To receive the report and to consider any recommendations to Council arising from the meeting held on 21 February 2008.

The Council received the Cabinet report and recommendations to Council arising from the meetings held on 21 and the 28 February 2008.

The Chairman reported that Council would be asked to debate the Revenue Budget and Council Tax for 2008/09 as part of the Cabinet report and advised Council of the process of the debate.  He stated that once the Leader had proposed the council tax and budget, Members of the Council would be provided with the opportunity to move any amendments.  Once the Council had agreed the Cabinet item, the meeting would move to Item 10 on the Agenda, and would formally set the Council Tax and the Revenue Budget in accordance with legislation.  That was not however, the opportunity for further debate, as it was the necessary formal step that was required to give effect to the resolution on the Cabinet Report.

The Leader of the Council presented the report of the Meeting of Cabinet held on 21 February 2008.  He reported that the first two pages consisted of the Draft Financial Strategy and the Draft Revenue Strategy.  These should be considered within the three year rolling strategy.  The Government settlement of three years was to be welcomed, and was a tribute to the lobbying by the Local Government Association.

Councillor Bramer, Cabinet Member for Resources, presented the Medium Term Financial Management Strategy (MTFMS) 2008 – 2011.  The document represented a capital and revenue budget for the next three to five years, as well as a Treasury strategy for the next year.  It was noted that it had been commended by the External Auditors, and he commended it to the Council as a positive budget for the County.  An additional £3.5m had been made available for Social Care, £900k of which would be spent within the next financial year.

The Comprehensive Spending Review showed how Central Government planned to allocate public spending.  Balancing the Council’s future finances, as well as making sure that they were sustainable, had not been easy.  Efficiency targets for the Council as a whole, as well as individual Directorates, had been set.  Savings of £400k alone had been identified by rationalising photocopiers and printers within the Council, which would allow for further investment in priority areas.  Councillor Bramer went on to say that the clarity of management of balances and reserves was sufficient to provide £4.5m in 2008/09 to cover any variables in the resources model.  This would be monitored throughout the year and adjusted as necessary.  It would mean that the Council would have monies set aside for any unforeseen situations, such as another flooding incident requiring the activating of the Bellwin Scheme.

Councillor Bramer went on to say that the Council had received a 2.35% real term increase for the next fiscal year, which was better than had been expected.  However, Hereford Council still received 20% less funding than the average upper tier authorities.  The Council tax rise of 4.4% only represented 1.5% in real terms, and therefore represented value for money for the tax payer. Thirty five councils had set their council tax for the coming year, and Worcestershire and Shropshire had set 4.34% and 4.4% respectively.  The proposed rise of 4.4% sat well with the Council’s rural neighbours.  Band D Council Tax would therefore be slightly above the average of £1,099, at £1,131.00 increase for the next fiscal year.

Councillor Bramer said that the MTFMS was a comprehensive document and the Corporate Management Board should be congratulated on their presentation.  The budget had been balanced, and the Council had not drawn on reserves to achieve this.  He recommended it to the Council for adoption.

Councillor PJ Edwards thanked Councillor Bramer for his report, and asked the Council to consider three important points.  The first of these was the coming financial risks; the second the duty to contain spending by balancing future budgets; and thirdly was the incremental effect of Prudential Borrowing on the Council Tax.  This would be £36.17 in 2008/09 for a Band D property, a figure that would rise to £68.89 in 2009/10 and £85.58 in 2010/11.  These figures had to be contained, and he urged the Executive and the Council to manage capital bids more effectively. 

Councillor AM Toon concurred that the capital areas were of the greatest concern.  She drew the Council’s attention to the level of Prudential Borrowing, which she considered to be an area of great concern: the rising cost of this borrowing was one of the biggest burdens for the Council.  She blamed poor procurement and financial management for the situation.

Councillor MAF Hubbard remarked that he felt that there was insufficient financial training for Councillors to be able to critically assess these reports. This was an important matter, as Members were being asked to set a central part of the Council’s finances.

Councillor RI Matthews drew Member’s attention to item 34 subsection d) on page 26 of the report.  He said that Herefordshire Connects was an item that had been on the Agenda for a while, and requested that Council be informed when the programme was to be delivered and when the Council would see the benefits.

Councillor TM James, Leader of the Liberal Democrats, said that he felt that the documentation could be simplified in its presentation.  He suggested that the Budget summary should have been included in the main text.  He was also concerned about the Medium Term Strategy and the impact of the proposed borrowing on council tax rates.  He went on to point out that the Capital Receipt reserves would be depleted during a period when future financial stability was difficult to predict.  A recession could increase interest rates in the medium term.  The level of borrowing meant that in order to service the Council’s debt, a sum of around £2 per week per householder would be required and that this strategy should be reconsidered.  He added that he would caution against funds being managed internally. 

Councillor SJ Robertson highlighted item 6.4.9 Smallholdings Estate on page 64 of the report.  She said that the principle of raising funds from vacant properties was sensible, but that eight occupied smallholdings had been given notice to quit.  She was concerned, as there had apparently been no debate over the matter, and the local Members had not been informed.  She said that the Council had a moral duty to help those who were being asked to leave, especially as the Council would be benefiting financially from the sale.  She added that a resident of many years in her ward had been offered a place that was outside of the ward area.

Councillor AT Oliver said that he had concerns regarding the Revenue Budget summary on page 18 of the report and the amount raised through Council Tax this year compared to last year.

Councillor Bramer replied to the issues that had been raised.  He said that the difference that had arisen between the £42m and £74m figures was as a result of the Dedicated Schools Grant. 

