Agenda item - Council Budget 2010/11

(Finance & Economic Development Portfolio Holder) To consider the attached report (C-088-2009/10).

(1) That, in respect of the Council’s General Fund Budgets for 2010/11, the following be recommended to the Council for adoption:

(a) the revised revenue estimates for 2009/10, with an anticipated reduction of the General Fund balance by £837,000;

(b) an increase in the target for the 2010/11 Continuing Services Budget from £18million to £18.1million (including growth items);

(c) an increase in the target for the 2010/11 District Development Fund net spend from £1.3million to £1.4million;

(d) an increase of 1.5% in the District Council Tax for a Band ‘D’ property to raise the charge from £146.61 to £148.77;

(e) the estimated reduction in General Fund balances in 2010/11 of £549,000;

(f) the four year capital programme 2010/11 – 13/14;

(g) the Medium Term Financial Strategy 2010/11 – 13/14; and

(h) the Council’s policy on General Fund Revenue Balances to remain that they be allowed to fall no lower than 25% of the Net Budget Requirement;

(2) That the 2010/11 Housing Revenue Account budget, including the revised revenue estimates for 2009/10, be recommended to the Council for agreement;

(3) That the application of the rent increases and decreases proposed for 2010/11 in accordance with the Government’s rent reforms and the Council’s approved rent strategy with the addition of an extra element to give an average overall increase of 2.4% be noted;

(4) That the established policy of capitalising deficiency payments to the pension fund, in accordance with the Capitalisation Direction request made to the Department for Communities and Local Government, be recommended to the Council for approval;

(5) That the Council’s Prudential Indicators be recommended to the Council for approval;

(6) That the Treasury Management Strategy for 2010/11 be recommended to the Council for approval; and

(7) That the Chief Financial Officer’s report to the Council on the robustness of the estimates for the purposes of the Council’s 2010/11 budgets and the adequacy of the reserves be noted.

The Portfolio Holder for Finance & Economic Development presented a report detailing the proposed Council Budgets for 2010/11, which would enable the Council’s policy on the level of reserves to be maintained throughout the period of the Medium Term Financial Strategy, despite the proposed use of £0.5 million from the reserves. The budget was based upon the assumptions that the District Council Tax would increase by 2.5% and housing rents would increase by 2.4%.

The Portfolio Holder emphasised the likely reduction in the Council’s Revenue Support Grant when the Comprehensive Spending Review (CSR) was undertaken after the next General Election. The revised Medium Term Financial Strategy (MTFS) had assumed a 5% decrease in 2011/12 with the total decrease being 10% over the CSR period. It was proposed to increase the target for the 2010/11 Continuing Services Budget (CSB) to £18.1million. The largest growth item was an additional £92,000 for the increase in employer’s contributions to the pension fund. A number of CSB income streams had been affected by the downturn in the Housing Market, including Local Land Charges, Building Control and Development Control. However, other income streams had exceeded expectations, including MOT income from Fleet Operations, and income from Licensing .

The Portfolio Holder advised that negotiations for the 2010/11 pay award had currently reached an impasse after the Employers had offered 0% in response to the Unions’ request for 2.5%. The Cabinet were reminded that every 1% increase added £200,000 to the Council’s salary bill. The MTFS had assumed annual increases of 1.5%, and it was expected that the final award would be close to this. The use of capital receipts on non-revenue generating assets had been highlighted when the Finance & Performance Management Cabinet Committee had considered the updated Risk Register. The Capital Programme anticipated the balance of capital receipts reducing from £24.3million to £9.9million over the next four years. The next triennial valuation of the Local Government Pension Scheme (LGPS) was due in March 2010. Applications for the capitalisation of pension deficit payments in the sums of £1.205million for the General Fund and £565,000 for the HRA had been submitted to the Department of Communities & Local Government for 2009/10; both of these directions had been approved.

In respect of the District Development Fund (DDF), the Portfolio Holder reported that the largest items of expenditure were £508,000 for the reduction in investment income, £400,000 for the generation of the Local Development Framework, £147,000 for the Planned Building Maintenance Programme, and £150,000 for the reduction in special grant funding for Concessionary Fares, which was £13,00 worse than had been anticipated. Officers were also working with an international firm of Accountants on a “no win, no fee” basis to establish whether the Council could recover any Value Added Tax. The current DDF programme of £1.358million exceeded the guideline by £58,000. However, as the DDF was perennially underspent, this was not considered significant.

The Portfolio Holder advised the Cabinet that within the revised MTFS, two alternative models had been presented for consideration. The first model envisaged a 2.5% increase in the District Council Tax in line with the previously agreed budget guidelines. The second model envisaged a 1.5% increase in the District Council Tax for 2010/11, which was predicted to lead to a £360,000 greater reduction in Revenue Balances over the next four years. Current projections indicated that the Council’s reserves would be £6.7million by 2013/14; 25% of net budget requirement would £4.3milion and thus it was not envisaged that this particular budget guideline would be breached.

For the Housing Revenue Account (HRA), the Portfolio Holder explained that the balance was expected to be £6.09million at 31 March 2011, following an anticipated deficit of £7,000 in 2010/11. There were no significant variances within the proposed HRA budget for 2010/11. Finally, the report of the Chief Financial Officer was highlighted to the Cabinet, and had concluded that:

(i) the estimates presented were sufficiently robust for the purposes of the Council’s overall budget for 2010/11; and

(ii) the reserves of the Council were adequate to cope with the financial risks facing the Council in 2010/11, but that savings would be required in subsequent years to bring the budget back into balance in the medium term.

The Portfolio Holder thanked Officers for their efforts in putting the budget together, and proposed that the model for a 1.5% increase in Council Tax should be adopted, with a 2.5% increase in future years. This would be a prudent measure given the current economic circumstances, and would be both affordable and manageable given the possibility that the Council’s settlement could decrease by more than the assumed 10% within the MTFS. The Cabinet agreed this measure, which would see the District Council Tax for a Band ‘D’ property rise to £148.77.

The Director of Finance & ICT reported that the capitalisation direction for the Council’s investment in the Heritable Bank had not been granted and that impairments was not being charged to the Housing Revenue Account (HRA). The administrators had informed the Council that the return would be between 79p and 85p in the £1, which was an improvement on the initial 80p quoted. An additional £375,000 within the DDF had been allocated for this item. The Council was anticipating a sizeable refund of Value Added Tax, probably for a similar amount as had been allocated for impairments for the Heritable Bank investment. This would be allocated to the DDF when it was received.

Decision: