Agenda item
Minutes:
At its last meeting in December 2017 the Authority gave initial consideration to the draft revenue budget, authorised consultation with representatives of non-domestic ratepayers and Trade Unions on the draft budget proposals and agreed to give further consideration to the budget at their next meeting on the 19th February 2018.
Budget Requirement
A draft budget of £54.5m was presented to the December meeting at which time the Treasurer spoke about the uncertainty on pay awards and that since writing the report a 2% pay offer had been made to green book staff. Whilst discussions were still on-going in connection with this offer, and the grey book pay award, it now appeared highly likely that the allowance included in the draft budget was insufficient. As such the draft budget had been amended to allow for a 2% pay award for green and grey book personnel for each year up to and including 2019/20. The pay awards for subsequent years were already included at a higher rate than this and hence had remained unchanged.
It was noted that a pay offer had been made to Fire-fighters in Scotland which equated to a 20% increase over the next 4 years; this included a 6.5% increase in 2018/19, significantly higher than that allowed for in our budget. The forecast whole-time establishment position had also been updated reflecting the latest staffing numbers and recruitment/retirement projections. These were the only changes made to the budget and resulted in an increased budget requirement in 2018/19 of £55.1m.
Government Funding Settlement
At the time of presenting the draft budget the draft Local Government Finance Settlement had not been published. This was released on 19 December, with the final settlement being announced on 6 February, which reaffirmed next year’s funding as £24.3m. Next year’s settlement would be the last of the current four-year settlement and in line with this a further funding reduction of £0.5m was anticipated. There was still no indication of what the settlement would look like after 2019/20. However the Government’s Autumn Budget published in November 2017 indicated that the economy was still struggling, that debt remained higher than anticipated and hence it appeared likely that austerity would continue, albeit at a reduced pace. Furthermore the Government was currently consulting on a Fair Funding Review (as detailed later on the agenda) which would set new baseline funding allocations for local authorities by delivering an up-to-date assessment of their relative needs and resources, using the best available evidence, with the outcomes of this anticipated to impact on the settlement in 2020/21 and beyond. Running alongside this the Government had restated its intention to increase the level of business rates that were retained locally, increasing this to 75% by April 2020. The impact of these changes was unclear at the moment and hence it was assumed funding would be frozen in future years.
Business Rate Adjustments
The draft budget presented in December included an estimate of Section 31 Grants in respect of business rate reliefs, and an estimate in respect of the business rate collection fund. These had now been updated to reflect the final position provided by billing Authorities at the end of January.
Council Tax 2018/19
Billing authorities had also provided final council tax base figures and the council tax collection fund figures.
The Government had amended the council tax referendum limits throughout the remainder of the four year settlement period, recognising higher inflationary pressures, and hence the limit for all Fire Authorities had been set at 3% for 2018/19 and 2019/20. No indication of future limits had been given.
Based on the assumptions outlined, the budget requirement would result in a council tax increase of 4.0%, exceeding the referendum limit, and as such the Authority would need to reduce the budget requirement by £0.3m.
Each 1% increase in council tax in 2018/19 generated an additional £0.3m of precept, and equated to a £0.65 increase in the annual council tax figure.
As reported in the draft budget our council tax of £65.50 was still below the national average of £72.80, and was the eighth lowest of any Fire Authority. Furthermore, our council tax increases of 2.9% over the last 6 years had been significantly lower than the sector average of 10.5% and were the joint lowest of any Fire Authority. It was noted that Fire accounted for less than 5% of the overall council tax charged for in Lancashire.
Further Savings Opportunities
The Authority had been extremely successful at delivering efficiency savings, delivering £18.5m between April 2011 and March 2018. This budget had identified further savings of £0.8m in 2018/19 and £0.3m in future years. However it was clear that the scope to deliver further savings was extremely limited, with the majority of departments struggling to balance demands against capacity. As such it may be possible to deliver further in year savings in the next two years by delaying expenditure and targeting an in-year underspend offsetting some of the funding shortfall, but the scope to utilise this to balance future budgets appeared limited.
