TYNE AND WEAR MUSEUMS JOINT COMMITTEE
4 FEBRUARY 2004
REPORT OF:
SUBJECT:
Treasurer to the Joint Committee
Revenue Estimates 2004/05
1. Synopsis
1.1 This report indicates the Probable Outturn 2003/04 and the Draft Estimate
2004/05 for Tyne & Wear Museums (TWM).
1.2 The Draft Estimate has been prepared in accordance with the criteria
approved by the Tyne & Wear Co-ordinating Committee on 11 December
2003.
1.3 Draft estimates in respect of the two recent Service Level Agreements
(SLAs) between TWM and North Tyneside Council, and between TWM
and Sunderland City Council, to operate Segedunum and Sunderland’s
Winter Gardens, respectively, are also included in this report. The
management agreement with the University of Newcastle, in respect of the
Hancock Museum, is excluded, as it follows the academic year (August to
July) with a non-local authority partner, and has no direct impact upon any
other aspect of the budget.
1.4 The Renaissance in the Regions programme is not included in these
figures because this is a completely ring-fenced programme with its own
cost centre which is managed by TWM on behalf of the North East Region.
2. Recommendation
The Tyne & Wear Museums Joint Committee is requested to
 Approve the Probable Outturn 2003/04
 Approve the Draft Estimates for 2004/05
 Remit the Draft Estimates to the constituent authorities for inclusion in their
budgets for 2004/05.
3. Probable Outturn 2003/04
3.1 The projected outturn for 2003/04 is £4,498,050.
3.2 Single Status
Phase One of Single Status, will be implemented by the Lead Authority,
Newcastle City Council, on 2 February 2004. The estimated cost of funding
Single Status in 2003/04, across those areas of TWM funded by the
District contributions is £21,750. Only Newcastle made a provision of
£96,240 to fund single status in 2003/04 however, it is anticipated that the
cost pressures in other districts can be contained as a result of prudent
budgeting and unscheduled savings in staffing costs as detailed below.
3.3 Insurance Premiums
The 2003/04 original budget included an allowance for a 50% increase in
insurance premiums, particularly in respect of terrorism premiums.
However, the day before the draft budget for 2003/04 was agreed, Zurich
Municipal Insurance issued notification, to all Local Authority clients that
premiums would rise even more significantly despite contracts being in
place to prevent this. The districts were advised at the time that the draft
budget was agreed, that it was impossible to predict insurance costs for
the coming year 2003/04. The lead authority investigated the possibility of
alternative insurers, but this proved impossible. The increase in premiums
imposed by Zurich Municipal for 2003/04 is £54,840. The majority of this
cost (£39,000) relates to the Newcastle venues.
3.4 Staff Turnover
During 2003/04 there has been significant staff turnover. In addition, the
process of seeking union approval for, and the recruitment to, new posts
incorporated into the 2003/04 original estimate has been a lengthy
process.
3.5 Probable Outturn
It is anticipated that the staff savings will be sufficient to fund the cost of
both the implementation of single status in those districts without a
provision in 2003/04 and the increased insurance premiums, other than in
Newcastle. For Newcastle, the probable outturn is a reduction of
£46,190: this is principally because of the later implementation of Single
Status than had been anticipated. Table 1, illustrates this contribution.
Table 1: Newcastle Probable Outturn 2003/04
£
A. 2003/04 Original Estimate
B. Single Status Provision
C. Single Status Provision required
D. Insurance Premium increase
E. Net reduction of costs (B+C+D)
F. 2003/04 Probable Outturn
£
1,861,140
(96,240)
11,050
39,000
(46,190)
1,814,950
Table 2, below, summarises the revised contributions from the five district
authorities.
Table 2: Probable Outturn for District Contributions 2003/04
2003/04
Original
Estimate (£)
Gateshead
Newcastle
North Tyneside
Stephenson Railway
Segedunum
South Tyneside
Sunderland
Museums
Winter Gardens
Totals
2003/04
Probable
Outturn (£)
Variation
(£)
357,330
1,861,140
357,330
1,814,950
0
(46,190)
176,120
310,180
655,940
176,120
310,180
655,940
0
0
0
937,120
246,410
4,544,240
937,120
246,410
4,498,050
0
0
(46,190)
4. Draft Estimates 2004/05
4.1 The provisional estimate for 2004/05 has been prepared on a real term
standstill basis and is illustrated in Table 3, below:
Table 3: Provisional Estimates for District Contributions 2004/05
Gateshead
Newcastle
North Tyneside
Stephenson Railway
Segedunum
South Tyneside
Sunderland
Museums
Winter Gardens
Totals
2003/04
Original
Estimate (£)
2004/05
Provisional
Estimate (£)
2004/05
Variation
(£)
357,330
1,861,140
400,830
2,017,360
43,500
156,220
176,120
310,180
655,940
185,600
322,240
730,250
9,480
12,060
74,310
937,120
246,410
4,544,240
997,700
258,500
4,912,480
60,580
12,090
368,240
4.2 Price Base
Estimates for 2004/05 are projected at outturn prices i.e. including a
forecast of the likely levels of expenditure required to cover projected
inflation to 31 March 2005 on all heads (including income).
