Agenda Item No____8________
2013/14 BASE BUDGET AND PROJECTIONS 2014/15 TO 2016/17
Summary:
This report presents for approval the base budget for
2013/14 along with the latest financial projections for the
following three years to 2016/17.
Options considered:
The budget for the forthcoming financial year must be
set annually. Whilst there could be options around the
individual budgets presented for approval i.e. what is
included in the budget for 2013/14, the overall position
now presented for approval is the culmination of work
carried out by officers and Cabinet, details of this work
is provided within the report.
Conclusions:
The Council’s budget is set for approval each year; it is
presented to Cabinet and then considered by Overview
and Scrutiny Committee before recommendations are
made to Full Council. This report now presents a
balanced budget for 2013/14 and also presents the
future financial projections for the following three
financial years, 2014/15 to 2016/17. The budget has
been produced based on a number of assumptions as
detailed within the main body of the report and also
reflects the provisional finance settlement announced on
19 December 2012. The report outlines the risks facing
the Council in setting the budget and forecasting future
spending plans and resources.
Recommendations:
1)
It is recommended that Cabinet agree and
recommend to Full Council:
a) The 2013/14 revenue account budget as
outlined at Appendix A and that the surplus of
£240,009 be allocated to the general reserve;
b) The demand on the Collection Fund, subject to
any amendments as a result of final precepts be:
a. £5,082,610 for District purposes
b. £1,450,000 (subject to confirmation of the
final precepts) for Parish/Town precepts;
c) The fees and charges as included in Appendix D
from 1 April 2013;
d) The statement of and movement on the reserves
as detailed at Appendix F;
e) The updated Capital Programme and financing
for 2012/13 to 2015/16 as detailed at Appendix
G;
f) The new capital bids as detailed at Appendix H
to be financed from capital receipts;
g) That Members note the current projections for
2014/15 to 2016/17.
2)
Reasons for
Recommendations:
That Cabinet resolves that the setting of fees
and charges for the waste service be delegated
to the Corporate Director as set out within 6.2 of
the report and that the delegation within the
constitution be updated to reflect this on a
permanent basis.
To recommend a balanced budget position for the
2013/14 financial year to be approved by Full Council on
27 February 2013.
LIST OF BACKGROUND PAPERS AS REQUIRED BY LAW
(Papers relied on the write the report and which do not contain exempt information)
Provisional 2013/14 and 2014/15 Settlements
Briefing papers – LGA, LG Futures
Cabinet Member(s) Cllr W
Northam
Ward(s) affected All
Contact Officer, telephone number and email: Karen Sly, 01263 516243
Karen.sly@north-norfolk.gov.uk
1.
Introduction
1.1
This report presents the detail of the 2013/14 revenue base budget and the
indicative projections for the following three financial years. From April 2013 a
new system of Local Government Finance comes into operation of which the
key components are the local council tax support scheme and the retention of
business rates at a local level.
1.2
An updated Capital Programme has also been included covering the periods
2012/13 to 2015/16.
1.3
This report will be considered by the Overview and Scrutiny Committee on 20
February and then presented for approval by Full Council on 27 February
2013.
1.4
The Financial Strategy covering the period 2013/14 to 2015/16 (the period of
the Corporate Plan) was presented to Members in November 2012. At that
time the forecast budget gap over the next three years was in the region of
£1.8 million. This position took account of the known spending pressures at
the time and also forecast grant reductions of 24% over the next three years
and council tax freeze for 2013/14.
1.5
Since November the detail of the budget for 2013/14 has continued to be
developed by both Officers and Members resulting in the budget now
presented in this report. This includes the provisional finance settlement
figures announced on 19 December, the final settlement is expected early
February. The final budget presented for approval on 27 February 2013 will
be updated to reflect the final figures.
2.
Finance Settlement - Overview
2.1
On 19 December 2012 the Secretary of State for Communities and Local
Government announced a provisional two-year settlement for local
government covering 2013/14 and 2014/15 and launched a consultation on
the settlement which ended on 15 January 2013.
2.2
These settlement figures reflect the changes both with the Local Council Tax
Support Scheme (LCTSS) and the new arrangements whereby the Council
retains part of the business rates it collects in its area. Both these changes
are a radical shift in local government financial support.
2.3
The final settlement figures are due to be announced in early February when
the result of a consultation exercise covering the provisional settlement and
the submission of the final National Non Domestic Rates projection for
2013/14 have been assessed.
2.4
A direct comparison of the financial settlement for 2013/14 with the previous
year is hampered to some extent by this radical shift in funding. The
Government uses a measure of local authority finance called “Revenue
Spending Power” which has as its constituent elements the main sources of
income to the Council. The table below illustrates this for 2012/13 to 2014/15:
Table 1 – Revenue
Spending Power
Council Tax Requirement
Formula Grant
Set Up fund
Community right to challenge
Community right to bid
New Homes Bonus 2012/13
New Homes Bonus 2013/14
New Homes Bonus 2014/15
C Tax freeze
Sub total
Homelessness
Revenue Spending Power
2012/13
Original
£’000
5,717
6,226
0
0
0
0
0
0
144
12,087
120
12,207
2012/13
2013/14
2014/15
Rebased Provisional Provisional
£’000
£’000
£’000
5,744
5,744
5,744
6,368
0
0
843
7,053
6,150
9
9
9
5
8
8
612
0
0
0
706
0
0
0
799
144
58
58
13,725
13,578
12,768
120
0
0
13,845
13,578
12,768
2.5
The rebased figures for 2012/13 now include “Rolled In” grants for the set up
fund, new homes bonus, council tax freeze and homelessness to compare
with the figures for 2013/14 on a similar basis. These show a reduction of
£267k (1.9%) for 2013/14 and £810k (6.0%) in 2014/15.
