Budget Report 2020/21 to 2023/24

Children’s and Adults Care & Education Committee 30 January 2020

Community Engagement Committee 4 February 2020

Strategic Housing and Planning Committee 6 February 2020

Environment & Sustainable Transport Committee 11 February 2020

Finance and Partnerships Committee 13 February 2020

Budget Council 27 February 2020

Contents Introduction 3

Budget outcomes 3

Financial Context 4

Corporate Plan 5

Comments of the Director of Corporate and Commercial (S151 Officer) 7

Medium Term Financial Strategy 8 Consultation and Engagement 10 Resources 11 Business Rates 12 Council Tax 13 Kingston Council Tax and Social Care Precept 13 Greater London Authority Council Tax 14 Total Council Tax 14 Collection Fund 15 Grant Funding 16 Use of Statutory Parking and Traffic Reserves 16 Expenditure 17 Adjustments to base budget 17 Inflation 18 Growth 18 Contribution to Reserves 19 Budget Reductions 19 Equalities Impact Assessment 20 Summary by Directorate 21

Flexible use of Capital Receipts 21

Housing Revenue Account Budget 21

Capital Strategy 21

Treasury Management 23

Pay Policy 23

Schools Budget 23

Annexes

Annex 1 - Budget Risk 2020/21

Annex 2 - Reconciliation of 2019/20 Budget to proposed 2020/21 Budget

1 Annex 3 - Statutory Council Tax Calculation

Annex 4 - Statutory Parking and Traffic Accounts

Annex 5 - Budget Growth 2020/21 to 2023/24

Annex 6 - Budget Reductions (Savings & Income Generation) 2020/21 to 2023/24

Annex 7 - Summary of budget by Service / Function

Annex 8 - Summary of budget by expenditure type

Annex 9 - Flexible use of capital receipts strategy

Annex 10 - Housing Revenue Account Budget

Annex 11 - Capital Strategy

Annex 12 - Treasury Management Strategy

Annex 13 - Pay Policy

Annex 14 - Schools Budget

2 Introduction

1. This report sets out the Budget for 2020/21 including the Capital Programme and Housing Revenue Account (HRA) and Schools Budget, and the Medium Term Financial Strategy (MTFS) to 2023/24 which continues to support the vision and ambitious outcomes for Kingston’s communities, residents and businesses as set out in the refreshed Corporate Plan:

To be a vibrant, diverse and inclusive Borough, where residents are empowered to remain independent and resilient.

2. The Council’s Liberal Democrat administration and officer Senior Leadership Team are focussed on delivering the following strategic outcomes which support the administration manifesto commitments:

● a well maintained borough with a sustainable approach to growth and development which benefits our communities

● a safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy

● healthy, independent and resilient residents with effective support to those who need it most

3. As part of its Corporate Plan, Kingston Council has a clear vision about the type of Council it intends to be and how it will strive to put the needs of residents at the heart of what the Council does by being:

A financially and environmentally sustainable, engaging and collaborative Council that works transparently in the best interests of Kingston’s residents and businesses.

4. In order to achieve this vision, the Council is proposing to set a budget and MTFS that will provide a foundation for the Council to achieve these key outcomes, change the culture of the organisation and ensure our scarce resources are focused on what matters most to our communities.

Budget outcomes

5. This report provides the budget proposals and council tax setting for the 2020/21 financial year achieving the following key outcomes

○ Growth and investment in services to meet our key priorities and demand pressures of £6.598m

○ The identification of £7.185m of revenue savings.

3 ○ An average council tax at band D of £1,613.08, a 1.99% increase in the Council Tax set by Kingston Council and a 2% increase in the Adult Social Care precept.

○ An increased general fund reserve of £19.633m for 2020/21, an increase of £3.5m on this year’s figure of £16.133m to ensure prudent cover for managed risks.

○ A Capital Programme to provide infrastructure investment in Kingston. The general fund capital programme over four years from 2020/21 will be £135.7m.

6. This Budget is designed to support the Council in meeting the significant challenges it faces in ensuring services for its residents and some of our most vulnerable communities are protected against a backdrop of increasing demand in terms of volume and complexity and decreasing resources available to fund those services.

Financial Context

7. The Council is currently operating, like all local authorities, in financially uncertain times. The provisional local government finance settlement was delayed due to the general election and announced on 20 December 2019, the latest it has ever been announced. The delayed announcement of funding and council tax referendum thresholds makes longer term financial planning ever more challenging. The settlement has still not given any certainty beyond 2020/21 as the comprehensive spending review planned for 2019 was delayed and replaced with a one year spending round.

8. At the time of writing, the European Union Withdrawal Agreement is being passed through parliament and the United Kingdom looks set to leave the European Union on 31 January 2020. The longer term economic impacts of this remain uncertain but there remains a significant risk that a downturn in the economy will impact the Council, in particular through loss of business rates income or higher rates of inflation on the costs of goods and services that the Council purchases. We will continue to monitor the impact of national economic events on the Council’s financial position.

9. At a local level, for Kingston, the structural overspend and shortfall of funding within the Dedicated Schools Grant (DSG) for children with special educational needs or disabilities gives rise to our most significant financial challenge. This challenge is not unique to Kingston, but the scale of the deficit combined with the low level of reserves held locally requires the Council to be tackling it with a greater degree of rigour and speed than many others. The cumulative deficit on Kingston’s DSG reserve is estimated to be over £20million by 31 March 2020 which places a considerable strain on the Council’s balance sheet. There is a clear national intention that the schools budget is ringfenced and the Council has therefore not ‘topped up’ the DSG from general fund resources. However, in order to be able to demonstrate financial sustainability the Council has to continue to make contributions to reserves

4 from the general fund to mitigate the growing DSG deficit on its balance sheet. The Council has been lobbying Government to provide clarity over the treatment of this deficit and seek a long term sustainable solution to funding this service.

10. Elsewhere within the Council, consistent with the national picture, there has continued to be a high level of demand for Adult Social Care. Work to manage this demand has reaped benefits - however there still remains increasing demand within this area which is reflected in the budget and MTFS. The high levels of demand in Children’s Services has continued to be a significant issue centred on children leaving care and Unaccompanied Asylum Seeking Children (UASC) and again this is reflected in the budget and MTFS.

11. The 2020/21 settlement is the first Local Government Financial settlement since the end of the four year settlement period from 2016-17 to 2019-20 and on this occasion gives a settlement for one year only. The provisional settlement showed a continuation of the funding provided in the previous 4 year settlement, along with additional funding to partly meet the significant funding pressures in both Adults and Children’s social care.

12. However for Kingston as for other local authorities it did not bridge the gap between the available resources and funding needed to meet the increasing demands and costs in local government services. The additional amount received was £2.030m in additional revenue grant which has primarily been used to provide growth for services to Children and Adults.

13. The settlement also confirmed that the Council Tax referendum threshold is set at 4%, comprising the 2% social care precept and a 2% general increase.

14. Taking all these risks and pressures into account, the Council needs to make savings of approximately £7.185m next year.

15. The context of local government finance in future years has a significant level of uncertainty with the likely impact of comprehensive spending review, the introduction of fair funding and the review of the business rates in 2021/22. This provides a challenging financial environment for the Medium Financial Strategy.

Corporate Plan

16. All the proposals in the budget result from the work the Strategic Leadership Team and senior managers have been doing over many months as part of the budget setting process. The proposals have been developed in collaboration with Portfolio Holders and reflect the administration’s political priorities and support the Corporate Plan.

5 A well maintained borough with a sustainable approach to growth and development which benefits our communities

17. The Budget proposes revenue growth and investment of £1.512m to support this outcome which includes investment in planning and waste and recycling. There is continued capital investment to bring forward the regeneration of Cambridge Road Estate in Norbiton, to deliver much needed additional Council homes, as well as market sales homes, improved open spaces, and community facilities. There is also further capital investment in our green spaces through the continuation of the community park programme and investment in electric vehicle lamp column charging points.

A safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy

18. The budget proposes revenue investment of £0.133m into the Kingston together fund, community engagement, bereavement services and highways network management.

19. The Council continues to support a vibrant community and voluntary sector recognising the significant contribution it makes to Kingston communities. There is investment proposed in the budget to launch the Kingston Together voluntary sector commissioning fund.

20. The first successful citizens assembly was held during 2019/20 on the topic of climate change. Investment is being made to increase capacity to deliver greater levels of community engagement going forward.

Healthy, independent and resilient residents with effective support to those who need it most

21. The greatest level of revenue growth of £3.820m is to support the most vulnerable in our communities and to meet the significant demand within children and adult social care services. This includes utilising adult social care Council Tax precept that central government introduced as a means to fund additional pressures within adult social care services. There is investment to champion independence; focus on strength and resilience; and support people of all ages to live healthy, independent lives.The budget seeks to ensure support and resources are targeted at the most vulnerable or where the outcomes will have the greatest impact of improving the lives of those who need it the most.

22. In addition, through capital investment and innovative partnerships, the Council is delivering the infrastructure that is needed for the future, including new school places and a new dementia care home.

6 A financially and environmentally sustainable, engaging and collaborative council that works transparently in the best interests of Kingston’s residents and businesses

23. The budget and MTFS support the continued transformation of the Council ensuring it is delivering value for money and effective outcomes by smarter commissioning, digital transformation, business process re-engineering and reviewing all support services to ensure they are focussed on enabling frontline service delivery for the benefit of residents and businesses.

Comments of the Director of Corporate and Commercial (S151 Officer)

24. The Local Government Act (2003) Section 25 requires the Council’s Chief Financial Officer (as defined by section 151 of the Local Government Act 1972) to report on the ‘robustness’ of the financial estimates which are used in calculating the Council Tax for 2020/21. The Council is required to have regard to the S151 Officer’s comments when making the final decision on its budget and Council Tax for the year.

25. The purpose of the S151 Officer’s comments is to give assurance that risk is appropriately managed and that there is a legitimate expectation that likely eventualities are provided for within the budget – essentially that the financial plan is sound. They are not intended to give a guarantee that the budget is sufficient to cover all possible scenarios, nor that income and expenditure will occur exactly as budgeted.

26. Section 25 of the Act also requires the Council, in setting its budget, to maintain ‘adequate level of controlled reserves’. The S151 Officer is required to provide appropriate advice to the Council on the adequacy of its reserves, both those which are earmarked for specific purposes and for the General Fund balance. To inform this judgement, the S151 Officer has carried out a financial risk analysis of the Council’s proposed budget which is detailed in Annex 1.

27. In assessing the level of risk, all elements of the budget have been considered, including external economic factors, the impact of demand led growth and delivery of savings, any uncertainty over the level of funding available and the risk posed from the possibility that some savings proposals may not proceed as a result of consultation. This shows that £1.045m of the total £7.185m of savings proposals in 2020/21 are still subject to consultation and would need to be substituted with funding from reserves should they not proceed.

28. The most significant risk highlighted in Annex 1 is the risk of further overspends on the high needs block of the dedicated schools grant, causing a further increase in the cumulative deficit. This contributes £6.5m to the overall total level of risk of £14.998m that has been identified should all risks identified, materialise. This compares to a

7 total level of risk of £13.887m in 2019/20, with the increase largely due to the risk around pay inflation, offset by a lower overall level of savings and a lower value of savings that are subject to consultation. The Council general fund reserve is £19.633m compared to £16.133m in 2019/20.

29. The level of scrutiny and challenge exercised by Officers and Portfolio Holders through the budget setting process and the effectiveness of the budgetary control framework enabling successful resolution of in year financial issues enable the S151 Officer to offer assurance on the robustness of estimates in accordance with Section 25 of the Local Government Act 2003. Any amendments to the proposals included within this report may require a further assurance assessment to be given before a decision on those amendments is made.

30. The analysis of potential scenarios shows that for 2020/21 the Council continues to face a significant and material level of budget risk. The significant savings that have been made in response to resource reductions and increasing cost pressures have contributed to an increased inherent level of financial risk.

31. The ongoing pressure in relation to the High Needs Block of the Dedicated Schools Grant budget is considered as part of the schools budget papers in Annex 14. However, the deficit on this reserve does impact on the Council’s overall financial position and the need to make a planned contribution to the general fund balance to bolster the Council’s balance sheet position overall.

32. Based on the inclusion of growth and contributions to reserves within the budget, the flexible use of the Strategic Investment Reserve and leadership and organisational experience demonstrated in previous years in containing significant budget pressures, managing significant budget reductions and delivering transformational change, the General Fund balance is considered to be sufficient. The S151 Officer therefore advises that the level of reserves is adequate in line with Section 25 of the 2003 Act. Any amendments to the budget proposals which reduce the contribution to reserves or the overall level of reserves available would cause this advice to change.

Medium Term Financial Strategy

33. The MTFS sets out projections for costs of service delivery and the resources available to fund those services over the four year period to 2023/24.

34. The table below sets out a summary of the MTFS over the four year period.

8 2020/21 2021/22 2022/23 2023/24 Medium Term Financial Strategy £000s £000s £000s £000s Expenditure: Base Budget 136,308 140,421 144,385 151,279 Adjustments to Base Budget 446 (165) (93) 0 Inflation 2,984 3,672 3,799 3,892 Growth 6,598 4,339 4,510 4,330 Contributions to reserves 1,270 0 0 0 Savings (7,185) (3,882) (1,322) 571 Gross Budget requirement 140,421 144,385 151,279 160,072 Resources: Parking and Traffic Reserves (7,807) (7,807) (7,807) (7,807) Specific Grants (7,198) (1,413) (1,341) (819) Sub-total (15,005) (9,220) (9,148) (8,626) Financing Resources for tax setting purposes Business Rates (23,860) (23,845) (24,322) (24,808) Council Tax (103,001) (104,031) (105,072) (106,122) Collection Fund (Surplus)/Deficit 1,445 0 0 0 Sub-total (125,416) (127,876) (129,394) (130,930) Total Resources (140,421) (137,096) (138,542) (139,556) Annual Increase in Budget Gap 0 7,289 5,448 7,779 Cumulative Budget Gap 0 7,289 12,737 20,516

35. A reconciliation from the 2019/20 budget to the proposed 2020/21 budget is shown in Annex 2. The base budget has changed since the budget was published last year as savings relating to income in the enforcement accounts have been moved into the resources section; increasing both the gross budget and gross resources by £1.808m.

36. In the current context of Local Government funding, the analysis of resources and expenditure reveals a gap in the future between funding available and likely cost. In financial terms, this gap needs to be closed by budget reductions and/or increases in resources through local taxation.

37. Whilst no decisions on Council Tax increases in future years have been taken, the maximum that could be raised by increasing Council Tax to the current maximum permissible amount is shown in the table below. The table also shows the impact, if the annual contribution to reserves budgets being made for 2020/21 were removed. This would not be prudent given the wider financial context, but it shows an additional option to reduce the value of savings required. The table therefore shows the minimum amount that will need to be identified in savings from the future budget proposals.

9 2021/22 2022/23 2023/24 £000s £000s £000s Outstanding Estimated Budget Gap (Maximum 7,289 5,448 7,779 Savings Required) Maximum contribution from General Increase (2,070) (2,133) (2,197) Removal of Additional Contributions to Reserves (4,770) 0 0 Minimum Additional Savings Required 449 3,315 5,582

Consultation and Engagement

38. Throughout the Autumn we have been engaging with residents using a budget simulator tool to enable people to better understand the challenges we have in setting a balanced budget. During that period we had conversations with around 45 people on the budget and there were more than 249 views of the simulator online.

39. We also set out draft headline proposals on the areas that were being considered for investment and for savings along with indicative values for each directorate. This call for views closed on 16 January.

40. A multi-channel communications approach was taken to promote the consultation including JCDecaux billboards, a press release, resident and community newsletters, social media (twitter, facebook, instagram, next door, linkedin), posters in libraries, leisure centres and community notice boards and via distribution lists, through schools, strategic partners and community groups, councillors and council officers Library staff were available to help residents to logon to computers in the libraries to access information online and complete the survey if they wish or obtain an alternative format. The contact centre number was also provided as a point of access for help and requests for a paper version of the survey or other formats. 41. During the consultation period, there were 619 visits to the consultation home page, 237 downloads of the proposals document, 142 visits to the consultation survey and 28 full surveys completed. 79.4% of feedback came from people who live in Kingston, 14.7% from people who work in Kingston, 2.9% from people who own a business in Kingston and 2.9% from ‘none of the above, but regularly visit Kingston’

42. The consultation asked for comments rather than quantitative information. The main themes coming out of the comments were:

○ In the general comments, a few people commented that they would like more detail and, specifically, how the proposed capital investment will be broken down.

○ Some do acknowledge the lack of government support as a factor in having to make tough budget choices.

10 ○ Respondents were split on whether the council should be making savings from adults and community housing or should be increasing or maintaining our spending in this area.

○ Comments were broadly supportive of more spending on services provided through the Communities directorate, though with some differing views - specific points mentioned included improving roads or, making savings by not giving support to events within the borough. This also included suggestions around maintaining shop fronts, more spending on green spaces, a couple of comments questioned the plans on how commitments will be honoured with less budget.

○ Largely in support of maintaining funding for Children’s services.

43. Some of the proposals within this paper will be subject to formal consultation processes. Where a consultation process has already been identified as being required this is noted against the proposal. The inclusion of these items within the proposed budget is subject to the necessary consultation. If consultation results in revisions or cancellation of the proposed actions, then alternative arrangements will be made in year to deliver reductions in spend. If that cannot be achieved then the Council will need to draw on reserves to cover any shortfall in expenditure. The adequacy of reserves and associated risk is covered elsewhere in this report. Where formal consultation is not required the council will involve users and ensure they have opportunities to have their say in shaping service delivery by following the principles of our community engagement framework.

Resources 44. This section of the report explains the resources the Council has available to fund its expenditure, how they are generated and any restrictions on their use. It also outlines the expected level of resources over the medium term.

45. A summary of resources is shown in the table below.

2020/21 2021/22 2022/23 2023/24 Resources Analysis £000s £000s £000s £000s Business Rates 23,860 23,845 24,322 24,808 Council Tax 103,001 104,031 105,072 106,122 Collection Fund Surplus (Council Tax) 157 0 0 0 Collection Fund Surplus (Business Rates) (1,602) 0 0 0 Total Local Taxation 125,416 127,876 129,394 130,930 Specific Grants 7,198 1,413 1,341 819 Use of Statutory Parking & Traffic 7,807 7,807 7,807 7,807 Reserves Grand Total 140,421 137,096 138,542 139,556

Business Rates

46. Business Rates is a tax on business premises. Business rates are set nationally, but collected locally. The Council therefore cannot directly influence the level of income generated through this source. It is however a very important source of income for the Council.

47. The system of distribution of business rates has changed over recent years moving from a model of redistribution by central government to one of local retention of at least a share of the amounts collected. There has been a long standing ambition of the Government to move to a higher percentage of locally retained rates with attempts to move to 100% retention prior to the 2017 general election and more recently consultation on a move to 75% retention, which was delayed when the full spending review was pushed back to 2020. At the time of writing there has been no further specific information from the Government elected in December 2019 as to future intentions of reform in this area.

48. In 2019/20, the Council participated in the London Business Rates Pool Pilot. This pilot arrangement enabled 75% of business rates growth generated in the capital to be retained by London Boroughs (48%) and the GLA (27%). For 2020/21, no further pilot arrangements have been offered by the Government. The London Councils’ Leaders Committee has signalled its intention to continue to pool business rates across the capital, outside of the pilot arrangement and this has been reflected in the provisional local government finance settlement.

49. The proposed pooling arrangement will require each Borough to agree to enter into a memorandum of understanding regarding how the pool will operate. Without pilot status, the shares of business rates retained under the pooling arrangement will revert to 30% for Boroughs and 37% for the GLA, with the remaining 33% being retained by central government. Under these arrangements the levy on growth will be reinstated as the removal of this was part of the pilot arrangements only. The financial benefits are therefore substantially less than under the pilot arrangements of the previous 2 years and arise primarily from pooling the top up and tariffs across the capital to reach an overall lower tariff for the pool as a whole.

50. Under the pooling arrangements, there can be no formal ‘no detriment guarantee’ which has been another feature of the pilot arrangements. However, modelling undertaken by London Councils demonstrates that the risk of there being insufficient funds within the pool to ensure each authority is at least as well off as it had been outside the pool is low. It is estimated that a fall in business rate of 4.4% across the pool as a whole or around £90million in one tariff authority would have to occur for this to be the case. This is set against average real terms growth in business rates across London as a whole of over 2% per annum since 2013-14.

51. The financial benefits from pooling are proposed to be distributed in a similar manner to the current pilot pool. However as the financial value of pooling is substantially lower, the strategic investment pot will be removed. The GLA has also agreed to 12

12 forego it’s share of the benefits to create a greater incentive for Boroughs to participate. The benefits will therefore be distributed amongst the 33 authorities on the basis of:

○ Incentives pot - 18% ○ Population - 41% ○ Settlement Funding Assessment - 41%

52. The latest modelling from London Councils estimates that the net benefit from pooling business rates in London will be in the region of £25.9m, of which £0.3m would be attributable to Kingston. As these figures remain uncertain and not guaranteed, this benefit has not been built into the budget.

53. The level of business rates income included in the budget reflects the latest forecast the Council’s share of the Business Rates income to be collected. This has reduced by £0.299m since the 2019/20 budget was set due to a combination of successful appeals and erosion of the taxbase due to a decline in the retail and commercial markets.

Council Tax

54. The Council Tax which residents in the Borough pay comprises two elements, one is the tax levied by the Council to fund our services and the other is an amount collected on behalf of the Greater London Authority (GLA) and paid over to them. The final decision on the level of Council Tax levied by Kingston will be taken by Members at the Budget Council meeting on 27 February 2020.

55. The level of income collected through Council Tax is determined by the level of Council Tax charged and the number of properties that Council Tax is chargeable on which is known as the tax base. The tax base is determined by assessing the number of chargeable dwellings in the Borough and their Council Tax band, allowing for discounts or exemptions and estimating the number of new properties that are likely to be added in the Borough during the year. For 2020/21, the taxbase has been set, under delegated powers at 63,853.7 which is an increase of 1.67%. The increase primarily arises from new properties coming into the rating list, along with some changes to the level of discounts and exemptions awarded. For 2021/22 onwards, it is estimated that the tax base will increase from this level by 1% per year, though this will be annually reviewed.

Kingston Council Tax and Social Care Precept 56. In the 2020/21 Local Government Finance Settlement, the government has allowed a 1.99% annual general increase to Council Tax in 2020/21 without recourse to a referendum, this is less than the 2.99% allowed in 2019/20. It is the increase in the Council’s average Band D council tax taking into account those households both inside and outside of the Wimbledon and Putney Common Conservators Levy area which is measured against this threshold. In addition to the general increase, the

13 social care precept allows the relevant authorities to levy an additional precept to fund adult social care. This can be up to 2% per year in 2020/21.

57. The Kingston element of Council Tax proposed as part of this budget represents a general increase of 1.99% and a further 2% social care precept to fund adult social care services. The formal council tax calculation is set out in Annex 3. The table below provides details of the council tax requirement for 2020/21. The proposed average Band D Council tax for RBK for 2020/21 will be £1,613.08 This is the average Band D bill when taking into account those households both inside and outside of the Wimbledon and Putney Common Conservators (WPCC) Levy area. Exact amounts for properties inside and outside the WPCC area cannot be determined until WPPC issue their final levy but have been estimated for the purposes of this report.

