APPENDIX B
Financial Plan Update 2011/12 - 2014/15, Strategic Context and
Organisational Workstreams
1.
Current Position
1.1.
The Council, under a new administration, is preparing a Corporate
Plan to cover the period 2011/12 to 2014/15. The public sector is
faced with unprecedented budget cuts and local government
particularly is faced with significant reductions in future budgets
following the coalition government’s Emergency Budget on 22 June
and subsequent announcement in December 2010 of the 2 year
settlement from Central Government. This alone reduced North
Norfolk District Council’s total budget for the 2 year period by
£1.9million.
1.2.
The Council’s finances were already under pressure due to several
years of real term cuts in government funding combined with the
effects of the recession impacting upon income streams and
investment returns. During 2009 a range of options were identified to
deliver savings for the 2010/11 and 2011/12 budgets which delivered
savings in excess of £1million, however there remains an ongoing
forecast deficit of £1million from 2012/13. The scope to identify
further year-on-year efficiencies is therefore much more limited and
the identification of further savings will be challenging.
1.3.
This paper provides an update on the Council’s overall financial
position and outlines those workstreams currently being progressed
to identify future year savings. These workstreams take account of
the need to maintain effective service delivery and customer focus
whilst establishing more clearly the Council’s enabling role in helping
and supporting the local economy and well-being of communities.
Improving people’s quality of life by focusing on our agreed priorities
requires a well managed business plan to help the organisation
through a period of transition which will require cultural shift as well
as structural change.
2.
National Context
2.1.
At the national level there are 6 key areas that the District Council
needs to be alive to in considering its future options. These are;
¾
¾
¾
¾
¾
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The Recession / Economic Outlook
Comprehensive Spending Review 2012
Big Society / Localism Bill – Open Public Services White Paper
Local Government Resource Review
Welfare Reform Bill
National Performance Frameworks
Strategic Overview : Context Paper August 2011
2.2.
The Recession / Economic Outlook
2.2.1. Interest earned from the investment of the Council’s reserves,
balances and surplus funds makes an important contribution to
financing the overall budget.
2.2.2. Since the banking crisis of 2008 and the recession which followed,
interest rates have fallen significantly, and this has had a dramatic
impact on our investment return. In 2007/08 the Council earned
£1.38m in interest from investments at an average interest rate of
5.65%. By 2010/11 the amount had fallen by more than £800,000 to
just over £0.5m at average rate of just over 2%.
2.2.3. The balance available to invest over this period has averaged
£24.5m. The expenditure anticipated in the capital programme will
reduce this sum to below £15m by 2014/15, and this will further
reduce the return on investments.
Our financial projections
anticipated that interest rates will rise over this period, off-setting the
effect of the falling balance available, resulting in an estimated £0.5m
of interest earned each year.
2.2.4. Interest rates however look set to remain lower for longer and the
economic situation is very uncertain. The base rate is forecast to
remain at its current level of 0.5% until the middle of next year,
thereafter rising at 0.25% per quarter and reaching 3% by autumn
2014.
Economists are revising downwards their forecasts of
economic growth, suggesting that the UK economy will grow by only
1.3% in 2011, adding to the difficulty of reducing the UK’s budget
deficit.
2.2.5. Inflation as measured by the Consumer Price Index (CPI) dropped
unexpectedly to 4.2% in June but is still more than double the target
figure of 2%. It is anticipated by the Bank of England’s Monetary
Policy Committee to rise to 5% in the coming months as energy
prices rise in the autumn. The Committee are not prepared at the
moment to increase rates to curb inflation for fear of damaging the
fragile recovery in the economy.
2.2.6. Exports are a key factor in supporting the UK’s weak recovery. The
weakness in Eurozone economies is likely to hamper export led
growth as 40% of the UK’s exports are to Europe. If UK interest rates
were to rise, this would increase the value of the pound and remove
the competitive advantage currently enjoyed by exporting businesses.
2.2.7. Consumer confidence and spending is weakening and retail sales
volumes are falling. Unemployment is just under 2.5million and is set
to increase as the public sector shrinks and private sector only grows
at a modest pace. Consumers feel threatened by high
unemployment, are concerned by the falling value of their homes,
and pay freezes and inflation contribute to falling real incomes.
Strategic Overview : Context Paper August 2011
2.2.8. These problems are exacerbated by the challenges facing countries
in the Euro Zone. The possibility of default by one country and the
issue of contagion as well as the burden on other more prosperous
member states further threatens the tough economic situation in the
UK.
