Agenda item - Revenue Budget Setting Report 2016/17

To note the outcome of the final Local Government Settlement and recommends to Council approval of the revenue budget for 2016/17, impact on the budget proposals in 2017/18 and 2018/19, investment proposals, use of reserves, comment and advice of the Interim Strategic Director of Finance and Customer Services in relation to reserves, the consultation feedback from the public and partners, the proposed use of Capital Receipts to fund the first £2m of severance costs and the increase in the basic amount of Council Tax.

Report of the Interim Strategic Director of Finance and Corporate Services

Cabinet Member – Councillor Alam

Commissioners: Myers/Ney (in advisory role)

Recommended:- That the Council be asked to:-

· Approve as set out in this report the proposals for a balanced revenue budget for 2016/17 and the impact of the budget proposals in 2017/18 and 2018/19.

· Approve the investment proposals as set out in the budget report (Appendix 2) noting that some of this investment is required to address inherent budget pressures and some is required to provide scope for growth and improvement.

· Approve the proposed use of Reserves as set out in this report.

· Note and accept the comments and advice of the interim Strategic Director of Finance and Customer Services (Section 151 Officer), provided in compliance with Section 25 of the Local Government Act 2003, as to the robustness of the estimates included in the Budget and the adequacy of reserves for which the Budget provides.

· Note the consultation feedback from the public and partners following publication of Directorate budget savings proposals on the Council’s website for public comment through to 12^th February 2016 (Section 5 of this report and Appendix 3).

· Approve the proposed use of Capital Receipts to fund the first £2m of severance costs arising from service reconfiguration to deliver efficiencies and improved outcomes for clients and residents. See Efficiency Strategy (Appendix 4).

· Note the planned review of Habershon House Outdoor Education Centre which will report back to Cabinet in June 2016 (Paragraph 3.27).

· Approve:-

o An increase in the basic amount of Council Tax (i.e. the Borough’s element excluding precepts) of 3.95% - this being comprised of a 2% precept for Adult Social Care services (a new precept announced in the provisional settlement in December 2015 for Authorities with Adult Social Care responsibilities) and a 1.95% increase in the Council’s own basic level of Council Tax.

oThat the precept figures from South Yorkshire Police Authority, South Yorkshire Fire and Rescue Authority and the various Parish Councils and Parish Meetings within the Borough be incorporated, when known, into the recommendation to the Council on 2^nd March, 2016.

Consideration was given to a report introduced by Councillor Read, Leader of the Council, which proposed a Revenue Budget for 2016/17 based on the outcome of the Council’s Financial Settlement, budget consultation and the consideration of Directorate budget proposals through the Council’s formal Budget and Scrutiny process (Overview and Scrutiny Management Board).

Although the report contained proposals to balance the revenue budget for 2016/17, significant further early work needed to be undertaken in the new financial year in order to bring forward further proposals for Member/Commissioner consideration to enable the Council to establish a clear and sustainable financial plan for addressing the estimated financial gap that remained over the next two years (2017 to 2019). It would also need to start longer term planning for the period up to 2020 given the Government’s four-year settlement offer and the proposed fundamental changes in Local Government finance thereafter.

This report also provided feedback from public and partners in relation to the budget proposals in the light of their recent publication on the Council’s website for consultation until 12th February, 2016, as well as the extensive programme of engagement on the public priorities for the Council during 2015 which informed the “Views from Rotherham” report.

In addition, the Leader referred to items which had also been considered as part of the budget process which included looking at the best financial arrangements to protect frontline services, changes to capital reprofiling, PFI debt and Council Tax increase of 1.95% in addition to the 2% Adult Social Care precept which would maximise spending.

As a result of public consultation there was to be a further look at two service areas, which included the town centre visitor centre and school crossing patrol wardens, both of which were deferred for a year.

In terms of budget process, as expected, funding to Children and Young People’s Services had increased by £12 million with a further £50k being added to long term support for child sexual exploitation. The R.i.D.O. budget had also been protected in order to match the objective in growing jobs and maximising business rates as had Streetpride budgets as a result of direct requests from the public.

Councillor Alam, Cabinet Member for Corporate Services and Finance, also recommended the report as this set out the estimated budget position for 2017/18 and 2018/19 and was read in conjunction with the HRA budget report (agreed at full Council on 27th January, 2016), the Capital Strategy and the Treasury Management Strategy.

As part of the budget setting process it was suggested that a review be undertaken of Habershon House Outdoor Education Centre due to the projected income not meeting the full cost of providing the facility. This review would be reported to Cabinet in June and a decision made on its future operation based on a Value for Money assessment.

Stuart Booth, Interim Strategic Director of Finance and Customer Services, as Section 151 Officer, reported on the robustness of the estimates included in the budget and the adequacy of the reserves for which the budget provided for.

The budget setting process had been challenging given the unprecedented scale of the ongoing funding reductions required and the timescales in which to achieve them in formulating a robust and sustainable budget and preserving a financially resilient overall financial position. The report recognised the need for the Council to become more self-sufficient in the future with more revenue support coming from council tax, business rates, fees and charges and the increasing importance of growing the local economy with Rotherham’s involvement in the City Region.

There was a clear need for redefining the relationship with citizens moving forward and the report recognised the need for increasing council tax and the introduction of the new Adult Social Care precept.

In terms of the reserves it was noted the Council held a level of uncommitted reserves that could be drawn on, if required, to support the 2016/17 Budget and to give time for serious action to be taken to bring the Budget back into balance, so as to ensure its sustainability for the future. The review undertaken, incorporating a risk assessment of each reserve, guided the decision regarding the prudence of the level of reserves available to draw upon, if necessary, during 2016/17. The Council’s reserves, based on the latest monitoring, are expected to be £84.115m at 31^st March, 2016.

Commissioner Ney offered formal advice to the proposals in relation to the revenue budget for 2016/17 and the Capital Programme 2016/17 to 2020/21 which had emerged from the work of the Budget Working Group which involved the Leader, the Cabinet Members and Commissioners.

This approach allowed the Council to make sufficient progress in its arrangements for financial management of the authority to achieve an Outline Medium Term Financial Strategy and a Capital Strategy and to make proposals to balance the budget in 2016/2017.

In acknowledging this progress (in the context of very challenging financial circumstances) which would enable the Cabinet to make decisions and recommend to full Council a revenue budget and the council tax level for 2016/17. The Commissioners considered it important that the further work was needed and highlighted this to the Cabinet as formal advice.

In particular, the Cabinet was asked to ensure that further progress was made on the following:-

· Developing the MTFS for the full four year period, ensuring synergy with the Growth Plan and moving on from an annualised approach to budget setting.

· Utilising a themed corporate, strategic and crosscutting approach to drive out further efficiencies and avoid ‘salami slicing’.

· Moving towards greater sustainability in balancing the budget which avoids depletion of reserves or the danger of creating a financial precipice.

· Prioritising work on those measures used to balance this budget but which are not yet fully developed and may be challenging, including the review of staff terms and conditions.

Councillor Read, Leader of the Council, welcomed the formal advice from Commissioner Ney on behalf of the Commissioners and accepted it in its entirety.

Councillor Steele, Chairman of the Overview and Scrutiny Management Board, expressed his concern, however, with the collection of business rates, especially if there was uncertainty in the economy and the importance was stressed by Commissioner Ney on the need to dovetail the Medium Term Financial Strategy with the Growth Plan as this would begin to delivery greater certainty in the business rates environment. This would identify what could and could not be relied upon and some of the uncertainty would be removed as the Council moved to a four year budget position.