Agenda item

Budget Update

The Director of Finance and Corporate Resources will provide an update on the current budget position from that reported to the Executive on 26 July 2010.  That report is attached for information.


Duncan McLeod (Director of Finance and Corporate Resources) drew Members’ attention to the Executive report and decisions made at the Executive meeting on 26 July 2010 that set out the financial prospects for the Council in the next four years.  He then gave a brief presentation on the item, advising that the Committee would consider the outcome and implications of the announcement of the Government’s Comprehensive Spending Review at the November meeting.  The Budget set assumed Government support to freeze Council Tax would continue in 2011/12, that there would be a two year freeze on public sector pay for staff earning over £21,000 from 2011/12 and that there would be a control of housing benefit levels from April 2011.  The Committee noted that the Building Schools for the Future (BSF) Programme had been withdrawn and Duncan McLeod suggested that Members may want to consider the overall Capital Programme. Other potential Budget pressures included:-


·         Further Government announcements

·         In year spending pressures in 2010/11

·         School Places

·         Growth agreed without compensatory savings

·         Changes to grant distribution methodology from 2011/12

·         New service demands, such as those in Benefits

·         Growth in economy lower than forecast

·         Inflation increases

·         Rising interest rates


Duncan McLeod advised that the forecast assumptions had included an overall reduction of 25 per cent in formula and area based grants and Members noted the potential budget gaps for 2011/12 and the subsequent three years based on no Council Tax rise and on a three per cent rise.  A number of measures were to be considered in respect of the Budget Strategy, including the need for the One Council Programme to be the main driver in taking costs out of the base position.  These measurers then needed to be reviewed to see if they were both realistic and deliverable.


Members then discussed this item and raised a number of issues.  Councillor A Choudry commented that it would be beneficial if Members were provided with the current budget position of each Service Area before meetings of the Committee in order that Members understood the situation of each, the level of variance, what pressures each budget faced and what contingencies were in place.  Councillor Van Kalwala sought further clarity concerning contingencies in place with regard to the £6 million for inescapable growth in 2011/12 and in each subsequent year and what action could be taken to limit inescapable growth.  He also asked if a Government grant would be available to supplement a freeze in the Council Tax.  The Chair enquired what contribution to savings would staff pay freezes make and which service areas had committed the largest overspends.  In respect of annual growth, he asked whether this was because the cost of providing the service was increasing or due to some services being expanded.  The Chair also asked about the size of the Budget Gap in terms of percentage.


In reply, Duncan McLeod advised that the staff pay freeze would contribute around £2.5 million savings.  The largest overspends had occurred in Adult Social Care and Children and Families, however Duncan McLeod explained that these areas were more difficult to budget for as they were demand-led.  Previously, such overspends were managed by transferring funds from other departments but now it was important to have as much control as possible over each individual budget and any overspends would need to be compensated for in the following year.  Members heard that the Budget Gap was potentially 25 per cent because of grant reductions and without any Council Tax increase, two per cent of that would need to be found from the overall net budget which would not be a desirable scenario.  However, a three per cent rise in the Council Tax would contribute a saving of £21.5 million alone for 2011/12.


Duncan McLeod advised that a rigorous process was applied to justify growth figures, with each service area reviewed to identify if growth was inescapable.  The £6 million identified was an estimate and these funds were yet to be allocated.  The inescapable growth came from services the Council was required to provide and could be due to changes in legislation, provision of a service that was not previously provided or income reduction.  The Committee heard that although the Government had mentioned grants being available for local authorities to freeze Council Tax levels, it had not been specified how this would be provided and a further announcement was awaited.  In addition, if a Council Tax freeze was to be considered, then thought would need to be given as to how long the freeze would remain.  Duncan McLeod advised that information on budgets was mainly held centrally, however he confirmed that an update on each budget could be provided to Members before meetings of the Committee.




(i)         that the latest forecast for the Council’s Revenue Budget for 2011/12 to 2014/15 as set out in Appendix A of the report and the assumptions used to derive this be noted;


(ii)        that the overall budget process as set out in the report be noted; and


(iii)       that the proposed budget timetable be noted.

Supporting documents: