Your Councillors


Medium Term Financial Strategy and Budget Proposals

POLICY & RESOURCES COMMITTEE

15 FEBRUARY 2017

Is the final decision on the recommendations in this report to be made at this meeting?

No

 

MEDIUM TERM FINANCIAL STRATEGY AND BUDGET PROPOSALS 2017/18

 

Final Decision-Maker

Council

Lead Head of Service

Director of Finance and Business Improvement

Lead Officer and Report Author

Director of Finance and Business Improvement

Classification

Public

Wards affected

All

 

 

This report makes the following recommendations to this Committee:

It is recommended that the Committee:

1.   Notes the outcomes of consideration of budget proposals by the Service Committees;

2.   Agrees an updated Strategic Revenue Projection as set out in Appendix A;

3.   Agrees updated budget proposals as set out in Appendix B;

4.   Agrees the Revised Estimate for 2016/17 as set out in Appendix C for recommendation to Council; 

5.   Agrees the Budget Estimate for 2017/18 as set out in Appendix C for recommendation to Council; 

6.   Agrees the Capital Programme set out in Appendix D for recommendation to Council;

7.   Agrees a £4.95 increase in Council Tax for 2017/18 for recommendation to Council;

8.   Agrees the updated Medium Term Financial Strategy/ Efficiency Plan as set out in Appendix F;

9.   Recommends to Council the appropriate matters for decision to set a balanced budget for 2017/18 and the necessary level of Council Tax in accordance with the Local Government Finance Act 1992 and the Localism Act 2011 including the decisions made above.

 

This report relates to the following corporate priorities:

The medium term financial strategy and the budget are a re-statement in financial terms of the priorities set out in the strategic plan. It reflects the Council’s decisions on the allocation of resources to all objectives of the strategic plan.

 

The Capital Programme identifies key projects requiring long term funding to improve assets and regenerate the borough. These can be to meet any of the key priorities.

 

 

Timetable

Meeting

Date

Policy & Resources Committee

15th February 2017

Council

1st March 2017



MEDIUM TERM FINANCIAL STRATEGY AND BUDGET PROPOSALS 2017/18

 

 

 

 

1.           PURPOSE OF REPORT AND EXECUTIVE SUMMARY

 

1.1        This report brings together the revenue and capital budgets for 2017/18 with a view to recommending a balanced budget to Council on the 1st March 2017 including a proposed level of Council Tax. 

 

1.2        The budget outlined in this report incorporates the revenue budget proposals considered by this Committee at its meeting on 3rd January 2017 and the capital budget proposals considered at the meeting on 18th January 2017. The report also identifies issues emerging since that time and recommends amendments to the budget proposals as appropriate.

 

1.3        The report concludes by proposing an updated Medium Term Financial Strategy, reflecting the detailed revenue and capital budgets and current information about the financial position over the five year financial planning period.

 

 

2.           INTRODUCTION AND BACKGROUND

 

Background

 

2.1        This Committee has considered the developing Medium Term Financial Strategy for 2017/18 onwards on a number of occasions during the course of the municipal year.  In June 2016 a Strategic Revenue Projection and a Council Tax level was set for planning purposes and the process for developing a Medium Term Financial Strategy and Efficiency Plan was agreed.

 

2.2        In September 2016 the Committee considered a draft Medium Term Financial Strategy and Efficiency Plan for submission to Council.  The MTFS / Efficiency Plan considered how the Council’s corporate objectives and key priorities could be delivered within the constraints of the government’s four year funding settlement to local authorities, together with assumptions about service pressures, the Council’s capacity to generate income and the broader economic environment.  A budget gap over the five year planning period was identified and an approach was proposed for closing the gap. The MTFS / Efficiency Plan was agreed by Council at its meeting on 21 September 2016. 

 

2.3        Public consultation took place on service priorities and officers developed detailed budget proposals that contributed £3.2 million towards the £4 million budget gap.  On 3rd January 2017 the Committee considered revenue budget proposals for services within its own remit and referred the remaining budget proposals to the relevant Service Committees. A second report was considered at the Committee’s 18 January meeting specifically on the capital programme.  The outcomes of the consideration of budget proposals are set out in paragraphs 2.40 to 2.43 below.

 

2.4        In addition the Committee has considered two quarterly budget monitoring reports for the current financial year. These reports have reviewed revenue, capital and other balance sheet items and reported on any major variances or other issues. The reports identified areas where income or expenditure are significantly above or below budget.  Consideration of the third quarter’s performance against budget is reported elsewhere on this agenda and the implications for future financial planning are considered below.

 

Current Year 2016/17 

 

2.5        The second quarterly budget monitoring report, considered by the Committee on 23rd November 2016, projected an overspend for the year of £445,000.  A number of actions were identified that sought to reduce the overspend in the remaining months of the year.

 

2.6        The third quarterly budget monitoring report projects a reduced overspend of £281,000 for the year.  This represents welcome progress, but there remains further work to be done over the remaining two months of the year to try and reduce the overspend still further.  The most significant variances are as follows.

 

2.7        Temporary Accommodation - £357,000 adverse

 

This represents a reduction from the previous projection of a £500,000 adverse variance.  The Council has agreed a new Temporary Accommodation Strategy, incorporating more in-house provision and a greater focus on quick turnaround.  However, pressures will continue into 2017/18 and may be exacerbated by new legislation.  Accordingly, the Strategic Revenue Projection provides an additional £235,000 budget for 2017/18 only.

 

2.8        Development Management - £213,000 adverse

 

The Planning Service made extensive use of agency staff in the first part of the year but it has now been able to bring monthly spend back in line with budget.

 

2.9        Mote Park Café - £197,000 adverse

 

A report on the café’s performance will be considered by Heritage, Culture and Leisure Committee on 7th March 2017.  This will consider a range of options for the future of the café, given that performance indicates that the current operating model is not sustainable.  Given the current position, and in spite of urgent efforts being devoted to remedying it, it is unrealistic to expect the café to achieve its budgeted performance for the full 2017/18 financial year.  Accordingly a contingency against failure to meet the budget is included in next year’s estimates and is shown in Appendix A, Strategic Revenue Projection.

 

2.10    Pay and Display Parking - £320,000 favourable

 

Further income growth of £100,000 was already assumed for 2017/18 in the budget proposals.  Given that the service is already over-achieving against this, it is not unreasonable to incorporate an additional £200,000 saving in the budget proposals. This is reflected in Appendix B, Budget Proposals 2017/18 – 2021/22.

 

2.11    Debt Recovery Income

 

The current year’s trading indicates that the Debt Recovery Service has established itself successfully.  This has led to an upward revision of the net revenue projection for 2017/18 by £38,000 as compared with that shown in the original savings proposals.

 

Strategic Revenue Projection

 

2.12    The Committee originally considered a Strategic Revenue Projection at its meeting on 29 June 2016 and considered and agreed an update at its meeting on 3 January 2017.  Set out below is the latest information about the key elements of the updated projection. The Strategic Revenue Projection itself is included at Appendix A.

 

Local Government Finance Settlement 2017/18 – Revenue Support Grant and Business Rates Adjustment

 

2.13    The provisional local government finance settlement was announced on 15 December 2016.  This confirmed that figures for year 2 of the government’s four year funding settlement for local authorities, ie 2017/18, would remain as previously announced.  No change is therefore required to the Strategic Revenue Projection in this respect.  Maidstone will receive no Revenue Support Grant (RSG) in 2017/18, as anticipated, and will be subject to a Business Rates adjustment, in effect negative RSG, of £1.589 million in 2019/20.

 

2.14    The main impact of the local government finance settlement for District Councils like Maidstone has been the reduction in New Homes Bonus.  Previously, New Homes Bonus was paid for six years after a new home is built.  From 2017/18 it will only be paid for five years, and from 2018/19 for four years.  Additionally, the bonus will only be paid on housing growth in excess of 0.4% (growth in Maidstone has averaged around 1% in recent years).  The impact on Maidstone’s New Homes Bonus income, as compared with the projected amounts, will be a reduction of £750,000 in 2017/18 and an ongoing annual reduction of around £1.5 million.  However, there is no direct impact on the revenue budget, as Maidstone has used New Homes Bonus to support capital expenditure rather than revenue expenditure.  The effect will be that the Council will need to start borrowing to fund the capital programme sooner that would otherwise have been the case.  This will be reflected in the Treasury Management Strategy, which will be considered by Council alongside the Budget at its Council Tax setting meeting on 1st March 2017.

 

Business Rates

 

2.15    The business rates estimate for 2017/18 is based on the recently calculated NNDR1 return provided to the Department for Communities & Local Government on 31st January 2017. The return predicts growth above the baseline business rates level set out in the finance settlement. The table at paragraph 2.17 below sets out the distribution of the business rates calculated for the NNDR1 return and compares this to the assumed values from the government’s finance settlement announced on 15th December 2016.