2.6
The key components are however, the formula grant and the set up fund
where there is a significant shift in funding between the years and especially
2013/14 and 2014/15 where the further split between Revenue Support Grant
(RSG) and Baseline funding is illustrated below in Table 2.
Table 2 – RSG/Baseline
funding
RSG
C Tax freeze grant
C Tax support funding
Homelessness grant
RSG
Total RSG
Baseline
C Tax freeze
C Tax support funding
Homelessness grant
Baseline
Total Baseline
TOTAL SUPPORT
2013/14
2014/15
Amount
provisional provisional % age change
£’000
£’000
change
£’000
86
506
72
664
3,571
4,235
84
0
70
154
3,092
3,246
57
337
48
442
2,376
2,818
7,053
59
0
49
108
2,796
2,904
6,150
(23)
(989)
3.05
86
(903)
2.7
The resource shift from RSG to Baseline is an important development for the
future.
2.8
There were a number of other key messages contained within the provisional
settlement announcement which was also linked to the Chancellor’s autumn
statement on 4 December 2012. As well as the level of grants available the
announcement confirmed that:
•
•
•
•
2.9
The 1% reduction in funding in the Chancellor’s statement did not
impact local authorities.
A council tax freeze grant would be paid in 2013/14 and 2014/15
equivalent to a 1% increase in funding for 2013/14 and 2014/15 for a
0% council tax increase in 2013/14.
The threshold for referenda on council tax increases reduced to 2%
unless the council is in the lower quartile (which includes NNDC)
where a further threshold is introduced based on a cash increase on
no more that £5.
There will be no proposals in 2013/14 to set out referenda principles
for parish and town councils.
As well as the overall reduction in total funding before distribution to councils
there has also been a change in the components which drive the distribution.
In particular the data sets have been updated for the following changes:
•
2011 re-based population. NNDC saw its population figure drop from
104k (estimated 2012/13) to 102k as a result of using the data from
2011 census.
•
•
Changes to the scarcity weighting in the formula grant which, following
work by SPARSE and the Rural Services Network would have
benefited NNDC
Grant damping arrangements to control the “winners” and “losers”
which broadly have camouflaged the scarcity weighting changes
2.10
It is also important to remember that the proposal for these changes which
underscore the 2013/14 settlement will then be frozen until 2020.
3.
Provisional Finance Settlement - North Norfolk District Council
3.1
The following section of this report outlines the implications of the provisional
settlement on the financial position of North Norfolk District Council in more
detail. Table 3 below compares the main elements of the formula grant
position between 2012/13 and 2013/14. For the purpose of comparing on
similar bases the 2013/14 provisional figures exclude the Council Tax freeze
grant for 2013/14, Local Council Tax Support funding and homelessness
grants that have been rolled in from 2013/14.
Table 3 - Formula Grant
Relative needs amount
Relative resources amount
Central allocation
Damping
Council tax freeze grant
Total
2012/13
Original
£’000
3,489
(1,723)
4,663
(204)
6,225
143
6,368
2013/14
Provisional
£’000
4,458
(2,472)
4,531
(569)
5,948
0
5,948
3.2
The constituent data sets within the distribution formula for formula grant will
be frozen from 2013 to 2020 although the amount to be distributed will
change reflecting the continuing pressure on public expenditure. The main
element of the formula grant is the central allocation based on per head of
population. This is increased by the relative needs amount which reflects the
interaction of various indicators including sparsity, day visitors, benefit
claimants and additions recognising fixed costs, flood defence and coast
protection. It is in this area that arguments were made to Government to
examine and revise these sparsity indicators. These arguments were, in the
main, accepted by DCLG.
3.3
The relative resources amount reflects an assessment of the ability to raise
income from council taxes which is a negative value.
3.4
The final element is the damping figure which is designed to ensure that
authorities receive at least a minimum grant change. This is paid for by
removing grant from authorities who would have otherwise benefited
significantly from the distribution changes, and paying it to other authorities
who would have suffered a disproportionate reduction. It is this final element
in 2013/14 which has served to reduce the impact of the change in indicators
re sparsity etc. which had been fully recognised in national negotiations with
the DCLG. The masking of these changes by the damping arrangements has
been raised with DCLG in our response to the consultation on the provisional
settlement.
