Meeting documents

The Leader extended a warm welcome to Councillor Aled Morris Jones, newly appointed Portfolio Holder for Planning who was attending a meeting of this Committee for the first time.

None to declare.

None to declare.

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30th November, 2009.

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1st December, 2009.

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8th December, 2009 (Budget).

Submitted for information- The minutes of the meetings of the following Committees held on dates shown:-

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Community Safety Partnership Executive Group - 10th November, 2009.

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Corporate Parenting Panel - 14th December, 2009.

Reported - That the Corporate Director (Finance) had briefed members previously on the deteriorating financial position.  In June 2009, the Executive confirmed that savings or windfalls in the current year should be reserved for future years, resolved to support the National Employers in limiting pay awards, and asked services to prepare for 10% savings in the medium term. Further informal briefings since had helped develop the medium term plan which was outlined at Section 3 of the report to this Committee.

The Minister for Social Justice and Local Government announced the final local government settlement on 8 December, and it was due to be debated and confirmed by the National Assembly on 12 January.  The final settlement contained no surprises nor fundamental changes from the provisional settlement.

The final settlement confirmed a number of transfers both in and out of core local government funding and these were detailed at Paragraph 1.2.2 of the report.

WAG generally adjusted their figures to allow for these transfers in published comparisons.  The treatment in this authority’s budget was dealt with at paragraph 2.1.3. of this report.

The final settlement also confirmed the funding “floor” of 1% (on a like-for-like basis). Without this floor funding, Anglesey’s funding from WAG would have increased by only 0.4%, the benefit of the floor being worth an additional £0.58 m to Anglesey.  

The formula included numbers of people and other statistics which measured the demand on the authority’s services. For these statistics, ultimately it was the authority’s share of the Welsh total which determined whether it had done better or worse than the rest of Wales.

It was generally recognised that the oldest of the elderly population placed an increasing demand on local authorities services, and to recognise this the Standard Spending Assessment formula placed a heavy weight on those ages 85 and over. Between mid-2007 and mid - 2008 Wales’s population aged 85 and over increased from 70.1 thousand to 73.3 thousand. According to the same population figures, Anglesey’s population in the same age range was static at 1.8 thousand. This meant the population share in this age range falling from 2.57% to 2.46%, which because of the weighting given to the age range in the formula led to a loss of Anglesey of around £0.1m to £0.15m compared to the position had the average increase applied in Anglesey.

The Chancellor’s Pre-Budget Statement on 9th December was not expected to affect 2010-11 significantly, although there was an announcement of an extra £13.4 m for WAG.  Around half of this was a Barnett consequential increase of the additional funding to extend free school meals entitlements in England.  Because WAG’s budget had to be finalised before the Pre-Budget Report and because the entitlement to free school meals was devolved to Wales, this was not necessarily going to be replicated in Wales.  It will be necessary to lobby for the funding to be transferred to Welsh local authorities in 2010-11 if the same provisions were to be extended to Wales.

There was more interest in the Pre-Budget Report for the outlook from 2011-12.  The Director’s earlier briefings on the budget outlook, and those of the WLGA, had been largely based on figures published with the April 2009 budget. The Institute of Fiscal Studies analysis of the Pre-Budget Report spending plans pointed to an average annual reduction of 3.2% a year in Departmental Expenditure Limits.

Amongst the fiscal measures outlined in the Pre-Budget Report was a further increase in both employers’ and employees’ National Insurance contributions in 2011-12.  This would be an additional cost to be added to forward budget projections.

The Chancellor also announced a determination to cap public sector pay awards at 1% in 2011 and 2012, and to bring forward reforms to cap the employer’s contributions to public sector pension schemes.  Success in both areas would go a considerable way towards avoiding the worst case scenarios outlined in WLGA and other commentators’ forecasts.  

REVENUE BUDGET 2010-11

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Standstill Budget

Tables 1 and 2 of the report to this Committee presented the standstill revenue budget for 2010-11, drawn up according to the Authority’s usual conventions.  The Executive was asked to formally adopt the standstill budget as the starting point for revenue budget deliberations.