2020/21 Council Tax Setting Calculations £000s Gross Budget Requirement 140,421 Less: Specific Grants (7,198) Use of Parking and Traffic Reserves (7,807) Net Budget Requirement 125,416 Less: Business Rates (23,860) Collection Fund Surplus (Council Tax) (157) Collection Fund Deficit (Business Rates) 1,602 Total (22,415) Council Tax Requirement 103,001

Greater London Authority Council Tax

58. The announcement of the Mayor of London’s draft budget proposals was made on 18 December 2019. The consultation budget proposes a Band D Council Tax precept of £326.92 for 2020/21 compared to £320.51 in 2019/20, an increase of 1.99% or £6.41. At the time the draft GLA budget proposals were announced the Home Office settlement for policing including the council tax referendum thresholds for local policing bodies had not been announced. This remains the case at the time of writing this report. The GLA have therefore advised that it is likely the proposed Band D figure will change once that information is available.

59. Confirmation of the GLA’s budget and Council Tax will follow the London Assembly meeting on 24 February 2020 and will be reported to Council on 27 February 2020. Full details of the GLA’s draft budget can be found on their website at www.london.gov.uk/budget

14 Total Council Tax

60. The table below shows the total proposed Council Tax, inclusive of the GLA amounts and details amounts for each band. The figures for Wimbledon and Putney Commons Conservators levy are provisional, pending confirmation of the levy from that body and the individual figures in the table may therefore change. Any amendments will be reported to the Finance and Partnerships Committee if available, or Budget Council if received later.

Council Tax Council Tax Council tax Council Tax WPCC area Council Tax Band RBK GLA - most precept - WPCC areas of the area Borough

£ £ £ £ £ A 1,074.89 217.95 1,292.84 19.80 1,312.64 B 1,254.03 254.27 1,508.30 23.11 1,531.41 C 1,433.18 290.60 1,723.78 26.41 1,750.19 D 1,612.33 326.92 1,939.25 29.71 1,968.96 E 1,970.63 399.57 2,370.20 36.31 2,406.51 F 2,328.92 472.22 2,801.14 42.92 2,844.06 G 2,687.22 544.87 3,232.09 49.51 3,281.60 H 3,224.66 653.84 3,878.50 59.42 3,937.92

Collection Fund

61. The Council maintains a Collection Fund as required in order to account for the difference between the actual amounts of Council Tax and Business Rates collected and the budgeted amounts used in setting the tax for the year.

62. The Council is required to estimate the position relating to Council Tax at the end of the financial year, on the 15 January each year. Any adjustments arising from this are required to be included in the calculation for the following year’s Council Tax. Estimates at 15 January 2020 show that there is expected to be a surplus of £0.191m at the end of 2019/20, with Kingston’s share being £0.157m.

63. A similar process is undertaken for Business Rates with estimates made in respect of surpluses or deficits expected to arise at 31 March 2020. This is shared between the Council, the GLA and Central Government in proportion to their shares of business rates income. Due to the changing arrangements for business rates retention, this means that the balance brought forward at 31 March 2019 has been apportioned in line with the changing percentages in recent years, the 2019/20 in year amount will be shared 48% RBK, 27% GLA, 25% Central Government. Estimates show that there

15 will be a deficit of £3.074m with RBK’s share being £1.602m to be applied in 2020/21.

64. The overall position on the collection fund depends upon a number of variables. For example, on council tax, if the number of properties or the allowance for discounts, exemptions or appeals vary from those used in the council tax base, a surplus or deficit will arise. On business rates, variations can also occur due to assumptions made at a point of time on appeals and fluctuations in business rates income can occur, strongly linked to the performance of the wider economy.

Grant Funding

65. Kingston Council no longer receives any Revenue Support Grant (RSG). For 2020/21, the Government had originally intended to charge an additional tariff on the Council’s business rates income in the form of negative RSG. Fortunately this has been removed through additional one off funding in 2020/21 as was the case in 2019/20, though there is no certainty beyond this year.

66. A small number of specific grants exist and where there are limited technical restrictions on what they are spent on, these are held centrally. A breakdown of these amounts is shown in the following table.

2020/21 2021/22 2022/23 2023/24 Specific Grants £000s £000s £000s £000s Improved Better Care Fund 1,786 408 408 408 Housing Benefit Admin 363 326 294 264 Council Tax Benefit Admin 147 147 147 147 Social Care Support Grant (Children's & Adults) 3,009 0 0 0 New Homes Bonus 1,893 532 492 0 Total Specific Grants 7,198 1,413 1,341 819

67. The table above demonstrates that the level of specific grants reduces significantly after 2020/21 with the social care grant not being confirmed beyond 2020/21 and the improved better care fund and new homes bonus expected to reduce significantly in 2020/21. Further work is required to estimate the level of Housing Benefit Admin grant in future years as the level of universal credit increases and housing benefit reduces.

Use of Statutory Parking and Traffic Reserves

68. The on street parking, moving traffic contraventions and bus lane enforcement accounts are ring fenced accounts for the collection of income from these activities and whose income can only be spent on transport related activity. One of the most significant costs funded from this source of income is funding of the freedom pass for

16 Kingston residents, which combined with the taxi card had a budget for 2019/20 of £5.8m.

69. The level of expenditure on relevant activities included in the budget exceeds the level of income available from the accounts and as such the draw down from the accounts is shown alongside other general resources. The amount to be drawn down is less than that included in the 2019/20 budget, this is due to savings proposals put forward as part of the 2019/20 in relation to on street parking charges which have been reviewed and subsequently reversed. No changes to the level of income being drawn down from the accounts is expected over the four year period though this will be regularly reviewed to ensure the drawdown does exceed the available income.

70. Annex 4 provides a summary of forecast income for these accounts.

Expenditure

71. This section of the report sets out how the resources outlined above are deployed in order to deliver services and how the demands on the available resources change over time.

72. Inflation, growing demand for services and unavoidable increases in cost place additional pressure on the budget over the medium term and this is mitigated to a degree by budget reductions.

Adjustments to base budget

73. Adjustments are made to the current year (2019/20) budget in order to arrive at the base position for 2020/21. These are necessary to remove one off items or where the impact of a decision differs between financial years. The main adjustments are outlined below.

2020/21 2021/22 2022/23 2023/24 Adjustments to Base £000s £000s £000s £000s Removal of unachieved savings 810 0 0 0 Planned changes to previous years savings 353 (250) 0 0 Planned changes to previous years growth (828) (111) (175) 0 Re-alignment of HRA recharges 111 196 82 0 Total 446 (165) (93) 0

74. Budget monitoring reports to Finance and Partnerships committee through the year have highlighted that there are £1.6m of savings rated as red, which are undeliverable. Where these related to income from enforcement accounts, the planned draw down from those accounts has been reduced from 2020/21 onwards. In the remainder of cases, the savings have been removed from the budget as an adjustment to base.

17 75. Adjustments are also required where the impact of previous year’s savings and growth requirements changes year on year. These tend to be where growth was time limited or where the impact of savings decreases over time.

76. A review of the charges from the general fund to the Housing Revenue Account (HRA) for support services has revealed that some re-alignment is required in order to ensure the charges remain fair and accurate. Base budgets are being adjusted on a phased basis as each service area’s charges are reviewed.

Inflation 77. A key element in the budget preparation process is building in an appropriate allowance for inflation. In line with previous years, the draft budget presented continues to restrict inflationary increases to cost elements where there is an unavoidable contractual commitment only. Where the Consumer Price Index (CPI) is used, the September 2019 indicator (1.7%) has been used.

78. Pay inflation is allowed for, in line with the outcome of the Local Government pay award. For 2020/21 this is estimated to be 2%, although the proposed pay award has not yet been confirmed.

79. The table below shows the inflation allowed for in each category.

2020/21 2021/22 2022/23 2023/24 Inflation £000s £000s £000s £000s Pay 653 670 683 697 Non-Pay (Contracts & Social Care) 2,415 3,064 3,185 3,267 Concessionary Fares 98 111 119 121 Utilities 11 49 52 52 NNDR (Business Rates) 45 46 46 47 Fees & Charges (238) (268) (286) (292) Total 2,984 3,672 3,799 3,892

Growth

80. Growth is proposed to be added to the existing cost base to assist in delivering the Corporate Plan. The need for individual items of budget growth arise mainly from the need to fund the increasing demand for some of our services due to changes in demographics and client numbers or for unavoidable pressures where current budgets would be insufficient to maintain existing service levels.

2020/21 2021/22 2022/23 2023/24 Growth by Corporate Plan Theme £000s £000s £000s £000s A safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy 133 100 (100) 0 A financially and environmentally sustainable, engaging and collaborative council that works transparently in the best interests of Kingston’s residents and businesses. 1,133 2,770 3,544 4,645 Healthy, independent and resilient residents with effective support to those who need it most 3,820 1,304 896 0 A well maintained borough with a sustainable approach to growth and development which benefits our communities 1,512 165 170 (315) Total 6,598 4,339 4,510 4,330

81. Further details of the growth being applied is shown in Annex 5.

Contribution to Reserves

82. The budget proposals include establishing a new reserve with a £1.270m per year contribution relating to the costs of supporting children and young people with special educational needs and disabilities. The costs of this falls within the schools budget, funded by the dedicated schools grant (DSG). However, as the DSG account is in deficit it is important to increase reserves elsewhere on the balance sheet in order to be able to demonstrate financial sustainability.

83. A budget of £3.5million per year was established in 2019/20 to contribute to the Council's General Fund Balance and no further changes to this are proposed for 2020/21. The overall current level of reserves remains low for an authority of Kingston’s size and in comparison to other London Boroughs. This planned contribution will assist in increasing the reserves available to mitigate against risk.

Budget Reductions

84. The table below summarises the budget reductions being proposed in this medium term financial strategy against the corporate plan themes. More detail on the individual proposals making up these totals is provided in Annex 6. This includes the indicative impact on staffing resources of 16.5 FTE which will be subject to consultation and will include a mitigation strategy to minimise any compulsory

19 redundancies including prioritising the deletion vacant posts and those covered by agency and interim staffing.

2020/21 2021/22 2022/23 2023/24 Savings by Corporate Plan Theme £000s £000s £000s £000s A safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy 195 140 160 25 A financially and environmentally sustainable, engaging and collaborative council that works transparently in the best interests of Kingston’s residents and businesses. 4,189 1,268 170 140 Healthy, independent and resilient residents with effective support to those who need it most 1,857 907 504 100 A well maintained borough with a sustainable approach to growth and development which benefits our communities 944 1,567 488 (836) Total 7,185 3,882 1,322 (571)

Equalities Impact Assessment

85. An initial equality impact assessment has been undertaken regarding the budget reductions that will be enacted in the 2020/21 budget to assist members to fulfil the requirements of the public sector equality duty which is designed to eliminate discrimination, advance equality of opportunity and foster good relations within the protected characteristics. Kingston has had to make savings totalling £7.185m in 2020/21 and this budget has been produced against a backdrop of previous financial reductions from the government.

86. The budget reduction proposals have been assessed carefully to make sure that any changes will have the least possible impact on residents and service users with a commitment to fairness. Any impact on staff will be managed through the change management process supported by staff from Human Resources.

87. The impact of the budget reduction proposals will be monitored to ensure that any potential negative impact is reduced as far as possible. Each service area will undertake further appropriate impact assessments at the implementation stage if there is a likelihood of a negative impact for service users or staff within the equality protected characteristics.

88. The Council aspires to and is confident that the savings proposed will enable it to discharge more than its statutory obligations and continue to meet the requirements of those most in need of its support and help

20 89. Further details of the Equality Impact Assessment is included in the budget reductions information at Annex 6. Summary by Directorate

90. The result of the changes in resources and spending outlined above leads to a net budget requirement for each directorate for 2020/21 as follows.

Budget 2020/21 Directorate £000s Adults 53,015 Children's Services 29,870 Corporate & Commercial 51,682 Growth (5,605) Communities 10,041 Chief Executives 1,418 Total 140,421

91. A more detailed analysis by service is provided in Annex 7. Annex 8 shows the budget summarised by expenditure type. The budgets published in this annex and summarised in the table above show the best estimate available at the time this agenda is published as to how expenditure will be split across service areas.

Flexible use of Capital Receipts

92. To support local authorities deliver more efficient and sustainable services, a time limited flexibility is currently available to use capital receipts from the disposal of property, plant and equipment assets to fund the revenue cost of service reform. The Council’s refreshed strategy in respect of this is set out in Annex 9.

Housing Revenue Account Budget

93. The Housing Revenue Account (HRA) is a ring fenced account for all income and expenditure relating to the Council’s housing landlord function. Details of the proposed HRA budget and medium term plans are shown in Annex 10. In order to meet statutory deadlines for advising tenants of changes in their rent, decisions on the HRA budget and rent levels will be taken at the Strategic Housing and Planning Committee on 6 February 2020.

21 Capital Strategy

94. Annex 11 sets out the Council’s Capital Strategy including the recommended detailed capital programme for capital investment in the borough the period 2020/21 to 2023/24 of some £190.4m. This includes expenditure on general fund schemes of £135.7m and expenditure on the Housing Revenue Account (HRA) of £54.7m. The capital strategy is a new requirement under the updated Prudential Code and Treasury Management Code of Practice (both issued in December 2017).

95. The general fund capital programme is being funded by a mixture of capital receipts from the sale of surplus sites, grant funding and prudential borrowing. The HRA programme is being funded by Major Repairs Reserve, GLA grant, share of Right to Buy (RTB) Receipts, leaseholder receipts and Borrowing.

96. The programme reflects the Council’s priorities and objectives with major investment in housing and school places as well as rolling programmes to improve highways, pavements and street lighting. The Council continues to invest in the Hook flood alleviation scheme, parks improvements and structural improvements to the Kingston cemetery chapels. The programme also includes the Council’s property investment programme, regeneration project at Cambridge Road, planned works on road maintenance, provision of disabled facilities grants, support for the modernisation of registration and funeral services, investment in IT programmes, works to operational properties, and replacement of sprinkler system at Cattle Market car park.

97. The assumed level of prudential borrowing to finance the general fund capital programme is £93.9m, as detailed in Annex 11. This includes prudential borrowing for invest to save schemes of £76.1m and £17.8m as general support to the programme. Invest to save schemes include investment in the property investment programme whereby the financing costs for borrowing to fund the purchase of commercial properties will be funded through additional rental income and other invest to save schemes through either associated revenue savings or additional service income. Allowance for the financing costs for all borrowing approvals has been made in revenue estimates for 2020/21 to 2023/24.

98. The outline HRA capital programme has been drafted on the basis of the existing Housing Revenue Account 30 year business plan. The expenditure plans for the four years 2020/21 to 2023/24 include a programme of works to council housing stock of £23.6m. In addition it also includes provision for the completion of the affordable homes programme of new build housing of £25.7m. Finally it also assumes the continuation of a programme of property development schemes for social housing of £3.1m eligible to be funded by 1-4-1 net Right to Buy (RTB) receipts through an agreement with the MHCLG and other expenditure of £2.3m.

99. This programme over the 4 years (2020/21 to 2023/24) is financed by HRA borrowing of £14.5m, right to buy receipts of £3.1m, Major Repairs Reserve funding of £21.2m,

22 Leaseholders Contributions £3m, GLA Homes for Londoners Grant £9.5m and allowable debt from RTB receipts of £3.5m.

100.The outline education capital programme is shown within the capital strategy. This includes capital provision for works to maintain school buildings funded by the capital maintenance grant and plans for school expansions. This includes school’s expansion works at Burlington Junior School to increase pupil places.

101.The capital programme includes major projects funded from external bodies. The Mini Holland/Go Cycle programme funded by TfL is almost completed; the budget for 2020/21 is £125k.

Treasury Management

102.The proposed Treasury Management Strategy for 2020/21 is attached at Annex 12. This includes the annual investment strategy for surplus cash and borrowing including a policy statement on the minimum revenue provision required to be set aside to repay debt.

103.Under the prudential code for capital finance, the Council can take a local decision on the level of borrowing that it considers appropriate to support new capital investment. In taking such a decision the Council has to determine that any such borrowing is affordable (by reference to the impact on the revenue budget), prudent and sustainable.

104.In order to support any decision on prudential borrowing, local authorities are required to set a number of prudential indicators before the beginning of the financial year. These range from the setting of local limits on prudential borrowing to those that relate to treasury management activities. Monitoring against the indicators will be undertaken throughout the financial year and mid and end of year reports submitted to the Audit and Governance Committee. The indicators may be revised, following approval by Full Council, at any time during the year.

Pay Policy

105.The Council is required to set a pay policy for the remuneration of staff. This is included at Annex 13.

Schools Budget

106.The schools budget papers relating to the education services funded from the dedicated schools grant is set out in Annex 14.

23 Annexes

Annex 1 - Budget Risk 2020/21

Annex 2 - Reconciliation of 2019/20 Budget to proposed 2020/21 Budget

Annex 3 - Statutory Council Tax Calculation

Annex 4 - Statutory Parking and Traffic Accounts

Annex 5 - Budget Growth 2020/21 to 2023/24

Annex 6 - Budget Reductions (Savings) 2020/21 to 2023/24

Annex 7 - Summary of budget by Service / Function

Annex 8 - Summary of budget by expenditure type

Annex 9 - Flexible use of capital receipts strategy

Annex 10 - HRA Budget

Annex 11 - Capital Strategy

Annex 12 - Treasury Management

Annex 13 - Pay Policy

Annex 14 - Schools Budget

Background Papers: held by Rachel Howard, Acting Assistant Director, Finance

Phone: 020 8547 5709; Email: [email protected]

24 General Fund Revenue Budget 2020/21 - Risk Analysis ANNEX 1

Variation from budget in Likelihood Impact (1 Total RAG Ref Risk Risk Description Response worst case (1 = low; 5 = low; 5 = Score Rating scenario = high) high) £000s An additional £3.5million per annum is being added to the General Fund and an additional SEND Reserve is The structural overspend in the activities covered by the Dedicated Schools being established. Schools Grant leading to a cumulative deficit of £14.071m at 31 March 1 budget: DSG The DSG recovery plan is putting actions in place to 6,500 4 5 20 Red 2019 and forecast to be over £20m at 31 March 2020. The deficit could Shortfall reduce the annual deficit. exceed the level of the General Fund Balance. The Council are lobbying Government to create a sustainable solution to SEND funding. Consultation will be carried out as soon as possible and Consultation on budget proposals results in them being unable to proceed. any results leading to proposals being unable to proceed 2 Consultation The risk quantifies the maximum value of proposals still subject to will be reported as part of budget monitoring and 1,045 3 5 15 Red consultation. appropriate additional in year savings would be identified. Due to the continuing reduction in resources, significant overall levels of savings are having to be made again in 2020/21. The increasing The Council will implement its budget readiness process. challenges of achieving ongoing significant budget reductions creates a Progress in delivering savings will be regularly monitored 3 Savings 600 - 3- 4 12 Amber risk of budget variations. For example a delay of 1 month to planned through the year and reported regularly to Finance and savings for 2020/21 across the board would create a financial risk of Partnerships Committee and Strategic Leadership Team. around £0.6m Income received in the parking service is generated by either demand led services such as off-street car parking or residents permits, or by penalty charge notices issued for traffic contraventions. The latter may reduce over time if compliance regarding bus lanes, moving traffic contraventions Parking Regular monitoring in year to review the latest position. or parking requirements increases. A further risk is when a bus lane is out 4 Service The Council will complete a strategic parking review to 500 3 4 12 Amber of action due to transport and public realm works. A significant reduction in Income create a sustainable parking strategy. penalty charge notices would mean income falls below the level assumed in the budget. Similarly, if customer behaviour changes significantly in regards to use of off-street car parking or purchase of permits, this may cause income to fall below the budgeted level. National economic uncertainty or economic instability arising from the UK General exiting the European Union or other unknown factors, could impact upon Impact to be monitored through regular budget and 5 Economic the local population's personal finances. If this occurs, the Council will performance management. Utilisation of Brexit 350 4 3 12 Amber conditions inevitably feel the effect in demand for its discretionary income generating contingency if required. services and also the potential default concerning its statutory charges. Delays in agreeing a property investment strategy or the identification of Regular monitoring and review of progress will take Property suitable sites for investment would lead to the savings predicated on 6 place. Detailed business planning and the governance 326 3 4 12 Amber Investment additional property investment not being delivered. The risk equates to the framework for the investment company will be in place. net saving on additional property investment. Delays in decisions of property acquisitions and disposals places a risk of lost rental income and incurring revenue expenditure on the maintenance 7 Assets and upkeep of properties remaining on the portfolio. These range from Regular monitoring and review of progress will take place 370 4 3 12 Amber £0.5k/month to £3k/month on revenue costs and £0.5k/month to £12.5 k/month in rental income

25 General Fund Revenue Budget 2020/21 - Risk Analysis ANNEX 1

Variation from budget in Likelihood Impact (1 Total RAG Ref Risk Risk Description Response worst case (1 = low; 5 = low; 5 = Score Rating scenario = high) high) £000s The risk that if further children in the borough require this service costs will rise if their service provision is unable to be mitigated by the various savings strategies of Achieving for Children (AfC) built into the MTFS. The risk assumes a combination of net increases in numbers and increases in costs (over the allocated growth and allowance for inflation) across the Children's different cohorts (Looked after children, court directed legal costs, Leaving Growth of £1.5m has been provided for Social Care 8 Social Care care and Unaccompanied Asylum Seeking Children (UASC)). The 300 3 4 12 Amber placements for 2019/20. Placements National Transfer Scheme, the Home Office system for distributing UASC aged under 18, continues to be face unprecedented demand levels. This has resulted in RBK being at or over their set threshold, resulting in higher numbers of young people turning 18 each year. The central support grant received by RBK for UASC young people aged under 18 significantly reduces when turning 18. Risk that budget growth allocated to placements and community based support is insufficient to meet rising demand and cost pressures from the 65+ age group. People are living longer, and presenting with more acuity and complex needs, in particular those with advanced dementia or challenging behaviour. There could be budgetary pressures if demand Demographic Monitor regularly through the Adult Social Care Finance rises significantly beyond these levels as well as supporting swift hospital Growth in the and Performance Board (including mitigation) and reflect 9 discharge and maintaining the Council's position as a high Delayed 325 2 5 10 Amber elderly any variance in the subsequent year's budget proposals Transfers of Care (DToC) performer. If the demographic growth would population and continue the maximising independence programme. double with respect what has been allowed as growth in community services, the effect would result in a pressure of £100K for the lower needs group. If there was an additional 5 clients (in addition to what is allowed for in the budget) needing a nursing bed, it could result in further pressure of £225k (higher needs group). Severe winter weather placing additional spending pressures on winter Winter maintenance, highways maintenance and other budgets across the Maintenance Council Weather conditions are impossible to forecast with complete Regular budget and performance monitoring and 10 500 3 3 9 Amber & Highway accuracy and there is a risk of increased costs in terms of highway appropriate responsive actions. Maintenance clearance and highway maintenance should extreme weather conditions be experienced in 2020/21 Inflation has been provided within the budget for major service contracts, social care placements, NNDR and electricity. In most cases service contracts apply an inflation index at a specific point in time and so the risk Non-pay of higher than expected inflation is minimised by this approach. Non-pay This will be monitored. A small contingency is available 11 350 3 2 6 Green Inflation budgets not mentioned above have been frozen in cash terms with the should it be required. expectation that directorates will manage suppliers to keep within budget. The volatility that the economy is currently experiencing places additional risk on those budgets that have not been inflated. The local government pay award for 2020/21 has yet to be agreed. An The union's claim is subject to negotiation which we will allowance has been made for a 2% increase but unions have requested a 12 Pay inflation monitor. A small contingency is available should it be 2,612 1 4 4 Green pay award of 10%. Should this be agreed, the additional cost would be required. unbudgeted

26 General Fund Revenue Budget 2020/21 - Risk Analysis ANNEX 1

Variation from budget in Likelihood Impact (1 Total RAG Ref Risk Risk Description Response worst case (1 = low; 5 = low; 5 = Score Rating scenario = high) high) £000s The business rates pooling pilot means that the Council retains 30% of business rates collected (subject to a tariff). Although the budget includes a prudent estimate of business rates income, continued economic uncertainty poses the risk of a downward pressure on resources, including Business Monitor regularly and reflect any variance in collection 13 risks concerning business premises closing or being developed and also 415 2 2 4 Green Rates fund position in the subsequent year's budget proposals business rates appeals being higher than anticipated. A 1% reduction in the business rates collected would cause the retained amount to fall by around £0.415m.This would require a reduction in the budget for the following year to make up for any deficit on the collection fund. Council Tax being the main funding source of the net budget exposes the Council to risks such as collection rates and adverse changes in the size of the taxbase. Despite strong collection performance to date, there is a Monitor regularly and reflect any variance in collection 14 Council Tax risk of collection of council tax falling due to the difficult financial climate 100 2 2 4 Green fund position in the subsequent year's budget proposals resulting in a deficit on the collection fund which would require reductions in the budget for the following year. A 0.1% reduction in council tax collection equates to £0.1m. Officers have modelled projected tonnage figures and inflation estimates in Waste arriving at the waste management budget for 2019/20 and beyond. Monitor regularly and review future growth requirements 15 200 2 2 4 Green Management However, tonnage projections remain volatile and the risk here is that annually tonnage exceeds that which has been projected Growth includes an estimated costs for those expected to transition from Adult Social children's services. Risk that budget growth allocated to Learning Monitor regularly and review future growth requirements 16 200 2 2 4 Green Care Disabilities and Mental Health is insufficient to meet these rising demand annually and cost pressures, especially from unknown transition cases. The investment income forecast is based on short-term interest rates remaining close to current historical low Economic uncertainty could lead to variations in current interest rates levels. Based on the estimated average investment 17 Investment 75 3 1 3 Green earned on investments balance, a 0.25% variation in the assumed rate for investments, would cause a variation of approximately £75K in revenue costs. With short-term interest rates much lower than long-term rates, it is likely that the Council will maintain an under- borrowed position, in order to minimise borrowing costs and reduce overall treasury risk by reducing the level of its external investment balances. The Council has previously raised most of its long-term borrowing at fixed rates of interest, so exposure is limited to its LOBO (Lender’s Option Borrower’s Option) loans which could 18 Borrowing Risk of exposure to increases in interest rates on external borrowing. 230 1 3 3 Green be “called”. A LOBO is called when the Lender exercises its right to amend the interest rate on the loan, at which point the Council can accept the revised terms, or reject them and repay the loan. Current interest rates result in very low probability of a LOBO being “called” which would trigger premature repayment. In 2020/21 a 0.5% variation in LOBO loan interest rates would cause a variation of approximately £230K in revenue costs.

