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 initial proposals for the 2017/18 draft Revenue Budget was presented for the Executive’s consideration.

The Portfolio Member for Finance reported that the publication of initial draft proposals for the 2017/18 Budget signals the end of the first phase of the process by which the final Budget will be determined which has been conducted internally within the Council and which has involved extensive input by both Officers and Elected Members in service review meetings and budget workshops. The work has proved challenging and there remains a funding gap of approaching £3m between the original budget and what the Council requires to maintain its current position taking into account the range of cost pressures that it is facing. The schedule of draft savings proposals presented is substantial, but also includes options thus providing an element of flexibility in the choices to be made. The Portfolio Member for Finance stressed the importance of the Council being able to deliver a balanced budget for 2017/18 in order to ensure that it remains resilient to the challenges of the following financial years. The provisional local government settlement announced by Welsh Government was better than expected with the review of the funding formula proving advantageous to more rural councils, and it provided for a 0.3% increase in the allocation to Anglesey. However in reality this will be taken up by other pressures on the budget e.g. the Apprenticeship Levy, so all other requirements and improvement in services will have to be met by the Council from within the resources it has either by making cuts or by increasing the Council Tax. The Welsh Government settlement also made reference to an additional £25m specifically for Social Services in Wales although there are as yet no details regarding this allocation.

The Head of Function (Resources) and Section 151 Officer said that while the improved settlement is to be welcomed with additional funding (£54m) included in the settlement as part of what the Welsh Government foresees local authorities in Wales will be spending on services next year, the Welsh Government has at the same time foreseen that the Council Tax base will increase by 3.5% which will erode the £54m which has been designated as additional expenditure on councils. This has the effect of reducing the additional funding down to £6m, and after the inclusion of grants and new responsibilities which councils have to consider, the net result is in effect no increase in the budget for 2017/18 for councils. Anglesey is better off to the tune of £300k, but that sum is barely sufficient to cover the cost of the Apprenticeship Levy alone with the Council then having to meet the costs of inflation, demand on services and other pressures. The Officer said that the budget deficit is therefore still significant, and that he did not envisage any change to the Medium Term Financial Plan (MTFP) with further cuts in the region of £5m to £6m being necessary in 2018/19 and 2019/20. There remains work to be done on some of the savings in the schedule presented and some e.g. the Library and Youth Services Transformation are in the midst of a consultation process which needs to conclude before the savings figure can be incorporated in the final budget. Work also needs to be done on corporate and central budgets which have not been subject to the same review process as service budgets and this might yield some further savings. The draft budget figures are based on an increase of 3% in Council Tax but should the wish be to increase the Council Tax by less than 3%, then the starting point for the 2018/19 budget will also be lower meaning either more cuts will have to implemented in that year or the Council Tax will have to be increased by an amount greater than that projected in the MTFP.

The Officer said that he wanted to draw the Executive’s attention to a specific risk in the budget in the form of inflation. The 2017/18 draft budget is based on an assumed increase of 1% in inflation but recent forecasts suggest that inflation could increase by upwards of 2% in the next year which would place added pressure on budgets and could also lead to pressure for a greater increase in salaries which in recent years have been pegged at 1%.

Councillor Gwilym O. Jones, Vice-Chair of the Corporate Scrutiny Committee reported on the Committee’s response to the draft revenue budget proposals from its meeting on 19th October, 2016 which was circulated ahead of this meeting, and he recognised that the budget setting process has matured a great deal in recent years. He hoped that the Scrutiny Committee in taking a broader perspective of the proposals in terms of their potential impact on the priorities of the Corporate Plan had added value to the process.

Members of the Executive gave their views on the draft budget proposals and they also commended the work undertaken by Officers, particularly the Finance Service, as well as the contribution made by Elected Members to the process leading to the formulation of the draft proposals.

It was resolved –

•  To approve the standstill budget of £128.259m for 2017/18 and that this should form the basis of the 2017/18 revenue budget.

•  That the grants incorporated into the AEF and the additional funding for new responsibilities be allocated to the appropriate budgets.

•  That the Executive should seek to make sufficient savings in 2017/18 to balance the revenue budget without resorting to the use of general reserves.

•  That the Executive should seek the opinion of the public on the proposed savings.