 

2.16    The significant differences in the table occur due to four factors: 

 

a)   The finance settlement figures are the product of inflationary increases in the original baseline figures set at the commencement of the system on 1 April 2013. The figures do not reflect growth or changes in exemptions and allowances.

 

b)   There are a number of allowances that have been introduced by central government such as retail relief and the extension of the 100% small business rates relief and the effect of these were unknown in 2013/14 and were built into the system at a value that allowed a high level of take up which has not materialised yet.

 

c)   In the initial year of the system, 2013/14, the Council was required to set aside a significant provision against the cost of backdated and current appeals by businesses against their rateable value assessments. This provision requires an annual adjustment each year.

 

d)   A small amount of real growth in the rateable businesses premises in the borough.

 

2.17    The table below shows that the Council technically retains 40% of the income collected, but in practice there is a tariff payable to central government which reduces this percentage to 5.8%. The tariff is set as part of the finance settlement in each year and the Council must pay a tariff of £18,110,632 from its share in 2017/18. The balance is termed the ‘business rates baseline’ in the finance settlement.  Any growth above this baseline is attributable to the Council.

 

Authority and share

Provisional Settlement Figures £

Retained Income Forecast £

Growth against Baseline £

Business Rates Collectable

52,887,200

58,012,124

5,124,924

 

 

 

 

Central Government – 50%

26,443,600

29,006,062

 

Kent County Council – 9%

4,759,848

5,221,091

 

Kent & Medway Fire & Rescue – 1%

528,872

580,121

 

Maidstone Borough Council – 40%

21,154,880

23,204,850

 

 

 

 

 

Government Tariff on Maidstone

-18,110,632

-18,110,632

 

Business Rates Baseline

3,044,248

5,094,219

2,049,970

 

2.18    In normal circumstances the growth of £2,049,970 would be subject to a 50% levy which is payable to central government. Due to the fact that the Council is a member of the Kent Business Rates Pool the levy will not be due in full. The shares of the growth that are retained locally are set out in the table below:

 

Description

Amount £

Business Rates Growth

2,049,970

MBC Retains first 50%

-1,024,985

Levy paid to Government

-90,660

Balance - shared within Pool as follows:

934,325

Retained by Maidstone (30%)

280,298

Growth Fund contribution (30%)

280,298

Passed to Kent County Council (30%)

280,298

Held as provision against losses (10%)

93,433

 

934,325

  

 

2.19    The Committee has previously agreed the principles governing use of the growth.  It has been agreed that it should be utilised in two ways. The initial 50% share retained by the Council will be included as a contribution to the revenue budget and is accordingly shown as such in the Strategic Revenue Projection (£1,025,000).

 

2.20    The balance retained from the pool will be utilised in accordance with the Memorandum of Understanding which suggests two purposes:

 

·         To enhance financial resilience for each of the pool members; and

·         To promote further economic growth within the district based pool area. 

 

Having considered options to utilise the resources to achieve the second purpose, Committee has agreed to use the funds to support actions required in the Economic Development Strategy. 

 

Council Tax

 

2.21    The Local Government Finance Settlement confirmed that, as last year, local authorities may increase Council Tax by £5.00 per annum or up to 2%, whichever is the greater, without having to consult voters in a referendum.

 

2.22    In Maidstone’s case, the cash limit of £5 generates a higher increase than the percentage increase.  Policy and Resources Committee agreed at its meeting on 29th June 2016 that a Council Tax increase of £5 should be assumed for planning purposes.  Given the loss of Revenue Support Grant and the other spending pressures faced by the Council, it is reasonable that the Council should seek to maximise the potential revenue from Council Tax.

 

2.23    As last year, it is recommended that the Council Tax increase is based on the maximum cash increase.  This is treated as being £4.95 rather than £5, as a figure that is divisible by 9 facilitates compliance with the legislation about the rates for different Council Tax bands.  The additional income that a £4.95 increase generates for Maidstone Borough Council is £294,225 and this is included within the projected Council Tax income in the Strategic Revenue Projection.  The £4.95 increase gives a Band D Council Tax of £245.61.  An increase at this level will help to ensure that the Council is able to deliver on its priorities and maintain financial stability.

 

2.24    To aid the Committee’s decision making:

 

a)  For each 1% increase in the charge for this Council’s element of the council tax, the income generated in 2017/18 is approximately £143,000.

 

b)  At the current Band D council tax charge, a 1.99% increase in council tax would equate to an annual increase of £4.79. This is a monthly increase of 40 pence.

 

c)  A £4.95 increase in council tax charge equates to 41 pence per month and would be a 2.06% increase.