27 General Fund Revenue Budget 2020/21 - Risk Analysis ANNEX 1

Variation from budget in Likelihood Impact (1 Total RAG Ref Risk Risk Description Response worst case (1 = low; 5 = low; 5 = Score Rating scenario = high) high) £000s Budget 2020-21 Budget Risk Total 14,998

2020-21 2019-20 Summary by RAG status and prior year comparator £000s £000s Red risks 7,545 9,545 Amber risks 3,271 3,122 Green risks 4,182 1,220 Budget 2020-21 Budget Risk Total 14,998 13,887

ANNEX 2

Reconciliation between original budget 2019/20 and proposed budget 2020/21

£'000 £'000 Base Budget 2019/20 136,308 Adjustments to Base Budget: Removal of unachieved savings 810 Planned changes to previous years savings 353 Planned changes to previous years growth (828) Re-alignment of HRA recharges 111 Total Adjustments to Base Budget: 446 Inflation: Pay 653 Non-Pay (Contracts & Subscriptions) 2,415 Concessionary Fares 98 Utilities 11 NNDR 45 Fees & Charges (238) Total Inflation 2,984 Growth: Healthy, independent and resilient residents with effective support to those who need it most 3,820 A financially and environmentally sustainable, engaging and collaborative council that works transparently in the best interests of Kingston’s residents and businesses. 1,133 A safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy 133 A well maintained borough with a sustainable approach to growth and development which benefits our communities 1,512 Total Growth: 6,598

Contribution to Reserves - Strategic Investment Reserve 1,270 Budget Reductions Healthy, independent and resilient residents with effective support to those who need it most (1,857) A financially and environmentally sustainable, engaging and collaborative council that works transparently in the best interests of Kingston’s residents and businesses. (4,189) A safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy (195) A well maintained borough with a sustainable approach to growth and development which benefits our communities (944) (7,185) Gross Budget requirement 2020/21 140,421

ANNEX 2

Resources Parking / Bus Lane Enforcement / Moving Traffic Enforcement Accounts (7,807) Collection Fund Surplus / Deficit (Council Tax) (157) Collection Fund Surplus / Deficit (Business Rates) 1,602 (103,001 Council Tax ) Specific grants (7,198) Business Rates (23,860) (140,421 Total Resources 2020/21 )

30 ANNEX 3

FORMAL COUNCIL TAX CALCULATION AND RESOLUTION (For approval at 27 February 2020 Council – subject to confirmation of the GLA precept and the Wimbledon and Putney Commons Conservators levy.)

The Council is recommended to resolve as follows:

1) It be noted that on 15 January 2020 under delegated powers, the Director of Corporate and Commercial approved the Council Tax Base for 2020/21 for the whole Council area as 63,853.7 [Item T in the formula in Section 31B(3) of the Local Government Finance Act 1992, as amended (the “Act”).

2) That the following amounts be calculated for the year 2020/21 in accordance with Sections 31 to 36 of the Act:

a) The aggregate of the amounts which the Council estimates for 438,874,567.00 the items set out in Section 31A(2) of the Act, taking into account the total of special items included in e) below.

b) The aggregate of the amounts which the Council estimates for 335,873,282.00 the items set out in Section 31A(3) of the Act.

c) The amount by which the aggregate at a) above exceeds the aggregate at b) above, calculated by the Council in accordance 103,001,285.00 with Section 31A(4) of the Act as its Council Tax requirement for the year. [Item R in the formula in Section 31A(4) of the Act].

d) The amount at c) above [Item R], all divided by Item T (1 above), calculated by the Council, in accordance with Section 31B(1) of 1,613.08 the Act, as the basic amount of its Council Tax for the year.

e) The expenses of meeting the levy issued to it by the Wimbledon and Putney Commons Conservators shall be the aggregate of 47,797.11 all special items referred to in Section 34(1) of the Act.

f) The amount at d) above less the result given by dividing the amount at e) above by Item T (1 above), calculated by the Council, in accordance with Section 34(2) of the Act, as the 1,612.33 basic amount of its Council Tax for the year for dwellings in those parts of its area to which no special items relate.

g) The amount given by adding the amount at f) above to the result of the amount at e) above divided by the council tax base for the part of the Council’s area defined by the Wimbledon and Putney 1,642.04 Commons Act 1871, calculated by the Council, as the basic council tax for dwellings in those areas to which the special items relate.

31 ANNEX 3

h) Part of the Council’s Area Valuation Part of the Council’s Area to which All other parts of the Council’s Area Bands special items as defined in e) above relate

£ £ A 1,094.69 1,074.89 B 1,277.14 1,254.03 C 1,459.59 1,433.18 D 1,642.04 1,612.33 E 2,006.94 1,970.63 F 2,371.84 2,328.92 G 2,736.73 2,687.22 H 3,284.08 3,224.66

being the amounts given by multiplying the amounts at f) and g) above by the number which, in the proportion set out in Section 5(1) of the Act is applicable to dwellings listed in a particular valuation band divided by the number which in that proportion is applicable to dwellings listed in valuation band D, calculated by the Council in accordance with Section 36(1) of the Act as the amounts to be taken into account for the year in respect of categories of dwellings listed in different valuation bands. i) That it be noted that for the year 2020/21, the Greater London Authority has stated the following amounts in precepts issued to the Council in accordance with Section 40 of the Act for each of the categories of dwellings shown below:

Valuation GLA Precept Bands £

A 217.95 B 254.27 C 290.60 D 326.92 E 399.57 F 472.22 G 544.87 H 653.84

j) That having calculated the aggregate in each case of the amounts at (h) and (i) above, the Council in accordance with Section 30(2) of the Act hereby sets the following amounts of Council Tax for the year 2020/21 for each of the categories of dwelling shown below:

32 ANNEX 3

Part of the Council’s Area Valuation Part of the Council’s Area to which All other parts of the Bands special items as defined in e) above Council’s Area relate £ £ A 1,312.64 1,292.84 B 1,531.41 1,508.30 C 1,750.19 1,723.78 D 1,968.96 1,939.25 E 2,406.51 2,370.20 F 2,844.06 2,801.14 G 3,281.60 3,232.09 H 3,937.92 3,878.50 k) To note that, in accordance with Section 52ZB of the Local Government Finance Act 1992, the Council’s relevant basic amount of Council Tax for 2020/21 is not excessive in accordance with principles approved by the Secretary of State under Section 52ZC.

ANNEX 4

ON-STREET PARKING ACCOUNT, BUS LANE ENFORCEMENT & MOVING TRAFFIC CONTRAVENTIONS ACCOUNTS

Report by the Director of Corporate and Commercial

Recommendations:

1. to note the four-year forecast on the On Street Parking; Bus Lane Enforcement and Moving Traffic Contraventions accounts and any surpluses/deficits generated by the accounts in 2019/20.

GENERAL

Background

1. This annex forecasts the medium term position of the Council’s statutory On-Street Parking; Bus Lane Enforcement and Moving Traffic Contraventions accounts. Qualifying expenditure that can be offset against the income raised from these accounts is governed by statute. The Council must ensure that this expenditure meets the criteria that is set down.

2. The medium term projections of the balances on each of these accounts is summarised below and discussed in detail in narrative pertaining to the individual accounts in this Annex.

2019/20 2020/21 2021/22 2022/23 2023/24 Budget Budget Budget Budget Budget £000's £000's £000's £000's £000's On-Street Parking Account 241 (5) (251) (147) (43) Bus Lane Enforcement Account (221) (335) (279) (223) (166) Moving Traffic Contravention Enforcement Account (830) (333) (6) (29) (51) TOTAL BALANCE (809) (672) (535) (398) (261)

ON-STREET PARKING ACCOUNT

Background

3. The council is required to maintain the on-street parking account under the Traffic Regulation Act 1984 and the Traffic Management Act 2004. All costs and income associated with the provision of on-street parking are charged to the fund. Any deficit on the fund must be made good from the general fund however any surplus may be applied for specified types of eligible revenue expenditure as laid out in the acts. The categories of eligible expenditure include the provision and maintenance of off-street parking accommodation, public passenger transport, highway or road improvement

ANNEX 4

projects, environmental improvement and the implementation of the London Transport Strategy.

Medium Term Financial Forecast

4. The four-year forecast for the on-street parking account is shown in the table below:

2019/20 2020/21 2021/22 2022/23 2022/23 On-Street Parking Account Budget Budget Budget Budget Budget £000's £000's £000's £000's £000's Surplus as at 1 April b/fwd (729) 241 (5) (251) (147) Applied: Eligible Expenditure 4,237 4,026 4,026 4,376 4,376 MTFS savings items 2020/21 0 (534) (534) (534) (534) Total transfer out of fund 4,237 3,492 3,492 3,842 3,842

Original Net Budgeted Surplus (4,313) (4,313) (4,313) (4,313) (4,313) Outturn Variance 2019/20 (based on M9) 1,046 0 0 0 0 MTFS savings items 2020/21 0 534 534 534 534 2020/21 Inflation and minor changes 0 42 0 0 0 Estimated future inflation changes 0 0 42 42 42 Revised Net Budgeted Surplus (3,267) (3,738) (3,738) (3,738) (3,738)

Balance c/fwd 31 March 241 (5) (251) (147) (43)

Transfers Out of the Fund

5. There are a number of drawdowns from the reserve used to contribute towards base budget revenue spend. The contributions towards eligible expenditure have been in the base for a number of years and it is not proposed to change these in the current medium term plan. However, contributions have been adjusted in later years to ensure that the account stays in surplus over the life of the medium term. Additionally, depending on the outturn for the current year the contribution may need to be adjusted to keep the account in balance.

Transfers into the Fund

6. The income generated by on-street parking exceeds the cost of provision and the resulting surplus is transferred annually into the on-street parking account. The budgeted surplus will reduce each year as inflationary increases are applied to the costs of operating the service and an allowance for this has been included in the forecast. For 2019/20 the budgeted surplus is £4.313m. Current predictions show an underachievement of this target by £1.046m. The budgeted surplus for 2020/21 has been reduced to £3.738m.

Budget Risks

7. There is one key budget risks to the on-street parking account forecast position:

ANNEX 4

● An increase in the level of compliance with on-street parking policies has resulted in a reduced numbers of Penalty Charge Notices (PCNs) being issued and a consequential reduction in the level of income received. If this pattern were to continue there would be a risk to the budgeted surplus being achieved and could reduce the ongoing balance of the fund.

BUS LANE ENFORCEMENT ACCOUNT

Background

8. The council is required to maintain the bus lane enforcement account under the London Local Authorities Act 1996. All costs and income associated with bus lane enforcement are charged to the fund. Any deficit on the fund must be made good from the general fund however any surplus may be applied for specified types of revenue expenditure as laid out in schedule 2 to the Act. The categories of relevant expenditure include meeting the costs of public passenger transport and improvement of highways.

Medium Term Financial Forecast

9. The four-year forecast for the bus lane enforcement account is shown in the table below:

2019/20 2020/21 2021/22 2022/23 2022/23 Bus Lane Enforcement Account Budget Budget Budget Budget Budget £000's £000's £000's £000's £000's Surplus as at 1 April b/fwd (61) (221) (335) (279) (223) Applied: Eligible Expenditure 1,200 1,194 1,364 1,364 1,364

Total transfer out of fund 1,200 1,194 1,364 1,364 1,364

Original Net Budgeted Surplus (1,314) (1,314) (1,314) (1,314) (1,314) Outturn Variance 2019/20 (based on M9) (46) 0 0 0 0 2020/21 Inflation and minor changes 0 6 0 0 0 Estimated future inflation changes 0 0 6 6 6

Revised Net Budgeted Surplus (1,360) (1,308) (1,308) (1,308) (1,308)

Balance c/fwd 31 March (221) (335) (279) (223) (166)

Transfers out of the Fund

10. The contribution towards eligible expenditure has been in the base for a number of years. There are no plans to draw down any further from the reserves. However, contributions have been adjusted in later years to ensure that the account stays in surplus over the life of the medium term.

ANNEX 4

Transfers into the Fund

11. The income generated by bus lane enforcement exceeds the cost of provision and the resulting surplus is transferred annually into the bus lane enforcement account. The budgeted surplus will reduce each year as inflationary increases are applied to the costs of operating the service and an allowance for this has been included in the forecast. For 2019/20 the budgeted surplus is £1.314m and the forecast outturn position for income indicates that the surplus will be exceeded by £0.046m. The budgeted surplus for 2020/21 is £1.308m.

Budget Risks

12. There is one key budget risk to the bus lane enforcement account forecast position:

● An increase in the level of compliance with bus lane regulations would result in reduced numbers of PCNs being issued and a consequential reduction in the level of income received. This would pose a risk to the budgeted surplus being achieved and could reduce the ongoing balance of the fund.

MOVING TRAFFIC CONTRAVENTIONS ACCOUNT

Background

13. The Council is required to maintain a separate account for income and expenditure relating to the enforcement of moving traffic contraventions under Part 6 of the Traffic Management Act 2004. All costs and income associated with moving traffic contraventions are charged to the fund. Any deficit on the fund must be made good from the general fund however any surplus may be applied for specified types of revenue expenditure in a similar way to how surpluses generated by on-street parking activities are utilised. Medium Term Financial Forecast

14. The four-year forecast for the moving traffic contraventions account is shown in the table below:

ANNEX 4

Moving Traffic Contravention 2019/20 2020/21 2021/22 2022/23 2022/23 Enforcement Account Budget Budget Budget Budget Budget £000's £000's £000's £000's £000's Surplus as at 1 April b/fwd (1,583) (830) (333) (6) (29) Applied: Eligible Expenditure 2,654 2,821 2,651 2,301 2,301 Drawdown to support eligible expenditure (2020/21 MTFP) 0 250 250 250 250 Total transfer out of fund 2,654 3,071 2,901 2,551 2,551

Original Net Budgeted Surplus (2,327) (2,577) (2,577) (2,577) (2,577) Outturn Variance 2019/20 (based on M9) 426 0 0 0 0 2020/21 Inflation and minor changes 0 3 0 0 0 Estimated future inflation changes 0 0 3 3 3

Revised Net Budgeted Surplus (1,901) (2,574) (2,574) (2,574) (2,574)

Balance c/fwd 31 March (830) (333) (6) (29) (51)

Transfers out of the Fund 15. There are a number of draw down from the reserve that contribute towards eligible revenue expenditure. The drawdown from this account has been increased to ensure that the other statutory accounts are not over committed. As stated above, a compensating adjustment has been made to the other statutory accounts.

Transfers into the Fund

16. The income generated by moving traffic contraventions exceeds the cost of enforcement and the resulting surplus is transferred annually into the moving traffic contraventions account. The budgeted surplus will reduce each year if inflationary increases are applied to the costs of operating the service and an allowance for this has been included in the forecast. For 2019/20 the budgeted surplus is £2.327m and the forecast outturn position for income indicates the council will underachieve this target by £0.426m. The budgeted surplus for 2020/21 has been adjusted to £2.574m, to ensure the other statutory accounts remain in balance.

Budget Risks 17. There is one key budget risk to the moving traffic contravention account forecast position:

● An increase in the level of compliance has resulted in a reduced number of contraventions and therefore reduced numbers of PCNs being issued. If this pattern were to continue there would be a risk to the budgeted surplus being achieved and could reduce the ongoing balance of the fund.

38 RBK Budget Growth Requirements 2020-21 to 2023-23 ANNEX 5

Ref Strategic Directorate Title 2020/21 2021/22 2022/23 2023/24 Description Number of Committee additional FTE £'000 £'000 £'000 £'000 Healthy, independent and resilient residents with effective support to those who need it most Children's & Adults Adults Home care: Demographic and market 331 219 196 To meet increasing demand for home care service and ensuring that the Council paying the market N/A 1 Care & Education pressures rate for services to be able to provide the level of homecare Kingston residents require. Children's & Adults Adults Adult Social Care - Learning Disabilities 730 700 700 0 New demand transitioning from Children’s Services-13 young people who are new to Adult Social N/A 2 Care & Education Care service and 25 ‘post 19 school/college leavers who now need a full package of support Children's & Adults Adults Adult Social Care - Mental Health Working 580 400 0 0 Management of new demand: young people transitioning from Children’s Services or being N/A Care & Education Age discharged from hospital under S117. The South London Partnership (SLP) of 3 Mental Health Trusts and 11 Clinical Commissioning Groups (CCGs) was introduced to Councils in October 2018. The SLP programme was a systematic plan to review all CCG funded in-patient rehab placements via a complex care review team in order to step down to cost effective community alternatives. The initial promise was this would not result in additional cost for Local authorities - however in reality it has and 3 the Council has a legal duty to meet these costs. Children's & Adults Childrens Children's social care placements and 1,437 0 0 0 Growth to allow for additional social care need and cost that has occurred in 2019/20 as well as allow N/A Care & Education extension of leaving care statutory duty for a projected increase next year. Growth will be allocated to Children Looked After, Leaving Care, Remand and Unaccompanied Asylum Seekers aged over 18. This also includes growth to allow for 4 the increased cost of social care legal advice due to demand pressures. Children's & Adults Childrens Special Educational Needs and Disabilities 63 0 0 0 Increased expenditure on SEND legal advice in terms of number of cases (as % of rising EHCP N/A 5 Care & Education (SEND) Legal numbers) and case complexity. Children's & Adults Childrens Independent Review Officers (due to 65 0 0 0 Investment in an additional Independent Review Officer (IRO) to ensure that the caseloads of the 1 FTE Care & Education increased need and caseloads) team remain reasonable. The number of children looked after and children on child protection plans has increased in recent years and we are now at the point where caseloads for the IROs are not 6 manageable without additional capacity. Children's & Adults Childrens Cessation of Partners in Practice Funding 359 0 0 0 The partners in practice grant comes to an end in March. It funds a significant part of the children's N/A Care & Education for systemic family therapy team and social services early help offer. Without additional funding these teams would not exist and work with these care leadership young people and their families would cease. In the longer term this could result in escalations in to statutory social care and the limited early help service that would be left would not conform to best 7 practice. The growth will cover posts in Domestic Violence, Family Coaches and Mental Health. Children's & Adults Childrens Quality assurance - social care 40 0 0 0 0.5FTE post to improve the children's services quality assurance function. This function provides a 0.5 FTE Care & Education semi independent, specialist social care audit function to check the quality of social work practice and 8 make recommendations to maintain and improve social work practice. Children's & Adults Childrens Special Educational Needs and Disabilities 100 0 0 0 Education, Health and Care Plans are increasing by an average of 8% (110 - 130) per year. This Care & Education (SEND) case officers, annual review means that additional officers are required to ensure that SEND caseworker workloads remain officers and commissioning capacity manageable and also to ensure there are officers who can attend annual reviews and improve 9 commissioning efficiency - both form part of the SEND Transformation Plan. Children's & Adults Childrens Special Educational Needs and Disabilities 15 (15) 0 0 This is a one off investment in the systems used to capture SEND information. Currently the systems Care & Education (SEND) System upgrade do not adequately provide management information to inform SEND strategies and facilitate the 10 sharing of information by all teams who may be involved with a child and their family. Children's & Adults Corporate and Children’s commissioning client side 100 0 0 0 Investment in children's services commissioning to support contracts management and service 1.5 FTE 11 Care & Education Commercial performance. SUB-TOTAL 3,820 1,304 896 0 3 additional FTE

A financially and environmentally sustainable, engaging and collaborative council that works transparently in the best interests of Kingston’s residents and businesses. Environment & Corporate and Biodiversity officer 50 0 0 0 Investment to provide support nature conservation and biodiversity activities across the organisation 1 FTE Sustainable Commercial 12 Transport Community Corporate and Electoral Registration 108 0 0 0 Central government base grant has been reduced year on year and there won't be any grant from N/A 13 Engagement Commercial 2020/21- the Council needs to continue to ensure it is promoting electoral registration. Finance & Corporate and Capital financing costs 575 270 194 145 Growth required to fund the additional interest and minimum revenue provision payments relating to N/A 14 Partnerships Commercial the financing of the capital programme. Finance & Corporate and Offsite Storage 150 0 (150) 0 A project team to manage the Council's offsite storage by reducing reliance on a costly off site 3 FTE 15 Partnerships Commercial storage facilities whilst ensure there is the right level of access and appropriate record retention. Finance & Council wide Apprentice Salaries 250 0 0 0 To enable RBK offer starting salaries that is competitive with near neighbours to attract best N/A 16 Partnerships candidates. Finance & Unallocated Estimated future growth requirements 0 2,500 3,500 4,500 Estimate of additional growth requirements for as yet unknown future demand / cost pressures N/A 17 Partnerships SUB-TOTAL 1,133 2,770 3,544 4,645 5 additional FTE

39 RBK Budget Growth Requirements 2020-21 to 2023-23 ANNEX 5

Ref Strategic Directorate Title 2020/21 2021/22 2022/23 2023/24 Description Number of Committee additional FTE £'000 £'000 £'000 £'000

A safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy Finance & Corporate and Kingston Together Fund 60 100 (100) Creation of a dedicated resource to to launch and manage the new voluntary sector commissioning 1 FTE 18 Partnerships Commercial fund with mitigation funding available in 21/22 to support any impacted organisations Community Communities Community engagement - new models and 35 0 0 There is currently no budget to fund community engagement activity (e.g. Let's Talk events; Citizens N/A Engagement annual resident survey Assembly; Residents Surveys; digital platform for the new e-newsletter; consultation portal plus other means of engaging with residents). Investment is needed to meet the council's commitment to 19 improve how we engage and consult. Community Communities Coroner Costs increase from original 20 0 0 0 Bereavement Services - RBK is part of a consortium with other boroughs for the coroners service. Engagement growth in 19/20 (£40k) These costs have increased, partly because of a backlog issues Additional resource was required N/A from boroughs within the consortium to bring the service back to capacity and this the forecast for 20 increase in Senior Coroner Consortia costs as part of the Greater London West Jurisdiction. Environment & Communities Additional resources for network 18 0 0 0 Part funding of resources with go cycle. 0.5 FTE Sustainable management 21 Transport SUB-TOTAL 133 100 (100) 0 0.5 additional FTE

A well maintained borough with a sustainable approach to growth and development which benefits our communities Environment & Communities Street lighting energy costs £365k (based 365 0 0 0 Based on previous trends in energy cost increases over the past few years and the growing N/A Sustainable on an estimated 13% annual increase from difference between spending on street lighting energy costs and the budget available. Energy costs Transport 18/19) & increased by 13% between 2018/19 and 2019/20. This takes into account any savings from the roll 22 out of LED street lamp replacement. Environment & Communities New Cycling Infrastructure - ongoing 0 50 50 50 Revenue funding for maintenance of £30m of new cycle infrastructure. whilst initial additional costs N/A Sustainable maintenance are low, the cycle infrastructure will need effective reactive maintenance in future years 23 Transport Environment & Communities Re-set of penalty income targets in 75 0 0 0 Improved compliance of utilities leading to year on year shortfalls in income against target N/A Sustainable Network Management in light of greater 24 Transport compliance Environment & Communities Out of hours highways on call service 16 0 0 0 An essential service - Funds additional payments to 8 on-call officers to provide 24hr on call cover & N/A Sustainable winter service gritting decision making & monitoring over the 5 month winter period. 25 Transport Environment & Communities Electric Vehicle (EV) officer 40 10 0 0 Additional capacity to achieve faster development and roll out of the borough's electric vehicle 1 FTE Sustainable charging infrastructure and increased capacity to develop bids for funding (from GLA and Whitehall) 26 Transport to support roll out of EV charge points Environment & Corporate and Funding to plant 2,000 trees 0 20 (180) 0 Council commitment to plant (and maintain) an additional 2,000 street trees. N/A Sustainable Commercial 27 Transport Environment & Corporate and Waste Disposal cost per tonne increases 0 115 115 115 Current waste forecasts are lower than previous years. Year to Date (Nov. 19-20) residual waste has N/A Sustainable Commercial reduced by c.6%, but also increasing recycling offsetting some savings. Including housing growth, an 28 Transport estimate of 2.5% waste growth for consecutive years is proposed. Environment & Corporate and South London Waste Partnership (SLWP) 400 0 0 (400) Annual review of the SLWP contract for waste collection and street cleansing has led to significant N/A Sustainable Commercial annual review uplift to cover household growth; salary uplifts for drivers and additional costs of sorting and recycling Transport paper and card following a downturn in the global market for this material. Commercial discussions 29 with the supplier are ongoing and are due to conclude in December. Environment & Corporate and Household Refuse and Recycling Centre 120 20 85 20 South London Waste Partnership recommend an early extension to the current contract for recycling N/A Sustainable Commercial contract extension costs centres, to 2025, in order to align assets and contract end dates across the partnership region. Transport Increased costs largely relate to a drop in market value of a range of materials since the contract was 30 let along with increased maintenance and staffing costs. Environment & Corporate and Ancient marketplace waste costs 50 (50) 0 0 Additional costs for providing waste collection and cleaning of the ancient market place. A review of N/A Sustainable Commercial the market operation aims to reduce these again the following year but the growth here represents 31 Transport gap in current budget and contract cost payable. Finance & Growth Growth required to support options 50 0 0 0 To support appraisal of options for operational assets, following baseline evidence review. N/A 32 Partnerships appraisals (capital) Finance & Growth Revision of rental income budget from 200 0 0 0 Review of rental income target identified incorrect assumption on the level of some rental income N/A 33 Partnerships property investments

40 RBK Budget Growth Requirements 2020-21 to 2023-23 ANNEX 5

Ref Strategic Directorate Title 2020/21 2021/22 2022/23 2023/24 Description Number of Committee additional FTE £'000 £'000 £'000 £'000 Finance & Growth Property Voids 100 0 100 (100) There is currently no budget provision for voids on leasehold properties, a 5% void rate will provide N/A 34 Partnerships sufficient budget. Strategic Housing & Growth Additional resources for planning service 96 0 0 0 The cost of the new Planning Service structure to meet service demands. 3 FTE 35 Planning SUB-TOTAL 1,512 165 170 (315) 4 additional FTE GRAND TOTAL 6,598 4,339 4,510 4,330 12.5 additional FTE

41 Budget reductions (savings and income generation) 2020-21 to 2023-24 ANNEX 6 Estimated Strategic Transformation 2020/21 2021/22 2022/23 2023/24 Statutory review / consultation Ref Directorate Saving title Description FTE Impact Equality Consideration Committee Theme £000s £000s £000s £000s required? 2020/21 A financially and environmentally sustainable, engaging and collaborative council that works transparently in the best interests of Kingston’s residents and businesses. BCF Programme. Better Care Fund Programme In partnership with the Clinical Commissioning Group Children's & Neutral impact on service users . Consultation not required. Enterprising (BCF) Remove contribution of (CCG) ensure the BCF Grant is used to in accordance 1 Adults' Care & Adults 732 0 0 0 N/A Efficiency savings achieved Service is preventative. Borough additional funding from core Adult with the grant conditions and reduce the use of core Education through budget realignment Engagement with CCG required. Social Care budgets to BCF Council revenue funding to supplement the joint health and social care grant. Release of additional growth funding not required as Neutral impact on service users. Service is statutory. No Strategic Housing Enterprising Community housing Budget 2 Adults 30 0 0 0 needs are being appropriately met within existing N/A An equality impact assessment consultation/engagement & Planning Borough realignment resources will be undertaken as necessary required. Realigning staff recharges between Neutral impact on service users. Strategic Housing Enterprising Legitimate charges to HRA to reflect staffing budget 3 Adults the Housing Revenue Account & 110 0 0 0 N/A Achieved through budget No & Planning Borough realignment community housing realignment Community Enterprising Promote opportunities for services to get income from 4 Communities Filming income 8 0 0 0 N/A Neutral impact on residents. No Engagement Borough location filming fees This is an internal financial Community Enterprising Maximising funding for Home Recover staff costs for Home Office/MHCLG projects consideration from government 5 Communities 13 0 0 0 N/A No Engagement Borough Office/MHCLG projects where existing staff cover relevant functions funding and does not directly impact service users. Neutral Impact on all the groups. There are a number of options Community Enterprising available for the bereavement 6 Communities Fees and charges increases 9 0 0 0 Bereavement Services Fees & Charges review N/A No Engagement Borough families in the process to be undertaken with a range of costings including no cost. Neutral as it a statutory service Community Enterprising 7 Communities Fees and charges increases 3 0 0 0 Registration Fees & Charges review N/A and the charges are set by No Engagement Borough government. Move from block contract to activity based payments for No impact on service user as this Children's & Enterprising services. Predictive analytics indicate the provider will can be achieved through 8 Adults' Care & Communities Sexual Health 20 0 0 0 N/A No Borough generate the same income from charging back out-of- efficiency savings through better Education area clients to their local area. management of existing contract No impact on services users, but Children's & Further staffing savings arising from the consolidation of Enterprising this could have an impact on staff 9 Adults' Care & Communities Workforce review (Public Health) 50 0 0 0 Public Health and Community Safety into Healthy and -1 No Borough and an appropriate impact Education Safe Communities. Review of senior commissioning role. assessment will be undertaken No direct impact. any possible Environment & Enterprising Ensuring the highways surveys team is fully utilised on impact on staffing levels would be 10 Sustainable Communities Highways rechargeable works 13 0 0 0 N/A No Borough rechargeable works subject to EQIA at appropriate Transport time Environment & As a recognised training centre we expect to be able to Enterprising Neutral impact on all the groups. 11 Sustainable Communities Cycle instructor training income 8 3 0 0 bring in more income from a wider customer base. All N/A No Borough Income generation Transport instructors required to be reassessed over next two years. Neutral Impact on service users Community Enterprising Corporate & as this will be achieved through 12 Leisure Contract 80 40 0 0 Renegotiated the contract and management fees N/A No Engagement Borough Commercial efficiency savings by contractual renegotiation Savings delivered through improved contract management and the reprocurement of key services Neutral Impact on service users areas as well as a detailed review of strategic Finance & Enterprising Corporate & Smarter Commissioning - Better as this will be achieved through 13 18 0 0 0 commissioning. N/A No Partnerships Borough Commercial Contracting efficiency savings by contractual Specific proposals contributing to the original target for renegotiation this programme are now included in Adults and Children's services. Neutral impact on service users. Efficiencies to be realised through Potential impact on current staff Service is statutory and Strategic Housing Efficiencies to be realised through service redesign with 14 Leading Council Adults service redesign in community 88 0 0 0 -2.5 in redesign. An equality impact preventative. Consultation with & Planning minimal impact on service users housing assessment will be undertaken staff required. as necessary Introduction of voluntary buying and selling of annual Children's & Potential positive impact by Buying and selling annual leave in leave for staff. This will give an employee to employee 15 Adults' Care & Leading Council Children's 13 0 0 0 N/A giving greater flexibility to all staff No Achieving for Children platform to buy or sell leave up to 3 days additional Education to buy and sell leave. annual leave throughout the year in a managed system. To include all services in our central customer service Neutral impact on residents using Community Centralise customer contact for all 16 Leading Council Communities 100 0 0 0 team enabling us to resolve enquiries for residents more TBC the contact centre through No Engagement areas of the Council effectively at first point of contact. greater efficiency Continuing to provide flexibility and choice for our Neutral Impact as residents will Community Promoting channel shift and 17 Leading Council Communities 58 280 0 0 residents whilst promoting channel shift and increasing N/A continue to access face to face No Engagement increasing online transactions online transactions phone or online

42 Budget reductions (savings and income generation) 2020-21 to 2023-24 ANNEX 6 Estimated Strategic Transformation 2020/21 2021/22 2022/23 2023/24 Statutory review / consultation Ref Directorate Saving title Description FTE Impact Equality Consideration Committee Theme £000s £000s £000s £000s required? 2020/21 No impact on residents this is a Community ICT contract consolidation for fixed line telephony and the 18 Leading Council Communities Contract costs 20 10 10 0 N/A recommissioning of our network No Engagement Wide Area Network connections. Community No impact on residents as this is 19 Leading Council Communities Contract costs 50 0 0 0 Mobile Phones - reduction in costs N/A No Engagement just improving corporate tariffs. No impact on residents. Community 20 Leading Council Communities Business continuity offsite storage 10 0 0 0 Contract removed 2020/21 as no longer required N/A Cancellation of contract no longer No Engagement needed. Community Review of GIS system with a view to moving to an Open N/A no savings identified for this 21 Leading Council Communities GIS System 0 20 0 0 N/A No Engagement Source product. year Limited impact on residents as Community most requests are from 22 Leading Council Communities Street Naming and Numbering 5 0 0 0 Increase charges and automate the process N/A No Engagement developers during the creation of new dwellings. Neutral Impact on residents as this will be achieved through Finance fit for the Future - service Savings from implementation of a new structure and Finance & Corporate & business efficiency savings. 23 Leading Council restructure and digital 140 140 0 0 implementation of digital technologies that further deliver -2 No Partnerships Commercial Potential Impact on staff and an transformation savings through automation in 2021/22 Eqia will be undertaken to support the process. Introduce new gateway for all external legal spend. Finance & Corporate & Tighter management of external spend via South London 24 Leading Council External legal spend gateway 40 40 40 20 N/A N/A for residents No Partnerships Commercial Legal Partnership (SLLP) will avoid duplication and should create efficiencies Legal Income from work carried out on leases, business Finance & Corporate & tenancies and planning agreements etc by SLLP has 25 Leading Council Legal income 100 10 10 10 N/A N/A for residents No Partnerships Commercial increased over the years - this will bring budget in line with income being achieved. Finance & Corporate & Align apprenticeship levy budget with actual cost - Neutral impact savings achieved 26 Leading Council Apprenticeship levy 25 0 0 0 N/A No Partnerships Commercial reflecting amounts covered by schools and HRA through budget realignment Cost of historic enhanced pension arrangements continue Neutral Impact. Savings achieved Finance & Corporate & Historic enhanced pension 27 Leading Council 100 25 25 25 to decline year on year - bring budget in line then ongoing N/A by aligning budget to actual No Partnerships Commercial arrangements reductions as numbers continue to decrease spend level. Automation of transactional processes and a move Yes - women but fully mitigated Finance & Corporate & 28 Leading Council Remodelling the HR function 100 100 0 0 towards an Organisational Development model of N/A against with appropriate Staff consultation - complete Partnerships Commercial delivery processes Currently undertaking workshops with a range of staff to understand people's views on the current approach and what they Review of staff benefits and terms and conditions to Finance & Corporate & would like to see in the future. Depends on what changes are 29 Leading Council Review of staff rewards 100 0 0 0 ensure they are fair and equitable and compare to other N/A Partnerships Commercial made, still tbc London Boroughs and digitisation of processes. Once we have the results from this we can pull together wider proposals and undertake an impact assessment. Contract direct with Midland HR at Finance & Corporate & Contract direct with Midland HR at the end of the current N/A no savings identified for this 30 Leading Council the end of the Agilisys contract 0 0 60 60 N/A No Partnerships Commercial contract (March 2022) year (March 2022) Neutral for service user. Potentially age on the basis of the demographic of staff in the Finance & Corporate & Review of business support to identify opportunities to Support and Ops Service. But 31 Leading Council Automation - Business Support 100 115 0 0 -3 No Partnerships Commercial automate services and transactions also unlikely to result in redundancy situation - more likely that roles can be left vacant via natural turnover. Neutral for service users as Finance & Corporate & 32 Leading Council Post - Delivery Model Options 25 0 0 0 Digitalisation of the post room N/A savings is achieved through No Partnerships Commercial business efficiency Review the Council income collection and Bailiffs services to ensure that the Council maximises performance in this area, and that relevant policies reflect the organisation's Neutral to residents. Equality Finance & Corporate & Consolidated debt function & new 33 Leading Council 250 0 0 0 approach to supporting those in financial difficulty. -4 impact will be undertaken as No Partnerships Commercial approach to Bailiffs Savings may be delivered through a combination of fraud necessary prevention, service reviews and increased provision of online payment capability.

43 Budget reductions (savings and income generation) 2020-21 to 2023-24 ANNEX 6 Estimated Strategic Transformation 2020/21 2021/22 2022/23 2023/24 Statutory review / consultation Ref Directorate Saving title Description FTE Impact Equality Consideration Committee Theme £000s £000s £000s £000s required? 2020/21 Neutral impact on age and disability and the No consultation required. Children's & Adults Maximising 34 Adults Telecare Service Re-commissioning 46 56 0 0 Smarter commissioning and more effective contract N/A recommissioning of the service Engagement with existing Care & Education Independence management to deliver efficiencies. will have an EQIA and equality providers would be required. issues will be taken into account. Neutral impact on service users Implementation of Assistive technology across Adult as the technology will increase Children's & Maximising Social Care services which will maximise a client’s independence, access and 35 Adults' Care & Adults Assistive Technology 50 0 0 0 N/A No. Independence independence, helping them live longer in their own safety. Procurement will have an Education homes EQIA and equality issue taken into account Neutral impact on service users Re-negotiate rates with providers of High Cost/ High as involves the renegotiating Children's & Maximising Adult Social Care Contract Volume Residential Placements to provide better VfM and costs of placements based on the No consultation. Engagement 36 Adults' Care & Adults 200 150 0 0 N/A Independence negotiation standard rates. Part of Smartter Commissioning and contractual agreement between with providers required. Education Better Contracting Programme the provider and LA resulting in cost efficiencies. Potential impact on Age and Children's & Disability and Carers. Full EQIA Maximising Smarter commissioning and more effective contract 37 Adults' Care & Adults Adult Social Care - Respite Care 100 100 0 0 N/A will be undertaken to support the No Independence management to deliver efficiencies Education change process and mitigate the risks. Potential impact on Age and Children's & Disability and Carers. Full EQIA Maximising Adult Social Care - Day Smarter commissioning and more effective contract 38 Adults' Care & Adults 130 130 0 0 N/A will be undertaken to support the No Independence opportunities management to deliver efficiencies Education change process and mitigate the risks Age and Disability. Potentially Children's & Fully utilising the Disabled Facility Grant (DFG): Develop Maximising Fully using the Disabled Facility positive impact through 39 Adults' Care & Adults 50 0 0 0 proposals to target better use of DFG resulting in lower N/A No. Independence Grant (DFG) enhancing independence and Education expenditure by ASC early intervention. Digital Transformation/ Implementation of the ASC Children's & Digital Transformation/ Potentially positive impact for Consultation with staff will be Maximising Operating Model with integrated front-door delivery 40 Adults' Care & Adults Implementation of the Adult Social 290 0 0 0 N/A service users through improved required in September 2020 Independence model. . Education Care (ASC) Operating Model pathways. regarding potential new roles.

Ensuring that Continuing Health Care funding by Clinical Neutral impact on service users . Children's & Adults Maximising Commissioning group for care and support needs of 41 Adults Continuing Health Care (CHC) 150 0 0 0 N/A Efficiency savings achieved No Care & Education Independence residents are funded correctly including appropriate joint through budget realignment. funding arrangements with the NHS. Reshaped activity on education costs for young people Service is statutory. No Children's & Adults Maximising Adult Social Care - Review / Neutral impact as savings 42 Adults 200 0 0 0 with Learning Disability in transition resulting in budget N/A consultation/engagement Care & Education Independence realignment of budget achieved through efficiencies review. required. Neutral impact on service users . Children's & Adults Maximising Review and realignment of historical budgets regarding 43 Adults Care Act 400 0 0 0 N/A Efficiency savings achieved No Care & Education Independence the implementation of the the Care Act. through budget realignment Release of contingency growth funding that it is now not Neutral impact on service users. Strategic Housing Maximising 44 Adults Homelessness Prevention Fund 35 0 0 0 anticipated will be required to support homelessness N/A Achieved through efficiency No & Planning Independence prevention savings Children's & Promotion of remote working and revised travel policy Maximising Achieving for Children - Agile N/A no savings identified for this 45 Adults' Care & Children's 0 10 0 0 including google hangouts etc. Successful promotion will N/A No Independence working year Education lead to a reduction in staff travel costs. Children's & Review the finance functions within the Early Years Maximising N/A no savings identified for this 46 Adults' Care & Children's DSG Early Years Grant 0 26 0 0 service and possible efficiencies and rationalisation N/A No Independence year Education through closer working with the central finance team. Review youth service delivery and income generation Potential impact. An equality opportunities. Children's & impact assessment for service Maximising Review YMCA contract within youth services for sessions 47 Adults' Care & Children's Review of Youth Services 30 0 25 25 N/A users will need to be completed No Independence delivered at Kingsnympton and Dickerage youth centres. Education prior to any staffing or changes to Renegotiate contract and/or assess the best-value delivery. delivery model (from 2022/23). Potential impact- this may lead to a reduction in staffing so an Children's & equality impact assessment must Maximising Review of school admissions team (savings is net of 48 Adults' Care & Children's School admissions 7 0 0 0 -1 be completed to better Yes Independence £23K to cover investment in IT system) Education understand impact on staff from across the protected characteristic groups. There are currently three separate systems provided and Children's & Maximising supported with the same provider in use across Children's N/A no savings identified for this 49 Adults' Care & Children's Education ICT systems 0 10 0 0 N/A No Independence Services. The system and licencing costs will be year Education renegotiated with a view to merge into a single contract.

44 Budget reductions (savings and income generation) 2020-21 to 2023-24 ANNEX 6 Estimated Strategic Transformation 2020/21 2021/22 2022/23 2023/24 Statutory review / consultation Ref Directorate Saving title Description FTE Impact Equality Consideration Committee Theme £000s £000s £000s £000s required? 2020/21 Increased efficiency in the delivery and administration of the School Performance Alliance for Richmond and Neutral- no expected impact on Children's & Maximising Kingston (SPARK) and School Meal Contracts whilst any protected characteristic 50 Adults' Care & Children's School meals contract 50 0 0 0 N/A No Independence maximising income generation. The School Meal groups as this relates to contract Education Contracts have realised increased income in 2018/19 management. financial year. Strategic Housing Sustainable Pre-App charging process for Introducing a flat fee for officer time, currently not No direct impact, would affect 51 Communities 25 0 0 0 N/A No & Planning Communities planning applications recharged through the planning process. large developers only Environment & Sustainable 52 Sustainable Communities Maximising income opportunities 8 3 0 0 Sale of in-house survey service to other authorities N/A No direct impact No Communities Transport SUB-TOTAL 4,189 1,268 170 140 -13.5 FTE

A safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy Potential positive impact- for age Income through rolling out a beginners group teaching Community Enterprising Kingston Music Service - Additional as more opportunities for learning 53 Communities 31 0 0 0 model and increasing adult group lessons. Promotion of N/A N/A Engagement Borough income and efficiency savings. and cuts across protected instrument repair service. characteristics Neutral impact for residents and service users. Savings to be Work with the Rose Theatre to develop a self funding Community Enterprising Rose Theatre - financially achieved through contractual 54 Communities 20 15 30 0 model N/A N/A Engagement Borough sustainable model renegotiations. An appropriate Revised in line with latest proposal to The Rose EQIA will be undertaken if necessary Potential for more income from weddings at Guildhall, Community Enterprising N/A no savings identified for this 55 Communities Maximise income from Guildhall 0 10 20 25 requires investment for commercial development of the N/A No Engagement Borough year ceremonies market in line with competing venues. Community Recommissioning CCTV Camera Rationalisation of IT Networks. Dependent on outcome of N/A no savings identified for this 56 Leading Council Communities 0 10 0 0 N/A No Engagement network connections CCTV scoping review year Community Sustainable 57 Communities Library asset utilisation 5 15 0 0 Utilising library spaces to generate income N/A Neutral impact for residents N/A Engagement Communities To continue the redesign and modernisation of the library service that started with the implementation of self-service technology. To ensure the service is efficient and aligned Neutral impact for residents. Staff Community Sustainable 58 Communities Review of Library Services 60 40 60 0 with corporate priorities. To work more closely with N/A restructure has taken place and N/A Engagement Communities partners such as Adult Social Care, Public Health and been implemented community partners. To deliver the recommendations and findings of the Library services review. Impact is potentially positive through additional income generated through grants. A potential outcome could be Community Sustainable Culture services - increased Generating income through funding applications across 59 Communities 10 0 0 0 N/A targeted work which could be N/A Engagement Communities collaborative working across RBK. Culture positive for some or all of protected characteristics, dependant on funding streams and grants priorities Would need public consultation if Community Sustainable Culture Services restructure - Culture Service restructure, looking to develop shared N/A no savings identified for this 60 Communities 0 50 50 0 N/A services were significantly Engagement Communities shared posts across culture posts across cultural services year changed for residents An EQIA will be undertaken to Options to be developed for a review of the delivery of support the options once they are Would need public consultation if Community Sustainable 61 Communities Museum and history centre review 40 0 0 0 heritage services to ensure it is effective and efficiently N/A identified services were significantly Engagement Communities maximising the use of resources. changed to the residents

