To update Cabinet on the provisional Local Government Finance Settlement and to seek the views of Cabinet on the draft Medium Term Financial Strategy (MTFS) and the current planning assumptions and emerging proposals in the budget for 2013/14. The comments will then inform the final version to be presented for agreement to Cabinet on 5 February 2013 alongside the views from Overview and Scrutiny as part of the budget.

The Cabinet Member Financial Management presented the report of the Chief Officer Finance and Commercial, which provided information on the provisional local government finance settlement, and sought Cabinet’s views on the draft medium term financial strategy (MTFS) and the current planning assumptions and emerging proposals in the budget for 2013/14.  During the ensuing discussion, the following key points were made:

·         To date, Central Government had given no clear indication about future funding levels for 2014/15; therefore it was still unknown precisely what financial options might be available, and what caps might be imposed ahead of levels being set for that period.  It was possible that some changes might still be required to the draft strategy in order to accommodate any changes between the provisional and the final financial settlement. 

·         The proposed 1.9% Council Tax increase would be considered by Council in February 2013.  The proposed increase would cover the base budget funding, and was deemed necessary primarily in order to assist funding Adult Social Care, in response to increasing demographic pressures in this service area.  The Leader confirmed that this figure also presented an optimum level of increase without triggering a referendum under the provisions of the Localism Act 2011. 

·         It was noted that work was in progress to engage further with communities, so that continuous improvements could be made to the levels of response to the annual Herefordshire Quality of Life Survey. 

·         The Chief Officer Finance and Commercial confirmed that the borrowing levels were set in the Treasury Management Strategy, approved annually by Council.  The current levels of borrowing were well within the prescribed limits, and the details were set out on Page 67 of the agenda. 

The Chairman of the General Overview and Scrutiny Committee reported on the Committee’s recommendations on the MTFS, as follows:

·         The Committee urged Cabinet to increase the lobbying of MPs and the government, to highlight how the ‘sparsity’ issue adversely affected the Council’s budgetary position.  The Chairman gave examples of the effect of ‘sparsity’ in relation to service areas such as adult social care, due to Herefordshire’s significantly above average older population, and highways maintenance, due to the large rural road network and recent months of poor weather, and said that more emphasis needed to be placed upon the additional pressures faced by Herefordshire in respect of such issues.  The Cabinet Member Financial management and the Deputy Leader confirmed that Members of Parliament had been lobbied on such issues, and also on the challenges facing the Authority in relation to the impact of changes to specific funds, such as the Local Benefit Scheme, and Education and Early Years, and on service areas such as Highways and Public Transport. 

·         Cabinet was requested to ensure that the predicted savings identified through the Root and Branch reviews were delivered, to ensure that the Council’s budget was robust and deliverable.  The Leader confirmed that the reviews had been thorough and comprehensive, and had identified approximately £9.1m savings to date.  Monitoring was in place in order to provide the assurance being sought, and the coordinated approach meant that savings were identified across the service areas, and could be looked at collectively to ensure that any cuts were being made in the most effective and balanced way. 

·         The scope to restructure the Council’s existing borrowing portfolio, and in particular the LOBO loans, be reviewed - the point being that this type of loan was high-interest, and would benefit from restructuring.  The Leader stated that borrowing would be monitored robustly. 

RESOLVED:  that

(i)            The draft medium term financial strategy be noted;

(ii)          The assessment of the provisional local government finance settlement announced on 19 December 2012 – and the impact on Herefordshire – be noted; and

(iii)         A strict cash limit approach to budget management for future years, be endorsed.