REPORT OF THE RESOURCES SPOKESPERSON AND THE STRATEGIC DIRECTOR FOR FINANCE & INFORMATION AND COUNTY TREASURER

1. On 28 January 2002 the Secretary of State placed before the House of Commons the Revenue Support Grant Settlement for 2002/03. Details are contained in this report which sets out the Council's budget position for 2002/03 and forecasts for future years.

2. There are no significant changes from the details contained in my report to the Executive on 18 December 2001.

3. The RSG Settlement was 5.3% higher nationally in terms of Standard Spending Assessments than that for 2001/02 (5.5% excluding police) after adjusting for function changes.

4. Pay and prices and all other pressures are deemed by the Government to be taken account of within the settlement figure.

5. There is no pre-announced capping limit for 2002/03 although reserve powers will still be available to the Government to curb what it might decide are excessive increases in spending or Council Tax in that year or taking a trend over several years.

6. The scheme by which the government penalised local authorities which set Council Tax increases in excess of a guideline figure has been abolished.

7. Set out in Appendix 1 is the Standard Spending Assessment (SSA) settlement for the Isle of Wight Council. There is a net decrease of £45,000 in SSA compared with the December proposals.

8. The Council’s increase in SSA is 6.4% compared with 2001/02 after adjusting for function changes.

9. The Council has made representations to the Secretary of State on the RSG Settlement. There is however no evidence in the RSG Report of any significant adjustment arising from the representations made to Government ministers.

10. The detailed budget preparation process is complete and detailed estimates together with the proposed changes and service plans have been presented to individual Select Committees for their comments.

11. No firm decisions were taken at the Executive on 22 January either in respect of the overall level of spending or on the balance to be struck between spending priorities other than in respect of Education (see para 14). Members did however seek the views of the Select Committees on the draft proposals.

12. Since then Select committees have considered the budget proposals. Appendix 4 shows the Directors’ proposals in full, and comments of the Select Committees against those items that were not agreed.

13. The draft budget reported to Policy Committee on 22 January 2002 and now updated for decisions taken at that meeting and other developments totals as follows:

The draft budget is summarised at Appendix 2 for each service unit, and Appendix 3 shows the draft summary three year plan.

14. The education component of SSA has increased by 6.7% compared with 6.2% nationally. The education service will also benefit from some specific grants many of which will require the identification of matched funding. The sum transferred to the Learning and Skills Council in respect of Sixth Form Funding is £5.615 million.

The Executive resolved on 22 January that the education component of the Education and Community Development Services’ budget should increase in line with the education component of SSA, and this is reflected in the draft budget.

15. The overall increase in the teachers’ pay bill is estimated to be 3.9% including higher payments for certain teachers, particularly new entrants to the profession. The award must be met within the RSG Settlement and various special grants.

16. The Social Services SSA and Special Grants compared with the current year on a like for like basis are as follows:-

* in cash terms – the real terms percentage increase will be of the order of 1%.

Excluding Special Grants (ie looking at the net call on the revenue budget) the extra desired requirements of Social Services (including inflation for a like for like comparison) are:-

17. The draft valuation of the Pension Fund (which covers staff other than teachers and fire fighters) requires an increase in the Council’s employers’ contribution rate of 1% (from 9.5% to 10.5% in 2002/3 with a further 1.5% from 2003/4 and another 2% in 2004/5. The fund’s total employers costs remains below the average of counties. Moreover, this is less than the previous assumption of a 2% increase in 2002/3 with a further 2% in 2003/4 and 1% in 2004/5. The change has been taken into account in the draft budget.

18. The draft budget allows for pay awards of 3% for all groups and 3% for prices together with provision for extra pupil numbers in schools.

19. Provision is made for the financing of a capital programme of £12 million in 2002/03 in line with the capital allocations announced in December. These are set out in Appendix 5.

20. The Directors have put together what they regard is a balanced programme which:-

• allows Education spending to increase in line with the Education component of SSA and otherwise protects front line services as much as possible:-

The draft budget also takes account of the latest predictions on capital financing costs.

An allowance of £323k is also made at this stage for any additional net expenditure the Executive may choose to adopt or reinstate when considering the recommendations arising from the Select Committees’ budget deliberations. As, however, the Council’s car parking proposals had not finished their consultation stage at the time of writing, no provision has been made in the draft budget for additional real terms car park income.

At this stage the Directors make no collective suggestion as to the level of Social Services spending but seek political guidance. However, meeting the desires of Social Services in full would result in increasing the Council Tax by 13.25%.

At the other end of the spectrum, if Social Services spending were contained at SSA the Council Tax increase would be 5.8%. This would, however, reduce spending below this year’s original budget. Spending in line with this year’s original Social Services budget would produce a Council Tax increase of 7.5%.

An alternative line which would increase Social Services spending by £1.327m in real terms (roughly 50% of the sum requested) would result in a Council Tax increase of just under 10%.

21. The Council’s success as one of the pioneers of the Private Finance produced a specific grant from the Department of Local Government, Transport and the Regions to support the scheme through the RSG system. The Government has decided to continue paying a Specific Grant for this purpose in 2002/03. The precise amount of the grant will not be notified until June 2002.

22. The value of this grant in 2002/03 is estimated to be £1.428 million. (2001/02 £1.488 million) and is taken into account in the draft budget.

23. The Hampshire Police Authority precepts separately on the Island Council and Hampshire Councils. It has its own SSA and its precepts do not count against any potential capping limit for the Island Council. The Police Authority precept for 2002/03 is anticipated to be £75.15, an increase of 27.3% (subject to confirmation on 19 February).

24. Members will be aware of expenditure pressures in the current year on Social Services and waste management. The total potential overspend on these two items is estimated to be £1,554,000, as follows:

In a normal year this level of overspend would have more or less eliminated the Council’s General Reserve, or alternatively required severe service reductions in-year.

25. Once again, however, pro-active debt management coupled with continuing low levels of interest rates and significant capital slippage have resulted in a reduction in capital financing charges equal to almost half of this sum. In order to meet most of the remainder, it is assumed in the draft estimate that £600,000 of resources set aside for capital purposes will be used instead to support the revenue budget.

26. It has been possible, therefore, to provide a contingency for most of the potential overspends shown above, whilst leaving the estimated General Fund balance at the year end only slightly lower than budgeted. After allowing for all factors, along with a modest net saving in other areas, the expected withdrawal from the General Reserve in the current year becomes £536,000 compared with a budgeted withdrawal of £400,000, leaving a balance at 31 March 2002 of £1,825,000.

27. It is recommended that both of the overspending directorates be instructed rigorously to explore ways of minimising their call on reserves, with a final decision on sums to be written off being made by the Executive when final results for the year are known.

28. As stated above, it is expected that the General Fund balance at 31 March 2002 will be reduced below the £1.9m level (less than 2% of net expenditure) as I indicated in July and September. The District Auditor has commented that this is a very low level of balances leaving little flexibility for meeting unexpected liabilities or reductions in income.

29. The unearmarked balance of the Renewal and Repairs fund is £1.7 million after allowing for the scheme to cap the Lynn Bottom waste disposal site. This has to cover any potential emergency expenditure and the likely purchase of land at Prestwood Farm.

• who they think is mainly responsible for setting the level of Council Tax - the Government or the Council.

The results of the consultation process were reported to the Executive on 22 January and were taken into account by each Select Committee in considering the details of the budget.

The document is quite detailed and members should bear its contents in mind throughout the budget process leading to the Council Tax being finally set in February.

Consultation has also been carried out with local business community and trade union representatives.

The Highways capital allocation for 2001/2 was in the form of SCA, it has now been aggregated into ACG and BCA totals.

The overall budget strategy for 2002-03 assumes that £609,000 of capital slippage will provide resources to support the revenue budget. In the event that slippage does not occur to this degree, then a reappraisal of the programme will be necessary.

32. The draft budget as updated is therefore summarised at Appendix 2. These figures as amended by the decisions taken on the budget will be reflected in the Council’s three year plan which will be reported to the Executive in due course. The following paragraph shows how this would translate into the Council Tax for 2002/03. A forward forecast for 2003/4 and 2004/5 consistent with those plans is also shown at Appendix 3.