Reshaping the Facilities Community Sustainable Corporate & Reducing library courier service from 6 days a week, 2 Neutral impact on resident as this 62 Management library courier service 29 0 0 0 N/A No Engagement Communities Commercial visits a day to 2 days a week, 1 visit a day. is an internal program savings to meet volume and demand SUB-TOTAL 195 140 160 25 N/A

45 Budget reductions (savings and income generation) 2020-21 to 2023-24 ANNEX 6 Estimated Strategic Transformation 2020/21 2021/22 2022/23 2023/24 Statutory review / consultation Ref Directorate Saving title Description FTE Impact Equality Consideration Committee Theme £000s £000s £000s £000s required? 2020/21

A well maintained borough with a sustainable approach to growth and development which benefits our communities More flexible street trading opportunities expanded into No direct impact. equalities Community Enterprising Revised street trading policy and A designated streets around the borough and licensing of A issues will be considered on a 63 Communities 33 0 0 0 N/A Yes Engagement Borough board licensing. boards to remove obstructions whilst continuing to case by case basis during licence support local businesses and shops application process Finance & Enterprising Income from existing commercial Review of existing commercial property lets to drive Neutral Impact on residents. 64 Growth 204 50 50 0 N/A No Partnerships Borough property estate additional income. Income generation Finance & Enterprising Income from existing operational Neutral Impact on residents. 65 Growth 175 125 0 0 Income from letting buildings. N/A No Partnerships Borough property estate Income generation Finance & Enterprising New commercial income from Neutral Impact on resident. 66 Growth 16 751 353 (836) Focused investment in new commercial property. N/A No Partnerships Borough investment company income generation Additional revenue savings from Review of all RBK operational assets to reduce Neutral Impact on resident. An Finance & Enterprising 67 Growth existing operational estate 150 420 85 0 operational costs and potentially generate capital or N/A Eqia will be undertaken as No Partnerships Borough (operational review) revenue income necessary. All residents potentially affected by zero tolerance approach to Environment & Increased enforcement of fines/civil penalties to target Sustainable Zero tolerance approach to enforcement, No groups 68 Sustainable Communities 8 0 0 0 anti social behaviour and issues which impact other N/A No Communities environmental enforcement identified but need to ensure Transport residents adversely such as littering or fly tipping. monitoring of enforcement to ensure it is equitable Reduce Household Reuse and Recycling Centre (HRRC) Environment & Sustainable Corporate & by one hour in the summer (April to September) and two Neutral impact on resident with 69 Sustainable Reduce HRRC opening times 9 0 0 0 N/A No Communities Commercial hours in the winter (October to March), reflecting the most less flexible opening hours Transport popular usage times by residents. Neutral impact on residents. An Environment & Charge for household waste and recycling containers to Sustainable Corporate & EQIA will be undertaken to 70 Sustainable Waste and recycling containers 82 82 0 0 reduce environmental impact of new plastic containers N/A No Communities Commercial access the impact on any specific Transport being ordered unnecessarily groups. Neutral impact on residents. An Environment & Charge residents to bring "DIY waste" (rubble, wood, Sustainable Corporate & EQIA will be undertaken to 71 Sustainable Charge for DIY Waste 25 25 0 0 plasterboard etc) to the Household Reuse and Recycling N/A No Communities Commercial assess the impact on any specific Transport Centre (cost recovery) as a non-statutory service groups. Potential impact on age, disability Environment & Present waste and recycling containers on the pavement Sustainable Corporate & Pavement waste / recycling and gender. An EQIA will be 72 Sustainable 200 100 0 0 for collection where appropriate and supporting vulnerable N/A No Communities commercial collection undertaken to assess the impact Transport residents with assisted collections on the above groups Reduce size of household waste bins through natural Environment & replacement of old bins and ensure policies relating to Sustainable Corporate & Reduce capacity of household 73 Sustainable 42 14 0 0 collection of extra waste and use of recycling services are N/A Neutral impact on residents. No Communities Commercial waste bins Transport adhered to in order to reduce waste and increase recycling SUB-TOTAL 944 1,567 488 (836) N/A

46 Budget reductions (savings and income generation) 2020-21 to 2023-24 ANNEX 6 Estimated Strategic Transformation 2020/21 2021/22 2022/23 2023/24 Statutory review / consultation Ref Directorate Saving title Description FTE Impact Equality Consideration Committee Theme £000s £000s £000s £000s required? 2020/21 Healthy, independent and resilient residents with effective support to those who need it most Financial Inclusion Advice and Financial Inclusion Advice and support to residents to Potentially positive for service Children's & Enterprising support to residents to maximise maximise their benefits and reduce risk of financial users in that we will ensure that Service is preventative. No 74 Adults' Care & Adults 160 0 0 0 N/A Borough their benefits and reduce risk of hardship. Some of resident increased income comes to their benefit income is engagement required. Education financial hardship. the Council. maximised. Potential impact on Age, Review of short term services Disability & Gender. An EQIA has Children's & across Adult Social Care and Consolidation of the current spend on Housing Support Enterprising been undertaken to support and Service is preventative. 75 Adults' Care & Adults housing support to ensure that they 250 250 0 0 provision, reducing duplication and designing a more TBC Borough mitigate impact. Potential impact Consultation with staff required. Education have clear pathways and meet coherent pathway to meet a range of needs. on staff and appropriate EQIA will short term need. be undertaken as necessary Neutral- no expected impact on Children's & Improved commissioning of children placements by more Enterprising any protected characteristic 76 Adults' Care & Children's Placement commissioning 102 191 208 100 effective supply side management and market N/A No Borough groups as this relates to Education development commissioning. Potentially positive for disability Community Enterprising Additional income from Kingston Continue to develop customer base and increase and race if service expands as 77 Communities 20 0 0 0 N/A No Engagement Borough Interpreting Service profitability from Kingston Interpreting Service more people can access the service. Children's & No impact on service user as this Enterprising Stop Smoking Service - year on The new contract had efficiencies built in year-on-year in 78 Adults' Care & Communities 7 7 6 0 N/A can be achieved through No Borough year efficiency to the delivery model Education efficiency savings Delivery of elements of the substance misuse treatment No impact on service user as this Children's & Enterprising Review of Substance misuse service has been reviewed and is being delivered in a can be achieved through 79 Adults' Care & Communities 20 0 0 0 N/A No Borough contract different way, resulting in contracting efficiencies and an efficiency savings through better Education improved patient journey management of existing contract No impact on service user as this Children's & Reduction in commissioning contract value with Your Enterprising will be achieved through 80 Adults' Care & Communities 0 - 19 Services 95 100 0 0 Healthcare due to capacity building in 2019/20, meaning N/A No Borough efficiency savings by the delivery Education new model of delivery for some services. methods Potential impact- this may lead to a reduction in staffing if digitalisation reduces Children's & administrative support required Children's Social Care - Digitisation Digitalise single point of access processes to reduce 81 Adults' Care & Leading Council Children's 25 0 0 0 TBC so an equality impact No programme administration and manual systems currently in use. Education assessment must be completed to better understand impact on staff from across the protected characteristic groups. Recommissioning of services that Potential impact on Age and Home-based intensive reablement support provided to Children's & reable and support people to Disability and Carers. Full EQIA Maximising people in their own homes in order to promote 82 Adults' Care & Adults remain living at home and avoid 250 0 0 0 N/A will be undertaken to support the No Independence independence , improve quality of life and reduce the Education premature admission to residential change process and mitigate the number of placements into residential care care risks. Potential impact on Age and The Shared Lives scheme involves a young person or Disability. Ambition that the Children's & adult who needs support, move in with, or regularly visit, service change will potentially Maximising 83 Adults' Care & Adults Shared Lives 150 0 0 0 an approved Shared Lives carer. Shared Lives offers an N/A have a positive impact in that the No Independence Education alternative and lower cost option to residential new model and expansion of the placements. scheme will enhance people's quality of life and independence Impact is neutral on Disability and Age. Service Users will be Children's & Decommission Woodbury residential and respite unit for Maximising assessed and provided with 84 Adults' Care & Adults Woodbury 140 0 0 0 Learning Disability clients providing services within the N/A Consultation required. Independence alternative accommodation and Education community support that meets their identified need. Children's & Develop new 80 bed dementia nursing home to meet Maximising N/A - no savings identified this 85 Adults' Care & Adults New Dementia Home 0 0 170 0 rising demand for beds and ensure these are available to N/A No Independence year Education RBK at right price.

47 Budget reductions (savings and income generation) 2020-21 to 2023-24 ANNEX 6 Estimated Strategic Transformation 2020/21 2021/22 2022/23 2023/24 Statutory review / consultation Ref Directorate Saving title Description FTE Impact Equality Consideration Committee Theme £000s £000s £000s £000s required? 2020/21 Will be achieved via two developments undertaken with our Trusted Assessor, Kingston Carers Network. Kingston Carers Network are now fully utilising the ASC recording database system, which will minimise duplication and Children's & Neutral impact on service users Maximising create consistency of commissioning process for carers 86 Adults' Care & Adults Carer's pathway and relief review 30 0 0 0 N/A achieved through efficiency No Independence support services such as relief care provision. Also relief Education savings. care commissioning is brought in line with the ASC practice for direct payments, which will allow consistent funding based on personal assistant rates and the monitoring of relief care usage. Children's & Neutral impact on Age and Maximising Smarter commissioning more effective contract 87 Adults' Care & Adults Homecare Framework 100 50 0 0 N/A Disability. Procurement will have No Independence management of homecare Education an EQIA undertaken. Service is statutory. No Strategic Housing Maximising Provision of storage for the Provision of storage for the belongings of people 88 Adults 9 0 0 0 N/A Neutral impact on service users. consultation/engagement & Planning Independence belongings of homeless people presenting as homeless required. The level of predicted demand for emergency Neutral impact on service users. Service is statutory. No Strategic Housing Maximising 89 Adults Release of underspent budget 400 100 0 0 accommodation due to legislative change has not N/A Achieved through efficiency consultation/engagement & Planning Independence materialised savings required. Children's & Merge Way2Work apprenticeships team with workforce Neutral- no expected impact on Maximising 90 Adults' Care & Children's Apprenticeships 0 15 0 0 development team. Rationalise resources and combine N/A any protected characteristic No Independence Education skills of the team to maximise income generation. groups. Potential impact- it may lead to more automated systems so AfC will need to complete an equality impact assessment to ensure Children's & Automation and improvement to the Emotional Help there are no barriers to access. Maximising Emotional Health Service 91 Adults' Care & Children's 12 12 0 0 Service booking system to reduce the reliance on system TBC This may also lead to a reduction No Independence automation Education administration and manual maintenance. in staffing so an equality impact assessment must be completed to better understand impact on staff from across the protected characteristic groups. Increased and more efficient use of direct payments for use in Respite and Short Breaks delivery. This will shift Children's & Maximising the focus from paying suppliers and providers to allowing N/A no savings identified for this 92 Adults' Care & Children's Short break care 0 20 20 0 N/A No Independence families to organise their own provision. This will remove year Education administration and management charges when using provider services. Children's & Maximising Children's Social Care - Cluster Move to a borough based two cluster (locality) delivery N/A no savings identified for this Yes - may be some impact on 93 Adults' Care & Children's 0 50 50 0 N/A Independence delivery model model from the current three cluster approach . year statutory services. Tbc Education Potential impact- on Leaving Care and UASC service users. However, work is already Continued investment in best practice for UASC and Children's & Unaccompanied Asylum Seeking underway (includes Human Maximising NRPF with effective working arrangements with all Yes - change in policy or delivery 94 Adults' Care & Children's Children (UASC) and No Recourse 50 25 0 0 N/A Rights Assessments project and Independence agencies involved. Increase in case appeal resolution with to young people. Education to Public Funds (NRPF) Home Office collaboration) so partners and accessing public funds for clients. new impact would be limited. An equality impact assessment is currently being drafted. Potential impact- it may lead to a change of service delivery for service users so could potentially impact on age in terms of the young people who may be placed there. An equality impact Review of operating model for the delivery of Leaving assessment for service users will Children's & Yes - may be some impact on Maximising Leaving Care services & supported Care services with in house and external supported need to be completed. This may 95 Adults' Care & Children's 37 37 0 0 -3 service provided and Mother and Independence accommodation providers. accommodation providers. Increased focus and delivery lead to a reduction in staffing so Education Baby Assessments - tbc. on pathway planning and placement sufficiency strategy. an equality impact assessment must be completed to better understand impact on staff from across the protected characteristic groups. Estimated impact on 3-4 members of staff (bank and/or staffing). Children's & Maximising Developing an additional inhouse Supported N/A no savings identified for this Yes - change in policy or delivery 96 Adults' Care & Children's Supported accommodation 0 50 50 0 N/A Independence accommodation unit for care leavers (Greenleas 2) year to young people. Tbc Education SUB-TOTAL 1,857 907 504 100 -3 FTE

Grand Total 7,185 3,882 1,322 (571) -16.5 FTE

Summary of 2020/21 Budget by Service ANNEX 7

TOTAL BY SERVICE 2020/2021 (NET BASE VIREMENTS* ADJUSTMEN ADJUSTED INFLATION GROWTH BUDGET CONTRIBUTI BUDGET EXPENDITURE) BUDGET TS TO BASE BASE REDUCTIONS ON TO 2020/21 2019/20 BUDGET BUDGET RESERVES £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ADULTS OPERATIONS 44,610 (117) 200 44,693 923 1,641 (2,306) 0 44,950 ASC COMMISSIONING AND 6,587 (508) 250 6,329 59 0 (1,122) 0 5,266 TRANSFORMATION COMMUNITY HOUSING 3,468 (35) 0 3,433 38 0 (672) 0 2,799 ADULTS TOTAL 54,665 (660) 450 54,455 1,020 1,641 (4,100) 0 53,015 CHILDREN'S SERVICES 32,122 (4,657) 57 27,522 595 2,079 (326) 0 29,870 DIRECTORATE MANAGEMENT 937 (690) 0 247 0 0 0 0 247 SUPPORT & OPERATIONS 3,177 127 148 3,452 83 178 (375) 0 3,337 TRANSFORMATION 0 0 0 0 8 66 0 0 74 FINANCE 3,207 212 0 3,420 106 25 (140) 0 3,411 GOVERNANCE & LAW 1,978 276 0 2,254 83 108 (140) 0 2,304 CONTRACTS & COMMERCIAL 12,972 (1,680) 88 11,380 510 738 (485) 0 12,142 PEOPLE & ORGANISATIONAL DEVELOPMENT 892 49 0 941 46 8 (200) 0 795 OTHER CORPORATE SERVICES 7,273 20,159 (137) 27,295 356 575 (125) 1,270 29,371 CORPORATE & COMMERCIAL TOTAL 30,436 18,453 99 48,988 1,191 1,698 (1,465) 1,270 51,682 ASSETS (1,842) (4,311) 10 (6,143) (160) 350 (545) 0 (6,497) REGENERATION & STRATEGIC HOUSING 742 165 0 908 17 38 0 0 963 STRATEGIC PLANNING & INFRASTRUCTURE (51) (196) 50 (197) 30 96 0 0 (70) GROWTH TOTAL (1,151) (4,341) 60 (5,432) (112) 484 (545) 0 (5,605)

TOTAL BY SERVICE 2020/2021 (NET BASE VIREMENTS* ADJUSTMENTS ADJUSTED INFLATION GROWTH BUDGET CONTRIBUTION BUDGET EXPENDITURE) BUDGET TO BASE BASE REDUCTIONS TO RESERVES 2020/21 2019/20 BUDGET BUDGET £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 DIRECTORATE MANAGEMENT 65 46 0 111 2 0 0 0 114 CULTURE, COMMUNITIES & ENGAGEMENT 3,491 (110) 0 3,381 39 41 (174) 0 3,288 CUSTOMER JOURNEY 332 10 0 342 14 65 (178) 0 242 HEALTHY AND SAFE COMMUNITIES 635 19 (270) 383 40 45 (217) 0 251 DIGITAL & ICT 4,233 (2,378) 50 1,905 50 13 (85) 0 1,884 HIGHWAYS, TRANSPORT & REGULATORY 10,088 (6,378) 0 3,710 116 532 (95) 0 4,263 SERVICES COMMUNITIES TOTAL 18,843 (8,791) (220) 9,832 261 697 (749) 0 10,041 CHIEF EXECUTIVES 1,393 (4) 0 1,389 29 0 0 0 1,418 TOTAL 136,308 (0) 446 136,754 2,984 6,598 (7,185) 1,270 140,421

* The most significant element of the virements (budget movements) in this column arise from a decision taken in 2019/20 to remove budgets for depreciation from the services that held them and remove the corresponding credit, totalling £20.569m, from other corporate services. Depreciation is not a true cost to the Council (hence the budgets netted to nil) and it is considered more transparent not to include these charges in the Council’s management accounts as it has a distorting effect on the figures.

Subjective Summary of 2020/21 Budget ANNEX 8

SUBJECTIVE ANALYSIS 2020/21 - BASE VIREMENTS ADJUSTMENTS ADJUSTED INFLATION GROWTH BUDGET CONTRIBUTION BUDGE SUMMARY BUDGET TO BASE BASE REDUCTION TO RESERVES T 2019/20 BUDGET BUDGET S 2020/21 (FIGURES MAY NOT ADD DUE TO ROUNDINGS) £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 EMPLOYEE COSTS 50,700 3,991 0 54,691 833 480 (1,103) 0 54,901 PREMISES - RELATED EXPENDITURE 14,139 142 10 14,290 148 485 (9) 0 14,915 TRANSPORT - RELATED 543 (40) 0 503 0 0 0 0 503 EXPENDITURE SUPPLIES AND SERVICES 15,042 (1,542) (89) 13,411 434 295 (597) 0 13,543 SUPPORT SERVICES (5,382) (151) 0 (5,533) 0 0 0 0 (5,533) THIRD PARTY PAYMENTS 140,595 (10,411) 324 130,507 1,959 4,280 (4,336) 0 132,411 TRANSFER PAYMENTS 78,589 (774) 0 77,815 99 0 (130) 0 77,784 CAPITAL FINANCING 14,906 (63) 0 14,843 0 575 0 0 15,418 TOTAL EXPENDITURE 309,131 (8,848) 245 300,528 3,474 6,115 (6,174) 0 303,942 GOVERNMENT GRANTS (79,251) 7,237 0 (72,014) 0 108 0 0 (71,906) INTERNAL INCOME (26,842) 1,464 0 (25,378) (31) 0 (36) 0 (25,445) NON - GOVT GRANTS, REIMBURSEMENTS AND (22,852) (360) 250 (22,962) (215) (75) 80 0 (23,172) CONTRIBUTIONS CUSTOMER AND CLIENT RECEIPTS (56,177) (419) (49) (56,646) (194) 450 (1,055) 0 (57,444) INTEREST RECEIVABLE (294) 0 0 (294) 0 0 0 0 (294) (178,262 TOTAL INCOME (185,417) 7,922 201 (177,294) (440) 483 (1,011) 0 ) TRANSFER TO AND FROM RESERVES 12,595 927 0 13,521 (51) 0 0 1,270 14,741 TOTAL TRANSFERS TO / FROM 12,595 927 0 13,521 (51) 0 0 1,270 14,741 RESERVES GRAND TOTAL 136,308 0 446 136,754 2,984 6,598 (7,185) 1,270 140,421

ANNEX 9

Flexible Use of Capital Receipts Strategy

Introduction

To support local authorities deliver more efficient and sustainable services, a time limited flexibility is currently available to use capital receipts from the disposal of property, plant and equipment assets to fund the revenue cost of service reform.

Under normal rules, capital receipts can only be used to fund capital expenditure such as the purchase of capital assets or improvements to existing assets. The current flexibilities enable Councils to use income from the sale of certain assets to fund the short-term revenue costs that support invest-to-save and efficiency projects in order to provide revenue savings in the future.

This strategy sets out the intended use of this flexibility and applies to the financial year 2019-20 and for each subsequent financial year to which the flexible use of capital receipts direction applies (currently to 2021/22). The Strategy will be updated as part of the annual budget process in subsequent years.

The flexibilities fit well with the Council’s Medium Term Financial Strategy and its plan for achieving financial sustainability through transformation projects, including efficiency measures, invest-to-save projects and new income generation plans. Given the level of savings required over the medium-term and the number and scope of projects within the plan, it will be important to provide funding for these projects. The use of capital receipts means that these essential projects can be progressed without putting additional pressure on revenue resources.

Rules of Qualification

Revenue expenditure qualifies to be funded from the capital receipt flexibility if it has been incurred on any project that is designed to generate ongoing revenue savings in the delivery of public services and/or transform service delivery to reduce costs and/or transform service delivery in a way that reduces costs or demand for services in future years for any of the public sector delivery partners.

The capital receipt must be received in the years in which this flexibility is offered. The flexibility was initially available for three years from 2016-17 to 2018-19 but was extended for a further three years in the December 2017 provisional local government finance settlement.

Strategy for Use of Flexibility

Since 2010 the Council has been delivering savings programmes which have allowed it to focus resources on unavoidable cost pressures, including demand led services (such as adult and children's social care), as well as allowing the Council to match the level of spending with the reducing funding coming from central government.

ANNEX 9

This flexibility aligns with our corporate priorities and provides an alternative way of funding the one-off transformation costs and up front investment associated with delivery of recurring savings which will accrue to the General Fund in future years.

Capital receipts totalling £9.3m were received in 2017/18. £3m was set aside to fund the capital programme and the remainder is allocated to resource transformation costs incurred in the current financial year and future projects that will deliver the required savings in the Medium Term Financial Strategy. At the time of writing, a balance of £3.3m remained uncommitted.

Consideration has therefore been given to reduce the level of risk within the Medium-term Financial Strategy by using the flexibility to offset incurred and planned transformation costs currently assumed to be funded from general fund resources. This will help mitigate the inherent risk in the Medium Term Financial Strategy arising from two main factors: 1. the accumulated deficit that has arisen the high needs block of the dedicated schools grant, currently projected to be around £20m at year-end. 2. the scale of the savings to be delivered over the life of the Medium Term Financial Strategy, and the extent to which these require transformation of service delivery and management of demand for services.

Impact on Prudential Indicators

The council will have due regard to the requirements to the Prudential Code and the impact on the prudential indicators. The capital receipts described above are not built into the Council's current/proposed capital programme and so the utilisation of these receipts for capital receipts flexibility will not have a detrimental impact on the Council's prudential indicators, as set out in the Council’s Treasury Management Strategy. All schemes which are eventually deemed to qualify under this programme would have the required costs funded through capital receipts rather than revenue funding streams.

Planned Use of the Flexibility

The Guidance confirms that all of the following are qualifying forms of expenditure: ● Sharing back-office and administrative services with one or more other council or public sector bodies; ● Collaboration between local authorities and central government departments to free up land for economic use; ● Funding the cost of service reconfiguration, restructuring or rationalisation (staff or non staff), where this leads to ongoing efficiency savings or service transformation; ● Sharing Chief-Executives, management teams or staffing structures; ● Driving a digital approach to the delivery of more efficient public services and how the public interacts with constituent authorities where possible; ● Aggregating procurement on common goods and services where possible, either as part of local arrangements or using Crown Commercial Services or regional procurement hubs or Professional Buying Organisations;

ANNEX 9

● Improving systems and processes to tackle fraud and corruption in line with the Local Government Fraud and Corruption Strategy – this could include an element of staff training; ● Setting up commercial or alternative delivery models to deliver services more efficiently and bring in revenue (for example, through selling services to others); and ● Integrating public facing services across two or more public sector bodies (for example children’s social care, trading standards) to generate savings or to transform service delivery.

The Council intends to use capital receipts to fund projects associated with delivering the planned programme of savings and service reform. Specific approval of projects and allocation of funds arising from the use of flexible capital receipts will be at the discretion of the Section 151 Officer.

The savings currently planned to be delivered are set out in the budget report at Annex 6.