Table 4 – RSG
C Tax freeze
C Tax support
Homelessness grant
RSG
Total RSG
2012/13
Original
£’000
0
0
0
121
121
2013/14
2014/15
Provisional Provisional
£’000
£’000
86
84
506
0
72
70
3,571
3,092
4,235
3,246
C Tax freeze
C Tax support
Homelessness
Baseline
Total Baseline/redist NNDR
0
0
0
0
6,247
57
337
48
2,376
2,818
59
0
49
2,796
2,904
TOTAL SUPPORT
6,368
7,053
6,150
3.5
The provisional settlement for 2013/14 includes £5,947k from formula grant
and the rolled in council tax support, freeze grant and homelessness grants
(£843k, £143k and £120k respectively) split 60:40 (RSG:Baseline) in 2013/14
and totalling £7,053k. In 2014/15 this ratio changes to 53:47 (RSG:Baseline).
3.6
The important issue for the Council beyond 2013/14 relates to the split of
central government support between RSG and the Baseline. The provisional
settlement indicates that the RSG element will reduce by £989k (23%) while
the Baseline figure is set to increase by £86k (3%). The percentage increase
to the Baseline figure is that which will be applied as the rating multiplier in
2014/15.
New Homes Bonus
3.7
The New Homes Bonus (NHB) was introduced following a consultation which
ended in December 2010. It is designed to incentivise and reward Councils
and Communities who wished to build new homes in their area. Table 5
shows the current value of the NHB to the Council.
Table 5 – New Homes Bonus – Allocations to date
Allocation 2011/12 2012/13 2013/14 2014/15
£
£
£
£
2011/12
349,762 349,762 349,762 349,762
2012/13
261,916 261,916 261,916
2013/14
93,857
93,857
Total
349,762 611,678 705,535 705,535
3.8
2015/16
£
349,762
261,916
93,857
705,535
2016/17 2017/18 2018/19
£
£
£
349,762
261,916 261,916
93,857
93,857
93,857
705,535 355,773
93,857
Local Authorities are able to decide how this bonus is to be spent. It is paid as
an un-ring fenced grant. Currently the grant is transferred to the New Homes
Bonus Reserve. A policy for the use of this reserve is currently being
developed to guide the future use of these funds.
Local Council Tax Support Scheme
3.8
The Local Government Finance Act 2012 set up the framework for the Local
Council Tax Support Scheme (LCTSS). The scheme design has been widely
consulted upon and the cost of the LCTSS is shared between the County
Council, the Police and North Norfolk District Council. Previously subsidy
received form the Department for Work and Pensions (DWP) covered 100%
of the Council Tax Benefits but the new arrangements are to achieve a saving
nationally of £420 million from 2013/14. The incidence of the impact of the
changes is mainly on those who are able to work.
3.9
Pensioners are sheltered from the impact of the scheme so that an overall
10% reduction in benefit, when the incidence of those of pensionable age in
the District is taken into account, is potentially over 20% for non-pensioners.
The local scheme is designed so that the minimum a claimant would pay is
8.5% of the total council tax for the year. In adopting this threshold the
Council will be able to claim additional transitional grant from DCLG for
2013/14 only. The NNDC share of this is £22,700.
3.10
Linked with the introduction of the LCTSS are a number of technical reforms
which give billing authorities greater flexibility in raising money from council
tax payers who are owners of second homes or empty properties. Any
increase in revenue will be shared with the other major preceptors in
proportion to their levels of council tax.
3.11
Details of the LCTSS and Council Tax Technical reforms were reported to
Cabinet and Scrutiny in January and approved by Full Council on 23 January
2013.
Retained National Non Domestic Rates
3.12
The Local Government Finance Act 2012 also introduces the changed
arrangements for business rates. Previously the business rates collected by
the billing authority were pooled centrally and redistributed to individual
councils by formula. From April 2013/14 the Council will be able to retain a
proportion of the business rates collected in its area and pay a share to the
County Council and a further share to the Government as follows:
Central Government
North Norfolk District Council
Norfolk County Council
Total
Share %
50
40
10
100
3.13
Once the system baseline is agreed the changes in funding will be directly
linked to the fluctuations in the rateable values of businesses within the billing
authority area. Increased rateable values and rate income will be shared with
the government and county council.
3.14
The funding arrangement includes a system of tariffs and top-ups. These are
calculated by comparing the authority’s business rates baseline against its
funding level. The tariffs and top-ups are fixed at the start of the scheme and
index-linked to RPI in future years. The table below summarises the amounts
for NNDC as included in the provisional settlement. The tariff will be paid to
central government during the financial year. Top-up authorities are those
with a lower individual authority business rates baseline than its funding level
and therefore receive a top-up.
Table 6 – Tariffs
£000
Baseline Need (A)
2,818
NNDR Baseline (B)
9,313
Tariff Amount = A minus B
(6,495)
Risk – Finance Settlement
3.15
The three key reforms of Local Council Tax Support, technical reform of
discounts and Retained National Non Domestic Rates taken individually
would impose a serious financial risk on the Council. Taken together the level
of risk is greatly increased. National schemes that previously allowed these
risks to be spread through national benefit scheme or pooled NNDR will now
fall to individual councils. In order to mitigate this risk either an earmarked
reserve needs to be established or the recommended balance in the general
reserve increased.
3.16
The future levels of external funding will now be localised and subject not only
to the downward pressures on public spending but also exposed to the
vicissitudes of the local economy. There will be increased pressure on
collection of income but also on the local intelligence about business growth,
appeals and changes in benefit claimants circumstances.
4.
