To invite the Committee to comment on the Medium-Term Financial Management Strategy (MTFMS) prior to consideration by Cabinet.

The Committee was invited to comment further on the Medium Term Financial Management Strategy (MTFSM) prior to its consideration by Cabinet.

The report noted that the proposed final version of the Strategy had not changed significantly from the document considered by the Committee at its previous meeting in September.

The Director of Resources updated paragraph 15 of the report, which set out the prognosis for the four year period covered by the MTFMS, to confirm that, rather than the figures given in the report, the capacity for cumulative spending in 2007/08 would be £3.6 million, in 2008/09 £3.9 million, in 2009/10  £4.6 million and 2010-11 £3.8 million.

She then presented the report.  She informed the Committee that key assumptions had been made regarding the profiling of the savings to be achieved through the Herefordshire Connects programme and in relation to the accommodation programme.  In addition Directors were being required to meet costs including inflation within existing budgets except for allowances for pay increases of 2% per annum and increased pension costs.

She also drew particular attention to the intention to set aside some of the additional spare capacity in 2007/08 to ease the pressure identified in 2008/09 and provide a reserve in the event of slippage compared to the outline, approved financial appraisal for the Herefordshire Connects Programme.  She noted also the robust approach to be adopted towards Invest to Save proposals and Invest to Mitigate growth proposals.

In the ensuing discussion the following principal points were made:

·          The Director confirmed that the additional £451,000 included in the Medium Term Financial Resource Model for the Whitecross PFI Scheme was a one off sum to meet the project’s initial costs.

·          Questioned about the assumptions regarding the Herefordshire Connects Programme, the Director replied that the forecast was that savings of £11.75 million would be achieved over the four year life of the MTFMS.  It was expected, following benchmarking with other authorities that this level of savings would be achievable.  However, it was not possible to be certain about the profiling of these savings, hence the intention to set aside some of the additional spare capacity in 2007/08 to provide a reserve in the event of slippage.

·          A question was asked about the potential impact of inflation noting the requirement that Directors meet costs including inflation within existing budgets except for allowances for pay increases of 2% per annum and increased pension costs.  In reply the Director of Resources stated that in the last financial year there had been an underspend of some £4 million and £6 million in the year before that and it should therefore be possible to find ways of managing inflationary pressures.

·          In relation to managing VAT expenditure the Director of Resources confirmed that the Council was managing activity to allow it to reclaim VAT on exempt business activities whilst being mindful that this must not exceed 5% of the total VAT liability, in which case the Council would stand to lose the entire sum it had sought to reclaim.  She advised that the amount reclaimed currently represented 4.7% of the Council’s total VAT liability.

·          The Director confirmed that it had not been possible at this stage to incorporate potential expenditure in connection with the Rotherwas Futures project within the MTFMS. The Chief Executive added that Members had been informed that there was potentially a gap between the sum the Council would receive from Advantage West Midlands and might receive from developers and the cost of the road itself.  It was simply not possible at this stage to confirm the scale of that gap or indeed that there would ultimately be a gap at all.  As he had previously advised during consideration of the report on the Rotherwas Futures project a judgment had to be taken as to whether the potential return justified the risk.  It had to be recognised, however, that there was a potential impact on the future Capital Programme.

·          A question was asked about how it was intended to address the loss of £250,000 of external funding from Advantage West Midlands to continue website development.  The Director of Corporate and Customer Services replied that the Council had benefited in recent years from significant external funding for website development.  Work had been commenced to look at how best to proceed now that level of funding was no longer available.

·          The Director of Resources was asked about how the projected overspend on both Adult Social Care and Children’s Services would be addressed noting that this far exceeded the contingency sum of £1.3 million.  The Director answered that it was proposed to increase the contingency sum to £3 million for the current financial year.  The review of future needs and services for older people and adults with learning disabilities would then inform Invest to Save and Invest to Mitigate proposals for future years.

RESOLVED:  That it be noted that the Committee was generally supportive of the Strategy, whilst recognising that there would always be differences over some points of the detail.