To agree the budget and Joint Medium Term Financial Strategy (MTFS) for recommendation to Council on 4 February 2011.

The Cabinet Member Resources advised Cabinet had been preparing for sometime for the cuts in funding under the Comprehensive Spending Review.  The 2011/12 financial settlement had resulted in Herefordshire being required to make savings of £10.3m.  This would include the changes to the local government funding formula which would amount to losses of £2.7m in funding.  It was added that for 2011/12 a number of the grants the Council had previously received would now cease or become part of the general formula grant, and there would now only be six specific grants.  However, there would be greater flexibility for the Council in the way funds were spent.  The Cabinet Member added that it was not intended to increase council tax; this would take advantage of the government’s voluntary scheme to support councils that retained council tax at the current level, with the emphasis being in reducing costs not services.  Funding from reserves would be used to help with the reduction in grant funding.  The Joint Medium Term Financial Strategy brings together the financial planning of the Council and NHS Herefordshire.

The Director of Resources stated that:

• Members had been kept informed of the Comprehensive Spending Review (CSR) process and the wider implications of the reductions in public sector spending, which were outlined on page 6 of the report.
• The budget encompassed the council tax voluntary scheme to hold council tax at current levels
• The additional funding of £3.5m for Adult Social Care was welcomed.
• The reduction in the number of grants had reduced bureaucracy and increased local choice on spend.
• There would be an increased impact on schools as they faced funding pressures as the number of pupils on the rolls were falling.
• The settlement was expected to be in place for two years following which central government was to review the formula; further change was therefore expected including the localisation of council tax benefit.
• The majority of funding would now be via the general formula grant and details of this were still awaited, but the total savings required for 2011/12 was £10.3m.
• Directorates went through the star chamber process on two occasions before the conclusion of the overall budget and policy process.
• With the reduction in grant funding the emphasis had been on cutting costs and not reducing front line services.
• General reserves needed to be maintained at 3% of net revenue budget, which requires a reserve of £4.5m.
• The reduction in funding for concessionary fares could impact on rural areas  but would be mitigated by temporary funding generated through reserves which was required to be replaced within 12 months.
• 2012/13 would also be a challenging year reflecting the speed of the deficit reduction and the change in the formula grant.
• It was anticipated that there would be a loss of 250 full time equivalent (FTE) posts in the authority.

The Leader of the Council made the following comments:

• Although the authority had been preparing for cuts they were more extensive than expected.
• The settlement details were not known  ...  view the full minutes text for item 83