Agenda item
Budget Strategy 2013/14 to 2015/16
- Meeting of Budget and Finance Overview and Scrutiny Committee, Thursday 19 July 2012 7.30 pm (Item 5.)
- View the background to item 5.
This report was presented to the Executive on 16 July 2012. The report sets out the financial prospects for the Council for the next three years.
Minutes:
Mick Bowden (Deputy Director of Finance and Corporate Services) introduced the report before members which set out the financial prospects for the Council for the next three years. The report had previously been submitted to the Executive on 16 July 2012 and linked with the localisation of council tax benefit which was seen as a key risk in the budgets for future years.
The Deputy Director of Finance and Corporate Services outlined that although the £42m of savings identified in 2011/12 were achieved leaving the council in a stronger position to face the challenges ahead, the council was not yet half way through the 28% of savings that had to be made due to Government cuts. It was acknowledged that there was a permanent problem from weak GDP growth, with a 13% loss of trend output, with the economy not reverting back to trend as quickly as had been the case in previous recessions. Additionally, the gap in public spending and receipts was highlighted and, despite action being taken, there was a long way to go before the gap could be closed and debt levels may not be back to ‘normal’ until 2035. Mick Bowden highlighted the pressures placed on spending due to demographic changes in age related spending, with increased expenditure in health, long term care and pensions, resulting in the need to address the challenge of social care and long term structural changes in public spending.
The Deputy Director of Finance and Corporate Services explained that central government savings targets were lower and later than those for local government. Overall central government achieved a £5.3bn underspend in 2011/12, with the NHS delivering the biggest underspend in cash terms although relatively small compared to its overall budget. It was highlighted that Brent’s approach to managing its budget had been successful resulting in £42m savings being delivered as well as a total underspend on services of £1.2m. It was noted that the funding streams available to schools had changed with an underspend of £1m being achieved on a like for like basis. The outturn for the HRA was in line with forecast and under the new financial arrangements a 30 year business plan is being developed. In the current year emerging cost pressures had been identified by directors, in particular in relation to adult social care, children’s social care, the one council programme and changes to housing benefit and temporary accommodation, although borrowing could now be achieved at lower interest rates.
Mick Bowden drew the committee’s attention to the LGA funding model which addressed the pressures faced by councils’ nationally and how it relates to spending, with a projection that spending will be geared towards children, adult and social care as well as environment, particularly waste, resulting in reduced spending for other services. The LGA model highlighted that efficiency savings would not be enough with reform to social care being required and public services working together and potentially cutting services to meet the demanding spending costs regarding age related services and high pressure services.
The Deputy Director of Finance and Corporate Services explained that the 2012/13 budget showed a positive cumulative position of £2m although by 2015 a gap of £7.2m had been identified with more savings required to balance the books. The known variations from February to July 2012 were reported including; a reduction in council tax yieldof 25% due to a lower tax base, share of growth from baseline business rates as well as other key factors that had not previously formed part of the budget forecasting. The key risks to Brent were identified including the potential impact of increased council tax on housing benefit, welfare costs, the unpredictable demand on services and the maintenance of the One Council programme to ensure that all savings identified were delivered.
Mick Bowden explained the setting of the business rates baseline 2013/14 with regard to Central Government’s 50% share and Brent’s 50% share distributed between the council as well as the significance of being a top up or tariff authority, with the top up acting as a safety net for authorities that experience a reduction in business growth. It was highlighted that this would provide a challenge when forecasting growth and was not as simple as first envisaged It was concluded that the current position for public finances would be prolonged past the current spending review period and would not just relate to cuts but additionally the need to maintain a disciplined budget to recognise areas of growth alluded to by the LGA and to seek opportunities and savings where possible.
During the discussion that followed, members queried whether the new homes bonus related specifically to new build properties or included existing properties that had been brought back into use. It was explained that the government’s new homes incentive applied to all new homes provided, including properties brought back into use and although an incentive at a local level, nationally the money was funded by business rates as a way of redistributing monies. It was explained that the intention in relation to changing business rates was that no local authority were disadvantaged for the first year through the top up and tariff scheme. It was explained that there was the intention to have a reserves fund of £12m as the risk assessed level, which had been factored into each services budget. It was felt that central government would not allow the council to pass services back and retain their current level of funding. With regard to cutting services, it was felt that the council could question whether non statutory services which had been heavily reduced and cut were worth being maintained at such a reduced level. With future pressures to deliver social services, particularly with increasing aging populations, it was felt that a debate at national level on how these services would be provided long term needed to be carried out alongside other key areas such as waste and the encouragement of recycling to avoid landfill charges. It was highlighted that there was potential to lobby central government regarding inaccuracies with funding and estimated population size, as well as funding for school places. It was clarified that there did not appear to a benefit for London Authorities to pull together due to the top up and tariff element of the scheme.
RESOLVED:-
members noted the report
Supporting documents:
- budget, 16/07/2012 Executive, item 5. PDF 107 KB
- budgetappendix1, item 5. PDF 184 KB
- budgetapppendix2, item 5. PDF 21 KB
- budgetappendix3, item 5. PDF 43 KB