33. On 23 January 2002 the Council fixed its Tax-Base for 2002/03 at 49,836.7 Band D equivalent properties. There is an anticipated surplus on the collection fund attributable to this Council of £120,000. Subject to rounding this would produce a Council Tax, as follows:

Council Tax for Isle of Wight Council purposes at Band D £895.77 (after rounding)

34. For this Council’s services this would mean an increase of 13.25% or £1.79 per week for the typical Band C taxpayer.

35. To this figure needs to be added the anticipated Hampshire Police precept of £75.15 at Band D (plus 27.3%) and individual parish and town precepts where applicable. This would make the total Council Tax (excluding parishes) of £970.92 at Band D.

36. The overall increase in Council Tax would then be 14.2% or 2.06 per week for the typical Band C taxpayer.

37. If approved, the draft resolutions set out below would give effect to the proposals of the Directors as now updated. Members may of course make alternative proposals.

38. If a different level of Council Tax increase for this Council’s purposes is desired the following table sets out the changes needed, to achieve it:-

39. The effect of adopting any suggested changes to the proposals set out in Appendix 4 varying from the £323k global figure allowed for would directly affect these figures and the Council Tax increase.

40. By law the Council must set its Council Tax before 11 March 2002 [Section 30(6) of the Local Government Finance Act 1992]. However in order to be able to collect the first instalment of Council Tax on 1 April as normal the Council Tax will need to be fixed by not later than 22 February in order to allow for the setting up, preparation, printing and distribution of Council Tax bills. Any deferral which caused so much as a one day delay in distribution of bills would result in extra printing costs and delay the first and could jeopardise each subsequent instalment date. This could mean a minimum cost of £15,000 for extra printing costs plus over £6,000 for each subsequent day’s delay.

41. In addition there will be additional costs, unquantifiable at this stage arising from any consequential effects on payment patterns and delays in recovery procedures and disruption to court schedules if the authority were to be capped.

42. The Government has indicated prospective changes in the Local Government Finance system to take effect from 2003/04. This may mean a major shift in grant distribution, almost certainly cushioned by floors and ceilings to allow a phasing in of changes. The level of Council Tax in the years 2003/4 and 2004/5 will be heavily dependent on the outcome of the changes in the grant system proposed in the White Paper, and provision has been made in the budget for an update of the Island Apart Case.

43. The forward plans for 2003/4 and 2004/5 at present reflect a continuation of the decisions implicit in the 2002/3 draft budget. It will also be necessary to develop this plan further into a rolling and developing medium term budget strategy.

44. The draft resolutions set out below are provided as a starting point for debate. They are based on the draft budget considered by the Executive on 22 January, adjusted for subsequent developments. The salient points are:

• Provision for the service unit cash limits shown at Appendix 2, and incorporating the changes in Appendix 4, with a provision of £323,000 to add back should the Executive wish the items which Select Committees disapproved.

• Sufficient funds are provided to allow the Education Service spending to increase in line with the education SSA increase

i That the revised estimates for 2001/02 set out in Appendix 2 be approved with a final decision on the underwriting of overspends against cash limits being delegated to the Executive.

ii That the revenue estimates for 2002/03 be £132,993,000 and that the budget and cash limit for each service unit be as set out in Appendix 2 attached.

iii That the delegated schools budget be determined by the Director of Education and Community Development within the approved service budget.

iv That authority be delegated to the Executive to determine the initial capital programme within the limit of available capital resources and having given consideration to the views of Select Committees; and thereafter for the Directors Group to manage the programme from day to day within available resources and subject to any direction from the Executive.

v That the borrowing limits set out in the Treasury Strategy for 2002/03 as contained in Appendix 8 be approved. (Paper B2 of the Executive Agenda 18 February.)

vi That it be noted that at its meeting on 23 January 2002 the Council calculated the amounts for the year 2002/03 in accordance with regulations made under Section 33(5) of the Local Government Finance Act 1992 (The Tax Base).

vii That the amounts be now calculated by the Council for the year 2002/03 in accordance with Sections 32 to 36 of the Local Government Finance Act 1992 be as set out in Appendix 7.

viii That it be noted that for the year 2002/03 the Hampshire Police Authority has stated the following amounts in Precepts issued to the Council, in accordance with Section 40 of the Local Government Finance Act 1992, for each of the categories of dwellings shown below:

ix That, having calculated the aggregate in each case of the amounts at paragraph x) above and paragraph h) of Appendix 7, the Council, in accordance with Section 30(2) of the Local Government Finance Act 1992, hereby sets the following amounts as the amounts of Council Tax for the year 2002/03 for each of the following categories of dwelling below:-

