PART 1
(OPEN TO THE PUBLIC)
ITEM NO.
REPORT OF THE DIRECTOR OF AND LEAD MEMBER FOR CORPORATE SERVICES
TO THE CITY COUNCIL
ON WEDNESDAY, 20th FEBRUARY, 2002
Subject : 2002/03 REVENUE BUDGET
RECOMMENDATIONS : Members are requested to:
1. Approve a revenue budget of £249.090m for 2002/03 ;
2. Note the efficiency measures achieved from good housekeeping and prudent planning
amounting to £2.410m as set out in Appendix 4 ;
3. Approve the Council Tax levy in accordance with the formal resolutions contained in Appendix
10 ;
4. Request each Lead Member and Director to rigorously monitor the implementation of the
accepted savings and expenditure against budget on a regular basis, to identify and report to
Budget Committee any alternative savings which may be necessary to compensate for any
savings not achievable in full and to ensure that overall net expenditure is contained within
budget, and for the Lead Member and Director of Corporate Services to report monthly to
Budget Committee on progress with the budget on a corporate basis.
EXECUTIVE SUMMARY : This report :1. Identifies that the approximate outturn expenditure for 2001/02 is expected to be in line with
the budget, and consequently the balances held in reserve at 31st March, 2002 will be £4m as
planned.
2. Sets out the details of the RSG settlement for 2002/03 for Salford, which allows for a 4%
increase in SSA and once again is less than the national average increase, due to the effects of
data used which reflects population loss, reduced traffic flow weightings and a reallocation of
resource to London and the South-East to reflect the higher cost of living there (the area cost
adjustment).
3. Identifies that a projected standstill budget indicates the need to spend £249.090m, which
would result in a 4.9% Council Tax rise for Salford's services,
4. Identifies that the budget would also enable the Council to : maintain its investment in keeping the City clean ;
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 passport the SSA increase for Education, provide match funding for the Standards Fund
and meet the DfEE’s target for the percentage of the total Education budget to be
delegated to schools.
5. As part of the budget strategy for 2002/03, it will be necessary to continue to contribute £1m to
reserves and to capitalise certain revenue expenditure totalling £4.5m, of which £1m will
require a direction from the Secretary of State under Section 40(6) of the Local Government
and Housing Act 1989.
6. It is estimated that a deficit of £1.096m will be incurred on the Collection Fund at 31st March,
2002 to ensure that the shortfalls in previous years Council Tax collection arising from
population drift is made good. Salford's share is approximately £1m.
7. The Greater Manchester Police and Fire Authority precepts will increase by 6.5% and 4.9%
respectively.
8. The resultant Council Tax levy, subject to confirmation of the Police and Fire precepts and after
allowing for the Collection Fund deficit, will be £759.48 at Band A and £1,139.22 at Band D,
an increase of 5%. Single person households will pay 25% less.
9. Responses from the public have been taken into account in framing the budget.
BACKGROUND DOCUMENTS :
1. Letters from the DETR dated 28th and 31st January, 2002 entitled "Local Authority Finance
(England) : Revenue Support Grant for 2002/03 and Related Matters”
2. Reports to Cabinet dated 11th December, 2001, 15th January, 2002 and 5th February, 2002
3. Budget Consultation Report : "A Year of Opportunity" and responses from the public
CONTACT OFFICER :
John Spink
Tel No : 793 3230
WARD(S) TO WHICH REPORT RELATES : All wards
KEY COUNCIL POLICIES :
Budget Strategy
DETAILS : Continued overleaf
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REPORT DETAILS
1. INTRODUCTION
1.1. The purpose of this report is to seek the approval of members of the Council to :
The proposed revenue budget for 2002/03 ; and

The proposed Council Tax levy for 2002/03.
2. REVIEW OF 2001/02
2.1. A revenue budget of £240.330m was set for 2001/02, an increase of 2.6% on last year.
2.2. The budget required efficiency savings of £2.258m, other funding adjustments totalling
£5.370m and the capitalisation of revenue expenditure totalling £7.648m to keep within
budget, whilst enabling the Council to maintain its investment in keeping the City clean,
matching the Standards Fund grant provided for schools and fully passporting the SSA
increase for Education.