The standstill budget allowed for inflation to 2010-11 out-turn prices including :-

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Teachers Pay 

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Other Pay 

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Members Allowances

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Discretionary Income 

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Pensions 

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Energy and Contract Prices

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Fire Service Budget 

There remained uncertainty about future inflation.  For 2009-10 the budget treatment was changed to retain forecast out-turn inflation in a central contingency budget.  At this stage the 2010-11 budgets had been estimated at out-turn prices, but the same approach of centralising the inflation provision may again be required for 2010-11.

The standstill budget (detailed at Paragraph 2.1.4.) also allowed for :-

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National Non-Domestic Rates 

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School Pupils 

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Waste Tonnages

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Penhesgyn gas generation

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Smallholdings ring-fencing 

Although demographic reductions had been allowed for in the education budget, the standstill budget did not yet allow for demographic growth affecting other services.

The standstill budget as presented reflected the deletion of Environmental Services as a separate service headed by a Head of Service, and the consequential restructuring.  The proposed restructuring of the Managing Director’s department was not yet reflected in these tables and further adjustments may be required before the budget was completed.  The Executive’s decision to centralise control over structural building repairs and maintenance budgets (other than schools and smallholdings) required administrative changes, rather than changes in how budgets were shown here.

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Risk and Contingencies.

The main source of uncertainty, as in 2009-10, was over inflation and interest rates.  Inflation increasing would add to costs but interest rates increasing would increase interest earned.

The annual contingency budget for Job Evaluation and Employment Costs now stood at £900k, i.e. 2% of the relevant pay bill.  A round sum of £700k for Green Book staff had been allowed for in the decision on Pay and Grading.  The sum allowed in the standstill budget may face a proportionate reduction as savings proposals reduced the staffing budgets.

The budget currently included a ‘process’ contingency of £500k with the aim that this be reduced as the budget was finalised.  No significant contract contingency was required in 2010-11 but a general contingency would be required to deal with unforeseen events during the year.

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Budget Gap

The Management Team recommended that the standstill budget should be adopted by the Executive as a basis for the 2010-11 revenue budget.

Taking the Final Settlement figures and assuming the Council increased the Council Tax by 5% as resolved by the Executive in November, the affordable total budget requirement was £119,105k.

The Medium Term Financial Plan adopted in March 2009 allowed for a growth allowance of £1.2m, of which £225k had been allocated, leaving a net £975k.  Taking this into account left a budget gap of £2.034m to be bridged.

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BUDGET STRATEGY

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Capital

The authority’s approach to medium term financial planning was better developed for capital spending than revenue spending, with the use of rolling three-year capital plans.  These were usually rolled forward at the same time as the annual budget.

Recent efforts had been directed at improving revenue budget planning, with the result that rolling forward the capital plan was less well advanced.  However, as the capital funding for 2010-11 was not as bad as had been feared,the annual capital budget for 2010-11 was capable of being framed from the second year of the capital plan adopted in March 2009, having reviewed and updated, where required. This review would need to take account of the Asset Management Plan and consider the requirements of schools reorganisations. This was an approach which allowed ongoing spending programmes to continue.

The review of the capital plan for 2011-12 onwards would need to take account of :-

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Expected reduction in capital funding from 2011-12;

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The Executive’s forthcoming development of strategic priorities for the Council.

This work would need to take place after March 2010, when it was intended that the strategic priorities would be adopted, with a view to bringing a revised capital plan to a later meeting of the Council.

If indeed capital funding was to be halved over the period 2011-12 to 2013-14, it was inevitable that there would be a need to substitute for a loss on this scale. This may be by recourse to unsupported borrowing on a larger scale, or in some cases by private sector contractors’ investment recouped by higher service charges.  This in turn would add to pressures on the revenue budget.

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Allowance for Demographic and Growth Pressures

Notwithstanding a financial climate that meant budgets in total were being reduced in real terms, any strategy needed to allow for growth pressures and priorities.  This was done in the plan adopted in March 2009 by allowing £1.2 m each year – a plan which allowed commitments to be made within this sum for the effects of the Pay and Grading review.  Going forward, the amount of this provision needed to be reviewed.

