To present the report of the Scrutiny Manager and the Head of Function (Resources) and Section 151 Officer.
Minutes:
The report of the Scrutiny Manager outlining the context to the 2018/19 budget setting process was presented for the Committee’s consideration. The report incorporated at Appendix 1, the report of the Head of Function (Resources) and Section 151 Officer on the initial proposals for the 2018/19 budget. The paper provided a position statement on the following matters –
• The Executive’s initial budget proposals
• Welsh Government’s initial settlement for Local Government
• Council Tax
• The reserves and general balances position
• Savings proposals
• Budget pressures and priorities
• Risks
• Impact on the Medium Term Financial Plan
The Portfolio Member for Finance reported that the report above brings to a close the first stage of the budget setting process which has been an internal process conducted within the Council. This has involved significant input by Officers and Elected Members in service review and budget workshop meetings where every savings proposal has been scrutinised, discussed and challenged. This preparatory work has not been easy especially as there remains a funding shortfall of approximately £2m on the standstill budget taking into account all the various financial pressures the Council is facing in relation to pay inflation, general inflation, the national living wage increase; reduction in grant funding and energy costs inflation. The schedule of savings proposals, whilst considerable does offer options, and thereby affords an element of flexibility as regards the decisions that have to be made.
The Council is required to present a balanced budget for 2018/19; this is also important in terms of ensuring the Council remains resilient to the financial challenges in the subsequent years. The initial budget work reflected in the Medium Term Financial Plan approved in September, 2017 estimated that the total savings required over the period from 2018/19 to 2020/21 would be £8.6m. It was also projected that the funding gap in 2018/19 would be £4m requiring services to identify budget savings of 4%. Consequently, Heads of Service identified potential savings of £3.296m.
The provisional local government settlement announced by Welsh Government on 10th October, 2017 although better than expected still represents a 0.1% reduction on the sum allocated to Anglesey the previous year. Having regard to all the known changes in the budget including staff pay increments, inflation, pay award, grants and new responsibilities, the funding needed to maintain a standstill budget has increased from £126m in 2017/18 to £132m for 2018/19. The written statement made by the Welsh Government’s Cabinet Secretary for Finance and Local Government also made reference to the provision within the settlement of an additional £100m on an all Wales basis for the school and social care elements of the settlement (£62m and £42m respectively). However, it is not explained how these figures have been arrived at nor the sum apportioned to Anglesey. It is clear from the figures that the stated additional provision has not as yet translated into additional cash funding for local authorities.
The Council therefore will itself have to meet all the additional pressures in order to balance service budgets either through cutbacks, increasing fees and charges or through further efficiency savings on top of the 4% increase in Council Tax provided for in the Medium Term Financial Plan. However, it is proposed to consult with the public on an additional 1% increase in Council Tax and for the £338k extra funding this would generate to be earmarked to respond to demand pressures within Social Services where expenditure on looked after children and associated out of county placements is overrunning the budget.
The Head of Function (Resources) and Section 151 Officer said that although the provisional settlement was better than anticipated the climate of austerity still prevails and the need for the Council to identify and implement savings has not gone away. Whilst the potential budget shortfall in 2018/19 is now £2m rather than the £4m originally forecast in the MTFP, the prognosis for 2019/20 is not so good. Whilst the provisional settlement for 2018/19 indicates that the potential settlement for 2019/20 will see a further reduction of 1.5% which is in line with the assumption made in the original Plan, the position with regard to pay related changes and their impact on the budget is now worse than expected i.e. incremental increases in the National Living Wage and possible removal of the 1% cap on the public sector pay award. These will put additional pressure on the budget in 2019/20.The Medium Term Financial Plan has been revised to reflect the lower planned savings requirement of £6.8m over the next three year period which still remains a substantial and challenging sum. The savings proposals as presented allow for some flexibility and in total they come to £3.3m where the requirement for 2018/19 is now £2m. However, should the Council decide to maximise these savings in 2018/19 it would help ease the burden on the 2019/20 budget.
Councillor Dafydd Roberts reported that the Finance Scrutiny Panel had at its meeting on 25 October, 2017 given consideration to the annual budget setting process and had noted the following –
• That an increasing amount of revenue grants are being transferred into the local government settlement (£91.7m in 2018/19). For Anglesey, the value of the grants transferred in 2018/19 is £2.343m meaning that actual settlement for Anglesey is not as good as it first seems.
• That the assumptions on which the budget is based are robust and realistic and the risks have been well considered.
• Whilst consulting with the public on the basis of a 5% increase in the Council Tax is not going to be easy, the Panel agreed with the principle that the General Reserves Fund should not be used to reduce the level of Council Tax increases.