 

d) Indications are that the major preceptors’ increases, at the current Band D council tax charge, will be:

·       Kent County Council: 3.99%, an annual increase of £45.27 (including 2% adult social care precept);

·       Kent Police: £5.00 maximum annual increase allowable to low precept police forces (equal to a 3.3% increase); and

·       Kent & Medway Fire & Rescue Authority: 1.88%, an annual increase of £1.35.

 

e)  The total increase if all these precept increases are agreed the band D council tax charge would move from £1,598.36 for 2016/17 to £1,654.93, an increase of £56.57 or £4.71 per month.

 

f)   In rural areas tax payers may be required to pay a charge to cover a parish precept. At this time a full list of precepts or intended movements in the charge is not available.

 

g) Under the Council’s currently agreed council tax reduction scheme, tax payers who are assessed as in need can receive a discount. This is dependent on circumstances and is provided through a scheme agreed by Council in December 2016.

 

2.25    A further increase of £4.95 is assumed in in 2018/19 in the Strategic Revenue Projection.  From 2019/20 a 2% figure is used as this gives a higher cash increase.

 

2.26    The following further adjustments need to be made to Council Tax income as follows:

 

-      Collection Fund adjustment – as reported to the Committee on 18th January, there is projected to be a one-off surplus of £96,000 arising from Council Tax collection activity in 2016/17.

-      Empty Property Discount – The Committee agreed at its meeting on 18th January to remove the Council Tax discount on Empty Properties, with certain exceptions, thus providing an additional £73,200 of income and £20,000 of staff savings.

-      Council agreed at its meeting on 7th December to a new Council Tax Reduction Scheme, which is expected to generate an additional £60,000 of Council Tax income.

 

Parish Funding 

 

2.27    Parishes are in the process of setting their precepts for 2017/18.  In 2016/17, these precepts generated £1.497 million in total, an average amount for Band D Council Tax payers in parished areas of £48.54.  Details of the precepts for 2017/18 will be reported to Council at its budget setting meeting on 1st March 2017.

 

2.28    At its meeting on 16th December 2015 Policy and Resources Committee considered the amount and distribution of the Local Council Tax Support Grant that the Council had hitherto received as part of Revenue Support Grant.  The Council had previously passported the relevant portion of the Local Council Tax Support Grant to parish councils.  However, the Committee agreed, and it was subsequently confirmed by Council, that when the Council ceased receiving Revenue Support Grant in 2017/18 the grant to parishes would cease.   

 

2.29    The Council continues to make a contribution to parishes for services that they provide and which are provided by the Council itself in non-parished areas.  This contribution is made through the Parish Services Scheme, which is included in the budgets for the Communities, Housing and Environment Committee.  The Parish Services Scheme will be reviewed in 2017/18 and the outcomes of this review will be reported to the Communities Housing and Environment Committee in the first instance. 

 

Other Income

 

2.30    A major contribution to the Council’s budget is made by income generated from sources such as Car Parks, Planning Fees, Commercial and Garden Waste collection.  At each service committee meeting in January 2017 the level of fees and charges made by each committee’s service areas was considered and set for 2017/18.

 

2.31    A further increase in Fees and Charges in respect of the Legal Service is proposed in a report elsewhere on this agenda.

 

2.32    The combined considerations of all fees and charges including the Legal Service amendment will increase the income budget by £371,490 and this has been incorporated into the budget proposals set out in Appendix B. 

 

2.33    In considering future years of the strategy an assumption of approximately a 1% increase in fees and charges income has been incorporated into the strategic revenue projection for the period 2018/19 to 2021/22.

 

Spending Pressures

 

2.34    Specific changes to expenditure budgets have been considered and are set out in the Strategic Revenue Projection attached at Appendix A.  The principal changes to the Strategic Revenue Projection that was reported to this Committee at its meeting on 3rd January 2017 are as follows.

 

2.35    Homelessness Prevention

 

A new Homelessness Reduction Bill is currently going through the parliamentary process and may be implemented as early as October 2017, and by April 2018 at the latest.  This places a number of new duties on local authorities in respect of preventing homelessness.  Grant funding to carry out the extra duties will in principle be available under the ‘new burdens’ doctrine.

 

The Council already recognises the value of homelessness prevention, both in itself and for the financial benefits in terms of reducing the cost of providing temporary accommodation.  We wish to develop our prevention service in advance of the legislation being implemented so that the Council is well placed to meet its statutory obligations.  Accordingly, one-off funding of £96,000 in 2017/18 and £34,000 in 2018/19 (£130,000 in total) is proposed.  Given the potential for grant funding in the future, this funding would only be made available for one year.

