To propose the three year draft financial strategy for 2010/13 that includes the 2010/11 budget.

The Leader introduced the item and drew Members’ attention to the amended recommendation to the Draft Financial Strategy 2010/2013 which had been circulated in advance of the meeting.

The Cabinet Member Resources advised Council that:

·         The Medium Term Financial Strategy (MTFS) was based on an ‘in principle’ council tax increase of 2.9%, which equated to a rise of £0.66p per week for Band D properties and which would be the lowest level of council tax set by the Council. An on going review of the MTFS would take place in advance of the 5 March 2010 Council meeting.

·         All public services were experiencing increasingly challenging times balancing lower funding levels with the need to maintain front line service delivery.

·         Whilst the Local Government Settlement provided an increase of £2.2million for 2010/11 additional budgetary pressures of £5.5million had been identified.

·         Careful review of the budget identified additional costs for Integrated Commissioning, Children’s’ Services, Adult Social Care (in anticipation of the costs relating to the implementation of the Personal Care at Home Bill), and winter maintenance, as well as the need to reimburse reserves.

·         Planning the strategic and operational intentions of the Council over three years during a period of such uncertainty was challenging and Members were advised that flexibility was needed in the process to allow for informed assumptions to be reflected and amended in the MTFS.

The recommendations were moved and seconded.

The Chairman of the Overview and Scrutiny Committee outlined the following key points raised by his Committee in considering the report:

·         the expectation that funding in subsequent years would be substantially cut year on year at a rate of -5% or more.

·         noted government’s expectation that council tax increase should be ‘substantially’ below 3% and queried the definition of ‘substantially’ in light of the proposed (in principle) council tax level of 2.9%.

·         that vital information was lacking to enable support for or against the Executive’s recommendations (e.g report on capital projects, information relating to the superannuation fund).

Members acknowledged the challenges in relation to the development of the MTFS during such uncertain times; however a number of Members expressed concern regarding the lack of detail with which to make an informed decision on the recommendations.  The following specific points were raised:

·         Clarifications were sought on; (i) the additional cost incurred in relation to shared services and improved procurement processes; (ii) the rationale of recruiting an additional 100 staff in the previous 12 months; (iii) uplift in relation to contracts; (iv) the Connects project anticipated £6million savings; (v) when compatible IT systems would be in place.

·         Comments were made regarding budget allocations; specifically in respect of dementia sufferers and archaeology.

·         It was important to ensure the organisation and the services it delivered were effective as well as efficient.

·         Clarification was sought as to why there remained a debt of £27.7million which originated from the previous Hereford and Worcester County Council.

·         The deficit buildings should not be considered for sale until the economic climate was more favourable.

·         The Council’s budget sheets should be made available on the web.

Responding to comments raised Executive Members stated that:

·         Members were reminded that the February Council meeting provided an opportunity to set the context, discuss issues and ask questions of Cabinet in advance of March Council meeting which would set the budget; the Assistant Chief Executive (Legal and Democratic) would write to Members outlining the legal and constitutional requirements of Council in the budget setting process.

·         Members were advised that officers from the Resources Directorate were attending public meetings in order to outline the position of the Council and the challenges it faced in delivering services and efficiencies in an effective way.

·         The impact of the Government’s position on the financing of local government and public sector in general was challenging and whilst additional funding had been received through the settlement grant, a substantial reduction in funding was expected on a rolling annual basis.  Work on reviewing the financial strategy would continue over the coming weeks and additional information would be made available to Members.

·         The role of the scrutiny function in helping to review the delivery of the right services, and the right time to the public was important to assist the effectiveness of the organisation.

·         Question relating to staffing would need to be referred to the Chief Executive.

·         Members were advised that typographical corrections would be captured in future documentation.

Members indicating support for the recommendations highlighted that the need for those opposed to the proposed budget needed to consider alternative proposals.

Responding to comments raised, the Leader stated that:

·         Para 27 of the report reflected inflationary increases in contract costs.

·         £500,000 had been spent on archaeological costs relating to the Rotherwas Ribbon, which required appropriate investigation, and which had been undertaken at an additional cost to the access road.  Current archaeological costs were being met though an alternative source.

·         It was acknowledged that a three year MTFS had to estimate years two and three.  This year these estimations were more difficult due to the current economic climate, the tightening of public sector finance and the certainty of an election no later than 3 June 2010. 

·         The impact of paying back the severe national debt needed to be considered within Government and by national politicians who needed to be mindful of their approach to funding local government and ensure that no changes to settlements were done mid year in order not to impact services detrimentally.

·         It was imperative that the MTFS took account of potential reductions in Government funding, and whilst no formal figure had been received, cuts of at least -5% were expected over the next two years.

·         It was expected that the reduction in public sector funding would also affect the Area Based Grant (up to £15million) which supported vital services.  However as the ABG stood outside the formal local government budget, it was vulnerable to mid year changes.

·         It was deemed appropriate to reimburse monies borrowed from the reserves in respect of winter maintenance and adult social care.

·         Capital spending has been considered and revised to ensure timescale and phasing of delivery together with the impact on the revenue budget.

·         The financial environment ahead has been described by a leading academic as an ‘end of era’ with officers and members needing to tackle severe challenges not previously experienced in their professional careers.

·         In response to comments made regarding borrowing levels, the differences between prudential and supported borrowing were outlined.  Assurance was provided to Members that the current combined debt level (both prudential and supported) of £115million was well below £185million which would be upper limit.

·         In considering the budgetary process, the proposed increases reflected needs identified, mostly in support of vulnerable children and adults.  Such increases needed to be fully explained to the public and set out within the appropriate context (including the pressures of rurality, demography and infrastructure).  Some potential funding impacts were yet to be fully costed, such as the Personal Care at Home Bill, which whilst a laudable principle, has been estimated by the Prime Minister to cost £650million and by the Association of Directors of Social Services as £1billion, of which 37% of the cost would be borne by local government. 

·         The impact of the recent severe winter weather was ongoing and it was expected that there would be a need to reprofile spend within the highways budget to deal with patching and resurfacing requirements and assess the additional requirements for the 2010/11 budget.

·         It was acknowledged that at 2.9% the proposed (in principle) council tax was too high and would have to come down. 

A vote was taken and the resolution was carried 26 for (2 against, 19 abstentions)

RESOLVED:     

THAT Council approve in principle:

(a)         the Medium Term Financial Strategy (MTFS) shown in Appendix A, which includes the 2010/11 budget and the 2010/11 to 2012/13 revenue overview summarised in the Finance Resource Model (FRM); (noting that the Treasury Management Strategy including the MRP statement remains in draft form until the next meeting of Council on 5 March 2010) and;

·               an additional £1.0m capital allocation for roads maintenance;

·               an additional £500k for the social care contingency; and

·               an additional £500k for the winter maintenance reserve;

(b)         a proposed council tax increase of no higher than 2.9%