PAPER C2

 

Purpose : For Decision

                       

                        REPORT TO THE CABINET

 

Date :              17 JANUARY 2006

 

Title :               BUDGET AND REVENUE SUPPORT GRANT REPORT 2006-07

                       

REPORT OF THE CABINET MEMBER FOR RESOURCES, AUDIT, AN EFFICIENT COUNCIL AND CUSTOMER CHAMPION

 

IMPLEMENTATION DATE : 27 January 2006

 

SUMMARY/PURPOSE

 

1.      To provide Cabinet with an update on the progress of the budget process and to invite discussion on further work required prior to formulating a recommendation to Full Council on the budget and Council Tax level for 2006-07.

BACKGROUND

2.      The Council has a manifesto commitment to a Council Tax increase in each of the next four years of no more than the Retail Price Index. In order to achieve this in 2006-07 it will be necessary to reduce budgets by an estimated £9 millions, and work has been underway for some time both by officers and members to identify options to achieve this through efficiencies, income generation opportunities and identification of non-priority services.

GRANT SETTLEMENT

3.      On 5th December 2005, the Government announced the provisional grant settlement for 2006-07. This was more favourable to the Island than expected, and in particular did not include the loss of Area Cost Adjustment which had been one of the July 2005 consultation proposals.

4.      The provisional settlement represents a major change in methodology, including the disappearance of ‘Formula Spending Shares’ which in the past provided a link between service spend and grant allocation. Another major change is the introduction of Direct Schools Grant.

5.      On a like for like basis, the Council’s Formula Grant has risen from £46.570m in 2005-06 to £48.196m in 2006-07, an increase of £1.626m or 3.5%. The changes to the grant methodology have produced some significant variations in grant across different councils, and a system of ‘safety netting’ protects grant losers to a considerable extent at the expense of grant gainers. Without the safety net, this Council’s grant would have been £3.362m higher. Changes before and after safety nets for all shire county and unitary councils are shown in appendix 1.

6.      A very welcome feature this year has been the simultaneous announcement of provisional figures for 2007-08, with grant stated to rise to £50.698m in that year, and increase of £2.926m or 6.1%. Without the safety net this would be £3.714m higher.

7.      Indicative figures for Direct Schools Grant are £68.979m in 2006-07 and £73.217m in 2007-08, increases of over 7% and 6% respectively. The final allocation will be dependant on pupil numbers.

BUDGET PROCESS

8.      Although the provisional settlement is better than expected, by about £1.7 millions, further budget pressures have come to light in recent weeks which mean that the budget reduction target is still around £9 millions, with a further £3 millions or so required in 2007-08. Since before Christmas cabinet members and directors have been examining a range of options to ensure that wherever possible budget reductions are delivered through efficiency, particularly in the ‘back office’, so as to minimise the impact on service delivery. It is important that the targets established for each service are adhered to, which means that where one saving proposal is removed, an alternative of equal value is substituted.

9.      Meanwhile, directors are also examining opportunities for cross service cost saving initiatives, both immediate and longer term, with a view to providing scope for service improvements. This work will also be taken forward on an on-going basis by the Aim High Budget Group.

STRATEGIC CONTEXT

10. The annual budget represents an expression in financial terms of the Council’s planned activities for the coming year, and as such is a key component of the planning cycle and the delivery of the Aim High change management plan.

CONSULTATION

11. Consultation has taken place with the voluntary sector, town and parish councils and youth representatives, and meetings with the business community and representatives of the Citizens’ Panel are scheduled later this month. A facilitated focus group approach has been adopted this year with some success, and the coordinated feedback from these five groups will be an important contribution to the Cabinet’s deliberations.

FINANCIAL IMPLICATIONS

12. The costs of the budget process are met from existing in-house resources.

LEGAL IMPLICATIONS

13. The Council is obliged to set a balanced budget and Council Tax for 2006-07 by 11th March 2006 at the latest. (In practice this needs to be done in February if bills are to be dispatched in advance of the first instalment date).

OPTIONS

14. 1      To endorse the budget process as described above

13. 2      To recommend an alternative approach.

EVALUATION/RISK MANAGEMENT

15. In setting its budget, the Council needs to ensure that adequate resources are available to meet the levels of service which it plans to provide, and that reserves are adequate to meet both known and likely future requirements. The chief financial officer is required by law to advise the Council on whether these two requirements have been met.

RECOMMENDATIONS

16. Option 1

BACKGROUND PAPERS

17. Budget Book 2005-06

Revenue Support Grant provisional settlement 2006-07 and 2007-08

APPENDICES

18. Appendix 1 – comparative grant changes, shire county and unitary authorities

 

Contact Point :Paul Wilkinson Assistant Chief Executive and Chief Financial Officer

Tel. (01983) 823606 e-mail [email protected]

 

 

MR PAUL WILKINSON

Assistant Chief Executive and

Chief Financial Officer

 

COUNCILLOR JILLY WOOD

Cabinet Member for Resources, Audit, an Efficient Council and Customer Champion