To propose the Draft Financial Strategy for 2009/12.

Cabinet considered the draft Medium Term Financial Strategy (MTFS) for 2009/12, particularly in relation to the current down turn in the economy, which has had a significant impact on the local economy.  Cabinet noted the good work that had been done previously in raising funds from our investments; however, the current interest rates were now considerably lower.  The report outlined the necessity for the reconsideration of the council’s budget, which had resulted in a shortfall in projected income due to a reduction in income and investment interest rates. Cabinet discussed the ongoing efficiency savings requiring efficiency savings in 2009/10 affecting all directorate budgets.  The Director of Resources advised Cabinet that previously investments could earn as much as £10k per day, in the current financial climate it looks at being little more than £2k per day.

Cabinet debated the delivering of a balanced budget in 2009/10 through the use of financial planning and effective financial management.  It was proposed, as a one-off measure, to use £1m of general reserves to meet budgetary pressures, which would be paid back.  Cabinet was advised the only alternative to achieve a balanced budget was to cut services by £1.7m, which Cabinet did not wish to do.  It was recommended to Cabinet not to increase the Council tax above 3.9% as any less than this could create further difficulties. 

The comments of the Strategic Monitoring Committee (SMC) were also taken into consideration, which were:

i)           assurance was sought that the savings expected from the Herefordshire Connects project were as reported to Cabinet on 31 July 2008 and would not be affected by the recession;

ii)         regard needed to be had to the extent of damage to roads by the recent winter conditions; and

iii)        SMC had noted that the revised MTFS proposed a 3.9% Council Tax increase for 2009/10 and for the further years of the MTFS up to 2011/12, however the Council would have to be mindful of Government pronouncements on Council Tax levels and monitor the situation.

Cabinet commended officers for the clarity of the report and for the Medium Term Financial Management Strategy workshop that was provided to all Members.  Cabinet proposed that the Council tax increase be set at 3.9% and noted the anticipated increase of 4.9% proposed by the Police and Fire Authority.

RECOMMENDATION That: Cabinet recommends to Council the recommendations for updating of the current Medium Term Financial Strategy and resource model as highlighted in the report.