Agenda item

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

The report of the Head of Function (Resources) and Section 151 Officer incorporating the Medium Term Financial Plan for 2018/19 to 2020/21 was presented for the Executive’s consideration.

The Portfolio Member for Finance reported that the Medium Term Financial Plan (MTFP) sets out the Council’s budget strategy over the next three year period and sets out the assumptions which will be taken forward to the annual budget setting process. A number of factors makes it particularly difficult at present to forecast the future with any confidence; additionally the rescheduling of the UK Government’s main budget statement from March to November means that the budget the Welsh Government will receive will not be known until after the date on which the Welsh Government publishes its provisional settlement currently planned for 10 October, 2017.

From 2014/15 to 2016/17 the Council has seen cash reductions in the grant it receives from the Welsh Government as shown in Table 1 of the report. The trend was reversed in 2017/8 when the Council received a slightly higher settlement in cash terms. This represents an overall reduction in Aggregate External Funding (AEF) of 8.1% between the 2013/14 level and the 2017/18 level. In order to mitigate the effect of this loss, the Council has increased the Council Tax at a higher rate than inflation over the same period (Table 2 of the report) with Council Tax as a percentage of the Council’s total funding having risen to 26.6% by 2017/18. Given the uncertainty regarding the UK economy, local authorities will be expected to shoulder further reductions in funding, possibly to the extent of 3.3% in 2018/19 and 2.6% in 2019/20 – a reduction in monetary terms of £5.4m over two years in AEF.

Added to this, local government generally is facing a number of budget pressures; Anglesey will also face its own unique budget pressures which will have to be factored into the MTFP. These are detailed in section 5 of the report and as well as the National Living Wage, the Public Sector Pay Award include service specific pressures in relation to Adult Social Care, Looked After Children, School Modernisation, Highway Maintenance and funding the Corporate Plan as its implementation progresses. The budget process also examines estimated inflation over a number of different areas of expenditure some of which e.g. energy, experience higher levels than others. These are set out in section 6 of the report.

Taking into account all the known budget pressures and the inflationary and other assumptions, it is possible to determine a standstill budget for the period 2018/19 to 2020/21, the standstill budget being the revised costs of continuing to provide services to the same level, delivered in the same way as they are delivered in 2017/18. The estimated standstill budget for the next three year period is shown in Table 5 of the report.

In light of the funding gap between the estimated standstill budget (table 6) and the estimated funding available (Table 7), it is projected that savings in the region of £8.68m will be required over the 3 years from service budgets, totalling £106.7m (2017/18 budget). This equates to savings of 8.1% over 3 years. Thanks are due to the Council’s staff who have hitherto sought to identify and realise savings annually. A review of both service budgets and the MRP Policy gives a total of potential savings identifies to date of approximately £4.7m which is still £4m below the estimated savings requirement.

The Portfolio Member for Finance concluded by saying that to achieve the future required savings, the Council will have to take more difficult decisions, including considering ceasing to provide non statutory services, closing facilities and increasing the contribution made by Anglesey’s residents to the services they receive.

The Head of Function (Resources) and Section 151 Officer said that a clearer picture will emerge once the settlement in announced; however the MTFP sets the broader context at a time when a number of difficult decisions will need to be made in order to achieve a balanced budget.

The Executive noted the following –

•  That for the purposes of the MTFP, an assumed increase of 4% in the Council Tax has been allowed for in each of the 3 years. Given the extent of the pressures on services and the Council’s desire to protect the vulnerable and to maintain the quality of services, it may be necessary to consider consulting on a 5% increase in the Council Tax. It may ultimately transpire when all the budget calculations have been made, that an increase at this level is not necessary but it would be prudent to plan on the basis of a worst case scenario and then if circumstances allow, be able to propose a reduced increase in the Council Tax.

•  That the public needs to be made fully aware that the Council has more or less exhausted the historical route of achieving savings whereby unused and/or unspent budgets were reduced and that backroom functions have also been rationalised as much as possible. The Council’s main aim has always been to protect core frontline services from the worst of the financial cutbacks; in implementing savings it is not choosing to cut services, but is seeking to do the best it can within the financial settlement it is given.

•  That it is imperative that the budget consultation exercise reaches as many Anglesey citizens as possible and that they are encouraged to present their views on areas which they think should be prioritised.

•  That the 2017/18 Revenue Budget monitoring report for Quarter 1 projects a year end deficit of £2.119m. If that were to be the eventual outcome, then more than likely the Council’s reserves would have to be drawn upon to make up the difference thereby reducing the level of the General Reserve Fund and making a higher level Council tax increase for 2018/19 a more real option.

It was resolved to note the contents of the Medium Term Financial Plan 2018/19 to 2020/21 and to approve the assumptions made.