Agenda item

To present an intitial General Fund Baseline for 2017/2018 against which the detailed estimates will be built upon in the course of the year.

That:

(a)    Cabinet agrees the initial financial baseline for 2017/18 and requests Portfolio Holders, supported by Officers, to continue to facilitate the various savings strands and initiatives to deliver a balanced budget for presenting to Cabinet in December 2016;

(b)    the Corporate Management Committee be consulted on the initial financial baseline for 2017/18;

(c)    the Local Council Tax Support Scheme grant to Town and Parish Councils be reduced by 5% in 2017/18, and

(d)    the decision whether to remain in the Essex-wide pool for non-domestic rates in 2017/18 be delegated to the Finance, Revenues and Benefits Portfolio Holder, in consultation with the Corporate Director (Corporate Services).

There was submitted a detailed report by the Portfolio Holder for Finance, Revenues & Benefits (A.5) which sought to provide Cabinet with an initial General Fund financial baseline for 2017/18 against which the detailed estimates would be built upon over the course of the year.

Cabinet was informed that:

·           The initial financial baseline for 2017/18 set out an initial budget ‘gap’ of £1.565m. In continuing the move to self-sufficiency, this was based on a 1.99% increase in the level of Council Tax at this stage of the budget cycle. This would, however, be subject to further review over the course of the budget setting process and against the referendum limits for 2017/18 which would be announced by the Government later in the year. If the referendum limit was set at £5.00 for 2017/18, in a repeat of the 2016/17 limit, then this could provide the opportunity to raise additional on-going income of £0.095m.

·           The initial budget ‘gap’ also reflected the provisional revenue support grant (RSG) figure of £1.650m, a reduction of £0.914m (36%) compared to 2016/17.

·           As highlighted in last year’s budget reports, the Government had announced provisional / minimum RSG figures for 2017/18, 2018/19 and 2019/20 on the basis of each Authority submitting efficiency plans to the Government by Autumn this year. The provisional settlement phased out RSG by the end of 2019/20 with only £0.400m receivable in that year.

·           A number of savings strands were already being progressed which would be finalised as part of presenting the revised position to Cabinet in December 2016. Work remained in progress in consultation with Portfolio Holders, the Corporate Management Committee and Members in order to identify the level of savings required to meet the budget ‘gap’.

·           Given current economic uncertainty following the EU referendum, it was difficult to forecast any knock on impact that could arise, which could include a more front loaded reduction in the RSG than already proposed. However, the Government had recently announced that they would no longer be aiming for a budget surplus by 2019/20, which it was hoped would limit any changes to the provisional RSG figures already announced. Although this would be monitored over the budget setting cycle with updates provided to Members accordingly, the provisional RSG figures announced last year had therefore been included.

·           The Council had to continue to seek ways to grow its own funding through regeneration, economic development etc. which would provide a strong position to move into the new era of 100% business rates retention from 2020. There were a number of critical ‘core funding’ risks around business rates, not only in the future but within the current partial retention regime.

·           The initial forecast did not include the final position for items such as cost pressures and potential further changes to budgets although estimates had been included where possible with further details likely to emerge over the course of the year. Therefore it was recognised that the budget ‘gap’ could increase further.

·           A number of Essex Local Authorities continued to remain members of a Business Rates Pool in 2016/17. However, given the uncertainty and risks surrounding business rates, it was not clear whether there would be a benefit in continuing an Essex Pool in 2017/18. Subject to the financial performance of the existing arrangements and future forecasts and risks, a decision whether to continue to remain in the pool would be required in the Autumn. 

·           In continuing the principle of passing on the reduction in the Council’s Government funding to Town and Parish Council’s via the Local Council Tax Support Scheme Grant, it was proposed on reducing the grant by 5% in 2017/18.

The Portfolio Holder for Finance, Revenues & Benefits (Councillor Howard) made the following statement:

·           “The report sets out the initial forecast for 2017/18 and therefore reflects the usual items such as inflation, an allowance for cost pressures and adjustments for one-off items.

·           After making these adjustments the current forecast funding gap is £1.565m.