2.3.
Comprehensive Spending Reviews (CSR) 2010 and 2012
2.3.1. The Chancellor, George Osborne, presented the Government’s
Spending Review on 20 October 2010, which fixes spending budgets
for each Government department up to 2014-15.
2.3.2. Following the CSR 2010 announcement the provisional finance
settlement was announced on 13 December outlining provisional
grant allocations for 2011/12 and 2012/13. The final announcement
was subsequently made on 31 January 2011 which gave the final
settlement figures for 2011/12 and provisional figures for 2012/13.
The latter was subsequently updated on 7 February. The headline
cash reduction in government grant for the Council in 2011/12 is
£1,167,504 and represents a reduction of 14.2% in the year, with a
further 11.8% (£833,835) reduction in 2012/13 based on the
provisional figures issued on 7 February 2011.
2.3.3. 2011/12 is the first year of the four year comprehensive spending
review and therefore projections have been made covering the three
subsequent years, although we have some certainty over 2012/13
due to the two year settlement.
2.3.4. A further two year grant settlement is due in the autumn of 2012
which will announce the individual grant settlements for Councils for
2013/14 and 2014/15. Any forecast beyond 2012/13 is therefore very
difficult due to the ongoing uncertainty of grant settlements and the
Local Government Resource Review (Section 2.4), with the Spending
Review being the basis upon which we are forecasting projections as
this indicates the national spending limits.
2.4.
Big Society / Localism Bill
2.4.1. The Localism Bill was published in December 2010. It sets out a
series of proposals with the potential to achieve a substantial and
lasting shift in power away from central government and towards local
people. The main measures of the Localism Bill provide for:
ƒ new freedoms and flexibilities for local government
ƒ new rights and powers for communities and individuals
ƒ reform to make the planning system more democratic and
more effective
ƒ reform to ensure that decisions about housing are taken locally
Whilst it is not possible to ascertain the precise impact that some of
these proposals will have on the authority, there will undoubtedly be
Strategic Overview : Context Paper August 2011
resource implications for some service areas and possibly savings in
others. The following sections summarise the main proposals.
General power of competence
2.4.2. Local authorities’ powers and responsibilities are defined by
legislation. In simple terms, they can only do what the law says they
can. The Localism Bill includes a ‘general power of competence’. It
will give local authorities the legal capacity to do anything that an
individual can do that is not specifically prohibited; they will not, for
example, be able to impose new taxes, as an individual has no power
to tax.
2.4.3. The general power of competence does not remove any duties from
local authorities - just like individuals they will continue to need to
comply with duties placed on them. The Bill does, however, give the
Secretary of State the power to remove unnecessary restrictions and
limitations where there is a good case to do so, subject to safeguards
designed to protect vital services.
Abolition of the Standards Board
2.4.4. Currently, all local authorities must, by law, have a code of conduct
and a standards committee to oversee the behaviour of their
councillors and receive complaints. A central body, the Standards
Board for England, regulates each of these committees. In the
Localism Bill, the Government will abolish the Standards Board
regime. Instead, it will become a criminal offence for councillors to
deliberately withhold or misrepresent a personal interest. This means
that councils will not be obliged to spend time and money
investigating trivial complaints, while councillors involved in corruption
and misconduct will face appropriately serious sanctions.
Clarifying the rules on predetermination
2.4.5. In parallel with the abolition of the Standards Board, the Government
intends to use the Localism Bill to clarify the rules on
‘predetermination’ in planning decisions. The Localism Bill will make it
clear that it is proper for councillors to play an active part in local
discussions, and that they should not be liable to legal challenge as a
result.
Community right to challenge
2.4.6. The Localism Bill will give voluntary and community groups, parish
councils and local authority employees the right to express an interest
in taking over the running of a local authority service. The local
authority must consider and respond to this challenge; and where it
accepts it, run a procurement exercise for the service in which the
challenging organisation can bid. This will make it easier for local
groups with good ideas to put them forward and drive improvement in
local services through social enterprise.
Strategic Overview : Context Paper August 2011
2.4.7.
2.4.8.
2.4.9.
Community right to buy (assets of community value)
Proposals in the Localism Bill will require local authorities to maintain
a list of assets of community value. Communities will have the
opportunity to nominate for possible inclusion the assets that are
most important to them. When listed assets come up for sale or
change of ownership, community groups will have time to develop a
bid and raise the money to buy the asset when it comes on the open
market.