2.3. Through close monitoring of expenditure throughout the year, identifying the need for
corrective action where necessary, eg to meet the additional cost of pay awards and shortfalls
in achieving a small number of savings proposals, expenditure has been contained within the
budget set.
2.4. This will allow the planned level of reserves of £4m by 31st March, 2002 to be achieved and
keep to the strategy established in the 2000/01 revenue budget of seeking to restore reserves to
3% or £7.2m by 2003.
3. THE 2002/03 REVENUE SUPPORT GRANT (RSG) SETTLEMENT
3.1. The Government has announced that it expects local authorities in England to spend a total of
£60.6billion, an increase of 7%.
3.2. The funding for this expenditure comes from three sources, as follows :£billion
 Government Grants, comprising :Revenue Support Grant
19.9
Special Grants
10.8
----30.7
 Business Rates
16.6
 Council Tax
13.3
----Total Standard Spending
60.6
-----
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increase
+ 1.9%
+ 15.3%
----------+ 4.4%
+ 9.8%
+ 6.0%
----------+ 7.0%
-----------
3.3. The Revenue Support Grant from the Government is a grant towards the general expenditure
by local authorities and is based upon what the Government expects each local authority to
spend if they all delivered the same level and standard of service (called the Standard
Spending Assessment).
3.4. The Special Grants from Government are aimed at providing grant support to specific services
or initiatives the Government wishes to see local authorities give priority to, eg grants for
schools to reduce class sizes, improve standards in education and improve the condition of
school buildings, or grants to Social Services to improve services for children, adults and the
elderly. There has once again been a substantial increase in Special Grants of over 15% in
2002/03 (21% in 2001/02)
3.5. The Government also determines the amount of money to be raised from businesses by
determining the rate in the £ all businesses must pay on the rateable value of their property.
The rate in the £ for next year will be 43.7p, an increase of 1.6%.
3.6. The Government will be expecting that, on average, local authorities in England will be
increasing their Council Tax revenue by 6%, but due to an increase in the number of
properties across the country, the increase in Council Tax is expected to be 5.2% and that the
average Band D Council Tax for a standard level of service will be £769.
3.7. Last year, local authorities spent £3.5billion more than the Government expected, all of which
falls on Council Taxpayers, giving an average actual Band D Council Tax of £901 and an
average bill of £740. A 5.2% increase would mean the average next year would be £948 at
Band D and £778 overall.
Impact of the National Grant Settlement on Salford
3.8.The Standard Spending Assessment announced by the Government for Salford for next year is
£227.858m, an increase of 4%. This is less than the average increase of 5.4% for all local
authorities because of changes to the data used in its calculation. The main data changes which
have caused this lower than average increase are population loss, traffic flows and the
adjustment for the cost of living in London and the South East.
3.9.The Government assumes for the purposes of determining grant that Salford will raise £44m
from Council Tax next year (+ 2.3%) and to receive £66.6m from business rates (+ 9%),
leaving £117.2m (+ 0.9%) to be provided in Revenue Support Grant by the Government.
3.10.However, the Government has again adopted a "floor" to the amount of Revenue Support
Grant to protect those local authorities who might receive less than a 4% increase in Revenue
Support Grant and business rates. As Salford's increase from these two sources is below this
4% threshold, it will receive an extra £1.853m in Revenue Support Grant, ie a total of almost
£119.1m.
3.11.Like most local authorities, Salford spends above the Government's Standard Spending
Assessment. It is estimated the Council needs to set a budget at £249.090m to maintain
the same standard of service as this year, which is some £21m (9.2%) above SSA.
3.12.All expenditure above the Standard Spending Assessment must be raised from Council Tax
and so Salford will need to raise £63.4m in total from Council Tax to fund its expected budget.
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3.13.Details of the impact of the Revenue Support Grant settlement on Salford are contained in
Appendix 1.
4. 2002/03 REVENUE BUDGET
4.1.Forecasts of spending requirements began in June last year and have been refined as
developments have unfolded during the year, particularly as the financial strategy was
developed during the Autumn, details of the RSG settlement were announced early in
December and submissions were received from directorates during December.
