Agenda item

An update on the 2010 Revenue Forecast was requested by Members at the last meeting of the Committee.  The attached report was circulated prior to the meeting.

Clive Heaphy (Director of Finance and Corporate Resources) introduced the report that was to be considered by the Executive on 18 October 2010.  He confirmed that the statement of accounts for 2009/10 accounts had been signed off with no qualifications.  Clive Heaphy advised that the outturn for 2009/10 meant that the balance of reserves available to the Council for 2010/11 was £7.5m, a prudent amount in view of the economic circumstances.   Members heard that the Government savings announced on 10 June 2010 meant the council had lost £6.855m of grant funding, including £2.249m of Area Based Grant and £4.606m of other grants including £3.634m of the Local Area Agreement Reward.  The outcome of the Comprehensive Spending Review (CSR) was likely to require more significant savings for local authorities, although the specific savings required for each council would not be known until the CSR Local Government Settlement was announced in December 2010.

Clive Heaphy then outlined a number of pressures on the general budget for 2010/11, which included increases in client numbers in Adult Social Care and Children’s Services and inflationary pressures from general prices and contracts.  Members heard that there were some long term contracts that the council was involved in which had built-in higher inflation rates which it would seek to renegotiate, although legally this could prove difficult.  The forecast overspend of £5.574m was attributable to reduced income, such as through planning fees and inescapable growth such as those in Adult Social Care and Children’s Services and this would continue to be monitored.  Clive Heaphy referred to the budget and forecast for each service area as set out in the report and he advised that it would not be prudent to balance the budget through using reserves this year and that instead it should be achieved through identifying further savings.

With the permission of the Chair, Robert Dunwell addressed the Committee.  Robert Dunwell asked if there was a strategy in place in respect of what non-statutory functions the council could consider restricting or stop providing altogether.

During Members’ discussion, Councillor Van Kalwala sought further comments with regard to maintaining a reasonable balance and were there any indications of what the council could expect with regard to the Local Government Settlement following the CSR.  Councillor Long emphasised the importance of achieving recycling targets to save the council costs through landfill charges.  With regard to mental health, she enquired whether Adult Social Care had devised a model of expected demand and would NHS Brent also be sharing in supporting this service and costs.  Councillor Long also asked if the increase in demand and spending in Adult Social Care could be attributed to the colder winter than normal over 2009/10. 

The Chair sought views on what would happen if the savings targeted could not be achieved and what the economic projections were for the next 12 months.  He asked for further clarity with regard to the overspend that had occurred.

In reply, Clive Heaphy advised that local authorities were legally obliged to maintain a reasonable balance and although the current balance met these requirements, ideally an increase in the balance towards the region of £12m - £15m would be desirable in view that the council was entering a higher risk period financially.  Clive Heaphy stressed the need to achieve the savings targets as there was no viable alternative.  Short term savings could be made through such things as looking at use of interim contract staff, how training was provided and whether attendance at conferences was necessary.  In the longer term, services would continue to be restructured and directors would be considering how further savings could be made in light of the outcome of the CSR.  Members were advised that the Local Government Settlement to be announced in December 2010 was likely to require the council to find savings in the region of 25% to 40% over four years and the Government was likely to want to achieve these savings early during this period.

In respect of the economic situation over the next 12 months, Clive Heaphy advised that interest rates were likely to remain the same over the next 9 months, with slight rises possible. Inflation was currently at 3.1% but was likely to rise in the New Year when VAT rates increased, however it was hoped that in the medium term, inflation would settle at around 2%.  Members heard that unemployment was likely to continue to rise, whilst GPD growth was showing signs of slowing.  Clive Heaphy stated that a stagnant economy would mean greater demand overall on council services and therefore additional costs.  He explained that the overspend in Adult Social Care had been attributable to rising demand, whilst in the longer term the population was living longer, however there would be no additional funding from the Government to accommodate this.  Budget priorities would need to be identified and it was conceivable that a greater allocation would need to be provided to Adult Social Care.  Other issues that needed to be addressed included transportation and landfill costs, with recycling initiatives crucial to avoid extra costs as a result of increased landfill tax rates.  With regard to NHS Brent, Clive Heaphy advised that substantial savings would be made through reducing the number of managers.  It was not yet clear how the new GP commissioning arrangements would operate.

Mick Bowden (Assistant Director of Finance and Corporate Resources) added that the council and Brent NHS were now working together better after earlier disagreements, however both were under significant pressure financially and future steps needed to be considered carefully.  With regard to the Adult Social Care overspend, Mick Bowden advised that since the budget had been set in March 2010, there had been an increase in client levels.  He felt that the rise was not due to the preceding colder than usual winter but was attributable to increases in specific client groups where a particular level of service was required.

The Chair concluded this item by indicating Members’ concerns in respect of the council balance and the overspend in Adult Social Care.