Transcript BUDGET AND SERVICE PLANNING AWAY DAYS

Budget 2012/13
and
Medium Term Financial Plan 2012-16
Councillor Muhammed Butt
Deputy Leader of the Council
Budget & Finance Overview & Scrutiny
8th February 2012
2011-12 – Forecast outturn
• On target to achieve budget for 2011/12
• Challenging year with considerable service and financial risks
• 97.5% of planned £41.7m of savings ‘One Council’ savings
achieved
• Strong financial disciplines applied rigorously throughout the
year
• Reserves not used to achieve target – end year reserves
£10.080m
2011/12 Forecast Outturn
(Based on December 2011 figures)
Latest Position
Over/(Under) Spend
£’000
Service Areas
Adult Social Services
Children and Families
Environment and Neighbourhoods
Regeneration and Major Projects
Finance and Corporate Services/ Central Services
Central Items / Government Grants
Net Over/(Under) Spend
£’000
292
108
0
(106)
(114)
180
(180)
0
Financial Pressures 2011/12
(1)
• Children & Families - Social Care placements (£318k), Legal
Costs (£131k net) and delay in closing Crawford Avenue (£190k)
• Adult Social Care – Placement costs (£800k), Transitions (£280k
net), frontline agency staff (£600k) and Brent Transport (£400k)
offset by operational savings
• Environment & Neighbourhoods - Delay in achieving Library
savings (£250k) and metered parking offset other transport
savings
Financial Pressures 2011/12
(2)
• Regeneration & Major Repairs – Temporary accommodation
(minus £250k net)
• Corporate Services – Schools payroll losses (£250k),
Procurement and Design Services
• Central costs – Debt servicing costs (minus £384k) from lower
interest rates and slower drawdown on Civic Centre
Economic situation
• Europe expected to be in full recession; UK ‘on the edge’ with
risk of double dip - Strong risk of Euro break-up
• Government borrowing up now over £1,000,000,000,000
• OBR downgrade of growth forecasts for 2012/13 and 2013/14 –
impact on public finances?
• Public sector pay restraint/pensions overhaul
• Rising unemployment for another 18 months
• Inflation peaked at 5.2% now 4.2% and falling
• Interest rates remain at 0.5% until end of 2014 or beyond
• House prices falling/flat in most of UK
Settlement for Brent for 2012/13
• Further 7.4% reduction in grant - cumulative 19.3% cut over
2011/12 and 2012/13
• Business rates collected in England in 2012/13 (£23.1bn) exceed
Formula Grant payable (£22.9bn) for the first time – excess used to
fund Council Tax freeze grant
£m
Adjusted Formula Grant 2011/12
165.060
Floor Reduction (7.4%)
(12.215)
Base Formula Grant 2012/13
152.845
Add 2011/12 Council Tax Freeze Grant
Formula Grant 2012/13
2.575
155.420
Real terms Formula Grant Loss - 2011/12 to 2016/17
(Effective grant – Business Rate retention in force from April 2013)
240.0
Post CSR
220.0
Grant - £m
200.0
180.0
160.0
140.0
120.0
100.0
2011/12
(Pre CSR
cut)
2011/12 Grant + 2.5% pa
187.0
Implied Grant (Best Case)
187.0
Implied Grant (Worst Case) 187.0
2011/12
(Post CSR
cut)
191.7
165.4
165.4
2012/13
2013/14
2014/15
2015/16
2015/17
196.5
152.8
152.8
201.4
152.1
152.1
206.4
139.0
139.0
211.6
132.1
127.9
216.9
122.8
116.4
Council Tax
• Localism Act 2011 allows the government to determine levels of
council tax increase above which local authorities are required to
seek approval via a local referendum
• For 2012/13 this has been set at 3.5% for London authorities
• 2012/13 Council Tax Freeze grant equal to 2.5% increase in funding.
• Brent - £2.575m receivable in 2012/13 only – propose acceptance
• This funding is in addition to 4 year grant in 2011/12 – 2014/15
• This is NOT an excessive rise as defined in the Localism Act and thus
is not subject to a referendum
Real terms Council Tax Loss - 2011/12 to 2015/16
(Assumes a static Council Tax base)
118.0
Council Tax take - £m
116.0
114.0
112.0
110.0
108.0
106.0
104.0
102.0
100.0
2011/12 Council Tax + 2.5% pa
Council Tax with MTFP increases
Council Tax with no increases
2011/12
105.6
105.6
105.6
2012/13
108.2
108.2
108.2
2013/14
110.9
109.3
105.6
2014/15
113.7
112.0
105.6
2015/16
116.6
112.3
103.0
Brent Council Tax 2012/13
£’000
Proposed Brent budget
Less Formula Grant
Less Net Surplus on Collection Fund
Total to be met from Council Tax for Brent Budget
Taxbase (Band D equivalents)
Band D Council Tax (£)
260,392
(155,420)
(774)
104,198
98,398
£1,058.94
• 3rd year of Council Tax freeze
• GLA Requirement to be added on – expect £306.72 not £309.82 –
Decision on 9th February
Budget process
•
Proposals developed by the Executive, taking account of the
advice of officers.
•
The key processes for doing this are as follows:
•
•
•
•
•
Borough Plan and updated medium term financial outlook considered
by the Executive in July 2011;
Away-days involving both Executive and Corporate Management Team
members considered key service and budget issues likely to affect the
council in future years;
Development by officers, in consultation with relevant Lead Members,
of budget proposals for individual service areas;
A process of external consultation with residents and businesses;
Consideration of matters raised by Overview & Scrutiny
• Approval to the detailed budget proposals in the report and
publication
The basis of our budget
•
Sustainable medium term plan which allow Council objectives and
priorities to be met – not just a 1 year issues
•
Realistic spending totals year-on-year (no use of reserves)
•
Reserves maintained at agreed level
•
Maintain real value of Council Tax where possible
•
Investing for transformation
•
Commitment to efficiency
•
Control debt interest costs through judicious use of prudential
borrowing
Budget Requirement 2012/13
Requirement
Service area budgets
Non-ringfenced Grants
Central items
Inflation provision and cost pressures and savings held centrally
Contribution to balances
Proposed budget requirement for 2012/13
£’000
240,634
(27,213)
41,180
4,791
1,000
260,392
Change on 2011/12
Budget requirement 2011/12
add inflation provision
add cost pressures
less change in central budgets
less service area savings
less reduction in contribution to balances
Proposed budget requirement for 2012/13
£’000
267,889
2,025
7,158
(3,456)
(11,724)
(1,500)
260,392
Service Area Budgets 2012/13
2012/13
Revised
Base
Budget
£’000
Cost Pressures
£’000
2012/13
Draft
Budget
Savings
%
£’000
%
£’000
Adult Social Services
89,936
2,229
2.5
(2,613)
(2.9)
89,552
Children & Families
Environment &
Neighbourhood
Regeneration & Major
Projects
Central Units
Total Service Area
Budgets
52,928
1,690
3.2
(3,216)
(6.1)
51,402
36,691
641
1.7
(3,259)
(8.9)
34,073
33,864
1,194
3.5
(1,781)
(5.3)
33,277
31,781
1,404
4.4
(855)
(2.7)
32,330
245,200
7,158
2.9
(11,724)
(4.8)
240,634
Impact of the One Council Programme
2010/11 2011/12 2012/13 2013/14 2014/15
Actual Forecast Budget Budget Budget
£'000
£'000
£'000
£'000
£'000
Cross-cutting savings/cost
avoidance
10,099
29,419
34,671
42,034
48,534
1,590
12,279
22,688
29,352
33,148
TOTAL PROGRAMME SAVINGS
11,689
41,698
57,359
71,386
81,682
Total Programme costs
(4,290)
(2,639)
(4,017)
(6,017)
(6,017)
7,399
39,059
53,342
65,369
75,665
Service project savings/cost
avoidance
NET PROGRAMME SAVINGS
Risk Assessed reserves = £12m
4½% of net budget requirement
Risk Assessment for Reserves setting
Demand risks
New legislation and other statutory changes
Interest rate risks
Procurement risks
Pay risks
Grant risks
Savings/income risks
Asset management risks
Major disaster
Total General Fund revenue risks
Potential Average
Risk
Likelihood
£’000
%
6,500 20.0%
9,500 20.0%
5,000 20.0%
3,900 20.3%
600 20.0%
2,600 19.0%
40,584 15.0%
1,000 10.0%
500 30.0%
70,184
17.0%
Net risk
£’000
1,300
1,900
1,000
790
120
495
6,088
100
150
11,943
Schools
•
Schools budget overspent by £5.7m at the end of 2010/11 and
forecast £7.2m by end of 2011/12
•
Principle issue is SEN/Statemented spending – Schools Forum have
approved a plan to recover deficit by 2014/15 but relies on no further
overspending in-between
•
School balances are £12m – 6th highest in London based on last CIPFA
statistics
•
Flat-cash settlement for 2012/13 with £6,236 per pupil (compared
with England average of £5,082)
•
Pupil premium up from £488 to £600 per disadvantaged pupil
•
Forum have asked for 15% reduction in centrally funded items – we
do not propose to agree this.
HRA
• From April 2012, new HRA self financing system is being implemented,
under which HRA Subsidy will be abolished in return for a one-off
redistribution of debt. The HRA budget for 2012/13 has therefore been
compiled on the basis of this new framework
• No cross subsidy permitted with General Fund
• Average 7.14% Rent increase (RPI + ½% + ¼ of the way to target rent)
• 2011/12 – overspend of £0.4m but HRA still £0.7m surplus balances ; Rent
collection 99.6%
• Optimised ALMO – new management agreement needed from
September 2012 – focus on collaborative savings
• 30 Year Business Plan being prepared for member approval in Spring.
Capital Programme
Resources
Grant and External Contrib.
Capital Receipts
S106 Funding
Unsupported Borrowing
Self-funded borrowing
Total GF Resources
Housing HRA
Unsupported Borrowing
Self-funded borrowing
Total Resources
Amended
2011/12
position 2012/13
(third
£’000
quarter)
£’000
(66,750)
(61,426)
(15,507)
(23,775)
(13,595)
(14,156)
(12,545)
(2,280)
(33,409)
(80,453)
(141,806) (182,090)
(8,704)
(13,846)
(5,953)
0
(11)
0
(156,474) (195,936)
2013/14
£’000
2014/15
£’000
2015/16
£’000
(47,103)
(7,315)
(15,781)
(6,730)
(1,718)
(78,647)
(9,284)
0
0
(87,931)
(33,208)
(8,815)
(8,523)
(6,972)
(200)
(57,718)
(9,284)
0
0
(67,002)
(17,361)
(22,320)
(7,940)
(6,972)
(200)
(54,793)
(9,284)
0
0
(64,077)
Capital Programme
• Capital is not free money – it has long term consequences,
particularly when budgets are falling
2012/13
£m
Budget Requirement (£m)
2013/14
£m
2014/15
£m
2015/16
£m
260.4
258.8
254.6
259.5
Capital Financing Charges (£m)
25.6
26.6
28.1
29.7
Capital Financing as a % of budget
9.82%
10.28%
11.04%
11.43%
2012/13
£’000
Cumulative unsupported borrowing costs
Impact on Band D Council Tax – using 2012/13
council tax base of 98,398 of unsupported borrowing
2013/14
£’000
2014/15
£’000
2015/16
£’000
68
426
1,007
1,599
£0.69
£4.33
£10.23
£16.25
Medium Term outlook
• Continued (increased?) pressure on public sector budgets – local
government likely to bear the biggest strain
• Indications of grant equivalent cuts of 5-8% in 2015/16 and a further 7-9%
in 2016/17
• April 2013 – large number of changes implemented
• Abolition of Formula Grant – introduction of Business Rate retention
• Localisation of Council Tax Benefits with only 90% of current funding
• Housing Benefit reforms bite / HB fraud transfers to DWP
• Community Infrastructure Levy
• Audit Commission replacement
• Recruitment/Retention issues – 4 year pay freeze, increased pension
costs, undervaluing of public sector workers, chaotic change
Medium Term Financial position
Budget Gap
2013/14
£m
Net savings required:
Annual
Cumulative
9.3
9.3
2014/15
£m
2015/16
£m
11.6
20.9
5.3
26.2
• Savings based on Council Tax increases of 3.5%; 2.5%; 2,5% respectively –
significantly higher if lower or nil rises
• Allowance for pay inflation of 1% in 2013/14 and 2014/15 and 2% in 2015/16; No
general allowance for non-pay inflation
• Levies: Forecast to grow from £2.579m in 2012/13 to £2.803m in 2013/14,
£3.043m in 2014/15 and £3.293m in 2015/16
• Freedom Pass/concessionary fares: £14.771m in 2012/13. Additional £1.360m
(2013/14), £887k (2014/15) and £936k (2015/16) in forecast.
• New Homes Bonus – growth of £1.4m per annum
Summary
•
Savings target over the spending review period (2011/12 to
2015/16) remains around £100m
•
£41.7m savings largely on target for 2011/12
•
Considerable risks – cost pressures could be higher and savings
make take longer to achieve than we think
•
2013 onwards – many changes in the funding regime, many as
yet unspecified
•
Savings on this scale are painful and energy & morale sapping
•
Civic Centre and regeneration remain the key focal points
•
Preserving our reserves is critical in a time of heightened risk