Context (AND LONGER-TERM APPROACH) SHADOW HEALTH AND 28 January - - PDF document

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GENERAL FUND BUDGET 2013/14 TO 2014/15

(AND LONGER-TERM APPROACH)

SHADOW HEALTH AND 28 January 2013 WELLBEING BOARD

Context

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Bird’s Eye View

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£bn £bn Gross Spend General Fund 0.5 Schools 0.2 Housing Benefit Payments 0.1 Housing Revenue Account 0.1 Capital 0.1 TOTAL SPENDING 1.0 Funding Government Grant:

• Formula grant

0.2

• Dedicated schools grant

0.2

• Specific grant and benefit subsidy

0.2 0.6 Fees and charges 0.1 Council tax 0.1 Housing rents 0.1 Capital 0.1 TOTAL FUNDING 1.0

Components of the Council’s Budget 2012/13

• General Fund
• “The Council’s Budget”
• Running costs of most services
• Met from government grant, fees/charges, council tax
• Total spend around £475m
• Net budget is £288m
• Schools’ Budget
• Mostly delegated to individual schools
• Met from government grant (Dedicated Schools’ Grant) (£235m pa)
• Housing Revenue Account
• Pays for provision of Council Housing
• Met from rents
• £80m pa spending

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Council Budgets 2012/13

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General Fund £475m Schools Revenue Budget £235m Capital Programme £55m Housing Revenue (The “Rent Account”) £80m Housing Benefit Subsidy £150m Building Schools for the Future – capital about £300m

£1m Buys (Running Costs)

• One Primary School with 200 children
• Five Libraries
• Leicester Leys, Aylestone and Evington Leisure Centres
• 80,000 hours of home care (200 clients)
• Residential care for 60 people
• One Children’s Residential Home
• One year’s priority highways repairs

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Where were we in February?

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2012/13 Budget

• The most severe government cutbacks in decades.
• Second year of four year government spending review.
• Gross cuts of £40m p.a. by 2014/15.
• Budget “balanced” to 2014/15, but environment extremely

volatile:-

• No grant certainty beyond 2012/13
• No national plans beyond 2014/15
• Localisation of business rates in 2013/14
• Council tax reduction scheme
• National cuts likely beyond 2014/15

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General Fund Budget 2012/13

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Formula Grant £177m Council Tax £98m Reserves £7m Council tax freeze grant £2m Specific grant, fees, charges £188m Total £475m Net Budget £288m New Homes Bonus £3m

Finance Settlement 2013/14 to 2014/15

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Local Government Finance Settlement - Headlines

• Finally published (with gaps) late on 19th

December

• Two year settlement – 2013/14 and 2014/15
• Our key grant figures:-
• 2013/14

£175m

• 2014/15

£153m

• Now over £70m cuts 2011/12 to 2014/15
• No changes to trajectory of cuts after 2014/15 –

massive reductions likely in each of 2015/16, 2016/17 and 2017/18

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Local Government Finance Settlement – The New System

• Formula grant has ceased
• Replaced by:

– Business rates retention – Revenue Support Grant

• Some specific grants have transferred to mainstream funding
• Education Services Grant
• Early Intervention Grant
• New Spending Review in “first half of 2013”

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How the New System Works (1)

£m £m What we would have had if formula grant continued 178.2 Add former specific grants:

• Early Intervention Grant

13.6

• Homelessness Prevention Grant

0.5

• Flood Grant

0.1

• Learning Disability Health Reform Grant

10.7 Less Education Services Grant (6.6) 18.3 Other changes: Council tax reduction scheme 22.7 2011/12 Council Tax Freeze Grant 2.3 “Start Up Funding Allocation” 221.6

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How the New System Works (2)

£m Start Up Funding Allocation is split between: “Baseline funding level” 88.5 Revenue Support Grant 133.1 221.6 Business Rates Retention Scheme Baseline funding level 88.5 Minus Business rates baseline (46.3) Equals top up grant 42.2 We now receive: 50% of local rates + Top up grant + Revenue Support Grant This replaces formula grant

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Local Government Finance Settlement – Early Intervention Grant

• This grant is being added to our mainstream funding
• Prior to the transfer, it has been cut by the DFE:-
• to pay for two year old nursery places
• to provide a national bidding pot of £150m
• Our grant will fall from £19.4m to £13.6m. On a like for

like basis this amounts to a £4.6m reduction

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Budget Approach

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Our Approach

• Three year budget approved last year to 2014/15
• Savings needed in 2015/16 and 2016/17 will mean a radical review
• f our services
• Two year proposals published now
• Gives time for further consideration over next 12 months
• Financial climate necessitates change of emphasis:

– budget a continuous process, not just once a year – sensible savings decisions already taken

• Some changes in future budget policy

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Our Approach to 2013/14 to 2014/15

• Protect front-line services wherever possible
• Make sensible savings in-year to reduce burden of cuts. This is heavily

directed to back office.