Local referendums
The Localism Bill will give local people the power to initiate local
referendums on local issues that are important to them. Local
authorities and other public bodies will be required to take the
outcome of referendums into account and consider what steps, if any,
they will take to give effect to the result.
Right to approve or veto excessive council tax rises
Currently, central government has the power to ‘cap’ council tax rises.
The Localism Bill will give local communities the power to decide. The
Secretary of State will determine a limit for council tax increases
which has to be approved by the House of Commons. If an authority
proposes to raise taxes above this limit they will have to hold a
referendum to get approval for this from local voters who will be
asked to approve or to veto the rise. This means that local authorities
will need to convince local voters, rather than central government of
the case for excessive rises in council taxes.
Abolition of regional strategies
2.4.10. ‘Regional strategies’ were first required by law in 2004. The Secretary
of State has already written to local authorities to tell them that the
Government intends to abolish regional strategies. The Localism Bill
will fulfil this intention, and get rid of the law that requires regional
strategies.
Neighbourhood planning
2.4.11. The Bill will introduce a new right for communities to draw up a
‘neighbourhood development plan’. Neighbourhood planning will
allow communities to come together through a local parish council or
neighbourhood forum and say where they think new houses,
businesses and shops should go – and what they should look like.
2.4.12. These neighbourhood development plans could be very simple, or go
into considerable detail where people want. Local communities would
also be able to grant full or outline planning permission in areas
where they most want to see new homes and businesses. Provided a
neighbourhood development plan is in line with national planning
policy, with the strategic vision for the wider area set by the local
authority, and with other legal requirements, local people will be able
to vote on it in a referendum. If the plan is approved by a majority,
then the local authority will bring it into force.
Strategic Overview : Context Paper August 2011
2.4.13. Local planning authorities will be required to provide technical advice
and support as neighbourhoods draw up their plans. The Government
will also fund sources of help and advice for communities. This will
help people take advantage of the opportunity to exercise influence
over decisions that make a big difference to their lives.
Community right to build
2.4.14. As part of neighbourhood planning, the Bill gives groups of local
people the power to deliver the development that their local
community want. They may wish to build new homes, businesses,
shops, playgrounds or meeting halls. A community organisation,
formed by members of the local community, will be able to bring
forward development proposals which, providing they meet minimum
criteria and can demonstrate local support through a referendum, will
be able to go ahead without requiring a separate traditional planning
application.
Requirement to consult communities before submitting very
large planning applications
2.4.15. To further strengthen the role of local communities in planning, the
Bill will introduce a new requirement for developers to consult local
communities before submitting planning applications for very large
developments. This will give local people a chance to comment when
there is still genuine scope to make changes to proposals.
Strengthening enforcement rules
2.4.16. For people to have a real sense that the planning system is working
for them, they need to know that the rules they draw up will be
respected. The Localism Bill will strengthen planning authorities’
powers to tackle abuses of the planning system, such as making
deliberately misleading planning applications.
Reforming the community infrastructure levy and other local
finance considerations
2.4.17. Local authorities are allowed to ask developers to pay a levy when
they build new houses, businesses or shops. The money raised must
go to support new infrastructure - such as roads and schools. This is
called the community infrastructure levy. The Localism Bill proposes
changes to the levy to make it more flexible. It will allow the money
raised to be spent on maintaining infrastructure, as well as building
new infrastructure. It will give local authorities greater freedom in
setting the rate that developers should pay in different areas. And
crucially, the Bill will give the Government the power to require that
some of the money raised from the levy go directly to the
neighbourhoods where development takes place.
Social housing allocations reform
2.4.18. At the moment almost anyone can apply to live in social housing,
whether they need it or not. As social housing is in great demand and
priority is rightly given to those most in need, many applicants have
Strategic Overview : Context Paper August 2011
no realistic prospect of ever receiving a social home. The current
arrangements encourage false expectations and large waiting lists.
2.4.19. The Bill will give local authorities greater freedom to set their own
policies about who should qualify to go on the waiting list for social
housing in their area. This means that they will be able, if they wish,
to prevent people who have no need of social housing from joining
the waiting list. Authorities will continue to be obliged to ensure that
social homes go to the most vulnerable in society and those who
need it most.
Reform of homelessness legislation
2.4.20. Councils have a duty to house people who are eligible, in priority
need and unintentionally homeless; and this duty will remain in place.
However, under the current rules, people who become homeless are
able to refuse offers of accommodation in the private rented sector,
and insist that they should be housed in expensive temporary
accommodation until a long-term social home becomes available.