He went on to say that the concerns that had been raised around the issue of Prudential Borrowing were addressed by the Prudential Code on page 91 of the report.  The Council must have regard to the Prudential Code when it sets its Affordable Borrowing Limits, which required it to ensure that total capital investments remained within sustainable limits and that impact on future council tax levels was acceptable.   The Cabinet would continue to work within this code.

Councillor Bramer stated that eight smallholders had been served notices to quit.  Three of the premises would be sold as part of the construction of significant capital projects; two were in difficulties and had fallen behind with their rent.  The remainder were subject to the Council’s policy that these farms should be considered as a starter route into agriculture, and not as farms for life.

Councillor Edwards remarked that he supported the view that the overall capital borrowing spends for 2010/2011 outlined on page 101 were not exceptional.  It was quite possible for capital budgets to double within 12-18 months, and it was conceivable that the Council would soon reach the limits outlined.

In reply to a comment on revenue streams Councillor JP French said other local authorities had to make cuts; Herefordshire did not have to face such drastic action.  However, efficiency savings were being made.  It was conceivable that the Council could attain savings in the region of £8m in-year spending on bureaucracy.  A report from the District Auditors had been received, and the Chief Executive would be submitting a further report later in the year.    The recommended changes in children and adult programmes had been adopted.

In reply to queries from Councillors TM James and GFM Dawe, Councillor Bramer said that the Council’s borrowing remained at 8%, which left a large differential between authorised external debt, and what the Council was actually taking out.  Changes in the presentation of the budget had been adopted as a result of requests from Central Government.  The Leader added that ongoing Member development in financial matters was important, and said that the Council’s Finance Team would answer any questions that Members might have.  The Council’s financial capacity was within the budget and was clearly set out in the table on page 15 of the report, where the excess of income over expenditure had been clearly laid out.  The Government had encouraged the Council to go down this route.   The Council would be obliged to prioritise the timescale and cash flow of capital budgets for all major projects currently under consideration.  The capacity for the rest of the supported borrowing arrangements was also laid out, and Members would have the opportunity to scrutinise the figures. 

The Leader reported that the integrity of the £2.5m grant that had been provided for the super refresh of the key priorities for the development of Local Area Agreement as outlined on page 9 of the report would be maintained.

Councillor AM Toon reported that the business case for the Wyebridge Academy had not yet been presented to Cabinet.  She considered that there was a potential estimated overspend on the project of £1.5m. The lack of a business plan had resulted in a call in on the matter in December 2007.  The subject would be exhaustively considered at a Cabinet meeting on the 27 March 2008.  Councillor Hyde, Cabinet Member for Children's Services, replied that there had been slippage on the timing of the presentation of the business case as a result of doubts over funding.  If the Council missed the chance to get the grant from the Department for Children, Schools and Families of £21,939,195 that was currently on offer, it would not be eligible for funding again until 2020.  The grant would meet the cost of the rebuilding of the school in its totality.

Councillor Toon went on to say that she was concerned about the involvement of the Diocese of Hereford in the running of the Academy as parents and children would lose their right to appeal once the Academy would be out of the control of the Local Authority.  Councillor ACR Chappell concurred with these comments, and said that if it had been made clear that the Church would be running the Academy, neither he nor Councillor WU Attfield, as Governors, would have voted for that arrangement.  It was clear, however, that it was important that the Council should support the South Wye area.  There were also other schools within the County that might be looking to be independent, such as the Lord Scudamore School.  The issue was important for the people of South Wye, and he assured Members that should either he or Councillor Attfield have any concerns about the project, he would bring them to Council immediately. The Leader thanked the Councillors for their comments, and pointed out that the Department had made it clear that there was a real risk that the Council might not receive the funding for the Academy if the schedule slipped.  It was clear that a debate on the matter was needed, and he assured Members that a practical solution would be reached at the next Cabinet meeting. 

Councillor Oliver highlighted the fall in the Comprehensive Performance Assessment score from 2 to 1 for Housing, and asked whether there were any other schemes apart from the mandatory 35% of affordable housing that was required of a developer to help solve the affordable housing issue.  The Leader replied that the Council might have to look again at the 35% proportionality.  The County was bidding to be a centre for growth, and there was a blue print for 16,500 houses to be built.  Herefordshire’s sub-regional importance within the region was vital, and the Council needed to be supportive and imaginative in how it supported this.  A sensible debate on the housing issue was clearly needed, and ways of educating the public about the situation would need to be found as growing generations could not now afford to buy houses.  This was a national as well as a local matter.

Councillor JG Jarvis, Cabinet Member for Environment and Strategic Housing, added that, in the current year to date, 41 affordable units had been completed.  A further 67 had been completed by Housing Associations, and 38 empty properties had been brought back into use.  158 affordable units had been delivered in the year, with a further 160 to be delivered by Housing Associations.  He went on to say that 1200 homes would be delivered over the next three years, which would bring the waiting list down by 25%.

In reply to Councillor James’s concern that the treatment of the Landlord of the Dog Inn, Ewyas Harold, was disproportionate, Councillor Jarvis replied that the Council had a duty to enforce the law, especially when there had been complaints from the public.  The District Judge had said that the Council had acted in a professional and impartial way.  The Council had offered alternative ways of dealing with the matter, but these had been ignored. 

RESOLVED: 

(a)   That the reports from the meetings of Cabinet held on 21 and 28 February be received.

(b)   The Medium Term Financial Strategy 2008/11 be endorsed.

(c)   The funding allocations to capital bids be endorsed.