Revenue Account Base Budget
4.1
The detail of the revenue budget now presented for approval is included
within Appendices A and B. Appendix A shows the overall position in the form
of the General Fund Summary. Further detail on the individual service
budgets is included at Appendix B which shows the movement of the 2013/14
budget compared to the updated budget for 2012/13.
4.2
As in previous years when the Authority has faced grant reductions, no
growth bids were invited for revenue expenditure in 2013/14. Capital bids
were invited, although these were limited to those which addressed Health
and Safety issues, computer system upgrades and enhancements that will
deliver efficiency savings together with Invest to Save projects that support
the delivery of the Corporate Plan actions. The capital programme is
discussed in detail at section 9.
4.3
The underlying assumptions contained within the revenue base budget for
2013/14 are as follows:
4.3.1
Council Tax – The budget assumes a council tax freeze in 2013/14 and
that the tax freeze grant as detailed at 2.8 is accepted in 2013/14 and
2014/15. No future assumptions have been made around annual council
tax increases. This means that the district element of the council tax
remains at £138.87 for 2013/14.
4.3.2
Employee budgets – 2012/13 is the final year of a two year pay freeze
recommended by central government starting in 2011/12. No local
agreement has yet been confirmed for 2013/14, although the budget does
assume a 1% pay award for 2013/14. As a guide a 0.5% sensitivity to the
pay award equates to approximately £44,000. An allowance has been
made to reflect vacancy savings of 2% as in previous years and where
annual increments are due these have continued to be factored into the
budget. The employer pension contribution rates for the three years
covering 2011/12 to 2013/14 were determined by the results of the
pension fund tri-annual revaluation as at 31 March 2010. From 2011/12,
there was a proposal to stabilise the contribution rate at 14.5% of the
payroll plus an additional fixed monetary contribution for three years.
These assumptions have been included in the 2013/14 budget. The next
pension fund valuation is due on 31 March 2013 to take effect from April
2014 and the contribution rate and fixed payment will be adjusted at that
point depending on the scheme position as at 31 March 2013. The
financial projections will be updated for any changes following the results
of this valuation.
4.3.3
Pay and Grading and Car Allowances – The results of the pay and
grading review came into effect in October 2012 and the budget and
future projections now fully reflect the financial implications. As previously
reported within the 2012/13 revised budget and budget monitoring
reports, one off costs as a result of the pay and grading review have been
funded from the Organisational Development earmarked reserve. The
2013/14 projections also included a target saving to be delivered from the
changes to car allowances of £245,000, mainly due to the changes to the
cash equivalent and leased cars policy changes. The budget assumes the
removal of cash equivalent payments from April 2013 and where
applicable those officers will become entitled to the car essential user
lump sum payments.
4.3.4
Fees and Charges – Section 6 of this report includes details of the fees
and charges for 2013/14, the financial implications of these proposals
have been reflected in the budget now presented for approval.
4.3.5
Contract inflation – The most significant of the Council’s contracts is the
waste contract. The new contractor prices have been included in the
2013/14 budget for all waste, cleansing and grounds maintenance
services as per the tendered contract.
4.3.6
Investment income – A total of £392,490 is anticipated for 2013/14. The
primary concern for the Council 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 1.65%
compared with 1.10% for the current estimates for 2012/13. The income
budget assumes the investment portfolio is invested with UK
counterparties in call accounts and term deposits, and that existing
deposits will continue to their maturity date. It also assumes the approved
investment of £5 million in pooled property funds. Further details of the
Council’s investment strategy are set out in the Treasury Management
Strategy Statement and Investment Strategy 2013/14 to 2015/16 which
appears elsewhere on this agenda.
4.4
Section 5 below provides further details of the savings proposals which this
report now recommends are taken forward within the 2013/14 budget.
4.5
The General Fund Summary presented at Appendix A shows a balanced
budget for 2013/14 and is summarised in Table 7 with the equivalent figures
from the 2012/13 budget.
Table 7 – Variance of 2012/13 to
2013/14 Base Budget
Net cost of services
Non service expenditure/ income
Net budget requirement
Local Taxpayers - Parishes
Local Taxpayers - District Council
Government Grant (Including LCTS & Rolled
in grants)
Council Tax Freeze Grant ongoing (10/11)
Council Tax Freeze Grant one off (11/12)
Council Tax Freeze Grant one off (13/14)
Total Income
(Surplus)/ Deficit
(Note: Income figures are shown in (brackets)
2012/13
Updated
Base
Budget £
2013/14
Base
Budget £
15,888,407
(2,046,865)
15,779,592
(2,353,367)
13,841,542
(1,538,934)
(5,789,171)
13,426,225
(1,450,000)
(5,082,610)
(6,225,303)
(6,932,874)
(143,134)
(143,134)
(145,000)
0
0
(57,616)
(13,841,542) (13,666,234)
0
(240,009)
4.6
Non-Service Expenditure and Income includes the adjustments for notional
items that are required to be charged within Net Cost of Services, for
example, International Accounting Standard 19 (IAS19) pension costs and
capital charges.
4.7
Appendix B shows the detail of the service movements for each of the eight
service areas. Table 8 provides a summary of the main movements in Net
Cost of Services across the standard expenditure headings, with notional
charges being shown separately.
