SUMMARY/PURPOSE

To apprise members of the Committee of the latest budget forecasts for 2006-07, and progress with the budget process.

BACKGROUND

1. The provisional Revenue Support Grant Report is expected to be announced in the week commencing 5^th December, and indications from the ODPM so far are that the overall non-schools grant will be lower than previously forecast, after allowance is made for specific grant transfers into general grant. In addition, there is a grant methodology review that includes a number of possible changes which have a detrimental effect on our share of the national total, most notably the Area Cost Adjustment.

It is hoped that the announcement in December will also include provisional figures for 2007-08.

The budget forecast is based on either a retention of national share, or a loss of share protected by a safety net, both of which produce a similar forecast for 2006-07, but with the latter leading to a poorer position in future years. (see below). In the event of a loss of Area Cost Adjustment and no safety net, the 2006-07 position would by £3.7 m worse than forecast, all other things being equal.

Table: Extra savings over and above budget plan (£9m), for different grant scenarios and future years.

Year	Retain share	Lose ACA, but ‑2.5% safety net*	Lose ACA, no safety net
2006-07	0	£0.4m	£3.7m
2007-08	£4.2m	£8.0m	£7.9m
2008-09	£10.3m	£14.3m	£14.2m

(A safety net of -5% would add £1.1 millions to the 2006-07 requirement.)

2. One strand of the budget strategy involves Adult Services finding £4 millions of savings in order to absorb spending pressures. The acting director has identified these and the proposals are now being subjected to detailed member scrutiny.

3. A further component involves efficiency targets of 5% for all in-house activity other than schools or Adult Services. These are expected to be identified in full by the time the grant position is known.

4. A panel of members has been examining services of a discretionary nature with a view to identifying those which do not contribute to the Council’s priorities or which could be delivered in a different way. This has resulted in some specific suggestions which the Directors Group is now working on. The budget plan assumed that £1.5 millions would be achieved through this ‘prioritisation’ process.

5. Finally, the budget forecast assumed that the Island-wide parking permit would cost £1 million in its unlimited form, and it was suggested that this might be reduced to £500,000 in order to deliver the savings target. Whilst there are ways in which this could be achieved, for example by limiting stays to 4 hours and increasing coverage elsewhere, it is not clear at this stage what the Policy Commission recommendation or Cabinet decision will be. There is a significant financial risk in this project.

6. Verbal updates on latest developments will be made at the meeting.

OUTCOME OF CONSULTATIONS

Consultation with a wide range of stakeholders will take place through focus groups in December and January.

FINANCIAL IMPLICATIONS

Both the grant settlement and delivery of the budget plan have significant financial implications which are dealt with in the body of the report. To the extent that the resultant Council Tax is too high, further savings of roughly £600,000 will be needed for each 1% reduction in the Tax increase.

LEGAL IMPLICATIONS

The Council is obliged to set a budget and a Council Tax level for 2006-07 before 11^th March 2006 which will deliver continuous improvement in service levels. The Chief Financial Officer is required to comment on the robustness of that budget and the adequacy of the Council’s reserves.

OPTIONS

(a) To note the report

(b) To make other observations and recommendations

RECOMMENDATION

Option A

BACKGROUND PAPERS

Budget Book 2005-06

Revenue Support Grant Consultation – July 2005

Contact Point: Paul Wilkinson, ( 823606 Email: [email protected]

PAUL WILKINSON

Assistant Chief Executive and Chief Financial Officer