Transcript Text Only - Blue slide with white frame

Estimates 2014/15 and
Medium Term Financial
Strategy
Presented by
Director of Finance and Technical Services
Ian Young
Background
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Reductions in Government Funding
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Practical Limits on Council Tax Increases
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Focus on Use of Reserves
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Ministerial View and Knight Review of Fire Service
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Budget – Long Term Application of Reserves not sustainable
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Peer Group Report – Strong Financial Position up to 2016
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Invest to Save – Best Value Duty of Continuous Improvement
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Value for Money
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View Needed on Short, Medium and Long Term
Current Position (Internal)
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Budget Holders 17th November Net expenditure £31.034m
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Increase of £307,000 or 1%
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Equates to a Council Tax Increase of 7.5% or £4.65 p.a. avge
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Proposed Application of £2m Reserves to finance peak in 2013/14
Capital Reduces Council tax Increase to 6.65% or £4.12
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Savings below Target (£577,000 v £950,000)
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Eroded by Increases in expenditure £384,000 and Reductions in
Income of £157,000
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Means Savings Programme still to deliver £1.3m Net by 15/16
Current Position (External)
• Effects will be driven by internal decisions in light of the External
Position
• Indicative for 2014/15 and 2015/16
• No changes yet to 7.3% and 8.1% Reductions in Funding
following June Spending Round
• Council Tax Freeze for both Years
• Referendum Trigger 2% for both Years
• Possible repeat of flexibility for Lower Quartile CT District and Fire
Authorities (£5) for 2014/15
Medium Term
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2016/17 to 2018/2019
2015 Election unlikely to change much
Forecasts for Pay and Cost Pressures
Cost Neutral 2015 Pensions Changes
Continued Grant Reductions
Increases in Business Rate Yield
Historically Reasonable Council Tax Increases
(average 4% )
• Variable Capping/Referendum Triggers
• No Ministerial Surprises
• More Savings may be required
Longer Term
• 2018/2019 To 2023/2024
• New System of Local Government Financing 2013
• Links RPI to about 18% of Income via Business
Rates with Potential for Growth
• Should Provide some protection from Grant
Reductions given Price Indices tend to drive Cost
Pressures
• Dependent upon District and City Positions
• Business Rate Freeze/Revaluation
• More Savings may be required
Basis of Key Post 2016 Assumptions
• Net Expenditure tied to Target CPI of 2%
• Continuing Real Reductions in External Funding of 5% p.a until
2020, 2% thereafter
• 4% p.a Council Tax increases
• Level of Reserves available to support Invest to Save
• £2m applied to support 2013/14 Capital Programme and 3 Year
Moratorium on Major New Build
• Minimum of £1.3m savings delivered by 2016/17 at the latest
Level of Reserves
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Estimated £5.7m @ 31.3.14
Pay/Price
£3,442,000
Pensions
£1,188,000
Contingency
£600,000
General
£324,000
New Developments
£103,000
Earmarked Grants
£47,000
Capital
£0
Possible Calls On Reserves
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Illegal for Preceptors to Budget for a Deficit
No Supplementary Precepts (Unlike Supplementary Levies)
Failure of Budget Assumptions
Incidence of Savings
Ready Reckoner of 1% Paybill =£180,000, 1% Council Tax
=£200,000
Pay/ Price covers 17% variation from assumptions
1%,1%,2%,2%,2% = 8.3% to 2018/19 (Planned)
But e.g 2%, 2%, 4%,4%,4% = +8% or £1.6m
Thereafter? HM Treasury Average Earnings 4.75% for 2018
Possible Calls On Reserves
• Pensions Reserve – amended NFPS and RDS - Employers’
increase of 1% =£300,000 per year (4 years)
• Possible financing of further Support Service reductions (LGPS)
• Resourcing for Fire Cover Review/Partnership Working
• New system of Local Government financing yet to bed down
• Insurance Fund
• One Off Referendum Costs?
General Application
• The application of Reserves to support Base Budget
Expenditure simply to deliver a particular level of Precepts or
defer necessary Base Budget reductions is not a sustainable
policy in the medium to longer term
• Invest to Save (Capital/Support for Introduction of Efficiencies)
• Balance level of Reserves held, External Financing and Savings
• 6% or 12%, 10% or 58% - Risk and Timeframe
• Two, Five or Ten Year View?
10 Year Scenarios
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Based on current “Real” position including £2m Support to Capital
programme and 3 Year Moratorium
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Reduces Reserves to minimum of c.10% of Net Expenditure (£3.0m)
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Assumes £1.3m achieved by 2015/16 or 2016/17 at the latest
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Council Tax Freeze for 2014/15, 2015/16 and 4% thereafter with
Additional Savings of £750,000
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Referendum limit of 2% for 2014/15, 2015/16 and 4%
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2014/15 Increase of 5.5%, 2% 2015/16
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Maximum Flexibility of £5 increase for 2014/15
Some Conclusions
• Council Tax Freeze 2014/15, 2015/16 and 4% thereafter :
• Requires £1.3m Original Target Savings no later than end of
2015/16
• Requires further savings of £750,000 by the end of 2015/16
• Reduces Reserves to £3m by 2016/17 with £790,000
contribution in 2014/15, £1.94m in 2015/16
• Will Require further savings of £700,000 over the two years
2018/19 and 2019/20
Some Conclusions
• 2% 2014/15, 2015/16 and 4% 2016/17:
• Requires £1.3m Savings no later than end of 2015/16
• In the absence of further savings reduces Reserves to £3m by
2017/18 with an £600,000 contribution for 2014/15, £1.5m in
2015/16, £350,000 in each of the following two years
• Requires £500,000 savings in 2018/19 and £400,000 in 2019/20
Some Conclusions
• At 5.5% 2014/15, 2% 2015/16 and 4% thereafter
• Requires £1.3m Savings no later than end of 2015/16
• Requires contribution from Reserves of £900,000 in 2015/16 but
balance restored over the three subsequent years
Some Conclusions
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A £5 (8.05%) increase in Council Tax in 2014/15 would contribute
£430,000 to Reserves
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Provided £1.3m savings made by end of 2015/16, minimum use of
Reserves over the next four years
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However, use of £640,000 could freeze Council tax for 2015/16 and
2016/17
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no requirement for additional savings unless to reduce Council Tax
from the assumed 4% per year from 2018/19 or to Reduce the
application of Reserves from 2018/19
Some Conclusions
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Need consensus on Planning Timeframe – Short, Medium, Long
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Need consensus on the balance between expenditure plans,
deliverability of savings, more efficiencies and Council Tax
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Freeze can be only a short term consideration
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Target savings a short term requirement
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Further Savings a medium to long term consideration
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Maximum increase provides long term assurance
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Tables available - Updated as Budget moves towards February 2014