 

2.36    Mote Park Café reprovision

 

The overspend against the Café’s budget is reported above at paragraph 2.9 above.  Urgent action is being undertaken to address the problem, but it is nevertheless appropriate to build in a contingency against failure to meet the budget in next year’s estimates.

 

2.37    Local Plan review

 

In his interim findings, the Local Plan Inspector has identified a number of issues that will need to be addressed in a review, which would have a target adoption date of April 2021.  In practice, this means that the review process will need to start much earlier.  Based on the scale of one-off resource input needed to prepare the current draft Local Plan, it would be prudent to provide a contingency of £200,000 per annum for the period to 2020/21.  As more detailed costings are prepared and scrutinised they will be included in the revenue budgets.

 

Savings Required

 

2.38    As set out in the Strategic Revenue Projection, the Council will need to identify £4 million of net savings over the period of the medium term financial strategy. In 2017/18 the requirement is £1.8 million.  This figure has increased as compared to the figure of £1.5 million reported to the Committee on 3rd January 2017, owing to the spending pressures outlined in the previous section.  However, the additional requirement can be met, thanks to further savings which are summarised at paragraph 2.46 below.

 

2.39    Proposals intended to reduce the budget gap were presented to Policy and Resources Committee at its meeting on 3rd January 2017.  All Service Committees have now considered the individual budget proposals for services within their remit.  They were asked to demonstrate how their budget proposals responded to the priorities expressed in the budget consultation and specifically in relation to Sports and Recreation and Culture and Tourism.  The Heritage, Culture and Leisure Committee was also asked to review the growth item of £100,000 relating to the Museum Service (£50,000 in 2017/18 and £50,000 in 2018/19) and the benefits that it would provide and whether that is justified.  The outcomes of Service Committees’ consideration of the budget proposals have been as follows.

 

2.40    Policy and Resources Committee (3rd January 2017)

 

Budget proposals for services within the remit of the Committee were agreed.

 

2.41    Strategic Planning, Sustainability and Transportation Committee (10th January 2017)

 

Members commented that a reduction in staffing levels could negatively affect the team’s improved performance.  The Local Plan was on track for adoption, but the Inspector had requested commitment to a full review and this may require further Officer time.  Any savings should be sought through the application of system improvements and through maximising income generation, eg through Planning Performance Agreements, rather than reductions in staffing.

 

The proposed budget reduction of £45,000 within Planning Policy for 2017/18 was not supported, as the Committee believed that to make this cut would lead to a reduction in the service to a level of deterioration

which would be unacceptable. It requested that alternative areas for savings be considered, but no specific suggestions for savings were proposed by the Committee.

 

2.42    Communities, Housing and Environment Committee (17th January 2017)

 

Questions were asked about the Parish Services Scheme and about budget proposals relating to CCTV, Disabled Facilities Grants and Recycling Collection.  The conclusion was that budget proposals for services within the remit of the Committee were agreed.

 

The Committee also considered a report on Service Level Agreements and Grant Budgets.  This recommended that the Council’s grants budget of £223,500 be reduced by 25% over the five year period from 2017/18, ie £55,000 in total, rather than 100% as set out in the initial budget proposals presented to Policy and Resources Committee, and that a number of uncommitted project budgets be removed.

 

2.43    Heritage, Culture and Leisure Committee (31st January 2017)

 

Budget proposals for services within the remit of the Committee were agreed.  The growth of £100,000 in the Museum Service was considered.  A motion to remove £50,000 of this growth was proposed but was not seconded.  There were no changes proposed to any other budget items.

 

2.44    It can be seen that the Service Committees proposed only one substantive change to the budget proposals, being removal of the budget reduction of £45,000 in relation to Planning Policy.

 

2.45    The Strategic Planning, Sustainability and Transportation Committee’s representation has been considered carefully.  It is recommended that the proposed budget reduction be retained, for the following reasons.

 

-       The total expenditure budget of the Planning Service is around £3.5 million.  The proposed saving is around 1% of this budget, so it is hard to see that it would lead to an unacceptable deterioration in service levels.

 

-       A review of the Planning Service is currently being undertaken which is likely to generate a range of recommendations for the future of the service.  These will address the level of service provided and it would be inappropriate to prejudge the findings of the review.

 

-       Additional resources of £200,000 per annum have been allocated to the Planning Service to allow it to carry out an update of the Local Plan in 2021, reflecting the Committee’s comments.  Whilst these resources do no directly substitute for the £45,000, they help to ensure that the core Planning service will not be impaired by having to support this major one-off piece of work.

