To propose the three year draft financial strategy for 2010/13.

The Chairman of Overview and Scrutiny Committee (OSC) was invited to present to Cabinet the comments of the OSC on the Medium Term Financial Strategy, as follows.  The OSC:

·         Noted the 4% increase in funding for 2010-2011 (the third and final year of the Comprehensive Spending Review 2007) and the probability that funding in subsequent years would be substantially cut year on year.

·         Noted that the development of the budget was ongoing, but expressed concern over the projected level of Council Tax at 2.9% (given the government’s expectation that Council Tax increase should be ‘substantially’ below 3%) and how such a proposed increase of 2.9% would be greeted by the public.

·         Noted the potential pressure on the superannuation fund.

·         Noted the joint work being developed regarding the tracking of savings.

·         Following a review of the Capital Programme, the OSC requested that the text of the Medium Term Financial Strategy be adjusted to make clear the major schemes it is proposed to complete within three years.

The Chairman of Cabinet and the Cabinet Member for Resources set the context for the discussion which followed:

·         Whilst acknowledging receipt of a 4% increase in the Formula Grant (equating to £2.2 million) it was recognised that the financial picture would change post election and on the publication of the future settlements; currently there were no formal indications for the next three years.  This being the case it was necessary to have flexibility over both revenue and capital budgets to adapt to the changes in the funding environment.  It was stated that the settlement received, whilst being consistent with the projection, did not take account of loss in income to the authority.

·         Two issues which would add significant pressures to the budget were highlighted as; (i) the implementation of free home care for those of critical need, of which 37% of the cost (currently estimated at £650 million) would be expected to be met by local government; and (ii) highways maintenance to address the considerable damage to the infrastructure as a direct result of the severe winter weather.  Both issues required to be addressed by government and the financial impact of both issues was currently hard to gauge.  Local Government was collectively lobbying government in relation to free home care, as whilst this may be a laudable aspiration the current financial realities could not sustain such a provision, especially as no base figures existed for those eligible for support.  The Chairman advised Cabinet that he had written to the Minister requesting the enactment of the Belwin formula to meet costs of repairs associated with the severe winter weather, which, following an initial survey was currently estimated at £5.5million.  Assurance was given that the county had appropriate stock levels of salt and grit but that reserves had been used to cover the budget overspend. 

·         The Chairman requested that Cabinet was cautions in their actions and delegate the revision of figures in light of additional information (the failure to do so would not be good governance).

·         Within the county there had been an increase in demand for services and a reduction in income.

·         Herefordshire had progressively reduced the council tax from 3.9% in 2009/10 to a proposed 2.9% for 2010/11.  It was emphasised that it was the responsibility for local authorities to set a council tax level which delivered services and value for money.

The Director of Resources emphasised that:

·         the key issue in relation to the draft financial strategy for 2010/13 was the high level of uncertainty of the future financial environment for the public sector. 

·         A reasonable estimation of -5% decrease in settlement year on year had been made for the next three years, however there was potential for a deeper impact and that there would be difficult times ahead.

·         The proposed balanced budget had been considered and approved for recommendation by the Joint Management Team and incorporated inflation, service pressures and other spending requirements, service efficiencies, a proposed council tax of 2.9% as well as the Formula Grant. 

·         The proposed level for council tax of 2.9% would be the lowest set by Herefordshire Council, however it was probable that there would be pressure to further reduce the level in future years. 

·         That he would continue to advise Cabinet of any possibilities relating to the capping of council tax.

Cabinet made the following comments in respect of this item:

·         That it was pleasing to note that the value of the superannuation fund was increasing and acknowledged that the resetting of contributions would be considered.

·         Recognised that there had been a significant impact on the authority’s income and charging.

·         Reinforced the principle that savings would be sought through organisational efficiencies and streamlining prior to any impact on front line services.

·         That prior to March work be carried out to:

·          

(i)                  Assess the impact of the severe winter weather to the 2000 mile road network, ditches and drainage.

(ii)                estimate the number of potential service users eligible for free home care for those of critical need; this figure would need to take account of those currently self funding their home care

·         In considering the repair to the road infrastructure the need to balance cost and risk of damage as a result of potholes.

RESOLVED THAT Cabinet:

a)      agree the Medium Term Financial Strategy (MTFS) shown in Appendix A, which includes both the revenue overview summarised in the Finance Resource Model (FRM) and subject to adjustments needed to deal with the recent or unexpected budget pressures;

b)     in principle agree a proposed council tax increase of 2.9% subject to finalising MTFS; and

c)   agree that the Leader, in consultation with the Director of Resources, finalise budget proposals, MTFS and council tax proposals for recommendation to Council.