4.3 Contributory Factors
The following factors have been incorporated into the provisional estimate:
 Inflation of pay and prices but excluding insurance premiums
 Approved growth in South Tyneside
 Insurance Premiums Inflation
 Implementation of Single Status
The specific impact of each of these is described in detail below:
4.4 Inflation
The inflation comprises two components:
4.4.1 Inflation on pay:
The draft estimate assumes an inflationary rise of 3% from 1 April 2004.
This equates to £113,560 across the budget. For every 0.5% variation in
the pay award a variation of £18,930 across the Service can be assumed.
Table 4 illustrates the individual saving on district contributions should a
2.5% pay award be made rather than 3%. It should be noted, that if the
pay award is 3.5%, an identical increase in contributions would be
required.
Table 4: Impact of a 0.5% reduction in the pay ward on District
Contributions 2004/05 to 2.5%
2004/05 Reduction of
Provisional
0.5% in pay
Estimate (£)
award (£)
Gateshead
Newcastle
North Tyneside
Stephenson Railway
Segedunum
South Tyneside
Sunderland
Museums
Winter Gardens
Totals
2004/05
Adjusted
Estimate (£)
400,830
2,017,360
1,620
7,620
399,210
2,009,740
185,600
322,240
730,250
780
1,170
3,060
184,820
321,070
727,190
997,700
258,500
4,912,480
4,120
560
18,930
993,580
257,940
4,893,550
4.4.2 Inflation on non-pay items:
Most other expenditure heads have been inflated by 2%, and income
heads by 3%. The notable exceptions are: Electricity (0%), Gas (5%),
Water (5%), Rates (2.66%) and insurance premiums which have been
included at 20% but this is dealt with separately (see 4.7, below). The net
impact of inflation excluding pay and insurance but including income is
£14,820.
4.5 Approved Growth:
4.5.1South Tyneside
The 2004/05 South Tyneside contribution includes growth of £4,000. This
is the second instalment of growth of £20,000 agreed by South Tyneside to
finance an assistant education officer post and other revenue costs of the
redevelopment of South Shields Museum. This sum was included in the
Business Plan submitted in support of the South Shields Museum
redevelopment to the HLF.
4.5.2 Department for Culture, Media and Sport
The DCMS has offered a second consecutive year of growth of £100,000
in Grant in Aid. Delivery and reform are pre-conditions of this new funding
and the priorities are broadening access to cultural activity for children and
young people, building communities, maximising economic contribution
and modernising delivery. The Director is continuing to review and adjust
the structure of TWM to enable the service to deliver the requirements of
the uplift in grant. The DCMS monitors the outcomes both through the
funding agreement process and through the gathering of qualitative and
quantitative performance data. The Minister and her officers have been at
pains to point out that this is additional funding for additional activity.
Attempts to use any part of this contribution as ‘replacement funding’ for
district contributions would not only be met with hostility, but could risk the
DCMS contribution.
The current proposals for utilising the uplift in grant in aid are:
 Creation of an outreach officer post
 Restructure of the Development section and creation of an
additional assistant development officer post
 Creation of a Principal exhibitions Officer
4.6 Employees
The Joint Committee will fund the equivalent of 203.50 full-time posts
(FTE) in 2004/05. This represents an increase of 3.5 FTE over 2003/04.
The breakdown of the variation in respect of the posts between years is as
follows:
FTE
Additions:
Assistant Director
Outreach Officer
Assistant Development Officer
Principal Exhibitions Officer
Assistant Keeper Fine Art
Assistant Learning Officer
Keeper of Art
FTE
1.00
1.00
1.00
1.00
1.00
0.60
1.00
6.60
Deletions
Senior Curator
Head of Development
Keeper of Fine Art (job share)
Assistant Exhibition Officer
Keeper of Biology
1.00
0.10
0.50
1.00
0.50
3.10
Net Effect
3.50
2.90 FTE of the new posts have been created as a result of the uplift in
DCMS Grant. The other 0.6 FTE changes results from changes in district
demand and are financed by increased trading income. The proposals
relating to the Art and Learning sections are the subject of a confidential
report to this Committee.
4.7 Inflation
The relative contribution, by district, accounted for by inflation (other than
insurance premiums) and by planned growth is shown in table 5, below.