Reserves and Balances
As set out in the Reserves and Balances Policy reported elsewhere on this agenda, a reasonable level of reserves was needed to provide an overall safety net against unforeseen circumstances which could not be contained within the base budget. In addition, they also enabled the Authority to provide for expenditure, which was not planned at the time the budget was approved, but which the Authority now wished to implement and to smooth out large fluctuations in spending requirements and/or funding available.
In line with guidance issued by CIPFA a review of the strategic, operational and financial risk facing the Authority was undertaken each year to identify an appropriate level of reserves to hold, this included an assessment of the financial assumptions underpinning the budget, the adequacy of insurance arrangements and consideration of the Authority’s financial management arrangements. The assessment focused on both medium and long-term requirements, taking account of the Medium Term Financial Strategy and the draft budgets.
This had identified:-
· A minimum target reserve level of £2.5m, 4.5% of the 2018/19 net revenue budget, reflecting the four year settlements but still maintained at a reasonable level due to on-going economic uncertainty, uncertainty on pay awards and the underlying risks within the budget;
· the maximum reserve limit was maintained at £10.0m.
At 31 March 2018 we anticipated holding £7.8m, providing scope to utilise approx. £5.3m of reserves. As such reserves could be used to deliver a balanced budget in 2018/19. It should be noted that utilising reserves in this way meant they were being used to fund recurring expenditure and hence this could only be a short term solution, with recurring savings being required in the longer term to offset the shortfall. However having reviewed the level of general reserves required and the anticipated utilisation of these, the Treasurer considered these were at an appropriate level to meet future expenditure requirements in 2018/19.
In addition to the general reserves the Authority also held earmarked reserves, created for specific purposes to meet known or anticipated future liabilities, capital reserves and receipts, to provide additional funding to support the capital programme in future years, and provisions for outstanding insurance claims and potential business rate appeals. Further details relating to these were included in the reserves policy and based on the professional opinion of the Treasurer these were adequate to meet future requirements in the medium term.
Council Tax 2019/20 and beyond
As highlighted earlier, funding up to and including 2019/20 formed part of the multi-year settlement and hence all other things being equal was set. Funding beyond this period was unknown, but was assumed to be frozen at £23.8m.
Based on this the draft budget as presented delivered council tax increases in excess of 3% in future years, above the existing referendum limit.
As previously advised, holding a referendum was extremely expensive, costing in excess of £1m, and was unlikely to deliver an increase in excess of the 3% threshold. As such we would need to either deliver additional savings or utilise reserves in order to balance the budget in future years, the extent of which was dependent upon current and future council tax decisions, and the accuracy of expenditure and funding forecasts.
As such the following council tax scenarios had been modelled:-
· A 3% increase in council tax each year, including 2018/19 (note there is no indication that the referendum limits will be maintained at 3% beyond 2019/20);
· A 2% increase in council tax each year, including 2018/19;
· A 1% increase in council tax each year, including 2018/19;
· A council tax freeze each year, including 2018/19.
The following table set out the funding shortfall anticipated each year:-
|
|
2018/19 |
2019/20 |
2020/21 |
2021/22 |
2022/23 |
|
A 3% increase in council tax each year |
(£0.3m) |
(£1.2m) |
(£1.7m) |
(£2.2m) |
(£2.6m) |
|
A 2% increase in council tax each year |
(£0.6m) |
(£1.7m) |
(£2.6m) |
(£3.5m) |
(£4.3m) |
|
A 1% increase in council tax each year |
(£0.9m) |
(£2.3m) |
(£3.5m) |
(£4.8m) |
(£5.9m) |
|
A council tax freeze each year |
(£1.2m) |
(£2.9m) |
(£4.4m) |
(£6.0m) |
(£7.4m) |
Assuming general reserves were used to balance the overall position each year, they were sufficient to balance the budget throughout the period of the current 4?year settlement. However they were only a short term solution, and based on the current assumptions included in the budget, and allowing for a 3% council tax increase each year, they would fall to our minimum level by the end of 2021/22. Furthermore the utilisation of reserves would still leave a recurring funding gap that would need to be offset by savings at a future point in time, and scope to do so was limited.