The first issue which needed to be allowed for was the unavoidable growth in the number of service users because of demographic changes. The treatment of demographic growth affecting social care budgets had been more ad hoc. An allowance of around £130k a year was made in annual budgets in 2007-08 and 2008-09 in response to a case made by the service.  In 2009-10, the addition of £750k to the annual budget was assumed to include demographic pressures.  The case made this year (Appendix A) referred to both predictable demographic pressures because the elderly population was increasing, and the growing number of service users in other adult services, which was less predictable.

The Management Team recommended  that the growth bid for demographic pressure should be allowed as a first call against the growth allowance in the 2010-11 budget, and that this item should be separately identified from other growth pressures in plans.

The Corporate Governance Inspection was likely to require some investment in the core governance functions of the authority, with specific recommendations about strengthening corporate services. This was likely to require some of the growth allowance in 2010-11 for permanent commitment, but not further growth after that.

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Revised Projections    

Taking account of the foregoing, the table at Paragraph 3.3.1 of the report attempted a five year budget projection.

In this table, 2009-10 was a summary of what was done that year and 2010-11 was taken from the latest standstill budget figures as outlined above. The projections for 2011-12 and 2012-13 followed a similar methodology to the Director’s presentation to the County Council in September, but updated as outlined in this report. The Council Tax projections assumed an annual increase in yield of 5%, although in practice this could be made up of an increase in taxbase of 1% and an increase in the Council Tax rate of 4%.

The savings requirement had been treated as a balancing figure in this analysis.  It was consistent with the Director’s September briefing that savings totaling around £10m needed to be made over the next 3 years (the actual figure here was £9.2m but the margin of error in such projections was such that it may as well be £10m). Projecting an increase in pay inflation after the proposed pay increase ended, and the effect of substituting for lost capital funding, meant the position got worse, not better, after 2014.

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Savings Requirements.

The need to make revenue savings on an unprecedented scale was of course the dominant issue of the budget strategy.  As had been rehearsed before, these would not be achieved by more salami-slicing or annual cuts, but a programme of change over a period of years.

Informal meetings between Executive members and the Management Team had identified a series of potential savings initiatives, under the following headings :-

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Authority-Wide Initiatives

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Alternative Providers

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Reduce Discretionary Services

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Service Rationalisation

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Service Reduction

These proposals would depend on the Executive’s intended consultation about its medium term objectives and its medium term financial strategy.  Not all the ideas debated so far would ultimately be implemented, some were uncosted, many were controversial and many would take time to deliver savings.

Some of these savings proposals involved reduction in staff numbers, some of which may be achievable by “natural wastage”.  However it was likely that there would also be staff severance costs involved in making savings for the medium term.  Other proposed savings were projects which required upfront investment to work up the project and make it work. For both purposes, it may be necessary to have access to financial reserves.  The Director reported in December on projections of financial reserves, up to £1.1m in excess of what he considered adequate.

The Management Team recommended :-

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that the Executive should seek to make sufficient savings in 2010-11 to balance the revenue budget without use of reserves;

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that the Executive should also seek authority from the full Council to spend up to £1.1m from financial reserves on staff severance or other means of delivering medium term savings.

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2010-11 REVENUE BUDGET PACKAGE

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Growth Bids

There was an allowance of £1.2 m in the 2009 medium term financial plan.  Of that, £0.225m had been taken by the ring-fencing of smallholdings budget and the recommended demographic growth bid. This would leave £0.675m to be allocated to other bids.  It was of course possible to allow more bids if more savings were made, or vice versa.

At the time of writing, the growth bids were being considered by the Management Team and these would be discussed informally with Executive members before bringing forward a package to the meeting today.

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Savings

Assuming the amount set aside for growth remained at £1.2m, net savings of £2.1m were required in 2010-11.

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MATTERS FOR DECISION

Appendix B of the report reproduced the relevant parts of the Budget and Policy Framework Procedure Rules relevant to the adoption of a Budget Strategy and an Annual Budget.  The content of a Budget Strategy was not prescribed, but its timetable required the co-operation of the Principal Scrutiny Committee and the full Council if it was to be adopted in March 2010.

The initial budget proposals for the revenue budget were more prescribed as to content and required decisions at this meeting (or at least by 20 January, six weeks before the Council meeting).  The Executive had also called a series of road shows starting on 20 January.  The completion of a consultation document covering both strategy and annual budget issues should serve both the requirements of the Constitution and public consultation.

This report recommended :-

(a) adoption of the standstill budget (paragraph 2.3.2);

(b) demographic pressures should be a first call on growth (paragraph 3.2.4);

(c) not to use reserves to balance the 2010-11 budget, but to seek access to them for initiatives which generate further savings (paragraph 3.4.5).

The Executive would be required to decide on the items listed at 4.3.2.2.1 of Appendix B.  The package of proposals presented at this meeting would facilitate that.

Councillor Ieuan Williams considered that the Executive needed to formalise how cuts could be achieved and that a long term plan should be drawn up. The Executive should be looking at where there was waste on a Department level. Also look at transforming the business to see where savings could be made and that lastly consideration should be given to services such as reduction in the road maintenance budget. Consultation should also take place with all members of staff seeking their suggestions as regards possible savings and that any package of savings should ultimately be determined by the County Council.

The Interim Managing Director stated that absolute clarity was required as regards the future direction of the Authority. This was required in order to manage the work force effectively and manage the reduction in the head count without resorting to large numbers of compulsory redundancies. By doing this it would be possible to identify staff potentially at risk and start managing that risk. He would be writing to all Heads of Service drawing their attention to the prospects that this Council faced and making it clear that they should not go out for external recruitment of staff other than under the most exceptional circumstances. They should also consider very carefully filling each and every vacancy not only in the context of the needs of today but what actually may be coming around the corner.

RESOLVED

1.To adopt the standstill budget as the starting point for the 2010/11 revenue budget.

2.That demographic pressures should be a first call on growth in the annual budget and built into medium term financial plans

3.Not to use reserves to balance the 2010-11 budget, but to seek access to them for initiatives which generate further savings.

4.To adopt as the Executive’s initial budget proposals for 2010-11:-

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a Band D Council Tax of £829.26, an increase of 5%;

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Growth additional to the standstill budget to deliver on corporate priorities, made up of:-

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     £300k for demographic pressures affecting social services budgets.

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£100k (three years) for the Energy Island project.

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£83k to strengthen services for vulnerable children and adults

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£400k (plus £200k 2011-12 for full year effect) towards building corporate capacity in response to the Corporate Governance Inspection recommendations and to provide the necessary managerial capacity to support the medium term savings programme;

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£25k asset condition surveys

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£20k criminal record checks

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£51k to mainstream funding of procurement officer.

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     A package of savings  made up of :-

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     Economy Drive: 20% of  specified supplies and services budgets: £162k

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     Cut  Press Advertising: £120k

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     Cut 5% of (non-school) energy budgets: £50k

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     2% reduction on schools’ quantums: £654k

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     Waste budget (reflecting reduced tonnages, etc.):  £470k

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     North Wales CCTV collaboration project: £45k

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     Professional trainees: £60k

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     Road maintenance: £200k

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     Management restructuring (one service): £32k

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     Leisure management: £50k

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     Other savings to be found:  £195k

5.To include in the Executive’s consultation proposals both for 2010-11 and the medium term strategy, an intention to review establishments (other than schools and leisure centres),  whose running costs are high compared with their  contribution  to the core objectives of the Council, with a view to securing alternative forms of provision.

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To note the transitional arrangements as referred to in paragraph 2.5 of the report to this Committee.

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To confirm the role of the LSB in relation to Community Planning as referred to in paragraph 3 as the main Strategic Partnership.

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That authority be given to the Portfolio Holder in conjunction with the Head of Service- Policy to respond to the national consultation on the New Measure by 12 January, 2010.

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Strategic Priority 1 - Enhance the reputation of the Council and Island.

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Strategic Priority 2 - Project and develop the Island’s economy.

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Strategic Priority 3 - Build and Support Sustainable Communities.

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Strategic Priority 4 - Promote Healthy Safe and Fair Communities.

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Strategic Priority 5 - Businesslike and Affordable Services.

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That the key objectives and supporting actions as outlined in section 3 of the report to this Committee be subjected to extensive external consultation with stakeholders and the outcome reported back to the Executive on 16th February, 2010.

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To note the work on preparing business plans to support these objectives by the end of March, 2010.