4.2.The estimated spending requirement for 2002/03 to maintain a standstill budget is £249.090m,
an increase of 3.6%. Details of how this has been built up from the 2001/02 base budget are
contained in Appendix 2.
4.3.A budget of £249.090m will enable the Council to deliver the services set out in Appendix
3.
4.4.In broad terms, the reasons for the increased spending requirement are as follows :£m
%
Function changes made by Government
- 1.6
- 0.7
Efficiency measures
- 2.4
- 1.0
Inflation
+ 9.9
+ 4.1
Capital Financing
+ 2.2
+ 0.9
Other Service Variations
+ 0.7
+ 0.3
+ 8.8
+ 3.6
4.5.A schedule of the efficiency measures already approved is shown at Appendix 4.
4.6.Proposals for additional expenditure are shown at Appendix 5. The current proposed budget
would not provide any funding for these proposals. It will be necessary for directorates to
consider meeting them from existing resources where possible, if the proposed Council Tax
increase of 4.9% is approved.
5. THE COLLECTION FUND
5.1. The Collection Fund is the account in which all financial transactions relating to the collection
of poll tax and Council Tax are kept.
5.2. A local authority is required to determine, by no later than 15th January preceding the financial
year for which the budget is being considered, whether its Collection Fund will be in surplus
or deficit on 31st March prior to the financial year in question, and to share out such surplus or
deficit with the precepting authorities in proportion to the composition of the Council Tax bill.
5.3. On 14th January, 2002, the Lead Member for Corporate Services, in consultation with the
Leader of the Council, approved a recommendation to declare a deficit on the Collection Fund
at 31st March, 2002 of £1.096m, of which the Council’s share will be approximately £1m,
arising from a trend in the reduction in the amount of Council Tax collectable which began to
emerge since 1996/97 due to empty property being caused by population moving away from
the City.
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5.4. This decision was consistent with a decision taken two years ago, when it was agreed that the
deficit would be recovered over a five year period to ensure budgeted collection targets are
achieved, but increases by £0.5m the deficit declared this year to ensure the accumulated
deficit is recovered within the five year target originally set.
5.5. An analysis of the amounts of Council Tax raised and collected since its inception in 1993/94
is attached at Appendix 6.
5.6.The collection of poll tax has achieved its budgeted collection target.
5.7.The Council Tax Benefit Subsidy Limitation Scheme has been abolished for 2002/03.
6.
THE 2002/03 COUNCIL TAX LEVY
6.1. If a budget is set at £249.090m then this, together with the effect of the deficit declared on the
Collection Fund referred to in paragraph 5 above, would lead to a Council Tax at Band A of
£692 and a headline Council Tax at Band D of £1038 for Salford’s services in 2001/02.
6.2. The Greater Manchester Police Authority met on 15th February and set their precept at £68.86
at Band D, whilst the Fire and Civil Defence Authority met on 14th February and set their
precept at £32.48 at Band D.
6.3. The combined Council Tax including precepts for 2002/03 will be £759.48 for most taxpayers
in Salford, who live in Band A properties, which is an increase of 5%. This looks likely to be
one of the lowest increases in Greater Manchester and below the increase of 5.2% expected by
the Government. Single persons will pay 25% less.
6.4. The average bill, which allows for discounts, will be around £740, whilst the tax at Band D,
which is used as the factor to determine the tax rates for all other bands will be £1,139.22.
6.5. The full range of Council Tax amounts at each tax band are as follows, by comparison with
this year :-
Single Person Households
2001/02 2002/03 Increase
£
£
£
Band A minus
452.07
474.68
22.61
Band A
542.48
569.61
27.13
Band B
632.90
664.55
31.65
Band C
723.31
759.48
36.17
Band D
813.72
854.42
40.69
Band E
994.55 1,044.29
49.74
Band F
1,175.37 1,234.16
58.78
Band G
1,356.20 1,424.03
67.82
Band H
1,627.44 1,708.83
81.39
Average Bill (after discounts)
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2 or more Person Households
2001/02 2002/03 Increase
£
£
£
602.76
632.90
30.14
723.31
759.48
36.17
843.86
886.06
42.20
964.41 1,012.64
48.23
1,084.96 1,139.22
54.26
1,326.06 1,392.38
66.32
1,567.16 1,645.54
78.38
1,808.27 1,898.70
90.43
2,169.92 2,278.44
108.52
705.16
740.42
35.26
6.6.A table showing the potential budgets for different levels of Council Tax increase is included at
Appendix 7.