Summary Council Tax options 2018/19
In considering its council tax requirements for 2018/19 the Authority aimed to balance the public’s requirement for and expectations of our services with the cost of providing this. As such the revenue budget focused on the need to:-
· deliver services as outlined in the Risk Management Plan and other plans;
· maintain future council tax increases at reasonable levels;
· continue to deliver efficiencies in line with targets;
· continue to invest in improvements in service delivery and facilities;
· set a robust budget that takes account of known and anticipated pressures;
· maintain an adequate level of reserves.
The draft budget as set out in this report achieved these objectives, but showed a budget reduction requirement of £0.3m in order to deliver a balanced budget based on a 3% increase in council tax. This could be achieved by including an unidentified savings target of £0.3m in 2018/19. The detailed resolution relating to this option shown in Appendix 1 was considered by Members.
It was noted that there had not been any responses to the budget consultation exercise.
In the professional opinion of the Treasurer, the budget had been prepared on a robust basis and the reasons for this opinion were set out in the report.
The option based on a council tax increase of 2.99%, £1.96, resulting in a council tax of £67.46 for a Band D property was MOVED by County Councillor F De Molfetta and SECONDED by County Councillor M Parkinson. The Clerk held a recorded vote and the names of Members who voted for or against the Motion and those who abstained are set out below:
For (22)
L Beavers, P Britcliffe, I Brown, S Clarke, D Coleman, F De Molfetta, J Eaton, N Hennessy, S Holgate, D Howarth, F Jackson, A Kay, Z Khan, M Khan, T Martin, E Oades, D O’Toole, M Parkinson, M Perks, J Shedwick, D Smith and M Tomlinson.
Against (0)
Abstained (1)
T Williams
The Motion was CARRIED and it was:
RESOLVED: - That the Authority:
1. note the Treasurer’s advice on the robustness of the budget;
2. note the Treasurer’s advice on the appropriate level of reserves/balances;
3. agree the revised gross budget requirement of £54.770m for 2018/19;
4. note the section 31 grant of £0.764m due in respect of the business rate reliefs;
5. agree the final budget requirement, net of the section 31 grant of £54.006m for 2018/19;
6. note the level of Revenue Support Grant £9.262m;
7. note the level of Business Rates Retention Top Up Funding £10.865m;
8. note the level of Local Business Rates Retention Funding £4.200m;
9. note the business rate tax collection fund surplus of £0.112m;
10. note the council tax collection fund surplus of £0.398m;
11. agree the council tax requirement, calculated in accordance with Section 42A(4) of the Localism Act of £29.169m;
12. note the council tax base of 432,384 determined for the purposes of Section 42B of the Local Government Finance Act 1992;
13. agree a council tax band D equivalent of £67.46, an increase of £1.96 (2.99%), calculated by the Authority under Section 42B of the Local Government Finance Act 1992 agree, on the basis of the fixed ratios between valuation bands set by the Government, council tax for each band as follows:
|
|
|
|
Band A |
£44.97 |
|
Band B |
£52.47 |
|
Band C |
£59.96 |
|
Band D |
£67.46 |
|
Band E |
£82.45 |
|
Band F |
£97.44 |
|
Band G |
£112.43 |
|
Band H |
£134.92 |
14. agree, based on each district and unitary councils share of the total band D equivalent tax base of 432,384, the share of the total LCFA precept of £29.169m levied on each council as follows:
|
Blackburn With Darwen Borough Council |
|
|
Blackpool Borough Council |
|
|
Burnley Borough Council |
|
|
Chorley Borough Council |
|
|
Fylde Borough Council |
|
|
Hyndburn Borough Council |
|
|
Lancaster City Council |
|
|
Pendle Borough Council |
|
|
Preston City Council |
|
|
Ribble Valley Borough Council |
|
|
Rossendale Borough Council |
|
|
South Ribble Borough Council |
|
|
West Lancashire District Council |
|
|
Wyre Borough Council |
|
|
TOTAL |
£29,168,595 |
Supporting documents:
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