2.4.21. The Localism Bill will let local authorities meet their homelessness
duty by providing good quality private rented homes. This option
could provide an appropriate solution for people experiencing a
homelessness crisis, at the same time as freeing up social homes for
people in real need on the waiting list.
2.5.
Local Government Resource Review
2.5.1.
The Local Growth white paper published in October 2010 stated that
business rates retention would be considered as part of a Local
Government Resource Review. The Terms of Reference of the Local
Government (LG) Resource Review were set out in a Written
Statement on 17 March 2011.
2.5.2.
The LG Resource Review is being conducted in two phases with the
first phase focused on the re-localisation of business rates and the
second phase, due to be completed by April 2013, will cover the
community budgets scheme.
2.5.3.
The DCLG published a consultation paper, Local Government
resource review: proposals for business rates retention on 18 July
2011 which sets out the Government’s proposed core components for
a business rates retention system. In addition, the consultation sets
out proposals for Tax Increment Financing which will operate within
the business rates retention system as a way of funding infrastructure
investment to unlock economic growth.
2.5.4.
This consultation also outlines how the proposals interact with wider
Government initiatives to promote growth, including the existing New
Homes Bonus, and considers how they will work alongside the
existing architecture of the business rates system for example rate
Strategic Overview : Context Paper August 2011
reliefs and the national business rate multiplier. Eight technical
papers are due to be published in August 2011.
2.5.5.
Business rates are currently collected by local authorities from
businesses in their areas like shops, offices, warehouses and
factories, but they are paid into a national central pool to be
redistributed as part of formula grant. This system means that local
authorities do not have any financial incentive to promote business
growth in their area, as they will not receive any of the business rates
receipts from new development.
2.5.6.
The Government wants to change the current system by enabling
councils to keep a share of the growth in business rates in their area.
The intention is to make councils more financially independent from
central government and give them a strong incentive to promote local
business growth.
2.5.7.
There are no proposals to make any changes to the way businesses
pay tax or the way the tax is set. Rate setting powers will remain
under the control of central government.
2.5.8.
However, if the government allowed all councils to keep all of the
business rates generated in their areas, some areas would have a
much larger amount than they need to deliver their services whilst
some others would have much less than they need. So, to ensure a
fair starting position for the new system, an amount of business rates
will be taken away from those with too large an amount in comparison
to their current spending (this is referred to as the “tariff” in the
consultation document) and top up those authorities with too little,
again in comparison to their current spending (this is referred to as
the “top up” in the consultation document).
2.5.9.
In future years the amount of business rates that central government
gives or takes from each local authority will remain fixed. This means
that any growth in business rates an authority achieves will be kept
by them. This creates a strong incentive effect to promote growth,
however will benefit those areas that have more opportunity to
promote large-scale development as opposed to rural areas.
2.5.10. There would be no fixed limit on the amount of business rates growth
an authority can benefit from under the new system. The more any
authority grows its business rates base, the better off it will become.
However, some local authorities with large amounts of business
property may stand to gain disproportionate amounts. Where this
happens, the government is proposing to take back a share of their
growth (this is referred to as the “levy” in the consultation document).
2.5.11. The proceeds of this will be used to give financial help to those
authorities who experience significant drops in business rates, for
example caused by the closure or relocation of a major business.
Strategic Overview : Context Paper August 2011
Depending on the amounts raised, the proceeds could also be
redistributed to authorities with lower growth, or fund schemes, for
example, for regeneration, in areas with high growth potential.
2.6.
Welfare Reform Bill
2.6.1.
The government published its White Paper on Welfare Reform on
11th November 2010. The paper sets out its proposals for a
fundamental reform of the current benefits system. The objective of
the new Universal Credit is to create a streamlined approach to
supporting working age households both in and out of work and to
ensure that work pays by increasing the financial incentives to work
and increasing the transparency of these rewards. The Universal
Credit will replace Working Tax Credit, Child Tax Credit, Housing
Benefit, Income Support, income based Jobseekers Allowance and
Income related Employment & Support Allowance.
2.6.2.
The main impact of these proposals for NNDC are as follows;
1. Local authorities will no longer administer Housing Benefit as they
do now.
2. There would be a long transition. Universal Credit will not be fully
operational for existing customers until about 2017 although the
intention is that new cases will start to be paid under the new
system from October 2013.
3. No decision has been made as to whether there will be any
residual parts of housing support administration that will stay with
local authorities. There may be a role for local authorities to help
administer Universal Credit (face to face), though the intention is
that most claims will be taken on line or through contact centres.