7.
PUBLIC CONSULTATION
7.1. Public consultation on the revenue budget has taken place in two stages this year. Firstly, in
September a document entitled “A Year of Opportunity” invited responses from the public on
the issues they would like to see the Council address in next year’s budget. More recently, last
month, a second consultation document was issued on the detailed budget proposals.
7.2. The consultation period for the latter closed on 8th February and details of the consultation
responses received are contained in Appendix 8.
7.3. Members are requested to consider the responses from the public consultation exercise in
determining whether any changes should be made to the schedule of savings recommended for
acceptance, the redistribution of resource, the level of the budget and the level of the Council
Tax.
8.
BUDGET ASSUMPTIONS AND RISKS
8.1. Members are aware that the Government issued its White Paper “Strong Local Leadership Quality Public Services ” in December. A requirement within that paper is for the chief
financial officer to report to the Council on the robustness of the assumptions built into the
budget. Whilst this proposal is not yet legislation, it has been the practice to adopt this
approach previously in budget reports and so this part of the budget report sets out the
comments of the Director of Corporate Services on the robustness of the budget.
8.2. Financial Health
Two years ago, the Council’s general reserves were eliminated by the call upon them to meet
additional costs of looking after children, and a strategy was developed to restore general
reserves to 3% by 31st March 2003, which would amount to £7.5m based on the proposed
budget for 2002/03.
Contributions to reserves of £2m were built into the 2000/01 and 2001/02 revenue budgets to
give general reserves of £4m by 31st March, 2002. This target will be achieved provided
directorates keep to their forecast of outturn expenditure for this year.
The target of £7.5m by 31st March, 2003 would require a budgeted contribution to reserves of
£3.5m in 2002/03. It has not been possible to build this amount into the budget, but
nevertheless a contribution to reserves will continue to be made in 2002/03, but of £1m, to
give reserves of £5m (2%) by 2003.
This will require a continuation of contributions to reserves in 2003/04 and possibly thereafter
to ensure the target of 3% is achieved. Outturns for 2001/02 and 2002/03 will be reviewed to
identify whether any underspends, should they materialise, can be added to reserves to help to
reach this target by the planned date or as soon as possible thereafter.
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The reason why the planned level of contribution over the past two years cannot be matched in
2002/03 is due to the need to ensure that other specific provisions are maintained at prudent
levels to meet potential future calls upon them without dipping into general reserves,
specifically :(a) The provision for irrecoverable bad debts on sundry debtor accounts – this has required
a contribution of £0.5m in 2002/03 ; there has been no contribution budgeted for during
the past two years ;
(b) The Insurance Fund for future liability claims requires an increase of £0.5m based upon
the advice of insurers to meet the increased risk of liability claims following events of
September 11th last year ; and
(c) The strategy to recover Collection Fund deficits as detailed in paragraph 5 above.
8.3.Inflation
Pay increases are assumed to be 3.5% for teachers and 3% for administrative staff. Should pay
settlements exceed these figures then the additional cost will need to be absorbed by schools
and directorates within the allocations permitted by the budget. A similar occurrence happened
in 2001/02 when administrative staff received an award 0.5% in excess of budget and the
continuing additional cost of this award has needed to be absorbed in the 2002/03 budget
without additional provision.
Price inflation is limited to a 2.5% increase for charges which are determined outside of the
control of the City Council, eg care charges by outside agencies, whilst no inflationary increase
has been allowed for general supplies, services and fuel costs. Any increases in costs above
these assumptions must be absorbed within directorate budget allocations.
The Education budget has been granted in full the increase in its SSA of £4.066m, equivalent to
4%, and within this increase will meet the required target for the proportion of its budget which
must be delegated to schools to manage directly, pay and price increases as referred to
previously and match any funding increase which the Standards Fund grant from the
Government will require.