Table 8 - Variance of 2012/13 to 2013/14 Base Budgets
Employees/Support Services
Premises
Transport
Supplies & Services
Transfer Payments
Income (External)
Total Direct Costs and Income
Notional Charges:
Capital Charges
IAS19 Notional Charges
2012/13
Updated
Base
Budget £
9,861,706
2,662,298
342,578
9,993,782
34,547,835
(45,254,659)
12,153,540
1,814,493
(256,842)
2013/14
Percentage
Base
Movement
Budget £
Variance £
%
9,663,471
(198,235)
(2.0)
2,469,738
(192,560)
(7.2)
340,425
(2,153)
(0.6)
9,698,961
(294,821)
(3.0)
26,491,049 (8,056,786)
(23.3)
(37,398,405)
7,856,254
(17.4)
11,265,239
(888,301)
(7.3)
2,292,529
(266,577)
478,036
(9,735)
26.4
3.8
Reffcus
Total Notional Charges
Total Net Costs
2,552,661
4,110,312
16,263,852
2,511,401
4,537,353
15,802,592
(41,260)
427,041
(461,260)
4.8
The significant movement within transfer payments reflects the changes to
the council tax benefit system from the introduction of the Local Council Tax
Support scheme. Within the new cost of services this is offset by the
reduction in income line, i.e. the subsidy that is no longer receivable.
4.9
This report recommends that the surplus of £240,009 for 2013/14 be
allocated to the general reserve
5.
Savings 2013/14 Onwards
5.1
As part of the preparatory work on for the budget process, Heads of Service
were asked to put forward savings bids and additional income that fell into the
following two categories:
•
•
Savings that will have no impact or an acceptable level of impact on
service delivery;
Income that can be derived without a significant change in policy.
5.2
In addition part of the budget work included a review of all budget heads
highlighting where additional savings could be achieved that would meet the
above criteria. Following this work a total of £163,097 savings and additional
income has been factored into the base budget for 2013/14, increasing to
£224,357 in 2014/15. A full list of the savings now included in the 2013/14
budget is attached at Appendix C.
5.3
Other savings that have been identified in the current year as a result of
current or planned service reviews have been factored into the budget and
future projections, these include the savings from the removal of the annex as
reported to Cabinet in December 2012 and also anticipated savings from the
review of the Tourist Information Centres as reported to Cabinet in January
2013.
6.
Fees and Charges 2013/14
6.1
Fees and charges proposals for 2013/14 have been made by officers and
discussed as part of the budget preparations with Cabinet and the Corporate
Leadership Team. Appendix D now provides the details of the proposed
charges for the 2013/14 financial year. Where applicable the proposed
increase to fees and charges in 2013/14 is generally around 2.5% or to the
nearest sensible figure. The exceptions to this are where fees and charges
are set by central government, for example planning and premises licence
fees or where there have been reviews/work in the current financial year to
inform the future fee setting process for example taxi licensing fees.
6.2
Trade waste and garden waste fees are set annually, as in previous years
and due to the timing of the work required prior to the start of the new
financial year, it is requested that delegated authority for setting these fees is
given to the Corporate Director, in consultation with the Head of
(1.6)
10.4
(2.8)
Environmental Health, Head of Finance and the relevant Cabinet Portfolio
Members.
7.
Council Tax 2013/14
7.1
Table 9 below summarises how the budget for 2013/14 will be financed and
the District’s net call on the collection fund for 2013/14. These figures assume
a council tax freeze in the District element of the Council Tax for 2013/14,
more detail is provided at Appendix E.
Table 9 – Council Tax Summary 2013/14
£
Total District amount to be met from Government Grant and
Local taxation
11,976,225
Less: Baseline Funding
(5,947,459)
Council Tax Freeze Grant – ongoing 2011/12*
(143,134)
Homelessness Grant
(120,000)
Local Council Tax Support
(842,675)
Local Council Tax Support – Transitional Funding
(22,740)
Council Tax Freeze Grant 2013/14
(57,616)
District Net Call on Collection Fund – excluding Parish Council
Precepts
Surplus
(5,082,610)
(240,009)
7.2
A Council Tax Base of 36,411 Band D equivalent properties was approved by
Full Council on 23 January 2013. Based on this figure, and with no increase
to the Net District Council Tax level, a Band D property would continue to be
£138.87 for 2013/14.
7.3
There has been a reduction in the Council Tax Base for 2013/14 (36,411)
compared to the previous year (41,366). Movements in the tax base figure
can be caused by a number of factors, for example changes in collection rate,
movements in property numbers, the impact of changes to discounts and
most significantly for 2013/14 the introduction of the LCTSS that comes into
operation in April 2013. The implications of the LCTSS has the effect of
reducing the number of Band D equivalents. Previously 100% subsidy was
received for those eligible for council tax benefit, from April the LCTSS is
funded in part from government grant and partly from council tax now payable
by individuals previously entitled to 100% subsidy together with a range of
technical changes impacting on empty properties and second homes. Full
details of the new LCTSS were reported to Cabinet and Scrutiny in January
and approved by Full Council on 23 January 2013.
8.
Reserves
8.1
The current position and forecast on the General and Earmarked Reserves is
attached at Appendix F. The statement provides the latest proposals for use
of reserves in the current financial year along with the budgeted movements
in 2013/14 and proposed movements in the following three financial years.