54 ANNEX 10 Strategic Housing and Planning Committee 6 February 2020 Housing Revenue Account Budget for 2020-21

Report by the Director of Growth and Director of Corporate and Commercial

Purpose To consult the Strategic Housing and Planning Committee on the proposed Housing Revenue Account (HRA) Budget for 2020-21 and make the necessary decisions to set rent and service charge levels for 2020-21.

Recommendation of the Portfolio Holder for Finance To resolve that:

1. the HRA 2020-21 base budget and proposal for growth and savings as set out in this report be RECOMMENDED to the Finance and Partnerships Committee; 2. the 2020-21 rent policy be agreed, subject to the constraints identified in paragraphs 11, 17 and 18 of the report; 3. the 2020-21 average rent increase of 1.97% as directed by Government and detailed in paragraph 13 of the report be agreed; 4. the tenant service charges are increased by inflation (September 2019 CPI) of 1.7% as detailed in paragraph 20 of the report; 5. that the 2020-21 rents for HRA hostels, non-dwellings and other non-Housing dwellings owned by the Council increase in line with inflation (September 2019 RPI) of 2.4% as detailed in paragraph 20 of the report; 6. the indicative HRA revenue budgets for 2020-21 to 2023-24 set out in Enclosure 3 be noted; 7. the additions and full HRA Capital Programme as described in paragraphs 30 to 34 of Annex 10 to the budget report pack with detail in Enclosure 5 be noted

Key Points

A. The Council is required to maintain a self-financing Housing Revenue Account (HRA), which is ring-fenced from the Council’s other budgets and is a record of all revenue expenditure and income relating to the Authority’s own housing stock. The Council is required to set a balanced budget for its HRA at the end of the year. B. The main source of income for the HRA is from rents and service charges paid by tenants, which comprise income from leaseholder service charges and charges paid by tenants for specific services. These resources can only be spent on services related to the provision of Council Housing, with the largest item of expense being the revenue cost of capital investment in the Council’s Housing stock through contributions to the Major Repairs Reserve. C. The HRA business plan financial model has been updated in order to inform the budget for 2020-21 and Medium Term Financial Plan to 2023-24. The revised assumptions take into account national policy changes as well as local information on any changes to service provision and support functions. D. In February 2019 the government issued its policy statement on rents for social housing which set out government policy for social housing from 1 April 2020 onwards. This new policy allows local authorities and housing associations to increase rents by up to CPI

1 55 ANNEX 10 plus 1% each year for a period of at least 5 years. The average rent increase in Kingston will be 1.97% for 2020/21. E. In 2020/21, investment is being made, including in staff structural changes already in progress, to improve services to residents, deliver safe, compliant and secure homes, and develop new thinking and approaches that continue to ensure we put our residents at the heart of service delivery. This includes £0.3m for borough wide stock condition surveys that will identify where investment is required for homes for the next 30 years and where to prioritise the expenditure to best effect. F. The Council is working to deliver modern, digitally enabled services to all our customers who want it and we are therefore budgeting for £0.4m to deliver improvements to services from a revised IT system that will deliver an improved experience for residents and increase the productivity of the front-line team. This will build on the work undertaken in the New Housing Model previously to deliver a Council based digital by choice offer in the future. G. In addition to this investment in service delivery, £0.7m has been included in the budget proposals for further support of the Cambridge Road Estate (CRE) regeneration scheme. The CRE growth funding will only be required in the event of a successful outcome in the ballot of residents on the proposals. The growth funding is for staffing to support our affected residents and the timely delivery of regeneration as laid out in the emerging Landlord Offer, as well as the professional support required to ensure the success of the CRE regeneration scheme. H. In 2019/20 a provision of £0.75m was made in the accounts for the Thames Water case to cover the cost of making payments to residents should this be required. The impact of this in the 2019/20 financial year means that there is an impact on the HRA reserves. Without this there would have been an increase in the HRA reserves at the end of the 2019/20 financial year. This is a prudent action and consistent with other providers of social housing. I. Savings of £1.088m are planned within the budget for 2020/21, and to ensure we continue the transformation of service delivery, there is a proposed call on the HRA’s reserves. The HRA balance will be adjusted accordingly from an estimated £6.934m at st 1 April 2020 to £5.664m at 31 March 2021. J. The reserve level in April 2020 of £6.934m assumes the HRA will spend to budget in 2019/20. This is a prudent assumption as at the end of November 2019 the HRA was forecast to underspend by £0.3m after the provision of £0.75m for the Thames Water legal case. Should an underspend arise in 2019/20 this will improve the opening reserves position in April 2020. K. In 2018 the government announced that it would abolish the headroom cap on the HRA. The headroom cap restricted the amount that Councils were able to borrow within the HRA. This is a welcome and significant change that provides an opportunity to increase the number of new homes, built and acquired, from additional borrowing and any reserves generated from operational efficiencies. A programme of regeneration for the Cambridge Road Estate and a new affordable housing programme, are being formulated to deliver additional homes, utilising this greater freedom to borrow. Subject to progression of these projects there may be additional costs to be funded within both revenue and capital budgets. The requirements that have currently been identified are included in this budget proposal. L. Key risks for the HRA are addressed in Enclosure 4 to the report.

2 56 ANNEX 10

Delivery of Additional Homes

1. The Council currently has 150 fully funded new homes being delivered both directly and through a local partner. These are at various stages of the development process are being funded through a mixture of HRA finance, right to buy receipts (RTB) and Greater London Authority (GLA) grant funding through the successful bidding for ‘Building Council Houses for Londoners’ programme finance. 2. The ‘Small Sites’ programme has concluded its feasibility stages with planning submissions for the first phase of homes planned for Spring 2020 following consultation. This first phase will result in some 95 new homes with a potential phase 2 (subject to further grant being made available) of 100 homes over the next 4 years. 3. RTB receipts have also been made available to Richmond Housing Partnership by way of capital funding agreements for a further 57 homes that start on site in the coming month. 20 of these are close to CRE in Bonner Hill Road, whilst the remaining 37 are on the Roselands clinic site, in New Malden. For these 57 new homes, the Council has 100% nomination rights. 4. The Council has now also entered into a ‘ring-fence’ arrangement with the Ministry for Housing, Communities and Local Government (MHCLG) and the GLA to secure any ‘unspent’ RTB receipts for the future. On this basis we no longer ‘use them or lose them’ and can take a considered view on where they might be best deployed for new homes supply.

2020-21 Proposed Budget and Indicative Budgets 2021/22 – 2023/24

5. The proposed budget for 2020-21 is shown in Enclosure 1 in statutory format, the 2020-21 key changes in Enclosure 2 and the indicative 2021/22 – 2023/24 budgets in Enclosure 3. The starting point for building the budget was the existing budget for 2019/20. 6. Expenditure in 2020/21 has increased by £0.720m when compared to the 2019/20 budget, this is due to an increase to the depreciation charge and one-off costs to cover the stock condition survey and service improvement. These additional costs are slightly mitigated by savings in staff costs and interest charges. The key changes to the budget are shown in Enclosure 2. 7. Inflation has been applied to the budget and an allowance for salary inflation in relation to the Local Government pay award. A small increase in other lines of expenditure, in line with contractual obligations has also been included. 8. The net result of these changes is a requirement to draw £1.270m from reserves in order to support the delivery of the improvements. This balance reduces the overall HRA balance to an estimated £5.664m, against a requirement for a minimum reserve balance of £3m. 9. The Section 151 Officer’s comments regarding adequacy of reserves is provided in the Resources Implications section of this report.

3 57 ANNEX 10 HRA Rents 10. Funds for managing, maintaining and developing HRA homes can only be generated through rental income, therefore rental income levels are a key factor of the budget

11. Government policy which directs the setting of rents will change from April 2020. The recent requirement to reduce rents by 1% each year ended in 2019/20 and the new policy effective from April 2020 allows local authorities and housing associations to increase rents by up to CPI plus 1% each year.

12. The policy contains flexibility for local authorities and other registered providers to set rents at up to 5% above formula rent. Where the rent exceeds the rent flexibility level, the policy states that the provider can only increase the rent by a maximum of CPI each year until the formula rent catches up.

13. A substantial number of Royal Borough of Kingston rents are slightly above formula rent and are therefore limited to the lower increase of CPI (as at September 2019 of 1.7%) only, instead of CPI +1%. This has resulted in our achieving an average rent increase of 1.97%.

14. The HRA budget has increased rents in line with Government Policy, this means an average rent increase of £2.19 per week for homes at social rent levels. Resulting in the average rent increasing from £111.82 to £114.01 per week.

15. The Council opted (through an agreement with Secretary of State for Communities and Local Government signed in 2012) to use Right to Buy (RTB) receipts accruing from the government’s reinvigorated right to buy policy (1-4-1) to re-provide affordable rented housing. This can be done through directly building homes, grant-funding a Housing Association to provide new affordable housing, or by purchasing properties on the open market.

16. The Government requires an affordable rent to be charged where Right to Buy receipts are used to provide additional homes. This policy means the Council can charge a maximum of 80% of the local private market rent for homes where RTB receipts are used.

17. Rents for these properties will continue to be set at an affordable rent, equivalent to 100% of the Local Housing Allowance (LHA).

18. Where properties are let at an affordable rent, the rent will increase by 2.7% in line with government policy.

Provision for bad debts 19. A significant risk to the 2020-21 HRA budget is the loss of income from rents as a result of bad and irrecoverable debts. This is expected from changes to Housing Benefit and the introduction of Universal Credit which could reduce the monies available to tenants and lead to increased arrears and bad debts. The annual contribution to bad debts provision is therefore being maintained at the higher level of 1.8% of rents in recognition of this risk.

Other rents and charges 20. It is proposed that rents on HRA Hostels, non-dwellings and other non-Housing dwellings owned by the Council be increased in line with inflation (September 2019 4 58 ANNEX 10 RPI) at 2.4%. It is also proposed that tenants’ service charges be increased by September 2019 CPI + 1%, i.e. 2.7%, in line with social rent guidelines.

Cost of borrowing 21. Cost of borrowing arises primarily from the interest on the loans taken out to implement Self Financing in 2012 and new loans to fund the HRA capital programme since that date. 22. The first of the Self-Financing loans begin to mature in 2028/29 and the updated 30 year HRA business plan forecasts to repay the loans as they mature and accumulate capital receipts to allow repayment of all other debts as they become due. Depreciation and other capital funded from revenue 23. A depreciation charge representing the loss of value in the capital stock during the year is made to the Housing Revenue Account. The depreciation charge of £9.5m is the largest single area of expenditure in the HRA so any future year changes could have a significant effect on the HRA budget. The depreciation charge to the revenue account, provides funding for capital expenditure or the repayment of debt through the Major Repairs Reserve. Revenue growth and savings 24. The key changes in the 2020-21 proposed budgets are detailed in Enclosure 2 and show a net budget increase of £0.720m against the 2019/20 budget. 25. Income Budgets have reduced by £0.063m. This is due to the loss of the additional week’s rent from last year, as this financial accounting year contains 52 weeks and not 53 weeks; the rent increase for 2020/21; and income growth from new affordable housing units. 26. Technical adjustments will result in a budget saving of £0.389m, mainly as a result of interest savings from funding capital expenditure from internal resources and not borrowing, slightly offset by higher depreciation of revalued stock and its components. 27. Further growth of £1.157m allowed for inflation, service improvement plan, stock condition survey and additional resource capacity to drive the development of new homes. 28. Savings of £0.111m have been achieved from efficiency savings on staffing costs. Capital 29. The HRA capital programme aims to improve existing HRA assets, increase supply from the government’s reinvigorating right to buy policy and to address a programme of planned works to estates and other demand driven projects. The proposed programme over the 4 years, 2020/21 to 2023/24, amounts to £54.728m and is shown in summary in Table 3 below with further detail in Enclosure 5: 30. Table 1 below shows the existing HRA capital programme as of month 8.

5 59 ANNEX 10

Existing HRA Capital Programme (2019/20 - 2022/23) Table 1

2019-20 2020-21 2021-22 2022-23 Total Existing Capital Programme £000s £000s £000s £000s £000s Better Homes 1,928 130 0 0 2,058 Other Projects 4,232 6,872 17,626 2,359 31,089 Major Capital Works 1,920 2,080 2,000 2,000 8,000 Statutory Compliance 1,459 850 800 600 3,709 Asset Improvements 3,923 2,950 2,695 1,970 11,538 Health & Safety 41 50 50 50 191 Housing Conversion 674 400 400 500 1,974 Refurbishment 592 350 350 350 1,642 1-4-1 Developments 2,316 3,052 0 0 5,368 Total 17,085 16,734 23,921 7,829 65,569

31. The proposed additions to the HRA capital programme are summarised in Table 2 below:

Proposed Additions to the HRA Capital Programme Table 2

2020-21 2021-22 2022-23 2023-24 Total Additions to Capital Programme £000s £000s £000s £000s £000s Other Projects 700 128 128 128 1,084 Major Capital Works 0 0 0 0 0 Statutory Compliance 570 0 0 600 1,170 Asset Improvements 390 690 870 890 2,840 Health & Safety 0 0 0 50 50 Housing Conversion 0 0 0 500 500 Refurbishment 250 0 0 350 600 Total 1,910 818 998 2,518 6,244

32. The total proposed HRA capital programme is summarised in Table 3 below:

Total HRA Capital Programme Table 3

2020-21 2021-22 2022-23 2023-24 Total Total Capital Programme £000s £000s £000s £000s £000s Better Homes 130 0 0 0 130 Other Projects 7,572 17,754 2,487 128 27,941 Major Capital Works 2,080 2,000 2,000 0 6,080 Statutory Compliance 1,420 800 600 600 3,420 Asset Improvements 3,340 3,385 2,840 890 10,455 Health & Safety 50 50 50 50 200 Housing Conversion 400 400 500 500 1,800 Refurbishment 600 350 350 350 1,650 1-4-1 Developments 3,052 0 0 0 3,052 Total 18,644 24,739 8,827 2,518 54,728 6 60 ANNEX 10

33. The funding for this programme of works is shown in Table 4 below. Table HRA Capital Programme Funding 2020-21 to 2023-24 4

2020-21 2021-22 2022-23 2023-24 Total Funding Type £000s £000s £000s £000s £000s Leaseholder Receipts 1,000 1,000 500 500 3,000 RTB receipts (1-4-1) 3,052 0 0 0 3,052 Other Capital receipts (allowable debt) 871 871 871 871 3,484 GLA Homes For Londoners Grant 2,700 0 6,800 0 9,500 Sub-Total 7,623 1,871 8,171 1,371 19,036 Major Repairs Reserve 9,516 9,879 656 1,147 21,198 Borrowing 1,505 12,989 0 0 14,494 Total 18,644 24,739 8,827 2,518 54,728

Consultations 34. There have been no public consultations specific to these proposals. Timescale 35. The HRA budget for 2020-21 will be considered at the Strategic Housing and Planning Committee on 6 February 2020 who will be asked to agree the rent policy and rent increases. The Finance and Partnerships Committee on 13 February 2020 who consider the overall budget and make the necessary recommendations to Council to agree the budgets for 2020-21. Resource Implications 36. In preparing the Council’s General Fund Budget and Council Tax, the Section 151 Officer is required by the Local Government Act 2003 to report on the robustness of the Council’s financial estimates and adequacy of reserves. The formal legal requirements do not apply to the HRA where there are no implications for Council Tax, however the same issues are relevant for the HRA budget and best practice suggests that the same considerations are made in respect of this budget. 37. The purpose of the Director’s comments on the robustness of the estimates is to give assurance that risk is appropriately managed and that there is a legitimate expectation that likely eventualities are provided for within the budget. It is not intended (nor possible) to give a guarantee that the budget is sufficient to cover all possible scenarios (however unlikely), nor that income and expenditure will occur exactly as budgeted. It is concerned with whether the plan is a sound one or not. 38. In reaching a conclusion on the robustness of the estimates, the Section 151 Officer has taken into account a number of factors including: (i) The budget proposals have been developed following guidance from the Section 151 Officer and have been subject to a rigorous process of development and challenge (ii) Expected levels of inflation are provided for to protect the real terms value of budgets

7 61 ANNEX 10 (iii) Known areas of expenditure pressure have been provided for and prudent estimates made about interest rates. (iv) The Council is operating with a strengthened approach to budgetary control which has successfully dealt with in year financial challenges as they have occurred. (v) Delivery against savings targets will be monitored separately and corrective action taken where necessary. (vi) The revenue effects of the capital programme have been reflected in the budget. (vii) Any recommended increases in fees and charges are consistent with the assumptions in the budget. 39. Based on this analysis, the Section 151 officer reports that the revenue and capital estimates given in this report are robust as if covered by Section 25 of the Local Government Act 2003. 40. Section 25 of the Act requires the Council, in setting its budget, to maintain an ‘adequate level of controlled reserves’. The Section 151 Officer is required to provide appropriate advice to the Council on the adequacy of its reserves, both those which are earmarked for specific purposes and for the General Fund balance. 41. To inform this judgement, the Director of Finance has carried out a financial risk analysis of the Council’s proposed budget. This is detailed in Enclosure 4. Based on budget monitoring information reported at the end of November 2019, the forecast balance at 31 March 2020 on the reserves is £6.934m. This compares favourably to the £3m minimum balance needed to cover against the risks identified in Enclosure 4 as well as any risks yet to be identified. Legal Implications 42. On 29 November 2019, the judgement in the test case initiated by the Council in 2017 to challenge the judgement in Southwark LBC v Jones (2016) in relation to water and sewerage charges recovered on behalf of Thames Water Utilities Limited (TWUL) was not decided in the Council’s favour. The Council was ordered to pay the Defence costs and refund certain charges to the Defendant, a secure council tenant. The test case was brought with the support of a collective, comprising of a total of 24 local authorities who considered Jones was wrongly decided. The collective was co-ordinated by the LGA.

43. The Council/Collective considers there are good grounds for appealing the High Court Judgement and has now applied for permission to appeal to the Court of Appeal. The appeal is supported by a total of 22 authorities. A decision on whether to grant permission to appeal is due to be decided in the coming months. If granted there will be a hearing before the Court of Appeal probably not before 2022. The Council, like each of the members of the collective, is required to contribute an equal share to the cost of the litigation. On a worse case scenario - that permission is granted but the appeal is lost after a hearing - the Council’s total costs exposure, including the costs before the High Court and the Court of Appeal, is estimated at £15K. This figure includes the estimated costs of the Defence.

44. The Council would also be liable to refund certain water and sewerage charges collected on behalf of TWUL, to those tenants who paid those charges to the Council as part of their rent. Conversely, if the Council/Collective succeeds before 8 62 ANNEX 10 the Court of Appeal, and Jones is overruled, it will not be required to pay any refunds. In addition, the Court should order the Defence to pay the Council/Collective’s costs in the High Court and Court of Appeal.

Risk Assessment

45. The risk analysis related to this proposal is included at Enclosure 4. Equalities Impact Assessment 46. There is no change to existing policy proposed within this report and therefore no Equalities Impact Assessment is required. Road Network Implications 47. None Environmental (including Air Quality) Implications 48. Improvements to housing will positively influence the sustainability of the stock and help the Council to meet its environmental objectives for example by reducing heat loss through enhanced external fabric improvements.

Background papers held by - Miguel Fernandez, Head of Finance - Engagement and Advice, tel: 020 8547 5955, email: [email protected]. Legal implications - David Fellows, Assistant Head of Law, South London Legal Partnership, tel: 020 8545 4568, email: [email protected].

9 63 ANNEX 10

ENCLOSURE 1

2020-21 PROPOSED HRA BUDGET

2019/20 2020/21 Changes Description Budget Budget £000 £000 £000 INCOME: Rental Income (27,705) 72 (27,633) Void Losses 405 33 438 Service Charges (2,446) 101 (2,345) Non-Dwelling Income (415) (7) (422) Grants & Other Income (1,261) (2) (1,263) Interest Received (7) 0 (7) Gross Income (31,429) 197 (31,232)

EXPENDITURE: General Management 7,090 976 8,066 Special Management 1,409 15 1,424 Other Management 4,022 (111) 3,911 Bad Debt Provision 468 32 500 Responsive & Cyclical Repairs 4,372 0 4,372 Interest Paid 5,295 (600) 4,695 Finance Administration 18 0 18 Depreciation & Direct Revenue Funding of 9,305 211 9,516 Capital Gross Expenditure 31,979 523 32,502

(Surplus) / Deficit for the year 550 720 1,270

Balance on the HRA at the start of the year (6,934) Balance on the HRA at the end of the year (5,664)

10 64 ANNEX 10

ENCLOSURE 2

2020-21 PROPOSED HRA BUDGET - KEY CHANGES

Item 2020/21 No. Description of proposed Budget - Key changes £'000

Net decrease in Rental Income - annual rent increase less removal of 1 week 53 rent and RTB sales 72

2 Increase in Non-Dwelling Income - due to annual rent increase (9)

Total Income Changes 63 Increase in Void Losses (dwellings) - budget alignment due to 3 increase in long term voids (mainly in sheltered housing) 33 Reduction in Service Charge income - due to void properties and RTB 4 sales 101

5 General Management budget - additional lead officer staffing capacity 200 General Management budget - stock condition survey and compliance 6 works 300

7 General Management budget - service improvement plan 200

8 General Management budget - Cambridge Road Estate regeneration 700

9 General Management budget - Inflation 116 Increase in Bad Debt Provision to 1.8% due to impact of Universal 10 Credit 32

Total Growth 1,682

11 General Management budget - Reduction in insurance costs (150)

12 Decrease in Other Management budget - savings in staffing costs (111) General Management budget - reversal of one-off transformation 13 funding (231) General Management budget - reduction in recharges from 14 Community Housing (144)

Total Savings (636) Decrease in Interest Paid - capital expenditure financed from internal 15 resources rather than borrowing (600) Increase in Depreciation & Direct Revenue Funding of Capital due to 16 higher value of housing stock 211

Total Technical Adjustments (389)

Net changes 720

11 65 ANNEX 10

ENCLOSURE 3

INDICATIVE ESTIMATES 2020/21 TO 2023/24

2020/21 2021/22 2022/23 2023/24 Description Budget Budget Budget Budget £000 £000 £000 £000 INCOME: Rental Income (27,633) (28,123) (28,870) (29,744) Void Losses 438 446 458 472 Service Charges (2,345) (2,390) (2,442) (2,501) Non-Dwelling Income (422) (435) (449) (464) Grants & Other Income (1,263) (1,275) (1,290) (1,307) Interest Received (7) (5) (5) (7) Gross Income (31,232) (31,782) (32,598) (33,551)

EXPENDITURE: General Management 8,066 6,758 6,877 7,008 Special Management 1,424 1,458 1,507 1,546 Other Management 3,911 3,911 3,951 3,990 Bad Debt Provision 500 509 522 538 Responsive & Cyclical Repairs 4,372 4,437 4,547 4,668 Interest Paid 4,695 5,240 5,623 5,560 Finance Administration 18 18 18 18 Depreciation & Direct Revenue Funding 9,516 9,879 9,729 9,908 of Capital Gross Expenditure 32,502 32,210 32,774 33,236

(Surplus) / Deficit for the year 1,270 428 176 (315)

Balance on the HRA at the start of the (6,934) (5,664) (5,236) (5,060) year Balance on the HRA at the end of the (5,664) (5,236) (5,060) (5,375) year

12 66 ANNEX 10 ENCLOSURE 4

RISK ANALYSIS 1. A number of risks have been identified under Self-Financing HRA and these have been outlined below: ● From 2020/21 the government rent policy statement allows rents to be increased by CPI + 1% for the next 5 years and thereafter by just CPI. ● The Government’s introduction of Universal Credit (UC), with all benefits paid directly to tenants, unlike Housing Benefit which is paid directly to the HRA Landlord. Studies from the pilot shows significant increases in arrears for tenants under UC as they don’t necessarily prioritise the paying of their rents. This is the current experience in Kingston so far with its limited rollout for tenants that experience a change in circumstances during the year. ● The Government may also choose to reduce the level of benefits payable and thus further reduce the ability of our tenants to pay increasing rents. ● RTB sales reduce housing stock and rent income so government policy changes that encourage more RTB sales could result in significant loss of rental income which might be difficult to replace. ● Void properties result in loss of income so if the level of voids is higher than budgeted, for example as a result of the redevelopment of sheltered housing or estate regeneration, there would be additional loss of net income. ● Management and maintenance costs could increase more than rents. ● Investment in council stock could be subject to cost pressures or be in schemes that are not priorities or value for money. ● Recovery of costs from leaseholders for works undertaken may be reduced through non-payment or late payment of charges.

