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 2018/19 and the resulting impact on the Isle of Anglesey County Council’s revenue budget was presented for the Executive’s consideration. The report also updated the Medium Term Financial Plan which provides a context for 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 2018/19.

The Portfolio Member for Finance reported that the process which has led to the final budget proposals for 2018/19 has been a long, challenging but comprehensive undertaking and thanks are due to everyone who has participated in the process both inside and outside the Council and in particular, the staff of the Finance Service for their hard work and professionalism throughout the process. The initial budget proposals were approved by the Executive on 6 November, 2017; these were published for public consultation on 7 November, 2017. The proposals were based on an increase of 0.1% in the Welsh Government’s provisional revenue settlement which accounts for most of the Council’s funding and although this was better than expected, it was still insufficient to bridge the funding gap. The Welsh Government announced its final settlement figure in December, 2017 giving a total AEF of £95.8m – an increase of £0.888m (0.7%) from the provisional figure but still leaving the Council with a budget shortfall. With most of the Council’s costs relating to staff, the pay award this year which is expected to be around 2.5 % to 3% will have a budgetary impact; additionally, service budgets are under pressure with the most seriously affected being the Children’s Services budget and the Out of County education service budget. The draft budget proposals which were consulted upon identified potential savings of approximately £3.3m; having considered the feedback from the public consultation and the issues raised therein, the savings proposals have been amended as set out in section 10.1 of Appendix 1 in a way that addresses the main concerns raised during the consultation process. The amendments made reduce the total value of the savings proposals to £2.522m. Section 12 of the report updates the Medium Term Financial Plan in light of the improved settlement as well as possible future settlements. However, because of the uncertainty regarding settlements after 2018/19 and the difficulty in making predictions with any accuracy, section 12 outlines two possible models – the worst case scenario as at Table 9  where savings of

£5.26m are envisaged over the next three years, and the best case scenario as at Table 10 where the savings requirement over the same period drops to £2.8m depending in both cases on the changes in Aggregate External Funding and budget pressures and inflation at the time. The Portfolio Member for Finance referred to section 10.3 of Appendix 1 which sets out the options for allocating budget savings of £490k from the delegated schools budget deferred from 2017/18, and he proposed that the savings be apportioned across the school sectors based on the level of balances as at 31 March, 2017 i.e. the second of the four options. The proposed final budget for 2018/19 is £130.945 funded by means of the AEF of £95.812m and a 4.8% increase in Council Tax. The increase of 4.8% in the Council Tax raises the Band D Council Tax for 2018/19 by £52.20 to £1,140.21 at a level that still compares favourably with other North Wales authorities. It is further proposed that the funding generated by a 0.8% increase in Council Tax i.e. above the initial 4% proposal, is allocated to Children’s Services as a contribution to the increasing costs faced by the service as a result of the increase in the number of looked after children.

The Head of Function (Resources)/Section 151 Officer confirmed that having considered all the risks and mitigating actions as set out in the report, he was of the view that the budgets proposed are robust and deliverable. He echoed the Portfolio Member’s comments by saying that although at face value the situation is better than at first forecasted, with a higher than expected end settlement, the extra funding received is not enough to cover the increased cost and pressures which the Council is facing in the form of general inflation, pay inflation/increases, additional responsibilities and cuts in specific grant funding. The Council therefore has no option but to try to make up the deficit by increasing Council Tax, and this continues the shift over recent years whereby an increasing proportion of councils’ funding is met by local taxation i.e. Council Tax. There is some uncertainty as regards future budgets as reflected in the report at Appendix 1 which offers two possible scenarios going forwards. Much depends on the level of funding allocated by the Central Government to the Welsh Government and then on the latter’s priorities in distributing that funding. There is also uncertainty surrounding future pay costs; whilst local government pay increases have been pegged back at 1% for a number of years there is now pressure to lift the cap; consequently the Council is preparing for a pay increase of 3% both in 2018/19 and possibly in 2019/20 (not including teachers’ pay).The Officer said that he therefore saw no indication that the need to identify savings will ease; conversely as the need to make savings continues, finding those savings becomes increasingly difficult. The long-held strategy of making cuts and efficiencies is no longer enough; the Council will have to look at the services it provides, and how it can continue to provide them. Over the next three years the Council may have to identify savings of between £3m and £6m, if pay increases exceed expectations, the savings required could be even higher.

The Executive in considering the information, noted the following –

•  The Executive noted that the Central Government’s austerity agenda, in force for a number of years, is now having a real effect, and that the options put forward are the best the Council can do in an increasingly difficult situation where budgets are reducing and pressures are increasing. The alternative to increasing the Council Tax is to make deeper cuts in services which is a route the Council is keen to avoid. This is the hand the Council has been dealt with and is trying to make the best of while minimising the impact on taxpayers.

•  The Executive noted that having regard to the public consultation, to the input by stakeholders and by Scrutiny, it has reviewed the proposed schedule of savings in response to public opinion and has amended the proposals accordingly. It has noted and has responded to the concerns raised specifically in relation to education, to school transport, to grant funding for community groups and to schools’ repair and maintenance.

•  The Executive noted, and it highlighted that a number of grants are now being combined and/or assimilated within the general revenue settlement to the Council, but in the process of assimilation the grant funding is actually being cut e.g. the Waste Disposal Grant in being incorporated within the settlement has reduced by 20%, the Education Improvement grant has reduced by 8%.

•  The Executive noted that the Employers pay award is 2% for all staff on pay point 20 and above but is considerably higher for staff on lower pay scales and is 9.19% for staff on pay point 6.

•  The Executive noted that the calculations in the Medium Term Financial Plan (MTFP) as presented in September, 2017 were based on a Council Tax increase of 4% over the term of the plan; the updated MTFP is based on a Council Tax increase of 5% for the same period. The increase has been revised upwards in recognition of the mounting pressure on the Council’s budgets and the desire to still protect services for the vulnerable as far as resources allow. The Executive further noted that the 5% unofficial ceiling on Council Tax increases is now coming under pressure with some councils in Wales considering increases above this threshold.

•  The Executive noted that although the Council is continuing to strive to improve performance whilst at the time having less resources at its disposal, year on year cuts are not sustainable in the long term; there has to be an end point to the reductions in local government funding.

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 note the equalities impact assessment summary on the budget proposals as outlined in Section 11 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 10 of Appendix 1 and Appendix 3.

•  That the savings on the delegated schools budget deferred from 2017/18, be allocated across the 3 school sectors on the basis of school balances as at 31 March, 2017 (the last known figure). This would allocate the savings as follows:

£399,940 to the primary sector; £53,460 to the secondary sector; £36,600 to the special sector.

•  To note the Section 151 Officer’s recommendation that a minimum of £6.5m general balances is maintained for 2018/19.

•  To note the comments made by the Section 151 Officer on the robustness of the estimates made as set out in Section 8 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 28 February, 2018.

•  To authorise the Section 151 Office 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 4.8% increase in the level of the Council Tax.