop clear and detailed understanding of Political objectives and priorities
•
Stop things that are not priority
•
All central items to be robustly reviewed
•
“Inescapable” Growth to be minimised
•
Council Tax Strategy for the medium term
•
Consider limiting Capital Programme or repaying debt
•
Learn and join with others
Service and Budget Planning
Timetable for 2012-13 (1)
Date
Action
July
First service and budget planning awayday
September
Service planning and budget guidance issued
September/
October
Work on formulating draft budgets
October
First stage budget meetings between F&CS and service areas
2-3 November
Second service and budget planning awaydays – issues to be considered as part of the First
Reading debate
8 November
Budget and Finance Overview & Scrutiny – 1st Reading Debate
November /
December
Continue to develop proposals for achieving 4 year budget targets including ‘star chamber’
meetings
21 November
Full Council. First reading of Policy Framework and Budget
7 December
Schools Forum meets to agree funding formula and budget issues
12 December
Report to Executive on Performance and Finance Review 2010/11 – 2nd Quarter
15 December
PCG - Detailed consideration of budget issues
Up to January
Consultation with residents, businesses, voluntary sector, partner agencies and trade unions
on budget proposals
Service and Budget Planning
Timetable for 2012-13
(2)
Date
Action
Mid-December
Confirmation of the following year’s funding from central government
15 December
Release of the Mayor’s consultation draft GLA budget
11 January
Budget and Finance Overview & Scrutiny collects evidence and discusses 1st interim report
25 January
Greater London Assembly considers draft consolidated GLA budget
End of January
PCG agree budget proposals to be presented to February Executive
1 February
Schools Forum meets to agree the recommended Schools Budget
9 February
GLA ‘s final consideration of consolidated budget
February
Budget and Finance Overview & Scrutiny receives budget proposals prior to the Executive.
Discusses 2nd interim report
13 February
Executive considers and announces administration’s final budget proposals, agrees fees and
charges for the following year and agrees savings/budget reductions for the HRA budget
report as well as the overall average rent increase
16 February
Budget and Finance Overview & Scrutiny receives the outcome of the Executive’s budget report
and agrees a final report
27 February
Full Council agrees budget