Council Tax Banding	A	A	B	C	D	E	F	G	H
calculation including the	(Disabled
Police Precept	Reduction)
Arreton	542.64	651.17	759.70	868.23	976.76	1,193.82	1,410.88	1,627.93	1,953.52
Bembridge	551.28	661.53	771.79	882.04	992.30	1,212.81	1,433.32	1,653.83	1,984.60
Brading	554.07	664.89	775.70	886.52	997.33	1,218.96	1,440.59	1,662.22	1,994.66
Brighstone	545.13	654.16	763.19	872.21	981.24	1,199.29	1,417.35	1,635.40	1,962.48
Calbourne	549.51	659.41	769.31	879.21	989.11	1,208.91	1,428.71	1,648.52	1,978.22
Chale	545.84	655.01	764.18	873.35	982.52	1,200.86	1,419.20	1,637.53	1,965.04
Cowes	549.33	659.19	769.06	878.92	988.79	1,208.52	1,428.25	1,647.98	1,977.58
East Cowes	548.09	657.71	767.33	876.95	986.57	1,205.81	1,425.05	1,644.28	1,973.14
Freshwater	546.73	656.08	765.43	874.77	984.12	1,202.81	1,421.51	1,640.20	1,968.24
Gatcombe	546.93	656.32	765.71	875.09	984.48	1,203.25	1,422.03	1,640.80	1,968.96
Godshill	546.05	655.26	764.47	873.68	982.89	1,201.31	1,419.73	1,638.15	1,965.78
Gurnard	546.77	656.12	765.47	874.83	984.18	1,202.89	1,421.59	1,640.30	1,968.36
Lake	544.81	653.77	762.73	871.69	980.65	1,198.57	1,416.49	1,634.42	1,961.30
Nettlestone/Seaview	544.73	653.68	762.63	871.57	980.52	1,198.41	1,416.31	1,634.20	1,961.04
Newchurch	543.61	652.33	761.05	869.77	978.49	1,195.93	1,413.37	1,630.82	1,956.98
Niton/Whitwell	544.56	653.47	762.39	871.30	980.21	1,198.03	1,415.86	1,633.68	1,960.42
Rookley	545.04	654.05	763.05	872.06	981.07	1,199.09	1,417.10	1,635.12	1,962.14
Sandown	554.83	665.79	776.76	887.72	998.69	1,220.62	1,442.55	1,664.48	1,997.38
Shalfleet	546.06	655.27	764.48	873.69	982.90	1,201.32	1,419.74	1,638.17	1,965.80
Shanklin	547.54	657.05	766.56	876.07	985.58	1,204.60	1,423.62	1,642.63	1,971.16
Shorwell	543.60	652.32	761.04	869.76	978.48	1,195.92	1,413.36	1,630.80	1,956.96
St Helens	548.51	658.21	767.91	877.61	987.31	1,206.71	1,426.11	1,645.52	1,974.62
Totland	549.93	659.91	769.90	879.88	989.87	1,209.84	1,429.81	1,649.78	1,979.74
Ventnor	557.23	668.67	780.12	891.56	1,003.01	1,225.90	1,448.79	1,671.68	2,006.02
Wootton	545.96	655.15	764.34	873.53	982.72	1,201.10	1,419.48	1,637.87	1,965.44
Wroxall	546.04	655.25	764.46	873.67	982.88	1,201.30	1,419.72	1,638.13	1,965.76
Yarmouth	550.15	660.18	770.21	880.24	990.27	1,210.33	1,430.39	1,650.45	1,980.54
Unparished	539.40	647.28	755.16	863.04	970.92	1,186.68	1,402.44	1,618.20	1,941.84

Department of the Environment letters of 28 January 2002 and the enclosures thereto

The figures for Council Tax used by the government assume a 100% collection rate and spending at SSA. The actual Council Tax will be different according to:-

2001/2002 2001/2 2002/2003 Adjusted National Settlement AdjustedSettlement Change Change

The figures for 2001/2 have been adjusted by the Government to reflect changes in function for the coming year. The largest single item is in respect of the transfer of Sixth Form Funding to the Learning and Skills Council.