2. These risks could lead to a loss of both net rental income and loss of effective control of the capital programme and both could result in a reduction in delivering improvements to the Council’s stock and services provided to tenants. 3. In preparing the budgets a number of specific measures have been addressed: ● Rents have been reviewed to ensure that budgeted amounts are achievable ● Provisions for bad debts have been reviewed to ensure they are adequate ● The Authority has chosen not to make a voluntary revenue provision for the repayment of loans, in order to avoid reducing reserves but to allow reserves to accumulate in future. 4. Borrowing Limits - The government abolished the borrowing limit on the HRA in 2018/19, in its place RBK through the annual review of the 30 year HRA business plan will aim to deliver a plan that demonstrates an ability to repay all outstanding debt over the 30 year life of the business plan as they become due. 5. Use of 1-4-1 receipts - The 1-4-1 receipts have arisen from the retained element of the RTB sales receipts and must be spent on specific items e.g. affordable housing. There are various rules surrounding the use of these receipts and they need to be spent by the 13th quarter from when they arose. If they have not been spent then the receipt needs to be paid back to MHCLG along with interest at 4% above the base rate (currently 0.75%) i.e. 4.75%. 6. The Council has entered into an agreement with the GLA, following their invitation to councils to opt-in to their Right to Buy ring-fence offer, which was approved at SHAP committee in October 2019. The GLA undertakes to ring-fence Right to Buy receipts received by the Council and transferred to the GLA, for use by that council only in accordance with a standard agreement. The benefit of opting-in to the ring-fenced receipts scheme is that the Council

13 67 ANNEX 10 retains control over the spending of this money, together with the interest paid. The offer provides us an additional three years to match fund receipts and deliver new homes. 7. The 2020/21 depreciation budget is based on the asset valuation as at March 2019. The asset valuation at March 2020 will be used as the basis of the actual charge for 2020/21. Therefore there is a risk the figures may change. 8. Estate Regeneration - The programme enabling costs are funded from a combination of revenue, capital and grant sources. There is a risk that the result of the ballot on the regeneration of the Cambridge Road Estate will be a ‘no’ to the proposals, in which case this will result in some additional costs to the HRA. Any such additional costs will be funded from the HRA reserve balance. 9. Water Charges Commission – following the loss in November 2019 of the RBK v Moss court case relating to water and sewerage charges under the Thames Water Agency Agreement, a decision on permission to appeal the case has yet to be heard. Losing the case could result in a significant financial cost to the HRA, for which a provision of £0.750m has been made in 2019/20 but the value and timing of the liability, if any, remains uncertain. 10. Reserves - It is estimated that general reserves at the start of 2020/21 will be £6.934m. This is considered to be adequate and is more than 10% of the total annual income. This assumes the HRA will spend to budget in 2019/20, which the service is on target to do as at the end of November 2019.

14 68 ANNEX 10 ENCLOSURE 5 HRA Capital Programme 2019/20 to

2023/24

2019/20 2020/21 2021/22 2022/23 2023/24 Total Project £000 £000 £000 £000 £000 £000 Better Homes 1,928 130 0 0 0 2,058 BETTER HOMES 1,928 130 0 0 0 2,058 Home Loss Disturbance Payments 400 400 0 0 0 800 HRA Masterplanning 33 0 0 0 0 33 Housing Management Solutions 675 0 0 0 0 675 ICT Housing Solutions 0 400 0 0 0 400 Housing Management ICT System 500 0 0 0 0 500 Small Site programme 700 6,100 17,254 2,359 0 26,413 CRE Development Programme 871 672 500 128 128 2,299 17 and 19 Chamberlain Way 1,053 0 0 0 0 1,053 OTHER HRA PROJECTS 4,232 7,572 17,754 2,487 128 32,173 Disabled Adaptations Programme 499 570 400 400 400 2,269 Building Accessibility Programme 287 200 200 0 0 687 Fire Safety Works 63 250 100 100 100 613 Asbestos Management and Removal 145 150 100 100 100 595 Flat Entrance Door Renewal 250 250 0 0 0 500 Renewal of Tunstall system to sheltered blocks 160 0 0 0 0 160 Installation of door entry system at Dale Court 55 0 0 0 0 55 HRA STATUTORY COMPLIANCE 1,459 1,420 800 600 600 4,879 HRA Hostels 33 40 40 40 40 193 General Lift Improvements 120 0 250 100 0 470 Water Tank Renewal 121 70 70 70 70 401 Estate Lighting 450 500 700 700 700 3,050 Repairs to Roads Pathways Parking 178 80 80 80 80 498 Garage Conversion to Additional Parking 450 250 145 0 0 845 Major electrical upgrades to communal parts 764 250 150 0 0 1,164 Provision of Parking Bays to implement Parking Enforcement 20 0 0 0 0 20 Commercial Boiler Replacement (Sheltered & hostels) 964 1,000 1,000 1,000 0 3,964 Domestic Boiler Replacement 823 950 950 850 0 3,573 York Way Sheds, 2-16 0 200 0 0 0 200 HRA ASSET IMPROVEMENTS 3,923 3,340 3,385 2,840 890 14,378

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ENCLOSURE 5 (Cont'd)

2019/20 2020/21 2021/22 2022/23 2023/24 Total Project £000 £000 £000 £000 £000 £000 Estate Health and Safety, Priority Repairs & Improvements 41 50 50 50 50 241 HRA HEALTH & SAFETY 41 50 50 50 50 241 55 Mount Pleasant 91 0 0 0 0 91 Conversion of 3 bed to 4/5 bed houses 583 400 400 500 500 2,383 HRA HOUSING CONVERSION 674 400 400 500 500 2,474 Structural Works Repairs/Damp 449 400 150 150 150 1,299 Major Void Works 143 200 200 200 200 943 HRA REFURBISHMENT 592 600 350 350 350 2,242 Purchase of HRA Properties - Use of 1-4-1 receipts 2,316 3,052 0 0 0 5,368 1-4-1 DEVELOPMENTS 2,316 3,052 0 0 0 5,368 Major Capital Works 0 1,000 1,800 1,800 0 4,600 Timber Window Replacement 540 800 0 0 0 1,340 Decent Homes - Kitchens & Bathrooms 200 200 200 200 0 800 Estate Improvement Works at Haylett Gardens 600 0 0 0 0 600 H&S Improvements at McDonald House 80 0 0 0 0 80 Roof Replacement at Moor Lane House 0 80 0 0 0 80 McDonald House - Undercroft 150 0 0 0 0 150 Cumberland House - Drying Room 200 0 0 0 0 200 Dale Court - Drying Room 150 0 0 0 0 150 Major Capital Works 1,920 2,080 2,000 2,000 0 8,000 HRA HOUSING 17,085 18,644 24,739 8,827 2,518 71,813

16 70 ANNEX 11 Kingston Capital

Strategy 2020/24

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Purpose of Capital Strategy

This strategy explains:

1. This Capital Strategy is an overarching document which sets the policy framework for the development, management and monitoring of the Council’s investment activity. Investment in this context means any investment involving the use of the Council’s own or borrowed funds, so will incorporate the Capital Programme and all Treasury Investment activity.

2. The strategy is designed to fully comply with the Prudential Code of Practice for local authority capital investment which has recently been revised by the Chartered Institute of Public Finance and Accountancy (CIPFA) in parallel with revised guidance to local authorities from the Ministry of Housing, Communities and Local Government (MHCLG). The main purpose of the Code is to ensure that capital investment proposals are affordable, prudent and sustainable.

3. The aim of the capital strategy is to outline the overall long-term policy objectives and resulting capital strategy requirements, governance procedures and risk appetite. The capital strategy is reported separately from the Treasury Management Strategy Statement with non-treasury investments being reported through the former.

Core Principles

4. A number of Core Principles underpin the capital strategy and its associated programme, these are summarised below:

● Capital investment decisions reflect the aspirations and priorities included within the Council’s Corporate Plan and supporting strategies

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● Schemes to be added to the capital programme will be subject to a gateway process, prioritised according to availability of resources and scheme specific funding and against key capital bid criteria ● The cost of financing capital schemes, net of revenue benefits, are profiled over the lifetime of each scheme and incorporated into the Medium Term Financial Strategy. ● Commissioning and procuring for capital schemes will comply with the requirements set out in the council’s constitution, financial regulations and contract standing orders.

Criteria

5. Each year the Council reviews its capital expenditure plans and priorities for the next four years in order to agree a capital programme. This is undertaken alongside the revenue budgeting process in order that the impact of both is considered. Capital bids are submitted by services for the capital expenditure they require over the next four-year period. The following set of criteria is used to score the bids:

6. Details of the annual capital budget setting process is set out in Appendix A in more detail.

Context

7. In 2017 the Prudential Code and Treasury Management Code were revised to include a new requirement for local authorities to prepare a capital strategy report which will provide the following:

● a high-level long term overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of services

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● an overview of how the associated risk is managed ● the implications for future financial sustainability

8. The aim of the capital strategy is to outline the overall long-term policy objectives and resulting capital strategy requirements, governance procedures and risk appetite.

9. The strategy sets out in detail the recommended capital programme for the next four years for approval by Council. It also includes summarised information up to 2023/24 to show the full quantum of expenditure commitments over the life of the medium term financial plan. The strategy sets out the long term context in which capital expenditure, investment and resourcing decisions are made to contribute towards the achievement of key objectives and priorities.

10. Further work will be undertaken in future years to stretch the horizon of the capital programme review process to provide a more developed view of capital expenditure requirements beyond four years in line with other key strategies such as the Asset Management Plan and Housing Revenue Account Business Plan.

Influences on Capital Strategy

Internal Influences

11. The 2020-24 Kingston Corporate Plan is being considered at Finance and Partnerships Committee on 13 February and more detail can be found in those papers.

12. The 2020-24 Kingston Corporate Plan “Making Kingston Better, Together” details the council’s visions, strategic outcomes and priority activities set against the outcomes. The plan provides a framework for the decisions the council needs to make and how to prioritise and allocate available resources.

Four strategic outcomes are identified in the plan:

● A well maintained borough with a sustainable approach to growth and development which benefits our communities. ● A safe borough with diverse and vibrant communities which help to shape local priorities through participatory democracy. ● Healthy, independent and resilient residents with effective support to support those who need it most ● Kingston council will be financially and environmentally sustainable, working transparently and collectively in the best interests of Kingston’s residents, partners and businesses

There are a range of core Council strategies that sit underneath the Corporate Plan and provide details of activity in particular service areas these include:

● Customer Access Strategy

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● Digital Strategy ● Health and Well-Being Strategy ● Children and Young People Strategy

External Influences

13. There are a range of external influences which also feed into the capital planning process including shaping capital expenditure priorities and influencing the level of capital resources available to fund the programme.

14. London Plan and Mayor’s Transport Strategy (MTS) - the Mayor’s London Plan sets out the strategic direction for London including the allocation of housing targets (therefore establishing growth patterns) and infrastructure investment. The current London Plan, doubles housing growth expectations for the borough to 13,600 homes over the next decade and introduces ‘Opportunity Area’ status for much of the borough. This also includes jobs growth, particularly an increase in office provision in Kingston Town Centre. The London Plan and MTS note the importance of the investment in Crossrail 2 which has 10 stations in Kingston, although the scale of delay and cost over-runs associated with the opening of the Elizabeth Line will significantly hinder this investment. Other infrastructure projects are set out in Kingston’s Direction of Travel, jointly published by the Mayor and RBK in 2016.

15. Local Economy - the level of resources available to fund the capital programme are affected by the local economy. Payments through the Community Infrastructure Levy (CIL) and S106 are directly linked to development together with values achieved for capital receipts from the sale of council owned vacant land or buildings. The level of right to buy receipts are affected by the local housing market and government housing policy.

16. Austerity - The Council’s capital investment ambitions are made against a backdrop of austerity and significant central government funding reductions. It is therefore vital that the Council’s capital strategy ensures that assets are utilised in the most appropriate way to deliver corporate objectives, meet statutory requirements and sustain core infrastructure but also support the delivery of savings or income generation in the revenue budget.

17. Shared Services - the Council has a number of established partnerships in place for the delivery of shared services with other local authorities. The most relevant in terms of capital expenditure programmes include the shared IT & environmental services with the London Borough of Sutton and the South London Waste Partnership (SLWP) which is a partnership of four London boroughs (Kingston, Sutton, Merton & Croydon) for the delivery of improved and cost effective waste management services.

18. Commercial Activity and Further Ambition - In 2017 the Council purchased two commercial properties following opportunities identified within the local Kingston market. These properties are currently held on the Council’s balance sheet as investment properties. The income from these properties covers the capital financing costs related to the financing of the acquisitions and has released savings into the Council’s revenue budgets which has

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contributed to the income and savings targets that the Council has needed to and continues to need to achieve. 19. Since then the Council has taken a decision to continue with plans for acquiring commercial property but to do so through a wholly owned commercial property company. This follows the consideration of the business case behind the proposals being considered at the Finance & Partnerships Committee in June 2019 and the Business Plan for the company being agreed at Council in July 2019. The business case assumes that the Council will provide both loan and equity financing into the company and that this will be funded by external borrowing by the Council.

20. The Council is currently in the process of setting up an appropriate wholly owned company structure. This includes a holding company and the commercial property company. The purpose of the commercial property company is to invest in a range of commercial property to generate a return. A total initial investment of £68m has been agreed with the Council providing loan financing and equity financing into the company for these purchases. The provision of financing into the company is built into the four year capital programme.

Capital Budget Setting / Prioritisation (see Appendix A)

21. Each year the Council reviews its capital expenditure plans and priorities for the next four years in order to agree a capital programme. This is undertaken alongside the revenue budgeting process in order that the impact of both is considered.

22. As part of the annual capital budget setting process services are required to complete a capital bid request form with details of the capital expenditure that they require. These forms are required to be completed for all new schemes, for existing schemes which are uncommitted (i.e. have not incurred expenditure and are not contractually committed) and for all rolling programmes of expenditure including growth to existing rolling programmes.

23. Each year a cross service officer review group is brought together to review, challenge and score bids submitted by Directorates for capital expenditure over the next four year period. The criteria against which the bids are scored are as follows:

● The scheme delivers revenue savings ● The scheme is driven by transformation; workforce and smart place ● The scheme is required for essential works or maintenance ● The scheme has the ability to lever in match funding to partially fund the scheme ● The scheme when delivered meets community needs

24. Officers submitting the bid are asked to state which of the five criteria the capital expenditure satisfies. Each bid can satisfy more than one criteria. Each criteria is weighted by the review group and bids are scored 1-5 against the criteria that applies to them. An overall score for each scheme is achieved by adding up the individual weighted scores against each individual criteria. Schemes are then ranked according to their total scores. These scores are then used to draw up a prioritised list for consideration by the Corporate Resources

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Panel (CRP) which is a group of senior officers including the Director of Corporate & Commercial and the Director of Growth who provide oversight of the capital programme. If there are further questions on any particular schemes, the review group can undertake a more in depth review session with key officers.

25. Separate member review and challenge of capital bids, capital resources and prioritisation was then provided through a specific Capital Star Chamber session.

26. This prioritisation process supports the Council in making decisions about which schemes to progress, especially when capital resources are limited.

Capital Resources

27. Capital resources available to fund the capital programme are reviewed annually as part of the wider capital programme review process. This includes a review of projected capital receipts from the disposal of council assets, available resources from government or third party grants, S106, Community Infrastructure Levy (CIL), right to buy receipts and sums set aside in reserves.

28. Property assumptions feed into this review in terms of asset use and the planned disposal of surplus assets. In terms of the Housing Revenue Account (HRA) assumptions within the Business Plan are reviewed such as sums available in the Major Repairs Reserve (MRR), numbers of RTB sales which affects the levels of resources available through the general Right To Buy (RTB) sum, allowable debt, and net RTB receipts.

Revenue Implications from Capital Schemes

29. Services are required to identify and record any potential revenue implications from capital schemes as part of the capital bidding process. These are then taken into consideration during the scheme prioritisation process and reflected in the medium term revenue budgets were necessary.

Capacity to Deliver Schemes

30. The capacity to deliver capital schemes is initially assessed through the capital programme review bidding process. Services are required to highlight key risks for the scheme and capacity would be part of this assessment. The finance team also have close contact with project managers delivering schemes. Any capacity issues are highlighted and followed up through the in year capital monitoring processes to find appropriate solutions.

Governance

31. The Finance and Partnerships Committee have oversight of the capital programme with the capital budget, in year monitoring and the outturn position all being considered during the year. The Finance and Partnerships Committee review and approve the capital programme

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before it is finally approved by Full Council. The Strategic Housing and Planning Committee consider the HRA Business Plan.

32. Council approval of the programme gives an allocation to budget managers in the capital programme. Separate approval is required for any significant changes to the profiling or nature of that spend in year in line with financial rules set out in the Council’s financial regulations.

33. Once approved the programme is managed by officers and reported to Finance and Partnerships Committee on a quarterly basis. Key issues are any reported under or over spends projected for schemes together with changes in the profiling of spending over the four year budget period. For projects that are forecast to overspend or for new projects within a financial year officers are required to present a paper to the Corporate Resources Panel (CRP) prior to seeking committee approval. In all cases the impact of scheme outcomes including timings are assessed and in the case of projected scheme overspends options to reduce the additional expenditure are considered including re-engineering or scaling back projects or trying to secure third party external funding to reduce the pressure on scheme budgets.

34. In all events the Council will continually look to ensure that quarterly projections are as accurate as possible and a rigorous process is applied to ensure that budget managers are made accountable and the appropriate approvals are obtained (as referenced to the financial regulations) for any changes to the Council agreed four year programme.

Strategic Property Management

35. Work is underway to develop a new approach to the way in which the Council invests in, and manages its assets. This includes a new AD Property, dedicated to the delivery of a modern and high performing corporate landlord function.

36. Key priorities for the property service during 2020/21 are:

● Invest in new commercial property and invest in new property projects, to create additional income to support the regeneration of local areas. The structure for this is being incorporated and property expert directors being recruited. ● Utilise the Council’s assets to deliver maximum economic and social returns for the Borough ● Review the social value/community element of the property estate to create a sustainable approach and maximise social value outcomes

Commercial Property Acquisitions

37. In June 2017 Growth Committee took the decision to acquire the freehold interest of Kings Place and Conquest House, it was added to the capital programme at Treasury Committee later that month. In September 2017 Growth Committee approved the acquisition of the

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leasehold interest of Kingsmill Business Park and it was added to the capital programme at Treasury Committee in October 2017. Together these properties achieve a gross annual income of £3.4m which is approx 2.5% of the council’s gross revenue budget.

38. As part of the 2018/19 budget setting process Council approved a capital budget for investment in commercial property of £68m. As explained in para 19 the Council has since taken the decision to set up a wholly owned investment company for the investment of commercial property. The Council will provide loan financing into the company on commercial terms including a state aid compliant interest rate and equity investment. The capital provision within the capital programme for the direct purchase of commercial properties will be instead used for the provision of capital loan and equity financing into the company.

39. The business case assumes that the council will use external borrowing through the Public Works Loan Board (PWLB) to provide the loan financing into the company. The difference between the interest rate at which the Council can access funds from the PWLB and the commercial interest rate into the company will produce a margin for the Council. This margin will be partially used to finance the equity investment into the company but also used to support the borrowing costs of capital expenditure programmes and projects across the borough as part of the Council’s capital programme.

Possible risks for the Council

40. Property investment has its own specific risks, the principal ones being property risks, financial risks and corporate risks. The arrangements set out in this policy are designed to help minimise these risks.

a) Property Risks – the property market is cyclical and is affected by the wider economic environment. There are also property risks that are specific to a building due to its location, condition and quality of tenants. Mitigation proposed in this policy for these risks include diversifying the portfolio (portfolio mix) to include investments that perform differently over the economic cycle. The evaluation criteria, diversity of location, due diligence tests, approval processes and accountability for implementation are also proposed to address property specific risks.

b) Financial Risks – the primary financial risks are borrowing levels, interest rates movement, ongoing ability to service debts, the general investment market conditions and its effect on rental income. For existing on balance sheet commercial property investments a special reserve has been created and a funding strategy that allocates debt and all associated costs to these commercial property investments so that the net revenue benefits to the Council are transparent and can be benchmarked. For the loans into the commercial entities including the commercial property company there is a risk of payment default. This is mitigated through regular monitoring of the financial position of entities where it is providing loan financing, assessing their ability to repay any outstanding debt. Annual reporting is also required as part of the loan agreements that are in place. This should provide an early warning of any potential issues and the Council

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then has the ability (through the loan arrangements) to work with the entity to find solutions to prevent a loan default.

c) Corporate Risks – effective operational delivery requires staff with the requisite expertise, effective arrangements for asset management and the recognition of the reputational risks that can come from inappropriate tenants, and from legal and environmental breaches.

Four Year Capital Programme - 2020/21 to 2023/24

33. The capital programme sets out the Council’s plans for the acquisition and improvement of assets over the next four years. This includes expenditure on general fund and Housing Revenue Account (HRA) schemes totalling £190.4m as shown in the table below.

2020/21 2021/22 2022/23 2023/24 Total £’000 £’000 £’000 £’000 £’000

General Fund 90,291 34,649 6,189 4,543 135,669

HRA 18,644 24,739 8,827 2,518 54,728

Total 108,935 59,388 15,016 7,061 190,397

General Fund 34. The General Fund existing programme as at month 8 from 2020/21 to 2022/23 consists of £123.6m already approved for ongoing projects as set out in the table below.

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2020/21 2021/22 2022/23 Total Existing Capital Programme £000s £000s £000s £000 Schools Building Programme 8,873 0 0 8,873 General Fund Property Programme 13,951 975 450 15,376 Property Acquisition Programme 41,000 27,000 0 68,000 Housing General Fund Programme 14,326 990 990 16,306 ICT Programme 2,311 1,570 1,500 5,381 Regeneration Programme 455 120 0 575 Environment Programme 230 50 50 330 Highways Programme 4,427 2,190 2,190 8,807 Total Current Programme 85,573 32,895 5,180 123,648

35. It is proposed to add £12m over 2020/21 to 2023/24 to the General Fund capital programme for new projects or additions to existing projects or rolling programmes. This will be supplemented by any slippage approved as part of the closing of the 2019/20 accounts. In addition new projects may be added during the year. The new programme and total combined programme is summarised below with further detail on additions to the programme in Enclosure 1.

