To receive a presentation on the budget and emerging options and consider the report to Cabinet on 13 December and make recommendations to Cabinet.

The Committee received a presentation on the budget and emerging options for 2013/14 and considered the report to Cabinet on 13 December.

The Chief Officer Finance and Commercial (COFC) gave a presentation and commented on the development of the medium term financial strategy; the overall approach being taken by central government and the implications of the Chancellors Autumn Statement.  His principal points were:

·         That government had lowered the threshold for a council tax referendum from 3.5% to 2%.

·         The original assumption for 2013/14 was a council tax increase of 2.5% but this has been reduced to 1.9% following government’s announcement in November.  The financial planning assumption for 2014/15 and 2015/16 had now been reduced to zero council tax increase.  This would be revised in line with any government indications concerning the referendum threshold level.

·         The Government had again offered for 2013/14 a further grant to freeze council tax.  This was equivalent to 1% for Herefordshire worth approximately £800K.

·         He indicated the negative cumulative impact of accepting the council tax  freeze grant.

·         In the last two years the Council had made budget reductions of £21.1m

·         Following changes to local government funding methodology comparison with individual funding lines was not now possible.

·         Following the Autumn Statement £10.997m is the calculated government funding reduction over the next two years.

·         A number of specific government grants had been moved into the general funding.

·         The 2013/14 budget proposed a £2m top up to replace reserves or add to existing ones and a total of £5.18m of revenue pressures have been recognised e.g. adult safeguarding; children’s safeguarding, corporate transformation etc.

·          Nationally the adult social care funding system needed radical reform however any resolution had been delayed until the next comprehensive spending review expected early 2013.

·         Anticipated savings from adult social care finding derived from the transformation programme had slipped.

·         In September 2012 a £3m overspend had been predicted. This was now estimated to be an overspend of £5m.  While recovery plans had been put in place to address the overspend he expressed doubts about whether the full overspend could be brought back into balance without the use of reserves.

·         The Root and Branch review process had identified £5m of savings but a further £5m was being sought by accelerating the review process.

During the course of debate the following principal points were noted:

·         Concern was expressed about how the level of overspend could have increased so much, particularly in the short timescale.

·         While the £1.2m used to drive corporate transformation was starting to deliver savings these were not materialising as quickly as anticipated.

·         Concern was expressed that ‘agency spend’ should not be increased to pay for additional staff to sort out the problems caused by the financial pressures.

·         The 2011/12 revenue account would use the underspends across the Council to offset the overspend in adult social care.  The Committee expressed concern that this was penalising and damaging other service areas.

·         Following continued overspends to the adult social care budget the level of budget management was questioned.  In response the COFC reported that budgets were regularly monitored. The funding of delegated care packages was now administered via a central panel. The Committee expressed concern that the level and timeliness of care should not be compromised.

·         The Committee questioned the rational for the recommendation to Cabinet on 13 December that a council tax increase of 1.9% be assumed when the provisional Local Government Settlement announcement would not be made until 19 December.  The COFC responded that the report to Cabinet set out the current financial planning assumptions as the Council needed to have some assumptions about council tax levels for budget planning, however, the decision concerning the level of council tax increase would be a matter for the political process.

·         Responding to concerns about how any change to the national credit rating may affect capital borrowing interest rates the COFC reported that borrowing was actively managed and undertaken via the Public Works Loan Board.  A degree of Council borrowing had been delayed with expenditure being supported from cash balances.

·         Discussions were on-going with Hoople regarding £540k of savings in 2013/14.

RESOLVED: that the General Overview and Scrutiny Committee recommend that in considering the report to Cabinet on 13 December, Cabinet should not commit to a Council Tax increase of 1.9% until the announcement of the local government settlement on 19 December 2012 has been fully assessed.

At this point the Committee adjourned for 10 minutes and resumed at 11.30am.