8.2
There are three main reasons for holding reserves:
•
•
•
8.3
To provide a working balance to help cushion the impact of uneven
cash flows and avoid unnecessary temporary borrowing – this forms
part of the General Fund Reserve
A contingency to cushion the impact of unexpected events or
emergencies – this also forms part of the General Reserve
As a means of building up funds, referred to as earmarked reserves,
to meet known or predicted requirements. Earmarked reserves are
accounted for separately but remain legally part of the General Fund.
The title of the earmarked reserve generally reflects the purpose for
which the balance is being maintained for.
As part of putting the budget together for 2013/14 all reserves have been
reviewed along with the current balances. Where balances are no longer
required or an allocation can be maintained within the General Reserve for
such purposes it is recommended that balances be reallocated to the General
Reserve or another earmarked reserve as appropriate. The following outlines
the reallocations and movements for the earmarked reserves:
Table 10 – Reserves Reallocation
Reserve
Current
Comment
Balance
£
Carbon
21,180 The reserve was previously
Management
held for outstanding initiatives
to deliver the Carbon
Management Plan – no
further initiatives are planned
and one-off funding exists
within the restructuring and
invest to save reserve.
31,574 Previously established
Investment
following the disposal of the
Income
European Investment Bank
(Treasury
(EIB) to offset future
Management
implications.
Investment)
Housing
The Pier
Whistle-
Recommendation
Reallocate to the General
Reserve
Maintain balance and
reallocate as the Treasury
Management Investment
reserve to be used to
mitigate the impact of
fluctuations in returns
from property
investments.
242,000 Established from
Reallocate £142,000 to
homelessness funding grants the general reserve and
not spent in previous financial maintain £100,000 for
years.
one-off expenditure for
example surveys.
15,000 Established from previous
Reallocate to the General
underspends to fund Pier
Reserve
works.
10,000 Previously established to
Reallocate to the General
Table 10 – Reserves Reallocation
Reserve
Current
Comment
Balance
£
blowing
fund costs for investigations
as required.
Recommendation
Reserve to be called upon
as required.
8.4
After taking account of the planned movements to and from reserves and the
reallocations as detailed in table 8, this will give a forecast balance on the
General Reserve at 1 April 2014 of £1,771,576. Estimated planned use over
the next three financial years this leaves a revised balance of £1,371,576 by
2016/17. Use of the general reserve has been allowed for of £200,000 in
each of the next three financial years. This will smooth the impact of the
funding reductions over the short term.
8.5
New Homes Bonus (NHB) Reserve – The Council received a provisional
allocation in December for 20131/4 of £705,535. The budget now presented
takes account of this being transferred to the earmarked reserve in the year,
see also 3.8. The net transfer in the year reflects the previous decision to use
some of the NHB to fund a Community Infrastructure Levy Planning Policy
Officer.
8.6
Within 3.16 the risks of the new funding regime were highlighted along with
the need to increase the level of the reserves accordingly, it is recommended
that an allowance of approximately £600,000 be allocated within the general
reserve to mitigate the impact should it be necessary. As the new scheme
comes into effect the level of the reserve will be reviewed and updated
accordingly. The level of the reserves and their use will continue to be
monitored and a comprehensive statement about the adequacy of the
reserves and recommended balance will be included within the Chief
Financial Officer’s report, which forms part of the annual Council Tax and
Budget report to Full Council in February.
9.
Capital
9.1.
This section of the report provides details of the 2013/14 capital programme
for approval.
Current Capital Schemes
9.2.
The current capital programme was last updated within the revised budget
report which was approved by Council in December 2012. At that time,
account was taken of known slippage between financial years, and approval
was given for the inclusion of a further £37,084 to be made available to fund
refurbishment works to the Rocket House, and £21,000 for the replacement of
a scanner and printer for the Planning Service, both of which are to be funded
from capital receipts.
9.3.
The programme as reported in Appendix G incorporates the slippage
identified, the two changes identified in 9.2 above, and one further
amendment which is the capitalisation of the cost of replacement scanners
within the Personal Computer Replacement Programme.
9.4.
Personal Computer Replacement Programme – As part of the arrangement to
upgrade all personal computers to Windows 7, there is a requirement to
replace some of the Council’s scanners. Whilst budget exists within the
revenue account the estimated cost of this is £14,500, which is above the
Council’s de minimus capital expenditure level and therefore needs to be
capitalised within the Personal Computer Replacement Programme, to be
funded from a revenue contribution to capital outlay.
New Capital Schemes
9.5.
In addition to the existing capital programme, approval is also being sought
for eleven further capital projects, as identified in Appendix H.
9.6.
Car Park Refurbishment – The anticipated budget requirement is £180,000
which would be used to resurface and reline a number of car parks. As a
major source of income to the Council, these works would increase the
potential of these car parks to generate income.
9.7.
Chalet Refurbishment – The budget requirement of £36,000 would be used to
refurbish chalet roof structures, as well as facilitating the replacement of
windows and doors. This would ensure that the buildings are fit for purpose
and that they can continue to contribute to the Council’s letting income
streams.
9.8.
Doctors Steps – The Doctors Steps access to the Cromer East Promenade is
popular and gives direct access to five chalets elevated from the prom. The
budget provision of £22,000 would be used to replace the iron structure which
is suffering from erosion and fatigue, and should ensure continued use of this
access point.
9.9.
Victory Swim and Fitness Centre – The £54,370 budget requirement is to be
used to maintain the structure of this facility in line with the Council’s
contractual obligation with DC Leisure. There is currently a damp issue
present in the reception area and dance studio of the building, which requires
permanent resolution, in order to fulfil this commitment.
9.10.
Public Conveniences – The budget requirement of £15,000 would be used to
undertake a plumbing and drainage improvements programme at relevant
public conveniences. The scheme will resolve various works required under
health and safety regulations, which include replacement of non-operational
hot water devices, improvements to pipework and fitting of thermostatic mixer
valves, and improvements to toilet and basin fittings.
9.11.
Personal Computer Replacement Fund – A request has been made for the
renewal of a decision previously made by the ICT strategy group and capital
programme from 2007/08, to undertake a rolling programme of replacement
of personal computers to facilitate the efficient and effective provision of
services. An annual budget requirement of £20,000 is being requested to
replace old and unsupported equipment.
9.12.
Openwide Loan Repayment - Openwide Loan Repayment – There is currently
£25,000 which remains outstanding on a capital loan to Openwide, which
occurred following their fitting out of the Tides restaurant as part of the
Cromer seafront and town centre improvements a number of years ago. The
early repayment of this balance will result in an annual profit share element
becoming payable to the Council. The repayment monies are to be reinvested
by Openwide, in the Tides Restaurant, where a cash injection could result in
improved profits, a proportion of which would then become eligible for profit
sharing. Whilst this bid has been submitted as part of the 2013/14 budget, it is
requested that it is funded in the 2012/13 financial year and has therefore
been included in the 2012/13 updated capital programme.
9.13.
Disabled Facility Grant - A request has been made for the continuation of the
programme of including £700,000 per annum (part funded by grant of
£443,000) for Disabled Facilities Grants for 2014/15 to 2016/17.
9.14.
Play Areas (Various sites to be determined) - The Council owns a number of
play areas containing traditional equipment, which is now approaching the
end of its useful economic life. A budget requirement of £100,000 is
requested in order to address those playgrounds and equipment which are in
the poorest condition. A needs assessment will be undertaken to identify
those areas which would benefit most from the funding prior to undertaking
any improvements.
9.15.
The total of the estimated project costs associated with these capital bids up
to 2016/17, that would require funding is £1,283,370 (after allowing for an
estimate of grant funding for the Disabled Facilities Grants), and it is
anticipated that £452,370 would be spent in the 2013/14 financial year. All of
these schemes are to be funded from capital receipts.
9.16.
Once approval for the new capital bids have been received the capital
programme will be amended to reflect these changes. The certainty of new
capital receipts will be monitored as part of the on-going budget monitoring
process and where applicable recommendations will be made to amend the
capital programme and it’s financing.
9.17.
Local Investment Strategy – opportunities to deliver affordable housing in the
district through the provision of loan finance to registered providers is being
explored and will be presented to members accordingly.
Capital Programme Funding
9.18.
There are a number of sources of funding available to fund capital
expenditure. The following, outlines those which are available to the Council:
a)
External Contribution or Grants – e.g. the Environment Agency (EA) and
other third party contributions.
b)
Reserves – Available capital and revenue reserves can be used for
funding capital expenditure e.g. Capital Projects Reserve. Following the
LSVT in 2006, the Council receives a share of the Victory Housing Trust
VAT shelter receipts. These receipts are currently going into the Capital
Projects Reserve, and may therefore be used to fund capital expenditure.
These are forecast to end in 2014/15 when the amounts set out in the
transfer agreement have been reached.
c)
Capital Receipts – Capital receipts are generated from asset disposals
and can only be used to fund capital expenditure or to repay debt. The
latter is not applicable at the moment as the council is currently debt free.
Following the LSVT in 2006 the Council receives a share of the right to
buy capital receipts from Victory Housing (Preserved Right to Buys).
d)
Borrowing – Under the Prudential Framework the Council is able to fund
expenditure from borrowing provided that they can demonstrate
affordability and need. Whilst the Council maintains a level of capital
receipts, the need to borrow cannot be demonstrated. The Council does
not therefore intend to enter into any prudential borrowing at present and
this has been reflected in the Treasury Strategy and Prudential Indicators
report for 2013/14 which is included elsewhere on this Agenda.
10.
Future Projections
10.1
As mentioned earlier in the report the provisional settlement announcement
covers the two financial years 2013/14 and 2014/15. The forecast included at
Appendix A makes assumptions around the future level of funding for 2014/15
onwards. This shows a current forecast budget gap of £894,616 in 2014/15,
increasing to £1,524,810 in 2015/16 and £2,212,681 in 2016/17. This is after
allowing for a use of reserves of £200,000 in each of the first two years of the
forecast.
10.2
The financial strategy report presented to Members in November 2012
highlighted both short term work to be carried out to deliver a balanced
budget for the coming financial year 2013/14, for example reviewing all base
budgets and identifying savings and additional income streams that fell into
the following categories:
•
•
10.3
No impact or an acceptable level of impact on service delivery.
Income that can be derived without a significant change in policy.
In the longer term the following distinct aspects of work were identified that
would support the strategic direction of the Council:
•
•
Creating new revenue streams by increasing the Council’s tax base
for housing and business rates – to take advantage of the shift in the
funding regime from a centralised formulaic system to one that
provides an incentive at the local level through increased levels of
funding for growth in domestic and non domestic properties.
Efficiency Savings – reducing overheads and identify opportunities to
deliver services more efficiently, including materials recycling facility
and leisure contract procurement; Planning service peer review,
Customer Services/Web Strategy and administrative buildings.
10.4
These work streams will be continuing and will be used to inform the updated
financial strategy and financial projections that will be completed in 2013/14.
11.
Financial Implications and Risks
11.1
The overall budget for 2013/14 is balanced and delivers a surplus of
£240,009, which subject to approval, will be transferred to the General
Reserve. In the light of the increased financial risks that the Council is facing
it is proposed that the level of the General Reserve is increased to £1.6
million. The main risks faced by the authority are outlined below:
11.1.1
Future Funding – The new funding arrangements, as identified within this
paper, reflect the continued downward pressure on the public finances.
The changes in base data and the intention to “freeze” the distribution
formula for seven years mean that any adverse impact that the new
formula contains for 2013/14 will remain until 2020. In addition the
indicative figures for 2014/15 show a significant reduction in support by
some £903k and, importantly, a shift between Revenue Support Grant
and Baseline Funding. The financial planning process has taken account
of this change.
11.1.2
Savings – The savings programme is fully included in the forward year
budgets and although there is a slight reduction in the total for 2012/13
the programme is set to remain on course during 2013/14 and beyond.
However, as the pressure on public sector expenditure is set to continue
the delivery of savings beyond these levels will have to embrace more
radical solutions and therefore pose an increased risk to the Council’s
financial position.
11.1.3
Income (demand led budgets) – The review of fees and charges has been
undertaken to try to maintain the real value of the income they generate.
However, the demand led nature of a significant number of these income
streams means that attention also has to be paid to the overarching
economic environment. In particular in the local economy this process
needs to reflect both the local and tourist demands for services.
11.1.4
Local Council Tax Support Scheme (LCTSS) – the change to the funding
of the Local Council Tax Support places increased financial risks on the
Council. The model, though well developed and subject to testing and
consultation, will only be fully tested in a live situation after April 2013.It
conforms to the national move to reassess the provision of benefits and,
in a similar way to other LCTSS, anticipates that all owners or occupiers
of property will pay some part of the council tax demand. It is anticipated
that the collection of these modest amounts of Council Tax will be more
difficult and while the collection rate has been adjusted for this,
undoubtedly additional costs will result.
11.1.5
Council Tax Technical Reforms – These reforms derived from the
increased flexibility provided by central government are a means by which
some of the additional costs of the LCTSS are mitigated. However, in
themselves they pose a number of challenges in collection. The estimates
of additional income from these technical changes have been carefully
considered but any shortfall will increase the financial risks the Council is
experiencing.
11.1.6
Retained National Non Domestic Rates – A further change to the financial
mechanisms that support the Council is within the collection and retention
locally of business rates. Prior to April 2013 the income collected from the
National Non Domestic Rates had been pooled and redistributed to local
authorities. After April 2013 this mechanism changes such that 50% is
retained locally and this is split with the County Council. The remaining
50% is paid over to Central Government. Within this revised approach
there are a number of inherent risks which will now be borne locally rather
than across a national pool. Mitigating these risks will require the Council
to develop a great deal more awareness of developments that impinge on
the district’s rateable value as well as reinforcing the need to maintain a
high level of collection.
11.1.7
Investment Returns – Interest rates have never been so low for such a
sustained period of time in the national economy. The delivery if
investment returns is problematic with the choice of counterparty and
period of exposure being weighed on a daily basis in line with the treasury
management strategy. Sound principles underpinned by professional
guidance from treasury management advisors allows for a cautious but
not complacent approach to investment returns. The development of a
property led investment portfolio, for example, weeks to increase
investment returns without compromising the security of the invested
funds. However, these returns still provide support to the revenue budget
and changes in economic forecasts, money markets and the stock market
as well as the government’s triple A rating can all impact on these returns.
12.
Sustainability – none as a direct consequence of this report.
13.
Equality and Diversity
13.1
The Council is required to consider the equality duty in its decision-making
and this includes the budget process. As part of any savings or investments
the Council must consider how it can:
•
•
•
Eliminate unlawful discrimination, harassment and victimisation;
Advance equality of opportunity between different groups; and
Foster good relations between different groups by tackling prejudice
and promoting understanding.
13.2
As discussed within the main report (section 5) savings and additional income
proposals have been put forward for recommendations as part of the budget.
As part of the proposals Heads of Service were asked to identify any equality
issues affecting a number of protected groups that needed to be considered
as part of accepting the savings/additional income proposals, and where any
negative affect was identified, how this could be minimised or removed. A
cumulative assessment has been undertaken in relation to the equality forms
and the savings proposals and no negative impact has been highlighted as a
result of this exercise.
14.
Section 17 Crime and Disorder considerations – none as a direct
consequence.