All directorates will bear their share of savings not achieved in 2001/02 relating to
accommodation and increases in income, the cost of which flow through into 2002/03.
Inflationary increases during 2002/03 will require close monitoring and scrutiny, and where
they exceed the assumptions made will need to be contained within the budget allocations to
directorates.
8.4.Function Changes in Social Services made by the Government
The Government has made a number of function changes affecting Social Services, mainly to
the services for adults, which has made less resource available than local authorities are likely
to need to spend. Local authorities, both individually and through their associations, have
lobbied the Government for additional funding.
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Whilst the funding provided by Government is sufficient to meet immediate needs, there is a
risk that demand will place pressures upon the available funds for 2003/04 and possibly
towards the latter part of 2002/03.
Funding provided by the Government to the Health Service may be of support and the
Community and Social Services Directorate will be working closely with local health partners
to ensure that such funding is used in an appropriate manner.
The Social Services budget, at this stage therefore, assumes that demand can be made available
within the resource allocated by Government.
8.5.Use of Grant Funding
Budget plans are dependant upon a range of specific grants from the Government, some of
which are time-limited, eg SRB, NRF, Childrens Fund, etc.
It will be necessary for later years to have exit strategies in place to minimise any budgetary or
service impact.
8.6.Capitalisation of Revenue
It has been necessary to capitalise certain items of revenue expenditure for the past two years’
budgets, amounting to some £13m and £7m respectively, to ensure a budget can be set at an
affordable Council Tax. This has required the permission of the Secretary of State for certain
items, and such permission has been given.
It will be necessary to continue with this practice for 2002/03, but the amount to be capitalised
will reduce further to £4.5m. Again, the permission of the Secretary of state will need to be
sought to capitalise early retirement costs estimated at £1m.
However, this practice cannot be sustained because of the strain it places upon available capital
resource and the risk it creates in maximising the potential for future capital resource from the
Government. A strategy will be required from 2003/04 will begins to unwind the capitalisation
of revenue until it is eliminated.
8.7.Capital Programme
The revenue budget assumes that there will be no revenue implications arising from the
preparation of the 2002/03 capital programme other than the assumptions over the capital
financing costs which will be incurred on new borrowing and rent loss from disposing of assets
with a rental income attached.
The capital programme for next year currently indicates an excess of spending bids above
available resource and work is currently underway to identify a funding strategy which
minimises the revenue impact.
8.8.Budget Assumption Details
A schedule of the assumptions made in drawing up the 2002/03 revenue budget is contained at
Appendix 9.
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9. RECOMMENDATIONS
9.1.Members are requested to:
(a) Approve a revenue budget of £249.090m for 2002/03 ;
(b) Note the efficiency measures achieved from good housekeeping and prudent planning
already approved amounting to £2.410m as set out in Appendix 4 ;
(c) Approve the Council Tax levy in accordance with the formal resolutions contained in
Appendix 10 ;
(d) Request each Lead Member and Director to rigorously monitor the implementation of the
accepted savings and expenditure against budget on a regular basis, to identify and report to
Budget Committee any alternative savings which may be necessary to compensate for any
savings not achievable in full and to ensure that overall net expenditure is contained within
budget, and for the Lead Member and Director of Corporate Services to report monthly to
Budget Committee on progress with the budget on a corporate basis.
A WESTWOOD
Director of Corporate Services
COUNCILLOR D ANTROBUS
Lead Member for Corporate Services
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LIST OF APPENDICES
Appendix
Details
1
Analysis of Impact of 2002/03 Revenue Support Grant Settlement on Salford
2
Formulation of 2002/03 Standstill Budget
3
Meeting the Pledges
4
Approved Efficiency Measures 2002/03
5
Proposals for Redistribution of Resources 2002/03
6
Analysis of Council Tax Collection 1993/94 to 2001/02
7
Analysis of Council Tax options
8
Details of Responses to Public Consultation
9
Schedule of 2002/03 Revenue Budget Assumptions
10
Formal Resolutions - 2001/02 Council Tax
11