Council approved the Medium Term Financial Strategy (MTFS) for 2007 – 2010 when the budget for 2007/08 was set in March 2007.  This report is seeking Cabinet approval to Corporate Management Board’s (CMB’s) recommendations for updating the current MTFS for the 2008 – 2011 period.  The report has been drafted by the Director of Resources in consultation with the CMB.

Cabinet will receive a further report on the MTFS for 2008 – 2011 from the CMB at its meeting on 24th February 2008 that will include details of the final local government finance settlement and any other suggested changes.  Cabinet will also consider views expressed by the Strategic Monitoring Committee (SMC) on this report and finalise its recommendations to Council on the financial strategy for 2008 – 2011, budget for 2008/09 and Council Tax for 2008/09 at that meeting.

Cabinet was advised that the report before them sought Cabinet’s approval of the Corporate Management Board’s (CMB) recommendations for updating the current Medium Term Financial Strategy (MTFS) 2008/11.  Cabinet was advised that a further report would be presented to Cabinet on the MTFS from the CMB at its meeting on 21 February, which would include details of the final local government finance settlement and any other possible changes.  Included will also be any recommendations from the Strategic Monitoring Committee (SMC) and the final recommendations to Council on the financial strategy for 2008/11, the budget for 2008/09 and Council tax for 2008/09.

The Cabinet Member (Resources) set out the direction of the budget referring to the financial settlement for Herefordshire as outlined below:

It was added that it was felt that efficiency gains could be achieved in all service areas through better use of resources without significant reductions in the level of service provided.  The Director of Resources stated the areas of Adult Social Care, Waste, Children’s Social Care, Highways and School Transport were referred to as core service areas with the most financial pressure and it was stated that a modest fund would be set up for these key areas.  The Director added that these were CMB’s recommendations to Cabinet covering the next three year period and that work had been carried out with Cabinet in order to put the proposals together and set the scene of key points for the current financial year and forecasting for the next financial year.  It was stated that in the local government financial settlement the final figure for the formula grant was £53.04m.  Cabinet was advised that there had been a redistribution of the financial settlement leaning more towards London and the South East, however in percentage terms Herefordshire had not lost out as significantly as some other similar sized authorities.  The Leader paid tribute to officers and politicians that had supported Herefordshire in lobbying ministers to achieve the settlement given.

With regard to the recent pay awards the policy on inflation uplift had been revised by CMB to reflect the recent above inflation pay awards.  It was noted that non-inflation on non-pay budgets had been retained.  Each directorate budget had been reviewed to ensure that service cuts would not need to be made.  Cabinet was advised that a single one off payment had been made to the Social Care Adults and Health budget.  A review of the inflation factor on fees and charges had been carried out and it was proposed that it remain at 2½%. 

In referring to the base budget the Director stated that modernisation funding had been identified for the future.  It was suggested that additional money set aside for Adult Social Care to help modernise services be ring fenced in the budget for the future.  In referring to modernisation plans CMB recommended that within the draft MTFS 2008/11 that the Council match fund a contribution to that of the Primary Care Trust, which would be held until the modernisation plan for the two organisations was approved.  It was added that CMB had identified a series of change issues listed at paragraph 36 of the report where money was to be ring fenced for future modernisation plans.  In reviewing the reserves and balances CMB recommended that a fund is created providing a reserve to cover the Bellwin threshold in the event of flooding or any other eligible emergency.  In the general reserves there had been a balance of £3m.  It was proposed that this be increased to £4½m.

The Leader referred to page 14 of the report and the future Council tax increase and gave notice that he wished to have the recommendation revised in light of the final settlement agreement to 4.4% for 2008/09 from the 4.7% proposed.  A Member in attendance asked when the Council would be informed on the accommodation strategy and the Leader stated he recognised the need for Cabinet to work with Scrutiny over the strategy and it was proposed that this should happen shortly.  Reference was made to Environment directorate cut backs particularly in relation to the highways.  Cabinet advised that although the budget was always under pressure the cut backs referred to were not in relation to the highways.

Further discussion was held on the budgets and reserves and any risk management that needed to be addressed in particular with regard to the ICT strategy.    Cabinet expressed that good work had been done in setting up reserves and addressing budget issues.

Cabinet also discussed the work of Scrutiny officers and the Head of Legal and Democratic Services advised Members of the recent interviews carried out to recruit additional staff. 

RESOLVED

THAT: Cabinet approve the Corporate Management Board’s recommendations for updating the current Medium Term Financial Strategy and resource model highlighted in the body of the report subject to:

(a)        inclusion of the final local government finance settlement figures for Herefordshire for 2008/09 and indicative figures for 2009/10 and 2010/11;

(b)       a revised planning assumption for a Council tax increase of 4.4% in 2008/09; and

(c)        continued discussion on the level of reserves in the light of (a) and (b) above.