• Protect our facilities. No closures to:-
• Community Centres
• Museums
• Sports Facilities
• Arts Venues
• Libraries
• Protect and increase funding for safeguarding
• No changes to adult care criteria
• Redesign and protect direct services to vulnerable children and families
• Some changes of focus:-
• Children’s Centres – some facilities in least deprived areas will have

reduced activity

• Homelessness – focus on prevention not temporary accommodation 18

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Budget – Total Savings

2013/14 2014/15 £m £m Action in hand 3.9 5.4 Gross savings 4.0 9.3 Less budget pressures (3.1) (2.6) 4.8 12.0 Less savings already accounted for (0.2) (1.2) 4.6 10.9 NB: £4m support to EiG

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Actions being taken to reduce budget pressures

Examples

• Further savings across all divisions in

Corporate Resources Department (£2.6m)

• Increased use of assistive technology

(£0.1m)

• Renegotiation of contract to clean community

centres (£0.1m)

• Re-negotiation of Children’s Centre external

contracts (£0.2m)

• Property Services Savings

(£0.9m)

• Management Savings

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Estimated Posts Deleted

• City Development and Neighbourhoods

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• Education and Children’s Services

62

• Adult Social Care

6

• Housing

34 TOTAL 109 Plus actions in hand:-

• Review of Property Services
• Review of Corporate Resources divisions

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• Other 6

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Other Policy Changes

• Building Schools for the Future
• Inflation
• Managed Reserves Strategy

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Managed Reserves Strategy

• A strategy for building up then using reserves over 4

years

• Addresses the huge government cuts faced in medium

term

• Reserves topped up by one-off monies in 2013/14 and

2014/15

• Reserves drawn down in 2015/16 and 2016/17
• Maintain a minimum working balance of £15m

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Spending Forecasts 2013/14 to 2016/17

2013/14 2014/15 2015/16 2016/17 £m £m £m £m Divisional Budgets as agreed in February 236.1 230.9 230.9 230.9 Capital Financing & Corporate Budgets 14.3 12.9 14.6 14.9 Inflation 5.5 10.4 13.7 17.0 Other Changes:- Market Prudential Borrowing 0.2 0.2 0.2 0.2 BSF Affordability Contribution 0.6 1.0 1.0 1.0 CLABS 3.1 3.1 3.1 3.1 Adults’ Demographic Growth 2.5 5.0 One off Provisions agreed in 2012/13 Budget (largely severance) 12.5 Planning Provision 3.0 6.0 9.0 In-year Contingencies against Slippage 3.0 3.0 Energy Cost Reduction Schemes 1.5 1.5 Service Transformation Provisions 1.0 5.0 Council Tax Reduction Scheme – Hardship Fund 0.5 0.5 0.5 0.5 Former Specific Grants 18.4 18.7 19.0 19.4 Cuts Package 2013/14 Budget (4.7) (10.8) (10.8) (10.8) Growth – Cuts in Early Intervention Grant 4.0 Managed Reserves Strategy 6.4 8.8 (8.8) (7.8) NET BUDGET 302.4 288.2 271.9 282.4

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Spending Forecasts - Commentary

• Inflation provided at:-
• 1% on non-teachers’ pay
• 1.75% on prices for two years
• nothing on prices thereafter for most services
• Provision for increases in energy costs made separately

– now fixed at £1.5m p.a. (was £3.0m)

• Money has been added for former specific grants

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Resources Forecasts

2013/14 2014/15 2015/16 2016/17 £m £m £m £m

Tax Income

Council Tax 77.7 79.6 81.5 84.3 Business Rates 45.0 50.6 51.7 53.1 Government Grant Top up Grant 42.2 43.5 44.7 46.0 Revenue Support Grant 133.0 109.7 88.1 69.1 New Homes Bonus 3.9 4.8 5.9 7.1 Collection Fund Surplus 0.6 TOTAL FORECAST INCOME 302.4 288.2 271.9 259.6

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Resources Forecasts – Local Taxes

Council Tax Income

• 2.0% p.a. increases (3% in 2016/17)
• No acceptance of freeze grant
• Council tax reduction scheme
• New empty property charges

Local Rates Income

• New source of income
• Decline of 0.5% assumed for future years in real

terms

• Estimates volatile due to appeals

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Resources Forecasts – Government Grant

Top Up Grant

• This is part of the business rate retention scheme
• We get this because rates are low compared to our

needs – some authorities pay a tariff

• It will be index-linked for at least 7 years

Revenue Support Grant

• We have figures for two years
• RSG bears the full brunt of government cuts
• Big cuts forecast in 2015/16 and 2016/17 (and also in

2017/18!)

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Bringing It All Together

Forecast Spending £m Forecast Resources £m Gap using Reserves £m 2013/14 302.4 302.4 0.0 2014/15 288.2 288.2 0.0 2015/16 271.9 271.9 0.0 2016/17 282.4 259.6 22.8 2017/18? 300.0 250.0 50.0

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Reserves Strategy

2013/14 £m 2014/15 £m 2015/16 £m 2016/17 £m Brought forward 01/04/12 11.4 22.8 31.6 22.8 Planned increase 2013/14 – 2012/13 budget 5.0 Managed reserves strategy 6.4 8.8 (8.8) (7.8) Carried forward 22.8 31.6 22.8 15.0 Less minimum required balance (15.0) (15.0) (15.0) (15.0) Available balance 7.8 16.6 7.8 0.0

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Risks

• The national economic situation, and our

funding estimates, remain volatile

• Key risks are:-
• Additional government funding cuts
• Economic slowdown and fall in our rates

income/increase in benefit costs

• Capacity to deliver budget savings

already approved

• Additional academies

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How are we Managing Risk?

• Specific contingencies in 2013/14 and

2014/15 when most budget reductions are anticipated

• Planning provision of £3m per annum

(cumulatively) from 2014/15

• Minimum reserves balance of £15m

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