4. Local Authorities should have a greater role in delivering support
for those who need help with their council tax bills. Council Tax
Benefit is to be replaced by a local scheme.
Council Tax Benefits
2.6.3
It is the Governments intention to localise council tax benefits from
April 2013 and at the same time reduce spending on them by 10%. It
is unclear where the funding for council tax benefits will come from as
it is likely to be embraced within the current resource review. The
impact on an individual authority could vary considerably from the
average 10%. A consultation paper entitled Localising support for
council tax in England was issued on 2 August with a closing date of
14 October.
2.6.4
Given council tax benefit is a demand-led item of expenditure; any
growth in the cost of CTB is included within the government’s
annually managed expenditure (AME) figures under the current
financial system. Expenditure is often reported under AME as the
Government believes it cannot be reasonably subject to close control
over a spending review period. Any growth beyond spending
Strategic Overview : Context Paper August 2011
assumptions is captured in the Government’s overall borrowing
requirement.
2.6.5
The reform will be accompanied by a new Government grant to local
authorities. The government will consider whether maintaining the
new grant allocations unchanged for several years will help to provide
certainty for local authorities. The ability of a local authority to
manage a demand based benefit from a fixed (and smaller) cash
funding pot will be a significant challenge going forward.
Housing and Council Tax Administration Grant
2.6.6
DWP has to reduce its running costs expenditure by 26% over the
four years of the spending review. It has been made clear that this
reduction will have to be reflected in the administration grant.
2.6.7
In England, the administration grant for 2011/12 is totalling £462m
compared with £485m in 2010/11 a cash reduction of £23m (4.7%).
North Norfolk’s share of the reduction is slightly less than the average
from £0.805m to £0.769 (£0.036m or 4.3%). Total core funding for the
administration grant for 2012/13 was announced at £465m by the
DWP in circular HB/CTB S3 2011 (February 2011) but with no
information regarding its distribution.
2.6.8
With the move to Universal Credits, it can be assumed that it is
unlikely this grant will continue in its current form. However, no
information has yet been published which details how local authorities
will receive funding for their administration costs from 2013/14
onwards.
2.7.
National Performance Frameworks
2.7.1.
The abolition of a national performance framework which included
Local Area Assessment Targets and Comprehensive Area
Assessments has been universally welcomed. The absence of a
national framework allows Councils to decide what performance
regime they will use and whether they will continue to collect and
publish performance data. There may be a replacement national
framework proposed but as yet no details have emerged.
3.
The Council’s Financial Position
3.1.
The budget report to Full Council in February 2011 identified a future
budget deficit of £849,000 in 2012/13 increasing by a further £36,000
in 2013/14. Overall this equates to nearly £900,000 of savings that
was forecast to be required over the next 2 years for the Council to
meet its statutory requirement of producing a balanced budget
position whilst maintaining a reasonable level of reserves to ensure
sound financial management. The Council in February also received
a report on the adequacy of the Council’s reserves and
Strategic Overview : Context Paper August 2011
recommended a minimum level of general reserves of £950,000. The
projected balance on the general reserve at March 2015 is now
£1,313,000. A detailed listing of the Council’s cash backed reserves
is given in the addendum to this paper.
3.2.
There remains a projected balance on the capital projects reserve of
£1.4million as at April 2015, however the use of this reserve needs to
be considered alongside any future housing strategy. All other
earmarked reserves are due to be used within the next 2 years
except for the restructuring reserve which has a forecast balance of
£477,000 and the LSVT reserve. The LSVT reserve is held to cover
warranties provided through the housing stock transfer and it is
recommended that this continues to be held for this purpose. The
restructuring reserve is available to finance future one-off costs
associated with restructuring or invest to save projects.
3.3.
The estimates as at February 2011 that underpin the current budget
and future projections included the following assumptions:
ƒ
Council Tax – The budget assumed a council tax freeze in
2011/12, thereafter increases of 2.5% were assumed. This has
been adjusted for in Table 1 with an assumption that there will
be no increases in future years. This means that the district
element of the council tax remains at £138.87 for 2011/12
through to 2014/15.
ƒ
Employee budgets – The revenue budget does not make any
allowance for an inflationary pay award for 2011/12 and
2012/13, for each of the following two years a 1% increase has
been assumed, however this is subject to national negotiation.
