Agenda item

This report reviews the major financial issues facing the Council in this and the next three years. It also provides a framework for the more detailed preparation of the draft Revenue Budget for 2013/16. The committee is asked to consider and comment on the report and forward its recommendations to Cabinet for consideration on 2 October 2012. 

Discussion:

The Chief Finance Officer introduced the report that was annually submitted for consideration and reviewed the outlook for the major financial issues that faced the council over the next three years. It also provided a framework for the preparation of the draft revenue budget for 2013/14. He advised that the outlook was more uncertain than last year, as it was the second half of the government’s Comprehensive Spending Review 2010 period and, combined with changes to future funding announced by the Chancellor and the new distribution arrangements resulting from the Resource Review, the Council no longer had available the offer of the Council Tax Freeze Grant of £2.5 million from 2012/13 that supported a nil increase in council tax for this year.

The committee was advised that the Comprehensive Spending Review had predicted a reduction in resources of 28% over the four-year review period. For Medway this had meant a reduction of 11.9% in 2010/11 and 8.3% in 2012/13. Recent announcements by the Chancellor and the new distribution meant that it was now anticipated that a 4.3% reduction was required in 2013/14 and a further 9.8% the following year, with the likelihood of more reductions in 2015-2018 when the next Spending review was announced. Officers also advised that there would be changes to how schools would be funded in the future and work was about to begin on what this would mean for the council’s financial future but it was not thought to be much of an impact in the short-term.

The Chief Finance Officer advised the committee on each of the tables set out in the report, which concluded (at Table 6 on page 108 of the agenda) with a deficit in resources of £5.9 million in 2013/14 and a further £3.3 million in 2014/15 (meaning £5.9m + £3.3m, equating to £9.2 million on 2013/14) after significant savings and council tax increases had been allowed for. Members were advised that if the council could reduce some of the pressures set out in section 5 of the report, this would reduce the deficit.

Members commented that there was no reference to the ‘Stop the Estuary Airport’ campaign which was on-going and likely to be for the next few years and would inevitably require the appropriate finance to support the council’s cross-party position. It was also suggested that the cost of the project manager (a consultant) used for regeneration projects could be charged to capital, rather then the revenue account and asked that this was raised with the Portfolio Holder for Finance during the preparation of the draft budget for 2013/2014.

The committee also commented on the Better for Less savings (paragraph
6.2 of the report), which consistently reported the delivery of £5 - £10 million savings. Members asked for further information, as the £5 million variation could mean the difference between the council having a budget deficit, or not. Officers advised that the Better for Less programme had been running for some time but the Category Management aspect of the project had only recently begun. The council was due to see the completion of the first element of the Category Management programme by February 2013 when a more realistic figure could be reported.

Members also asked if the Medium Term Financial Plan had built in costs for a possible future request for a Council Tax Referendum, should the council set a council tax rate higher than was acceptable to the Secretary of State. Officers responded that the Secretary of State would declare what he considered to be excessive before the council set its budget. Last year this was 3.5% but it might not be set at that figure again. However, the council did not anticipate that it would set a council tax outside of the acceptable limit but for Members’ information 1% of the council tax rate was approximately equivalent to £1 million revenue for the council.

Decision:

The committee agreed to:

(a)         recommend that the Cabinet endorses the underlying aims of the Medium Term Financial Plan;

(b)         recommend that the Cabinet endorses the forecast level of overall funding outlined in Section 4 of the report;

(c)         recommend that the Cabinet instructs Portfolio Holders and Directors to identify savings and efficiencies to achieve a balanced budget for 2013/2014;

(d)    request that the Cabinet considers including provision for the on-going ‘Stop the Estuary Airport’ campaign into the Medium Term Financial Plan 2013-2016.