Table 5: The impact of inflation and planned growth by district
Gateshead
Newcastle
North Tyneside
Stephenson Railway
Segedunum
South Tyneside
Sunderland
Museums
Winter Gardens
Totals
Original
Estimate
2003/04
357,330
1,861,140
Inflation
Approved
growth
10,300
52,500
0
0
Totals
367,630
1,913,640
176,120
310,180
5,640
8,500
0
0
181,760
318,680
655,940
18,440
4,000
678,380
937,120
246,410
4,544,240
28,040
4,960
128,380
0
0
4,000
965,160
251,370
4,676,620
4.8 Insurance Premiums
As stated in 3.3 the 2003/04 premium increased by £54,840. These
increased premiums are also subject to an inflationary factor of 20% for
2004/05. This involves an additional inflationary cost above the 2% applied
to most other non-pay expenditure heads of £39,650.
A major element of the increases is in respect of Terrorism premiums and
these fall unequally across the districts, according to the valuation of the
collections and the post-code in which they are held. The main burden
falls on Newcastle because of the value of the collections in the Laing Art
Gallery; Gateshead is the next largest because of the Shipley Art Gallery’s
collections. The respective additional costs are shown in Table 6, below.
Table 6: Increases in insurance costs for 2003/04 and 2004/05
Gateshead
Newcastle
North Tyneside
Stephenson Railway
Segedunum
South Tyneside
Sunderland
Museums
Winter Gardens
Totals
2003/04
increase in
Insurance
Premiums
5,810
39,000
20%
Inflation
2004/05
Totals
4,750
28,160
10,560
67,160
1,610
150
890
260
2,500
410
2,680
1,860
4,540
5,010
580
54,840
3,250
480
39,650
8,260
1,060
94,490
The combined increases in contribution caused by inflation, plus the two
years of increases in insurance premiums will result in the percentage
increases shown in table 7, below.
Table 7: Percentage increases in contributions associated with
inflation, growth (South Tyneside, only) and insurance
premiums for 2004/05
Gateshead
Newcastle
North Tyneside
Stephenson Railway
Segedunum
South Tyneside
Sunderland
Museums
Winter Gardens
% increase
5.84%
6.43%
4.62%
2.87%
4.11%
3.87%
2.44%
4.9 Single Status
As stated in 3.2, Phase 1 of Single Status was implemented on 2 February
2004. The estimated cost of funding Single Status in 2004/05, across
those areas of Tyne and Wear Museums funded by the District
Contributions is £205,860. A 0.5% variation in the pay award would not
affect this figure significantly.
Implementation is being phased, so that the full costs will not be borne
immediately after implementation. Staff set to benefit through rises of more
than two increments, will be entitled to a rise of two increments at
implementation, and up to a further two increments on 1 May 2004 and 1
November 2004, and every six months thereafter, until they reach their
new grade. They will then progress through the grade in the usual way.
Premium payments entitlements in respect of overtime will be maintained
until 1 August 2004 to enable further negotiations with Unions.
Within TWM, worker groups affected include attendants, visitor services
posts, drivers, clerical, finance and admin workers, gallery explainers,
excavators, cleaners and shop assistants. Manual staff, in particular, are
set to benefit financially and there is a disproportionately large number of
these within TWM because of the requirement to provide front of house
services (customer care, retail facilities, security etc.). The current wage
bill within TWM for staff covered by Phase one is circa £2m per annum.
Given the number and diversity of staff involved and the complexity of the
protection arrangements and the savings involved, the task of estimating
the cost of the proposals has been challenging. TWM have developed a
model to estimate the potential costs over a five-year period.
Costs associated with single status are presented in table 8. As noted in
3.2 only Newcastle had made a provision for funding Single Status. This
sum (£96,240) is noted in the table as it will be offset against the actual
costs of single status in 2004/05.
Table 8: Additional costs associated with implementation of Single
Status
Gateshead
Newcastle
North Tyneside
Stephenson Railway
Segedunum
South Tyneside
Sunderland
Museums
Winter Gardens
Total (actual cost of single status)
Provision already built in by Newcastle
Balance for 2004/05 Budget
5.
Cost of
Single
Status (£)
% of
2003/04
budget
22,640
132,800
6.34%
7.14%
1,340
3,150
0.76%
1.02%
47,330
7.22%
24,280
6,070
237,610
96,240
141,370
2.59%
2.46%
5.23%
2004/05 Budget Risk Assessment
5.1 The 2003 Local Government Act imposes a duty on the Treasurer to the
Joint Committee to undertaken an assessment of the budget to ensure it is
robust.
5.2 A risk assessment of the 2004/05 budget has been undertaken.
The robustness of the budget proposals needs to take account of a
number of factors, which could influence the financial stability of the Joint
Committee. The main factors to take into account are as follows:
 The reasonableness of the underlying budget assumptions such as:
o Has a reasonable estimate of inflationary pressures been made?
o Have realistic income targets been set?
o Are all known variables associated with the implementation of Single
Status accounted for?
 Is there a contingency available to cover some of the risks associated
with achieving the target?
 Is there a reasonable level of unearmarked reserves, which could be
used to cover any adverse changes?
 The strength of financial reporting arrangements.
5.3 The Joint Committee’s budget strategy therefore needs to be assessed
against these criteria.
5.4 In coming to a view on the robustness of the Budget Strategy the
Treasurer to the Joint Committee has taken account of the following cost
pressures and the uncertainties surrounding the level of funding required in
2004/05:
 The single status position: Because of the complexities surrounding pay
protection, the final costs in 2004/05 cannot be confirmed at this point.
When the figures are confirmed, any additional costs that may occur will
have to be addressed by the Joint Committee.
 Insurance Premiums: The actual premiums will not be confirmed until
late February 2004, although strenuous efforts have been made to
ensure that realistic provision has been made in 2004/05.
 Pay Award: Negotiations are at an early stage and may not be finalised
until after 1 April 2004, although all indications are that the pay award
incorporated into the estimate is realistic and consistent with the rate of
recent awards.
A further report will be submitted to Committee when these issues are
resolved.
5.5 The level of earmarked balances and reserves held by the Joint Committee
is being reviewed. This review will establish if the balances are still required
and if so, if the levels are appropriate. Those no longer required will be
reassigned to support the budget. This process will provide further resilience
to the budget process.
5.6 A significant risk in respect of future years is the continuing cost associated
with the implementation of single status. Provisional calculations indicate
that an additional £120,000 of funding will be required by the Joint
Committee in 2005/06.
5.7 In summary, the Treasurer to the Joint Committee considers the proposed
budget for 2004/05 to be robust and adequate because: The regular budget monitoring and scrutiny arrangements will continue
and an emphasis will be placed on identifying any remedial action
required. This is evidenced by the success of the budget monitoring in
2003/04.
 Cost pressures have been identified and resourced. The Joint Services
Budget – Tyne and Wear Museum 2004/05 which identified all the
issues included in this report was agreed by Co-ordinating Committee on
11 December 2003.
6. Summary
The cost to the TWM districts of maintaining the existing level of service in
2004/05 is £4,912,480.
This represents an increase of £368,240 on the 2003/04 estimate.
The increases are due to the following factors:
 Inflation of pay at 3%
 Inflation of prices (excluding insurance premiums) on average at 2% and
income at 3%
 Planned growth in South Tyneside
 Unpredicted increases in insurance premiums in 2003/04
 Further increases in insurance premiums (estimated 20%) in 2004/05
 The cost of single status.
Details and explanations are provided above and a summary of the variations
is provided in table 9.
Background papers (held by the Treasurer to the Joint Committee on
2004/05 Museums Estimates, at Finance office, Discovery Museum – Tel
0191 232 6789)






Report to Tyne and Wear Co-ordinating Committee 11 December 2003
Letters of instruction regarding levels of district requirements
Letter to Director of Museums from DCMS 23 October 2002
Employee Estimates, including type, number and cost
FAMIS Tabulations
Detailed Excel spreadsheets identifying variations:
2005 Draft Estimate.xls
2004 Revised Estimate.xls
Table 9: Summary of the main variations between the original estimate for 2003/04 and 2004/05
Gateshead
Newcastle
North Tyneside
Stephenson Railway
Segedunum
South Tyneside
Sunderland
Museums
Winter Gardens
2003/04
Estimates
Inflation
(Pay and
prices –
NOT
insurance)
Planned
Growth
Insurance
increases
2003/04
Insurance
increases
2004/05
357,330
1,861,140
10,300
52,500
0
0
5,810
39,000
4,750
28,160
22,640
132,800
176,120
310,180
5,640
8,500
0
0
1,610
150
890
260
655,940
18,440
4,000
2,680
937,120
246,410
4,544,240
28,040
4,960
128,380
0
0
4,000
5,010
580
54,840
Cost of
Single
Single
Status
Status Provision
Standstill
Budget
2004/05
Variation
0
(96,240)
400,830
2,017,360
43,500
156,220
1,340
3,150
0
0
185,600
322,240
9,480
12,060
1,860
47,330
0
730,250
74,310
3,250
480
39,650
24,280
6,070
237,610
0
0
(96,240)
997,700
258,500
4,912,480
60,580
12,090
368,240