 

Accordingly, the saving of £45,000 continues to be included amongst the budget proposals.

 

2.46    Appendix B sets out the budget proposals, as discussed by Service Committees, with the addition of further Parking and Debt Recovery income as described in paragraph 2.10 and 2.11 above and revised proposals from Communities, Housing and Environment Committee as described at paragraph 2.41. The savings total the required £1.8 million. The proposals therefore produce a balanced budget. Save for the specific items described, the proposals have all been considered by this Committee previously.  The outcome is that this report brings together all previous considerations into a balanced budget for recommendation to Council.

 

2.47    For future years, 2018/19 to 2021/22, Appendix B includes savings of £1.6 million. The Medium Term Financial Strategy requires additional savings and efficiencies in order to balance over the next five years. These savings remain to be achieved to ensure plans exist for the continued future financial resilience of the Council.

 

Revenue Estimates

 

2.48    Attached at Appendix C is a summary of the revenue budget for 2017/18. The summary shows the Original Estimate 2016/17 as approved by Council in March 2016; the Revised Estimate 2016/17 calculated as part of the budget development work completed this year; and the Estimate for 2017/18 based upon the details set out in this report.  The Estimate for 2017/18 is analysed between gross expenditure, income and net expenditure, so that Members may see clearly how income generated by the Council contributes towards expenditure budgets.

 

2.49    Appendix C presents the Committee with the budget structured in line with the relevant Service Committees and separately structured in line with the strategic priorities set out in the Strategic Plan.

 

2.50    The Revised Estimate 2016/17 shown in Appendix C totals £19,428,410. This figure is net of all income with the exception of the use of balances, the finance settlement and the council tax requirement.

 

2.51    The Estimate for 2017/18 shown in Appendix C totals £18,896,890. This incorporates the savings and other adjustments discussed above. The figure is net of all income with the exception of the use of balances, business rates income and the finance settlement and the council tax requirement. This figure excludes the value of all precepts.

 

Capital Estimates

 

2.52    A draft Capital Programme was reported to Committee at its meeting on 18th January. The programme covers the same period as the strategic revenue projection, ie 2017/18 to 2021/22.  A small number of minor modifications have been made to the programme and a proposed Capital Programme for consideration by Council is set out in Appendix D.

 

2.53    The Council has previously made the decision that New Homes Bonus should not be used as a temporary resource to provide a balanced revenue budget. With the exception of Local Plan development and some small value revenue projects that were one-off in nature, resources gained from New Homes Bonus have been reserved for support to the capital programme.

 

2.54    For the financial year 2017/18 the Council will receive a New Homes Bonus grant of £4,001,418.  This is around £750,000 less than originally projected and will lead to a greater reliance on borrowing to fund the Capital Programme than would otherwise have been the case.

 

2.55    Other resources available to the council for capital expenditure are:

 

1)   Capital Grants and Contributions, eg Disabled Facilities Grant

2)   Developer Contributions (S 106) and Community Infrastructure Levy

3)   Prudential Borrowing

4)   Internal Borrowing, ie use of the Council’s own cash balances.

 

2.56    The programme was considered by the Committee at its meeting on 18th January 2017 and has only received minor modification.  The focus of the Programme is largely on Housing and Regeneration, reflecting the updated Commercialisation Strategy agreed by this Committee at its meeting on 23rd November 2016.  By building up our existing asset base, the Council can secure a long term, stable revenue stream that will support core services in the medium to long term.  A focus on housing in particular will allow the Council to address the shortage of good quality homes for market rent in Maidstone, whilst generating an attractive financial return.  By building new homes (rather than acquiring second hand stock) the Council can also help to regenerate the borough and make an active contribution to the delivery of the emerging Local Plan. 

 

Balances / Earmarked Reserves

 

2.57    Attached at Appendix E is a statement of general fund balances and details of the earmarked reserves. 

 

2.58    The earmarked reserves incorporate a capital reserve that includes all of the retained New Homes Bonus and other revenue support to the capital programme available from previous years. 

 

2.59    The estimated level of resources available from business rates growth is identified. The in year receipt will be held for use in the following year based on the principles set out in the memorandum of understanding to the Kent Business Rates Pool. 

 

2.60    General fund balances are estimated to be £3,624,000 by 31 March 2018. In considering the level of reserves that should be maintained Committee should make two decisions:

 

a.    The first is an absolute minimum below which the Committee cannot approve the use of balances without agreement by the Council. Since 2009 this has been held stable at £2,000,000 despite the net revenue expenditure level decreasing from £22 million to £19 million. It is recommended that Committee propose to Council that the minimum level of balances be maintained at £2,000,000.

 

b.    The second is an operational minimum set for daily use of balances by the Policy & Resources Committee. In the past this has been set £300,000 above the Council set minimum. This would be £2,300,000 and it is recommended that Committee approve the principle that the minimum level of balances for daily use should be £300,000 above the Council set minimum. 

 

Medium Term Financial Strategy / Efficiency Plan

 

2.61    Attached as Appendix F is the updated Medium Term Financial Strategy / Efficiency Plan. The Strategy covers the five year period of the Council’s planning cycle.

 

2.62    The financial projection that complements the Medium Term Financial Strategy Statement is the Strategic Revenue Projection given at Appendix A. The financial projection considers the targeted need for growth and savings over the period of the Medium Term Financial Strategy and incorporates a number of assumptions about inflation and changes in local and national initiatives. 

 

2.63    The financial projection that complements the Capital Medium Term Financial Strategy Statement is the capital programme given at Appendix D. 

 

2.64    The Strategy may require amendment following Committee’s consideration of this report or following consideration by Council on 1st March 2017. The final versions will be published as part of the budget documents on the Council’s website following the Council meeting.

 

 

3.           AVAILABLE OPTIONS

 

3.1        Option 1: To not recommend a budget or recommend a budget that is not balanced to Council.

 

3.2        The Council is statutorily required to set a balanced budget in time for the new financial year and in time for council tax billing to be achieved. If the Committee were to decide not to recommend a budget or recommend a budget that was not balanced Council would not be able to accept the proposal. A budget would need to be set and this would happen without the information or guidance from this Committee’s work over the past year.

 

3.3        Option 2: The Committee could amend the budget set out in this report but would need to take care that the final recommendation to Council is a balanced budget.

 

3.4        The Director of Finance and Business Improvement (section 151 Officer) must provide confirmation to Council that “the budget calculations are based upon robust estimates and that the level of reserves is sufficient for the purposes of the budget exercise”. Care must be taken in amending the budget set out in this report so that the Director of Finance and Business Improvement is able to make the necessary confirmation.

 

3.5        Option 3: the Committee recommend the budget set out in this report, including the proposed council tax charge.

 

 

4.           PREFERRED OPTION AND REASONS FOR RECOMMENDATIONS

 

4.1        Option 3 is the recommended option.

 

4.2        A significant amount of work has been completed by all four service committees and officers. The resulting budget plans set out in this report are deliverable; create a balanced budget; achieve this within the requirements of legislation and other government controls. In addition the budget proposed will enable the Council to achieve the priorities set out in the strategic plan update reported elsewhere on this agenda.

 

 

5.           CONSULTATION RESULTS AND PREVIOUS COMMITTEE FEEDBACK

 

Consultation with the Public

 

5.1        Consultation on the budget in Autumn 2016 took the form of a short survey. Residents were asked to prioritise ten areas of spending and then

to consider whether the spending for those ten areas should remain the

same, be reduced or cut altogether. The survey could be accessed both as

a paper document or on-line via the Council’s website. It was promoted

through face to face budget roadshows at a wide range of venues around

the borough, in the Kent Messenger and in a range of other media. In total, 2,008 responses were received. Both the number of responses and an analysis of respondents suggest that the information obtained is statistically significant and can be seen as a reasonable representation of residents’ views.  The results of the survey have been reported to each Service Committee and have informed their consideration of the budget proposals.

 

Consultation with Service Committees  

 

5.2        The Service Committees have been involved in the development of the Medium Term Financial Strategy and have specifically considered budget proposals at their meetings in January 2017.  The outcomes of this consultation are reported at paragraphs 2.40 to 2.43 above.  

 

Consultation with Audit, Governance and Standards Committee

 

5.3        The Audit, Governance and Standards Committee is responsible as part of its remit for the consideration of risk.  Accordingly, it considered a risk analysis for the Budget Strategy at its meeting on 16th January 2017.

 

5.4        The Audit Governance and Standards Committee has also considered the Treasury Management Strategy, which is due to be considered by Council alongside the Budget at its meeting on 1st March 2017.

 

 

 

6.           NEXT STEPS: COMMUNICATION AND IMPLEMENTATION OF THE DECISION

 

6.1        As Members will be aware, it is a statutory requirement of this Authority to resolve the level of Council Tax for the area. To achieve this objective the recommendations detailed in this report need to be addressed. In addition the precepts of Kent County Council, the Police Authority, the Fire Authority and all parish councils are required. These will all be incorporated into a resolution to the Council meeting on 1st March 2017. 