For individuals earning £21,000 or less an annual increase of
£250 has been assumed for each of the next two financial
years. There is also an allowance for turnover savings of 2%
as in previous years. Where annual increments are due these
have continued to be factored in. The employer pension
contribution rates for the next three financial years are
determined by the results of the pension fund tri-annual
revaluation as at 31 March 2010. In previous years the
contribution rate has increased annually, however from
2011/12 there is a proposal to stabilize the contribution rate at
14.5% of the payroll plus fixed monetary amounts for the next
three years. The budgets do assume savings arising from the
proposed pay and grading model and changes to car
allowances.
ƒ
Fees and Charges – Full Council in December 2010 approved
the fees and charges for 2011/12. The impact of the fee
increases have been factored into the budget. No assumptions
have been made on future fee increases although we are still
awaiting further government legislation on changes to the
planning fee charging regime.
Strategic Overview : Context Paper August 2011
3.4.
ƒ
Contract inflation – The most significant of the Council’s
contracts is the Waste contract for which Members will be
aware of the result of the procurement process that was
undertaken during 2010/11. The new contractor prices have
been included in the 2011/12 budget for all waste, cleansing
and grounds maintenance services as included in the contract
tendered. Thereafter between 2.0 and 2.5% has been
assumed for inflation per annum.
ƒ
Investment income – The investment income earned from the
Council’s investments is anticipated to remain at similar levels
to that being achieved in the current financial year. A total of
£550,000 is anticipated for 2011/12. The primary concern is
the security of the sums invested and this remains the main
consideration when selecting counterparties. The average
investment rate anticipated in the forward year is 2.42%
compared with 2.19% for the revised estimates for 2010/11. In
future years average interest returns are assumed to rise from
3.0% in 2012/13 to 3.4% in 2014/15.
The following table shows how the estimate for the current year
and future years will have changed as a consequence of the
current economic climate and to reflect any revised assumptions
following the closedown of the 2010/11 accounts.
Table 1: Updated forecast 2012/13 to 2014/15
£
2011/12
Original Forecast
(Surplus) / Deficit
Revised
Assumptions:
Income:
Amended
assumptions on
Council Tax income
Investment Income
Planning Income
Waste and recycling
income
Cumulative Revised
Forecast (Surplus) /
Deficit
0
£
2012/13
849,000
£
2013/14
885,000
£
2014/15
1,600,000
139,000
293,184
451,406
0
0
0
As yet
unknown
(80,000)
(80,000)
(80,000)
908,000
1,098,184
1,971,406
Strategic Overview : Context Paper August 2011
3.5.
Savings across Service Area - 2011/12 Budgeted
The following savings and income assumptions are built into the
current year budget which are being monitored to ensure they are
achieved.
Service Area
2011/12
£
Planning and Building Control
35,707
Conservation and Design
10,000
Land Charges
8,587
Tourism
0
Regeneration Management
4,000
Housing Service
21,337
Waste & Cleansing
0
Environmental Health
8,400
Sports Centre
10,115
Media and Communications
47,240
Legal Services
55,000
Customer Services
10,544
Car Parking Management
40,000
Revenues and Benefits
77,254
Organisational Development
56,284
Financial Services and Internal Audit
68,800
Partnership and Community Engagement 105,000
Sub Total Savings
558,268
Planning Fee Increase
50,000
New Homes Bonus
350,000
Homelessness Prevention Grant
120,470
Leisure Facilities Income
37,718
Car Parking
20,000
Sub Total Additional Income/Grant
578,188
Total Savings/ Income
1,136,456
3.6.
Assuming all savings in the current year are achieved, the challenge
for 2012/13 is therefore revised to £908,000 rising to over £1million in
the following year. There is currently a surplus in the general reserve
available for spend of £363,000. However further work is required in 2
significant areas:
¾ Understanding the implications of the 10% reduction in council
tax benefit following the announcement to localise council tax
benefits. The current budget is £8,028,529. A consultation
paper has recently been published as discussed earlier.
¾ Understanding the impact of Universal Credits and the housing
benefit administration grant currently £768,869.
Strategic Overview : Context Paper August 2011
3.7.
Future success will be dependant upon our ability to create capacity
within the organisation, plan effectively for change to minimise
disruption to our customers and work effectively in partnership to
deliver better outcomes for our communities. However this must be
achieved within a strong and effective governance framework which
includes a sustainable financial position allowing us to take
advantage of new funding opportunities.
4.
New Funding Opportunities
4.1.
New Homes Bonus
4.1.1.
The New Homes Bonus is a new scheme designed to incentivise and
reward for councils and communities who wish to build new homes in
their area. The government has set aside nearly £1 billion over the
Comprehensive Spending Review period for the scheme, including
nearly £200 million in 2011-12 in year 1 and £250 million for each of
the following three years. Funding beyond those levels will come
from reductions in formula grant. The Government believes this will
be a simple, powerful, transparent and permanent feature of the local
government finance system.
4.1.2.
The 2011/12 budget includes the £350,000 new homes bonus as
income. There is potentially a further £300,000 additional for
2012/13 which has not been factored into the financial forecast.
Future years bonus (ie beyond 2012/13) is likely to be offset by a
reduction in revenue support grant and therefore it would not be
appropriate to make further assumptions at this stage.
4.1.3.
In previous years the Housing and Planning Delivery Grant (HPDG)
was introduced to improve housing delivery but the government feels
this to have been ineffective and complicated which local authorities
couldn't rely on it as a sufficient and stable incentive.
4.1.4.
The new scheme seeks to rewarding councils for new homes – hence
the use of the word “bonus”. The key features of the bonus are;
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To match fund the additional council tax for each new home
and property brought back into use, for each of the 6 years
after that home is built with an additional amount for affordable
homes. The proposed addition is £350 for each of the six
years for each affordable home built.
The match funding will be split between upper (county) and
lower tier authorities (districts) based on a 20/80 split.
The value of the bonus should increase for at least six years.
It will be paid as an unringfenced grant.
Strategic Overview : Context Paper August 2011
4.2.
Community Infrastructure Levy (CIL)
4.2.1.
The CIL is a tariff which is applied on most new development at the
point when planning permission is granted. The Government’s view is
that this tariff would be fairer, faster and a more certain and
transparent system than the current system which relies solely upon
s106 agreements. The intention is that levy rates would be set in
consultation with local communities and developers providing
developers with much more certainty ‘up front’ about how much
money they would be expected to contribute. The levy would apply to
most new development above 100sqm in size and to all new
dwellings, except affordable housing, and would therefore spread the
‘burden’ of contributions across a much broader spectrum of
development than has previously been the case. Importantly, CIL is
intended to be directly related to the delivery of the growth proposed
in Development Plans and would operate as a contribution towards,
rather than a replacement of other infrastructure funding. The levy is
intended to ‘unlock’ the growth that is proposed in Development
Plans by raising funds that can be spent on the infrastructure which is
necessary to allow this growth to occur.
4.3.
Tax Increment Financing
4.3.1. The implementation of tax increment financing (TIF) depends on the
adoption of the business rates retention proposals. TIF would enable
councils to pay for future infrastructure developments by allowing
them to borrow against projected business rates growth. Such
borrowing would be within the existing prudential system.
4.3.2. The government has suggested that there are two ways in which TIF
could be operated within the business rates retention system:
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the first would allow local authorities to determine for
themselves whether to invest in a Tax Increment Financing
scheme, but would not exempt revenues from the impact of
the retention scheme;
the second would involve stronger government controls on
the ability to bring forward a scheme but would guarantee
revenues, without the risk of loss to the levy and reset
process.
4.3.3. The first option would give a local authority (or a group of local
authorities pooling resources and sharing the risks) the opportunity to
provide key infrastructure at their discretion. Clearly there is a major
risk that the growth in business rates will not materialise and there
have been suggestions that funds will not be available from lenders at
economic interest rates. Lenders are likely to be far keener to
provide funds in areas which have proven growth potential which is
more likely to be the already economically richer areas.
Strategic Overview : Context Paper August 2011
4.3.4. The second option will probably restrict developments to a number of
government approved schemes but is more likely to be sufficiently
secure for developers and banks to lend against.
5.
Current Spend
5.1.
The Council’s current spend can be analysed as follows:
Employees
Premises
Transport
Supplies and Services
Third Party Payments
Transfer Payments
Capital Charges
Income
Net Cost of Services
Budget 2011/12
£’000s
10,118
2,516
392
9,643
34
32,839
3,758
(42,380)
16,921
6.
Pay and Grading
6.1.
A job evaluation of 80 posts commenced in 2007 as a consequence
of new legislation. All posts that had been subject to change through
recent management restructures were also included. However since
that date there have been a number of concerns over the process
that was adopted and the original review timetable was effectively
abandoned. The process has highlighted discrepancies in the scoring
process to that which Inbucon would have expected in the application
of their scheme. It also became apparent that there was no audit trail
to validate the existing scheme.