• The Panel was not unanimous in agreeing that the funding generated by the proposed additional 1% increase in Council Tax should be earmarked for Social Services. If the financial situation requires a Council Tax increase of 5% then there is a case to be made that the additional 1% increase should be un-hypothecated and available across the board.
The Committee considered the information presented and it made the following points –
• The Committee sought clarification of the impact of the initial proposed savings on Anglesey’s residents and the services they are provided with. The Leader of the Council said that whilst some of the proposals will have an effect on schools, it is considered that this is the last budget that will not have a direct or tangible impact on residents given that no closure of a facility or termination of a service is proposed. The 2019/20 budget is likely to pose much more of a challenge because of the added pressures on pay budgets which are not quantifiable at this stage.
• The Committee noted that the impact in 2019/20 is likely to be more acute if the Council decides to use the better than expected settlement to reduce the Council Tax increase and/or the 2018/19 savings requirement. Better to seek to deliver the proposals in full in order to mitigate the effects in 2019/20 and strengthen the Council’s resilience to future challenges.
• The Committee sought clarification of the potential incorporation within the budget of £125k for the Energy Island Team as a continuation of the £125k provided in 2017/18 since removed from the standstill budget on the basis that no further authorisation was given by the Executive. The Leader of the Council said that bringing this funding into the budget will provide assurance and ensure continuity on the same principle as that adopted by the previous Executive. The funding would be used to co-ordinate the Council’s statutory consenting responsibilities and non-statutory activities arising from the proposed major projects for as long as the team is required.
• The Committee sought clarification of the funding generated by the second homes premium and suggested that this should not be part of the revenue budget. The Head of Function (Resources) and Section 151 Officer said that the budget was originally set at £564k whilst the actual additional debit raised by the premium was £984k with this figure remaining fairly constant since the start of the financial year. The figures show that the majority of taxpayers required to pay the premium have done so; however, the proposal is to increase the budget to 80% of this figure to accommodate the risk that the funds raised by the premium will reduce.
• The Committee had reservations about earmarking the proposed additional 1% increase in the Council Tax to Social Services on the grounds firstly that the Service has been requested to produce mitigating measures to counter the overspend and should be required to report on these; secondly knowing that additional funding has been ring-fenced for Social Services might mean there is less of an incentive for the service to produce mitigating measures, and thirdly providing protection for a particular service is unfair to other services which have no such safety net. If there is pressure on Social Services nationally and specifically Children’s Services because of increased demand, then approaches should be made to Welsh Government via the WLGA.
The Chief Executive said that the number of children which the Authority looks after has increased from 80 in March, 2015 to 142 currently, and although it has since stabilised, the risk of further increase remains. This pattern is replicated nationally and there have been discussions at a regional level about raising the matter with Welsh Government. The consensus at present however is that the matter should be considered further. Social Services and specifically Children’s Services, are aware that the matter needs to be tackled and in particular the issue of specialised out of county placements the costs of which can be significant. A single such placement can cost up to £250k per annum and has an associated effect on the cost of education provision. The service has reviewed every placement and in response to the Finance Scrutiny Panel, is preparing a paper on out of county placement costs in Children’s Services as well as the Learning Service; the paper also seeks to identify the reasons for the overspend in this area and what measures can be taken. This is not an easy task given that this is a statutory responsibility and a demand led budget which makes it all the more difficult to project expenditure with any degree of reliability.
• The Committee noted that the proposals could impact negatively on schools particularly those schools which have minimal reserves and may have to review their staff budget in order to meet any additional requirements. This in turn could have an impact on education standards at a time when the Authority is focusing on raising school standards and performance. The Head of Function (Resources) and Section 151 Officer said that once the schools quantum has been reduced the cuts are then applied according to formula and cannot be weighed or targeted to individual schools. Nevertheless, the primary sector in Anglesey has the highest level of reserves overall in Wales although within the sector individual schools may have a budget deficit.
• The Committee sought clarification of the proposal to delegate more of the repairs and maintenance budget to schools. The Head of Learning said that the intention is to reduce that part of the repair and maintenance budget held centrally and to delegate more of the funding to schools so that they have greater control over how their repairs and maintenance needs are met leading to potential savings for them. The Committee suggested that the proposal could be better explained before it is presented to the public. The Committee further suggested that in the interest of clarity and to avoid misunderstanding, the first reference to school breakfast club at line 6 of the proposals be amended to read “child care” club.
• Whilst the Committee noted that it would have liked to have seen the inclusion within the schedule of more options for generating income for the Council, it was satisfied that overall, the proposals provide a fair, reasonable and appropriate range of options on which to proceed to consult with the public.
Having considered all the information presented and having regard to the views expressed, the Committee resolved to recommend the proposed budget savings for 2018/19 to the Executive. (Councillor Aled Morris Jones abstained from voting)
NO ADDITIONAL ACTION WAS PROPOSED