 

6.2        It is the intention of officers to collate the decisions from this meeting and incorporate them into the necessary resolutions required by the Localism Act 2011 in order to achieve the above in time for the Council meeting. 

 

6.3        In addition it is necessary for the s151 Chief Financial Officer to give his opinion to Council, when setting the above requirements, that the budget calculations are based upon robust estimates and that the level of reserves is sufficient for the purposes of the budget exercise. Based upon the process undertaken this year and subject to the recommendation made by this Committee it is not anticipated that this opinion will include any adverse comments.

 

 

7.           CROSS-CUTTING ISSUES AND IMPLICATIONS

 

 

Issue

Implications

Sign-off

Impact on Corporate Priorities

The capital and revenue budget developed from this strategy provide resources for the achievement of the Council’s priorities. The MTFS has been developed in conjunction with the strategic plan and the budget summary set out at Appendix C is reported by committee and by strategic priority.

 

Director of Finance and Business Improvement

Risk Management

The development of the medium term financial strategy and the budget for 2017/18 supports the mitigation of the strategic risk of not having the resources available to achieve the Council’s priorities. The robust process followed, along with the Council’s policy to deliver a balanced budget ensure that expenditure estimates appropriately support the delivery of council services. 

 

The policy on balances helps to mitigate the risk of budget pressures arising from unbudgeted costs from the financial consequences of unforeseen emergencies. 

 

The key risks at an operational level are identified as part of the process of developing the annual budget.

 

Director of Finance and Business Improvement

Financial

The MTFS impacts upon all activities of the Council. The future availability of resources to address specific issues is planned through this process.

 

The prudential borrowing proposed in this report is governed by the Prudential Code for Capital Finance in Local Authorities and is governed by a number of principles that are set out in the Council’s published medium term financial strategy.

 

The council tax charge proposed in this report includes an increase that is below the threshold that would otherwise require the Council to hold a referendum.

 

Director of Finance and Business Improvement

Staffing

The current budget provides the resources necessary to fund the proposed staffing levels and the proposed pay strategy.

 

Director of Finance and Business Improvement Head of Finance & Resources

Legal

The report and the recommendations it proposes will enable the Council to set a balanced budget and a council tax charge within the time limits and constraints of legislation. The most recent legislation specifying the decisions required and the responsibilities for making those decisions is the Localism Act 2011 and the recommendations that Committee make to Council will be set out in the Council report as required by the legislation.

 

Director of Finance and Business Improvement Head of Finance & Resources

Equality Impact Needs Assessment

The objective of the MTFS is to match available resources to the priorities set out in the Strategic Plan. Delivery of those priorities should enable delivery in line with the impact assessment of the strategic plan.

 

Director of Finance and Business Improvement Head of Finance & Resources

Environmental/Sustainable Development

None identified

Director of Finance and Business Improvement Head of Finance & Resources

Community Safety

None identified

Director of Finance and Business Improvement Head of Finance & Resources

Human Rights Act

None identified

Director of Finance and Business Improvement Head of Finance & Resources

Procurement

None identified

Director of Finance and Business Improvement Head of Finance & Resources

Asset Management

Resources for management and maintenance of the Committee’s assets are included within the proposed programme.

 

Director of Finance and Business Improvement Head of Finance & Resources

 

8.        REPORT APPENDICES

 

The following documents are to be published with this report and form part of the report:

·               Appendix A: Strategic Revenue Projection 2017/18 to 2021/22

·               Appendix B: Budget strategy savings proposals 2017/18

·               Appendix C: Summary Budget 2017/18

·               Appendix D: Capital programme 2017/18 to 2021/22

·               Appendix E: Statement of General Fund Balances and Earmarked Reserves

·               Appendix F: Draft Medium Term Financial Strategy Statement

 

9.        BACKGROUND PAPERS

 

Policy and Resources Committee 03.01.17, Medium Term Financial Strategy and Budget Proposals

Strategic Planning, Sustainability and Transportation Committee 10.01.17, Medium Term Financial Strategy and Budget Proposals

Audit, Governance and Standards Committee 16.01.17, Budget Strategy – Risk Assessment

Communities, Housing and Environment Committee 17.01.17, Medium Term Financial Strategy and Budget Proposals

Policy and Resources Committee 18.01.17, Medium Term Financial Strategy – Capital Programme

Heritage, Culture and Leisure Committee 31.01.17, Medium Term Financial Strategy and Budget Proposals