Agenda item

To submit a report by the Head of Function (Resources)/Section 151 Officer.

The report of the Head of Function (Resources) / Section 151 Officer incorporating the detailed revenue budget proposals for 2019/20 was presented for the Executive’s final review. The report also updated the Medium Term Financial Plan which provides a context for the work on the Council’s future budgets. The Executive was asked to make final recommendations to the County Council to enable it to adopt a budget for 2019/20.

The Portfolio Member for Finance said that the challenge of setting a balanced budget for 2019/20 has already been reported and that he had previously described the concurrence of negative factors – a reduced funding settlement from Welsh Government, general price inflation and rising costs, pay inflation and increased teachers’ pension costs - as creating a “perfect storm” of challenges leading to an initial budget gap of £7.156m (before Council Tax increase and the application of savings). Savings to the value of £3.747m were identified which included a proposed £1.76m reduction in the delegated Schools’ budget. The Portfolio Member said that it had become clear from the public consultation on the 2019/20 budget proposals that people are not happy for cuts to be made to education or if they have to be made at all, they are of the view they should be kept to a minimum. The Executive has taken heed of this and other messages from the public consultation and has responded accordingly by making adjustments to the savings proposals as outlined in section 9.1 of the report.

The Portfolio Member said that the situation remains extremely challenging not forgetting that the Council has already made savings in the region of £25m since 2013/14. It could be said that the Council is very near the end of its ability to make service savings and that it is very difficult to see where any further cuts can be made without having a serious impact. The Council was overspent on its revenue budget in 2017/18 and will most probably be overspent again in 2018/19 due to a large extent to pressure on the Children’s Services budget. There is an argument to be made that funding for Children’s Services has not kept pace with the doubling of demand over recent years with the cost of child placements in the most complex cases reaching as much as £5,000 per week. In addition, the reduction in the Council’s level of reserves makes addressing any future service overspends potentially problematic.

The Portfolio Member said that he proposed the budget as presented with a heavy heart but with the reality being that the funding which local authorities receive from Central Government via the Welsh Government is not enough having been reduced year on year over the course of several years. The Portfolio Member quoted from an article in the 16 February edition of The Guardian on the English Council Tax system which raises points that are pertinent to Wales – it highlights the pressure that has been put on the Council Tax system because of the cuts in councils’ funding leaving councils nowhere else to turn to raise revenue for services other than by increasing Council Tax which impacts heavily on low income families. The article makes the case for overhauling the system and in the short-term, for increasing general taxation in order to increase funding for local government, to properly support local services and to take pressure off the Council Tax system.

The Head of Function (Resources)/Section 151 Officer said that the 2019/20 budget setting process had been difficult in terms of reflecting the costs and demands faced by services and then balancing those with the income the Council receives via the funding settlement and the Council Tax. It is a requirement under the Local Government Act 2003 that the budget set reflects what the Council views as the true costs of providing services i.e. that its revenues covers its spending, and that it was his professional opinion having regard to the risks as noted in the report that the budgets are robust and deliverable and that the resources the Council has available will cover the cost of services. Looking forwards, no indication has been given by Welsh Government as to the level of future funding, and in the absence of this information, the Medium Term Financial Plan continues to assume no increase in the Aggregate External Finance over the next three years. Council Tax is assumed to rise by 5% per annum; if the increase was less than this figure each 1% below the 5% would require additional savings of £0.41m. Therefore, the need to identify savings continues into the future. The Officer said that no confirmation has been received whether or not the UK Government will fund the increased pension costs for Teachers which for the Authority amounts to £800k. The budget assumes that no contribution will be forthcoming, but if additional funding is received, the Executive will consider how to use the funding at the point when the additional sum allocated is known.

Councillor Aled Morris Jones, Chair of the Corporate Scrutiny Committee reported from the Committee’s 4 February, 2019 meeting where the 2019/20 final budget proposals were scrutinised. The Committee had noted the key messages from the public consultation process noting also that the ideas presented would be scrutinised further by the Scrutiny Finance Panel as a basis for possible savings in 2020/21 and beyond. The Committee had made recommendations as to how the public consultation process could be improved by better reflecting the demographic profile of respondents; by differentiating between service users/non-service users; by preventing multiple /duplicate responses by respondents and by showing how different percentage increases in Council Tax are linked to services cuts or service gains. The Committee had also heard representations by a secondary and a primary head teacher who had outlined the impact on schools of the proposed cut in the delegated schools budget - the Committee had serious concerns about the cut in the schools budget and the repercussions for the quality of education. Having carefully considered the options, the Committee had by a majority voted to recommend a minimum 10% increase in the Council Tax in order to maintain services and to reduce the reduction in the delegated schools budget. Councillor Jones said that those were the majority views of the Committee but were not necessarily his own views.

