Agenda item

This report reviews the major financial issues facing the Council during this and the next four years. It also provides a framework for the more detailed preparation of the draft Revenue Budget for 2016/17.

Discussion:

Councillor Griffiths disclosed a non pecuniary interest as a member of the Argent Trust in relation to Danecourt School.

The Chief Finance Officer referred to the recent announcement from the Chancellor that Councils would be allowed to fully retain all business rates income. In addition the current revenue support grant would disappear over the life of the current Parliament. A Member commented that the announcement regarding business rates was interesting but the detail was important and until there was clarity it was very difficult for councils to plan their finances in the medium term. The Chief Finance Officer stated that the current Business Rates Retention Scheme operated under a system of top-ups, tariffs and levies, which ultimately prevented local authorities from benefitting excessively from business rate growth and funded a ‘safety net’ to protect local authorities from significant negative shocks to their income and it was likely that the new system would contain something similar. Therefore caution should be exercised when making assumptions about the levels of business rates that would be retained.

A Member referred to the increasing trend of schools moving out of local authority control and suggested work was needed to look at the impact on the Council if the Education Services Grant disappeared given that it was linked to the number of pupils in local authority maintained schools and continued to reduce when schools converted to academies. The point was also made that the Council did not seem to have a clear position on the increasing trend to encourage schools to become academies. The Chief Finance Officer responded that whilst much of the grant was passported straight to schools, a significant proportion was retained to fund special education needs, early years provision and certain other statutory functions of a local education authority. As more schools converted to academies, the funding for these statutory functions was lost in the form of reduced Education Services Grant and Dedicated Schools Grant.  Work was underway to look at the impact of the grant reductions with a view to formulating a more robust policy on this issue.

Reference was made to the £1.8m procurement savings and the fact that the living wage would increases costs on companies and therefore reduce the scope for negotiating savings. Officers replied that the Council was on course to achieve these savings, which would be recurring.  However, the impact of the living wage did make it more difficult when it came to in year negotiations or at the renewal of a contract. The Chief Finance Officer acknowledged that this was potentially a risk in the medium term.

A Member noted that the risk of a complete withdrawal of Schools Funding Agency Community Learning Grant had not been factored into commitments but felt that this should be. The Chief Finance Officer undertook to make Cabinet aware of this view.

Members also discussed the following issues:

Special Educational Needs (SEN) Transport £1m pressure – The Chief Finance Officer explained that although better contracts had reduced unit costs, these savings had already been assumed in the category management target that underpinned the 2015/16 budget and were therefore not available to mitigate the impact of demographic pressures impacting on SEN transport.  Were it not for the procurement savings the cost of SEN transport would have been significantly higher.

Waste Services Pressures – clarification was sought as to whether the additional £1.571m needed for 2016/17 and £1.386 for 2017/18 were incremental or additional pressures and whether by the end of 2017/18 the pressure was £1.8m or £4m. The Committee were advised that the figures were incremental and by the end of the second year the pressure would be £4m.

Local Business rates and appeals – the point was made that a small variation on collection rates could significantly impact on the Council’s finances. A sensitivity analysis would be carried out looking at the Council’s regeneration programme and what was known about new commercial sites being developed. 

Base budget – with regard to the Appendices detailing base budgets a request was made for these to be split between pay and non pay costs including details of FTEs.

Shared services – Shared services were being looked at across the council with the audit shared service with Gravesham Borough Council being a recent example. Regarding the communications shared service with East Sussex County Council there had originally been three aims (cost savings, resilience and ability to trade). The present position was that the arrangements would carry on at an informal level to achieve savings and increase resilience.

Projected deficit – with regard to the projected deficit of £42m by 2019/20 a Member made the point that residents would end up paying more Council Tax for worse services. Also regarding the need to radically rethink the way services were provided due to the scale of the deficit it was argued that many of the measures proposed would require investment to realise savings and this would be difficult to achieve.  Whether the Council was in a position to take the risks and introduce the innovations needed to realise these initiatives was queried in the light of the savings needed to be found. In response the Chief Finance Officer replied that the Council was embarking on a major digital transformation programme which would result in significant savings and improved services to the public so it was not entirely accepted that the savings needed to be found necessarily resulted in worse services to the public.  Where schemes required investment before savings could be found then robust business case needed to be demonstrated. There was the potential for the Council to borrow to provide such investments. Opportunities to generate income were being looked at as well as benchmarking on fees and charges – although any changes to the latter were a matter for Members to decide.

Decision:

The Committee agreed to:

a)        note the underlying aims of the Medium Term Financial Plan;

b)        note the forecast level of overall funding outlined in Section 4 of the report; spending priorities in Section 5 and the consequent funding shortfall identified in Table 2 of the report.

c)             request a briefing note giving more detail on base budgets across the medium term, in particular distinguishing between pay and non pay costs down to service line detail.