·           The forecast reflects the reduction in the Revenue Support Grant from the Government - £1.650m is estimated to be receivable in 2017/18 – a reduction of £0.914m or 36% compared with the figure receivable in 2016/17.

·           In terms of the current forecast, an increase in council tax of 1.99% is included. This will be subject to review as part of developing the budget over the course of the year.  

·           Last year also saw the Government acknowledge and support a move to self-sufficiency by allowing authorities to increase Council Tax by £5. It is likely that the Government will enable authorities to consider similar increases in 2017/18 and if they do, let’s hope that they provide some guidance early in the budget setting process rather than on the day of the Full Council meeting, as none of us found this helpful last year.

·           In terms of our core funding it is interesting to note that council tax now makes up approximately 50% of our overall funding, with 34% coming from business rates and just 12% from Government via the Revenue Support Grant. You have only got to look back to 2013/14 to see quite a different funding position with 38% of the Council’s core funding coming via the Revenue Support Grant.  

Under the stewardship of George Osbourne, this government rapidly eroded the Revenue Support Grant payable to Local Authorities in recent years. 

Let’s hope that Philip Hammond gives careful consideration to the squeezing of Local Government and considers either a freeze, or at the very least reduces the pace of the total removal of the Revenue Support Grant.

·           Based on early estimates, additional savings of£1.7m and £1.5m will be required in 2018/19 and 2019/20 respectively so there is no respite in the need to identify and secure significant savings year on year.

·           In terms of 2017/18 we must continue to build a balanced budget and based on the current forecast, this will require £1.565m of savings to be identified by December this year.

·           Finding further significant savings on top of the £12m plus savings we have already identified is now a significant challenge and presents members with some very tough decisions. Whilst we all want to protect the services we deliver, financial reality means that there is only so much this Council can provide within the limited resources it now has following the significant on-going reductions in Government funding.

Appendix A of the report sets out a number of initial ideas that we need to review and explore to see if they can deliver the savings required whilst limiting wherever possible reductions in the services provided to our customers. This will require a mix of transforming how we work and identifying options for alternative service delivery.

As I have said before I would like to be able to say that there will be no reduction in services, but I think we all acknowledge that this is highly unlikely given the savings we need to make in 2017/18 to 2019/20.

I am also keen to examine opportunities to increase revenue for the council as opposed to only considering cuts. 

Unfortunately, opportunities for Local Authorities to generate additional income through innovative service provision is often prevented by over-regulation by the government.  The time has come when we need to lobby this ‘rebooted’ government to help Local Authorities to be innovative, and to generate additional income to plug the gap being created by the savage and sustained reduction in the Revenue Support Grant that was initiated by the previous Chancellor of the Exchequer.

To successfully face up to this financial challenge, we need the engagement of all members so we all have a voice in how we shape our services going forward. Portfolio lead working groups are proposed as a way of exploring some of the ideas further. Having good debates and discussions as early in the budget cycle as possible is going to be invaluable - we must not underestimate the challenge that lies ahead.

In echoing my words during the budget process last year, I am happy to come along to any committee or any other member group to support the sharing of ideas to enable the necessary savings to be identified - not only to balance the budget in 2017/18 but to support us in moving a step closer to becoming fully self-sufficient by 2020.”

Having discussed the report and its implications:-

It was moved by Councillor Howard, seconded by Councillor G V Guglielmi and:-

RESOLVED that:

(a)    Cabinet agrees the initial financial baseline for 2017/18 and requests Portfolio Holders, supported by Officers, to continue to facilitate the various savings strands and initiatives to deliver a balanced budget for presenting to Cabinet in December 2016;

(b)    the Corporate Management Committee be consulted on the initial financial baseline for 2017/18;

(c)    the Local Council Tax Support Scheme grant to Town and Parish Councils be reduced by 5% in 2017/18, and

(d)    the decision whether to remain in the Essex-wide pool for non-domestic rates in 2017/18 be delegated to the Finance, Revenues and Benefits Portfolio Holder, in consultation with the Corporate Director (Corporate Services).