To agree the draft 2018/19 budget and medium term financial strategy (MTFS) for recommendation to Council on 26 January 2018.

The cabinet member for finance, housing and corporate services presented the report and highlighted:  

·         The report seeks to put forward a balanced budget for recommendation for full council on 26 January 2018.     

·         There had been a provisional settlement announced in the middle of December 2017 which has provided certain options to be considered, in particular the government had changed the basis on which a referendum was required by increasing council tax from 2% to 3% due to the effect of inflation and other clarifications in the settlement.    

·         The 20% increase in planning fees had been approved.  

Due to the provisional settlement announcement, the cabinet member for finance, housing and corporate services was now proposing an amendment to the recommendation ii and iii so that the core council tax was increased to 2.9% (instead of the 1.9% stated in recommendation ii of the report) and the adult social care costs be reduced to 2% (instead of 3% as stated in recommendation iii of the report).   This would provide the council the same amount of revenue but would allow greater flexibility in how the money could be spent.   The adult social care precept was one off funding which may not be available the following financial year and the increase in the core council tax would be added to the base budget and therefore available the following year.    

It was proposed that an additional recommendation as set out in vii below was required to make technical, grammatical and typographical amendments to appendices 1 and 5.   Following a query from the group leader for the Green party, it was confirmed that these amendments were not material and would not need to go back to General Scrutiny Committee.   The S151 officer agreed to circulate to scrutiny committee members’ details of the changes which would be made to the documentation.  

Following a query from the cabinet member for infrastructure, the S151 officer confirmed a base budget review had taken place and where necessary adjustments to base budgets had taken place.    Details of the changes in the directorate base budgets were contained within the table at paragraph 17 of the report. 

The S151 officer confirmed that there would be no impact on the budget if the changes proposed were agreed as there would still be a 4.9% increase in council tax.  

It was noted that Local Government Association had reported that the majority of other local authorities were adding increases to the core council tax rather than the precept for adult social care due to the uncertainty over whether the adult social care funding would still be available the next year. 

The group leader for It’s Our County indicated that it would be a good idea to raise the base budget provided it did not impact on the adult social care budget.   The cabinet member for health and wellbeing confirmed that it would have no impact on his portfolio area.  

Following a question from the group leader for It’s Our County, it was confirmed that the option to increase council tax by 5.9% (and therefore increase the base budget by 2%) had been discussed.  The reasons for not increasing further had been due to the average wage for Herefordshire which was £20k and the national average was £27k which would make it financially more difficult for residents.   

The group leader for It’s Our County noted that if it was explained to residents that the level of council tax needed to be raised by 5.9% they would understand, especially if the additional 1% was ring fenced to services which residents valued.    This was

an opportunity to maximise the opportunity to increase the base budget.  

The group leader for Herefordshire Independents strongly objected to the council tax being raised by 4.9%.      Due to the level of poverty in the county, there needed to be careful consideration of residents, especially those in rural areas

The scrutiny chairman for adult and wellbeing noted that due to the demographic of Herefordshire, there would be more and more older residents who living on their own, which would lead to increasing demand on adult social care support. 

Following a query from the group leader for Herefordshire Independent, the S151 officer explained the financial impact to the council if Hoople were to close.   The pension liability currently showing in the Hoople accounts would transfer to the council.  The pension deficit was in relation to those council staff who had transferred (TUPE) to Hoople and had been agreed when the company had been set up.   The valuation method to be used by the actuary of the pension scheme was set out in statue and was influenced by the fact that Hoople was not a precepting authority.   Worcestershire who administer the pension scheme were reporting that the whole fund was in surplus and at the next valuation in 2019 there was an expectation that the  fund as a whole would not be in deficit.     It was noted that Hoople had made a significant amount of savings over the last few years and had agreed to do the same for the next financial year.   It was reported that the council were expecting a £100k dividend from Hoople. 

The leader of the Green party commented that taking the opportunity to increase the base budget is sensible.   However, the re-jigging adult social care precept was a lost opportunity as the council needed to replace central government funding.   It was acknowledged that it was not an easy situation to manage but the opportunity should have been taken to put more money in the budget. 

The leader for the Liberal Democrats commented that regardless of the increase, members of the public will be angry and that it would be difficult for the public to sustain a 4.9% increase. 

The cabinet member for finance, housing and corporate services confirmed that he would provide written answers to the questions which the leader of It’s Our County had submitted prior to the meeting.    However, it was confirmed:

·         That the £7m savings in 2017/18 mentioned on page 42, paragraph 14 was achievable and there was sufficient funding in reserves.

·         That the identified savings were continually RAG rated to ensure that they remained achievable.

·         The “business rate smoothing” earmarked reserve is maintained to fund the potential cost of successful business rate appeals. This is used for lodged appeals and an estimate of un-lodged appeals to provided this estimate.

·         That a review of all earmarked reserves had been requested to ensure that they were all necessary and prudent.

·         The council received £20k for each completed NDP which goes towards the cost of  a referendum and that the last opportunity for funding was in April 2018 which meant that reserves would be required to fund future referendums. 

·         That the £500k savings identified in connection with the looked after children budget was a realistic figure and was based on:

o   £162k full year savings in independent fostering agency (IFA) arrangements

o   £132k full year savings on in house placements

o   £90k full year savings in “step downs” in special guardianship orders (SGO).

o   £116k part year savings in “step down” in SGO.

That:

the following be recommended to Full Council:

i.              the council tax base of 68,177.57 Band D equivalents;

ii.            an increase in core council tax in 2018/19 of 2.9%;

iii.           an additional precept in respect of adult social care costs of 2% applied to council tax in 2018/19 resulting in a total council tax increase of 4.9%; increasing the band D charge from £1,376.50 to £1,443.95 for Herefordshire Council in 2018/19;

iv.           the balanced 2018/19 revenue budget proposal of £144.1m subject to any amendments approved at the meeting specifically.

a.    The net spending limits for each directorate as at Appendix 3

b.    The gross revenue budget of £241.2m

c.    Delegates to the section 151 officer the power to make necessary changes to the budget arising from any variations in central government funding allocations via general reserves;

v.            the treasury management strategy at appendix 5 be approved;

vi.           the medium term financial strategy (MTFS) at appendix 1 be approved;

vii.               authority be delegated to the chief finance officer, in consultation with the cabinet member finance and the leader to make technical amendments (grammatical, formatting, and consistency) as necessary to finalise the appendix 1 and 3 for publication for council.