6.2.
It was therefore agreed in November 2008 to review the pay and
grading scheme against a pay policy that would have formal approval
and be ‘fit for purpose’ now and in the future.
6.3.
Any new pay and grading scheme needs to be fair and affordable and
will reflect the pay comparisons within the local government market
(which comprises the Eastern region) and includes all benefits such
as the car allowances to give an overall market comparative for the
total remuneration package. A consultation on a new proposed model
was launched in June 2010 and the financial forecast assumes the
implementation of this proposed model from April 2012.
6.4.
It has not been possible to obtain UNISON agreement to ballot the
staff on the proposed new model therefore the Council is currently
taking advice on how to implement in these circumstances.
Strategic Overview : Context Paper August 2011
7.
Workstreams – Short term and Medium / Long Term
7.1
To achieve savings for the 2012/13 and 2013/14 budget the following
workstreams are being progressed:
7.1.1. Management Structures - Re-looking at the organisational
structures and in particular our most senior management
arrangements. This includes changes to the way in which the
organisation works corporately.
A paper is being prepared in accordance with an agreed timetable. A
savings target of 20% on the overall cost of senior management (first
three tiers) would equate to about £280,000.
7.1.2. Prioritisation exercise - Exploring by service further savings that
can be achieved and/or additional income that can be raised either
through fees and charges or possibly trading services.
Papers have been issued to senior managers requesting savings
bids, or packages of bids, equivalent to a 10% reduction on their net
budget. This would provide a package of savings of almost
£1.3million for issuing to Cabinet on 7 October in accordance with the
agreed corporate planning timetable. At the informal meeting of
Cabinet in October, service areas will be identified where a greater
saving than 10% needs to be explored and/or a more fundamental
review of the service undertaken, and this work will be completed for
the following informal meeting of the Cabinet on 11 November. This
two stage process will avoid managers engaging in abortive work
where a saving of greater than 10% is not required.
A more fundamental service review should also be lead by a director
rather than the service manager. In making these decisions, Cabinet
Members will have the detailed information on each service budget,
due to be available from 19 September, which will provide a complete
picture of service outputs as well as cost.
7.1.3. Shared Services / Outsourcing - Continue to deliver on those
shared service arrangements already agreed such as in the revenues
and benefits service whilst exploring other opportunities for
outsourcing or sharing services.
A timetable for the revenues and benefits shared service project with
King’s Lynn and West Norfolk Borough Council has been approved
by a Joint Shared Services Board. A joint ICT procurement exercise
has already been completed for this project and a shared service
model is being designed for Member consideration.
Building Control is subject to an options appraisal exploring the merits
of entering into an existing Norfolk partnership. The timeframe is to
implement any new arrangements from April 2012.
Strategic Overview : Context Paper August 2011
Members may wish to consider other services for sharing or
outsourcing and this requires further discussion.
7.1.4. Asset Rationalisation – Rationalisation of the Council’s asset base
either through open market sales and/or asset transfer to achieve
revenue savings and possible capital reinvestment. Investment in
property will also be considered as part of our investment strategy for
2012/13.
The Council has previously investigated options relating to property
investment as part of its treasury management strategy, but at that
time the returns being achieved through other financial instruments
was more favourable. Property investment will be explored again as
part of preparing the 2012/13 investment strategy. A workshop is
being prepared for Members on the Council’s treasury activity and
future options.
The Cabinet Member for Assets is leading on a strategic review of
asset holdings to identify those which would be considered for sale or
transfer with a view to reducing the revenue burden of holding assets.
A paper for the wider cabinet is due to be completed by the end of
October 2011.
7.1.5. Partnership working – Review our arrangements with partner
organisations to remove duplication and identify potential community
led budgets. This requires a further informal confidential discussion
with the Cabinet to scope any work alongside the proposals emerging
from the localism agenda.
7.2
Medium / Longer Term
7.2.1 In the medium to longer term the Council should adapt its customer
services strategy to take advantage of new technology and review
business processes accordingly. The Council should be actively
exploring opportunities to outsource / trade or transfer services. In
some cases a more fundamental review of service delivery will be
required alongside a cultural shift in how people view and approach
their work.
8.
Recommendations
8.1.1. To note the updated financial forecast for 2011/12 to 2014/15
8.1.2. To note the workstreams and associated action plans and
milestones being progressed to deliver savings for 2012/13 and
2013/14 budget.
FPUfinal/SJO210911
Strategic Overview : Context Paper August 2011