The Executive considered the report and made points as follows –

•           The Executive noted that the pressure on Council Tax is increasing. Although this Council has historically been among the lowest charging authorities in Wales for Council Tax (18 out of 22) and based on the information published to date, remains so even with the proposed 9.5% increase (16 out of 22), it is difficult to see how increases at a similar level can be avoided in future if the Council’s revenue funding continues to be cut. The Executive emphasised that if the Council is to maintain services taking into account increasing costs and increasing demand, then the only way it can do so is by raising Council Tax unless Welsh Government provides funding at a level that fully meets the Council’s needs and the pressures it is facing.

•           The Executive noted that the Council has over time built up its reserves through careful stewardship of resources. The reserves are now in danger of falling to an unacceptably low level meaning that the Council might not in future have enough resources to fall back on should the unexpected happen. The Executive in noting that this situation is a risk to the Council’s financial well-being and is unsustainable in the long term, accepted that the Council’s reserves need to be restored to the minimum acceptable level and that committing to do so is a sensible and prudent approach to take.

•           The Executive noted that the process of setting the 2019/20 budget has been the most challenging yet and has involved meetings, workshops and discussions over the course of many months. The budget proposals have been assessed, scrutinised, challenged and refined taking into account the wide range of factors that influence how the budget is set.

•           The Executive noted that having regard to the outcome of the public consultation on the budget proposals and to the views of Scrutiny thereon, it acknowledges the concerns raised particularly in relation to cutting the delegated schools budget and the adverse effect this could have on the provision of education in schools. The Executive further noted that it has responded to those concerns and has reviewed and amended the proposals accordingly in an attempt to lessen the impacts on services and service users as much as possible within the resources it has available to work with.

•           The Executive noted that in order to ensure that the Council continues to balance its budget as legally required and continues to deliver services according to expectations and statutory obligations, it has to be properly funded in a way that fairly reflects those requirements. To achieve this requires everyone involved with public services from users to providers to lobby Welsh Government for parity of funding for local government.

•           The Executive noted and accepted the recommendations for improving the public consultation process put forward by Scrutiny.

It was resolved –

•           To note the formal consultation meetings on the budget and the resulting feedback as outlined in Section 2 of Appendix 1 and in

Appendix 2 to the report.

•           To note the equalities impact assessment summary on the budget proposals as outlined in Section 10 of the report and in Appendix 5.

•           To agree the final details of the Council’s proposed budget including the revised funding in response to budget pressures and the proposed savings as shown in Section 8 of Appendix 1 and in Appendix 3.

•           That the proposed reduction in the delegated schools budget be allocated on the basis of the 2018/19 budget share. This would allocate the budget reduction between the three sectors as follows: £347k in the primary sector; £252k in the secondary sector; £27k in the special sector (Section 9.3 of the report).

•           To note the Section 151 Officer’s recommendation that a minimum of £6.7m general balances is maintained for 2019/20.

•           To note the comments made by the Section 151 Officer on the robustness of the estimates made as set out in Section 6 of the Appendix 1.

•           To recommend a net budget for the County Council and resulting increase in the level of Council Tax to the Full Council, noting that a formal resolution, including the North Wales Police and Community Council precepts, will be presented to the Council on the 27 February, 2019.

•           To authorise the Section 151 Officer to make such changes as may be necessary before the submission of the final proposals to the Council.

•           To agree that any unforeseen pressures on demand led budgets during the financial year will be able to draw upon funding from the general contingencies budget.

•           To request the Council to authorise the Executive to release up to £250k from general balances if the general contingencies budget is fully committed during the year.

•           To delegate to the Section 151 Officer the power to release funding from the general contingency up to £50k for any single item. Any item in excess of £50k not to be approved without the prior consent of the Executive.

•           To recommend to the Council a 9.5% increase in the level of Council Tax.

•           To approve the increase in the Council Tax Premium for second homes from 25% to 35% and the increase in the Council Tax Premium for empty homes from 25% to 100%.

•           To accept the recommendation of the Corporate Scrutiny Committee that in order to further improve the consultation process for future years, the process should reflect and/or address the following:

•           Demographic profile of respondents

•           Differentiation between service users/non-users

•           Prevention of multiple/duplicate responses by respondents

•           How different percentage increases in Council Tax are linked to service cuts/gains.