Additions to Capital 2020/21 2021/22 2022/23 2023/24 Total Programme £000s £000s £000s £000s £000 General Fund Property 2,060 875 440 400 3,775 Programme Housing General Fund 0 0 0 150 150 Programme ICT Programme 0 0 0 1,500 1,500

Regeneration Programme 638 529 216 153 1,536 Environment Programme 190 350 350 150 1,040 Highways Programme 1,830 0 0 2,190 4,020 Total Additions 4,718 1,754 1,006 4,543 12,021

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Total Capital Programme

2020/21 2021/22 2022/23 2023/24 Total Total Capital Programme £000s £000s £000s £000s £000 Schools Building 8,873 0 0 0 8,873 Programme General Fund Property 16,011 1,850 890 400 19,151 Programme Property Acquisition 41,000 27,000 0 0 68,000 Programme Housing General Fund 14,326 990 990 150 16,456 Programme ICT Programme 2,311 1,570 1,500 1,500 6,881 Regeneration Programme 1,093 649 216 153 2,111 Environment Programme 420 400 400 150 1,370 Highways Programme 6,257 2,190 2,190 2,190 12,827 Total New Programme 90,291 34,649 6,186 4,543 135,669

36. The general fund capital programme shown above is provided in detail in Enclosure 1 to this annex.

37. All existing capital schemes that are underway or contractually committed and are due to continue into 2020/21 to 2023/24 were excluded from the capital programme bidding process and formed a first call on RBK available resources. These schemes are included in the proposed capital programme and are included in the tables above.

38. Every Council is required to prepare a schedule of Prudential Indicators in respect of the capital budget to demonstrate that capital investment is prudent, sustainable and affordable. These are being reported to Finance and Partnerships Committee on 13 February 2020 as part of a separate Treasury Strategy Annex (Annex 12) to the main budget report.

Capital Programme Spend by Corporate Priority Outcome

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39. The capital programme can be profiled against delivery of each of the Corporate Plan Priority Outcomes. The table below sets out the capital programme spend by year against each Priority:

Total Total Total Total 20/21 21/22 22/23 23/24 TOTAL Priority £000s £000s £000s £000s £000 1. A sustainable approach to new homes, development and infrastructure which benefits our communities, in a well maintained borough. 61,902 30,744 2,796 2,453 97,894 2. A safe borough which celebrates our diverse and vibrant communities, with local priorities shaped through participatory democracy. 3,052 845 460 440 4,797 3. Healthy, independent and resilient residents with effective support to those who need it most. 23,027 1,490 1,430 150 26,097 4. Kingston council will be financially and environmentally sustainable, working transparently and collectively in the best interests of Kingston’s residents, partners and businesses 2,311 1,570 1,500 1,500 6,881 Grand Total 90,292 34,649 6,186 4,543 135,669

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Capital Programme by Capital Programme Area

40. The capital programme can also be profiled into the different capital programme areas as is set out on the following pages:

Schools

General Fund Property

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Property Acquisition

Housing General Fund

ICT

Regeneration

Highways & Environment

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Rolling Programmes

57. Rolling programmes of expenditure ensure that assets are replaced or maintained in an appropriate and timely fashion. This represents a significant underlying, ongoing capital expenditure pressure for the council to continue business as usual. Each year the cost of rolling programmes is approximately £2.4m.

58. As part of the annual capital programme review process services are required to submit capital bids for all rolling programmes including the continuation of programmes into the fourth year of the budget (currently 2023/24) and any growth over and above normal levels of provision over the four year budgeting period. These programmes are then assessed against the criteria set out in paragraph 5 along with any new capital schemes to ascertain whether these schemes are targeted at key priority areas and whether planned expenditure is at appropriate levels.

59. The general fund property programme has a rolling programme of £0.4m per annum to carry out improvements and major repairs across the Council’s property portfolio.

60. The ICT programme has two rolling programmes of expenditure; the technology investment fund at £1.2m per year and the ICT capital maintenance programme at £0.3m per year. These programmes enable the Council to support service transformation and efficiency and replace and upgrade key equipment as required. It is proposed to roll these programmes forward one more year, adding £1.5m to the programme in 2023/24.

61. The highways programme has two rolling programmes; street lighting renewal at £0.44m per year and highways maintenance at £1.75m per year.

62. The Housing general fund programme has a rolling programme of £0.15m for discretionary grants per annum.

One-off projects

63. Additions to the programme are included for specific projects where there is an essential need for work, they support the achievement of the Council’s corporate priorities or they are achieving revenue savings or generating income within the revenue budget. Details of the entire capital programme are set out in Enclosure 1.

64. Projects of a significant value (usually over approximately £0.5m) should all be subject to committee approval in their own right prior to implementation and their inclusion in the programme represents in principle approval of the funding only.

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General Fund Capital Resources

65. A summary of the proposed funding of the general fund capital programme 2020/21 to 2023/24 is shown in the table below.

2020/21 2021/22 2022/23 2023/24 Total Capital Financing £000s £000s £000s £000s £000 Borrowing 9,890 3,610 2,527 1,787 17,815 Invest to save 48,599 27,438 60 0 76,097

External Funding: Disabled Facilities Grant 840 840 840 0 2,520 Education Funding Agency - Basic Needs 5,000 0 0 0 5,000 Education Funding Agency - Devolved Grant 1,023 0 0 0 1,023 Education Funding Agency - School Maintenance 350 0 0 0 350 Go Ultra Low City Scheme Grant 102 0 0 0 102 Greater London Authority 13,336 0 0 0 13,336 Transport For London - Local Implementation Plan 1,310 0 0 0 1,310 Section 106 270 5 3 0 277 Specific Capital Receipt 420 0 0 0 420 Community Infrastructure Levy 30 0 0 0 30 Reserves 65 0 0 0 65 Land Appropriation 540 540 540 540 2,160 Capital Receipts 8,516 2,216 2,216 2,216 15,164 Total 90,291 34,649 6,186 4,543 135,669

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66. Funding can take place from a number of resources including borrowing, capital receipts, grants, reserves, external contributions and contributions from the revenue budget. Such resources available over the next four years to fund the programme have been projected. Beyond this period these are difficult to forecast.

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67. The total RBK capital resources available is £17.4m, made up of capital receipts, land appropriation and unapplied CIL.

68. Capital Receipts - The potential capital receipts available to support the programme have been reviewed. The review has looked at whether planned receipts are still available, reviewed their values and identified any new receipts which could provide additional resources.

69. Land Appropriation - This refers to transfers of debt between the general fund and the HRA for the provision of land for new house building being undertaken within the HRA as part of the small sites scheme.

70. Planned prudential borrowing totalling £93.9m is being used to support the general fund capital programme expenditure plans over the period 2020/21 to 2023/24. Sufficient provision has been made in the revenue budget over the medium term financial plan period for the annual cost of this borrowing. In addition borrowing for invest to save schemes over the four year period of £76.1m has also been included. Expenditure on many of these schemes is subject to a financial viable business case being developed whereby sufficient revenue income or savings are generated to cover the cost of the planned borrowing to fund the scheme.

71. Minimum Revenue Provision - Where capital expenditure has been funded through the use of borrowing, the Council is required to set aside an amount from revenue each year to provide for the eventual repayment of this debt. The Council is required to provide an annual policy statement on how the new methodology has been implemented. This is set out in Annex 2 of the Treasury Management Strategy (Enclosure 2). There is no requirement for the HRA to make a minimum revenue provision but there is a requirement for a charge for depreciation to be made.

72. Government Grants - grant funding received towards the capital programme includes Transport for London (TFL) funding of £1.3m, Disabled Facilities Grant (DFG) of £2.5m, Education Funding Agency Basic Need grant of £5m, Devolved Formula Capital of £1m and School Maintenance of £0.4m, and Go Ultra Low City scheme grant of £0.1m. In each case the Council must apply these resources according to any specific grant conditions attached to the funding. A total of £9m is being applied across the 2020/24 programme.

A summary of different funding sources is provided below:

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Education

73. The Basic need grant allocation for 2020/21 has been confirmed as zero, future allocations are due to be announced in Spring 2020 however the Council does not expect to receive any further basic need funding in the foreseeable future. The government therefore expects that any new school places are delivered through free schools or expansions funded by the ESFA, although it remains a Council responsibility.

74. Unallocated Basic Need grant from 2019/20 totalling £4.1m will be reprofiled into 2020/21 to support required new capital expenditure on schools. Outline plans at the moment include 10% of the costs of the new secondary school at Kingsmeadow, and the facilitation of additional reception year and year 7 bulge classes.

75. Works to maintain school buildings is funded from the capital maintenance grant received annually from government, works are funded on a priority basis. We have anticipated grant of £0.7m in schools maintenance grant however this will not be confirmed by the ESFA until Spring 2020.

76. A schools grant allocation for provisions for pupils with Special Educational Needs and Disabilities (SEND) was announced in 2017/18 and is providing £0.563m per year across 2018/19 to 2020/21. Additional grant of £1.2m was awarded in May and December 2018 and is reflected in the existing capital programme allocation in 2019/20. The grant is being spent on providing additional SEND places. This includes creating new provisions and extending existing provisions at Local Authority schools and academies. The majority of spend has focused on Key Stages 1 and 2, however Key Stages 3 and 4 has seen significant investment also. £2.3m of the total grant is due to be spent by the end of 2019/20 with £0.563m remaining for 2020/21.

Transport for London 77. In December 2018 TfL published their Business Plan for the period 2019/20 to 2023/24 setting out how TfL will continue to invest in vital transport improvements in London and deliver the Mayor’s Transport Strategy, against a backdrop of some significant financial challenges.

78. Transport for London (TfL) grant funding is only confirmed annually and based on specific projects. Once allocations are announced and the split between capital and revenue projects detailed the corresponding budgets will be added to the capital programme. TfL have confirmed the boroughs allocation for the 2020/21 financial year. Royal Borough of Kingston

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upon Thames is £1.310m of which £1.2m is for corridors and neighbourhoods and £0.1m is allocated for the Local Transport Fund.

79. Further TfL funding for the Go Cycle programme is expected from TFL but yet to be confirmed. Once confirmed this will be brought into the programme in-year.

Disabled Facilities Grant 80. Disabled Facilities Grants are funded by the Ministry of Housing, Communities & Local Government to make adaptations to disabled residents homes. The Council is awaiting notification of the 2020/21 grant amount, a similar allocation to 19/20 has been assumed within the budgets.

GLA Loan 81. The GLA have made a £26m interest free loan to RBK to support the cost of the buyback of leasehold properties as part of the Cambridge Road Estate Regeneration programme. The loan will be paid back by the Joint Venture vehicle for delivering the project.

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Housing Revenue Account Business Plan

82. The Council’s 30 year HRA Business Plan sets out plans for maintaining and investing in, its housing stock of 4,534 rented and 1,507 leaseholder properties as at Period 8. Each year the 30 year housing revenue account business plan is reviewed to take account of any changes to factors including reflecting changes to housing policy, economic assumptions such as building cost inflation and interest rates and changes to local conditions such as stock condition and levels of RTB sales.

83. The HRA Programme of capital expenditure over the next four years 2020/21 to 2023/24 is £54.7m. Overall the HRA capital programme is set to improve existing HRA assets, increase supply with the support from the building homes for Londoners GLA grant funding and to address a programme of planned works to estates and other demand driven projects. Further detail is shown in Enclosure 5. This is to be funded by a range of different sources. £21.2m Major Repairs Reserve, £14.5m of borrowing, £3.1m RTB receipts, £9.5m GLA Homes for Londoners grant, £3.5m allowable debt element from RTB receipts and £3m leaseholder contributions.

84. The existing HRA capital programme reflects the position as of month 8 for 2019/20-2022/23 and is detailed in the table below:

85. The proposed additions to the HRA capital programme are summarised in Table below:

23 93 ANNEX 11

86. The total proposed HRA capital programme is summarised in Table below:

87. The funding for this programme of works is shown in the table below: HRA Capital Programme Funding 2020-21 to 2023-24

24 94 ANNEX 11

Major Works to Council Housing Stock

88. Following the end of the Better Homes grant funding, ongoing works to Council Properties are being funded through the Major Repairs Reserve (MRR) funding of £21.2m and allowable debt sums retained from Right to Buy receipts of £3.5m. In addition leaseholder contributions of £3m are expected to cover the cost of the works programme to leaseholder units. The Major Repairs Reserve is increased each year by the level of depreciation charged on existing assets. An outline housing capital programme of stock repairs and improvements for 2020/21 to 2023/24 is shown above for the first four years on the basis of the Housing Revenue Account Business Plan. The full 30 year view as per the business plan is shown in Annex 10 Enclosure 5.

New Build Programme 89. The Council is planning to undertake a programme of new build development on small sites across the borough. This work will be carried out within the HRA so in some cases will involve a land appropriation of general fund land across to the HRA which has been taken into consideration in the general fund and HRA capital financing requirements (CFRs) referred to the Treasury Strategy in Annex 12. The new build programme is to be funded by a mixture of GLA building homes for Londoners grant and HRA borrowing.

Right to Buy (RTB) Receipts 90. Under the new RTB arrangements introduced for 2012/13 the Council signed up to an agreement with Government for the use of net RTB receipts for the provision of new housing. It is estimated that a further £3.052m of net RTB receipts will have been retained through that agreement by the end of 2023/24. This can be used as direct provision to social landlords as a contribution of up to 30% towards the cost of the provision of affordable units or as a contribution to council affordable unit delivery or acquisition.

Cambridge Road Estate Regeneration 91. In March 2019 the Finance and Partnerships Committee took the decision to enter into a 50:50 Joint Venture with Countryside Properties (UK) to deliver the regeneration of the Cambridge Road Estate. This decision is subject to the outcome of a voluntary ballot which is due to take place in Spring 2020.

Capital Risk Management 92. There are a number of risks surrounding the capital programme, which inevitably increase at a time of economic uncertainty. These risks are reviewed and managed as part of the capital programme review process, in year capital monitoring and specific project and risk management arrangements for larger schemes.

25 95 ANNEX 11

Cost Overspends / Project Timescale Slippage 93. In the initial stages of development, major capital projects will have significant uncertainties. For example these may relate to the planning process, the views / interest of stakeholders who must be consulted, ground conditions, or the cost of refurbishing or demolishing existing buildings (e.g. the cost of asbestos removal). As such all major projects contain a defined contingency provision. The level of this contingency is set with reference to the type of project, it’s complexity and risk items identified on the risk register. Typically new build projects are allocated a lower contingency of an average 2.5 to 5% and refurbishment or alternation projects an average of 3.5 to 7% depending on contract value.

94. Once a scheme begins spend and timescales for completion are monitored as part of the monthly capital programme monitoring processes. Capital Receipts 95. The Council has continued to ensure regular review in terms of its assumptions for the inclusion of new capital receipts into the programme, particularly given the difficulty around some of the sites. Each year planned capital receipts are reviewed by the property and finance teams in terms of values, timescales and any known risk factors that need to be taken into account. Borrowing Costs 96. A provision for the revenue costs of future prudential borrowing within the capital programme has been made within the revenue budget. This allocation has been derived using estimates for interest rates over the coming four year period. There is a risk that interest rates rise above these estimates affecting the cost of this borrowing. This risk will be managed through the Council’s Treasury Management Strategy ensuring that the cost of borrowing to the Council is minimised.

Cost Price Inflation 97. There is increased uncertainty about the cost of projects due to potential changes in the cost of materials and labour arising from changes in the value of the pound relative to other currencies.

School Place Expansion 98. The level of basic need funding available for future school expansions is limited. Government has progressively reduced the grant available which restricts the council’s ability to deliver any required expansion.

Reduction in Value of On Balance Sheet Commercial Property Investment 99. The market value of properties is ascertained annually as part of the production of the statement of accounts. Commercial Property investments are intended to be holdings for the medium to longer term. Risk management mitigation includes active management such as the review of the performance of individual properties to feed into longer term disposal or refurbishment or reprovision decisions. The Council has an earmarked reserve in place to assist with any investment needed in commercial property properties. Despite an MRP exemption for on balance sheet commercial investment there is also the ability within revenue budgets to start MRP provision.

26 96 ANNEX 11

Non Repayment of Loans by Third Parties 100. The Council undertakes regular monitoring of the financial position of entities where it is providing loan financing, assessing their ability to repay any outstanding debt. Annual reporting is also required as part of the loan agreements that are in place. This should provide an early warning of any potential issues and the Council then has the ability (through the loan arrangements) to work with the entity to find solutions to prevent a loan default.

Strategic Ambition/ Longer Term Strategy/Look Ahead

101. Kingston will see significant growth over the next 15+ years. Large parts of the borough have been designated as an Opportunity Area in the Mayor of London’s emerging London Plan. Opportunity Areas are areas across London which are expected to see significant growth and change, often associated with major transport infrastructure upgrades.

The Council is currently reviewing opportunities across a number of large sites across the borough. Such opportunities include delivering service improvements in leisure, providing new and affordable homes and providing new commercial workspace. Capital budget provision has been included to carry out work to develop these proposals further including testing the viability of options being considered on each site.

27 97 ANNEX 11

Appendix A

Officers submitting the bid are asked to state which of the five criteria the capital expenditure satisfies. Each bid can satisfy more than one criteria. Each criteria is weighted by the review group and bids are scored 1-5 against the criteria that applies to them. An overall score for each scheme is achieved by adding up the individual weighted scores against each individual criteria. Schemes are then ranked according to their total scores. These scores are then used to draw up a prioritised list for consideration by the Corporate Resources Panel (CRP) which is a group of senior officers including the Chief Executive, Director of Corporate & Commercial and Director of Growth who provide oversight of the capital programme. If there are further

28 98 ANNEX 11 questions on any particular schemes, the review group can undertake a more in depth review session with key officers. Separate member review and challenge of capital bids, capital resources and prioritisation was then provided through a specific Capital Star Chamber session.

This prioritisation process supports the Council in making decisions about which schemes to progress, especially when capital resources are limited.

29 99 Enclosure 1 to Annex 11

Capital Programme 2020/21 to 2023/24 2020/21 2021/22 2022/23 2023/24 TOTAL Ref Strategic Committee PROJECT £000s £000s £000s £000s £000 FUNDING COMMENTS SCHOOLS PROGRAMME Children's & Adults Grant/RBK 1 Care & Education Burlington School Expansion 7,500 0 0 0 7,500 resources School expansion project to increase pupil places Children's & Adults 2 Care & Education Coombe Girls SEND Expansion 460 0 0 0 460 RBK resources School expansion project to increase pupil places SCHOOL EXPANSION PROJECTS 7,960 0 0 0 7,960 Children's & Adults 3 Care & Education Lovelace re-roof 350 0 0 0 350 Grant Existing project funded from grant SCHOOLS CAPITAL MAINTENANCE PROJECTS 350 0 0 0 350 Children's & Adults 4 Care & Education SEND provision 2018-2020 563 0 0 0 563 Grant Existing project funded from grant SCHOOLS OTHER CAPITAL PROJECTS 563 0 0 0 563 SCHOOLS PROGRAMME TOTAL 8,873 0 0 0 8,873

GENERAL FUND PROPERTY PROGRAMME Finance and 5 Partnerships CCTV Estate Upgrade 430 0 0 0 430 RBK resources Existing project in 2019/20 - 2022/23 capital programme Children's & Adults 6 Care & Education Children's Home for Looked After Children 2,491 0 0 0 2,491 RBK resources Existing project in 2019/20 - 2022/23 capital programme Children's & Adults 7 Care & Education Dementia Nursing Home 6,859 0 0 0 6,859 Invest to save Existing project in 2019/20 - 2022/23 capital programme Community 8 Engagement Kingston Cemetery Mortuary Chapels 750 500 0 0 1,250 RBK resources Existing project in 2019/20 - 2022/23 capital programme Finance and 9 Partnerships Property Investment Programme 41,000 27,000 0 0 68,000 Invest to save Existing project in 2019/20 - 2022/23 capital programme Children's & Adults 10 Care & Education Adult Social Care Accommodation 2,500 0 0 0 2,500 RBK resources Existing project in 2019/20 - 2022/23 capital programme Community 11 Engagement Adult Education and AfC Decant 420 0 0 0 420 RBK resources Existing project in 2019/20 - 2022/23 capital programme Community 12 Engagement Registration Service development 70 0 0 0 70 RBK resources New project for improvement works and digitise services Community 13 Engagement Chessington Sports Centre improvements 294 0 0 0 294 RBK resources New project for works to maintain the sports centre Community 14 Engagement Chessington Sports Centre Gym 30 0 0 0 30 RBK resources New project to create a community space for residents and groups to use Community 15 Engagement Old Malden Centre roof replacement 180 0 0 0 180 RBK resources New project to carry out roof replacement Community 16 Engagement Kingston Museum internal works 76 0 0 0 76 RBK resources New project for access works Community 17 Engagement Kingston Museum passenger lift 52 0 0 0 52 RBK resources New project to refurbish the passenger lift Children's & Adults 18 Care & Education Moor Lane Flooring 45 0 0 0 45 RBK resources New project to provide new flooring in the centre Environment & 19 Sustainable Transport Cattle Market Car Park Sprinkler System 375 375 0 0 750 RBK resources New project to replace the sprinkler system in the car park Children's & Adults 20 Care & Education Fircroft Underpinning works 500 500 440 0 1,440 RBK resources New projet to provide underpinning to building Community 21 Engagement Kingston Crematorium Generator 70 0 0 0 70 Invest to save New project to install a generator Community 22 Engagement Crematorium Modernisation 140 0 0 0 140 RBK resources New project to digitise service and increase crematorium capacity GENERAL FUND PROPERTY PROJECTS 56,282 28,375 440 0 85,097

100 Enclosure 1 to Annex 11

Capital Programme 2020/21 to 2023/24 2020/21 2021/22 2022/23 2023/24 TOTAL Ref Strategic Committee PROJECT £000s £000s £000s £000s £000 FUNDING COMMENTS Finance and 23 Partnerships General Fund Property Responsive Programme - Unallocated 284 400 400 400 1,484 RBK resources Addition to existing rolling programmes of £0.4m per annum to 2023/24 Finance and 24 Partnerships Asbestos removal 40 30 20 0 90 RBK resources Existing project in 2019/20 - 2022/23 capital programme Environment & 25 Sustainable Transport Bittoms Car Park improvements 45 45 30 0 120 RBK resources Existing project in 2019/20 - 2022/23 capital programme Community 26 Engagement Churchfields recreation ground approach roads 60 0 0 0 60 RBK resources Existing project in 2019/20 - 2022/23 capital programme Environment & 27 Sustainable Transport Car Park Upgrade Works 30 0 0 0 30 RBK resources Existing project in 2019/20 - 2022/23 capital programme Finance and 28 Partnerships Guildhall Operational Upgrade Works 8 0 0 0 8 RBK resources Existing project in 2019/20 - 2022/23 capital programme Community 29 Engagement Library Services Upgrade 30 0 0 0 30 RBK resources Existing project in 2019/20 - 2022/23 capital programme Community 30 Engagement Kingston Museum external roof works 232 0 0 0 232 RBK resources New project to carry out roof works GENERAL FUND PROPERTY RESPONSIVE PROJECTS 729 475 450 400 2,054 GENERAL FUND PROPERTY PROJECTS TOTAL 57,011 28,850 890 400 87,151

HOUSING GENERAL FUND PROGRAMME Children's & Adults 31 Care & Education DISABLED FACILITIES GRANTS 840 840 840 0 2,520 Grant Budget represents best estimation of grant allocation Strategic Housing & 32 Planning Housing General Fund - Discretionary Grants Unallocated 150 150 150 150 600 RBK resources Addition to existing rolling programmes of £0.15m per annum to 2023/24 Strategic Housing & 33 Planning Cambridge Rd Acquisition 13,336 0 0 0 13,336 RBK resources Existing project in 2019/20 - 2022/23 capital programme HOUSING GENERAL FUND 14,326 990 990 150 16,456 HOUSING GENERAL FUND PROGRAMME TOTAL 14,326 990 990 150 16,456

ICT PROGRAMME Community 34 Engagement DEVICE REFRESH 70 70 0 0 140 RBK resources Existing project in 2019/20 - 2022/23 capital programme Community 35 Engagement Data Centre Replacement 665 0 0 0 665 RBK resources Existing project in 2019/20 - 2022/23 capital programme ICT PROGRAMME - ICT MANAGED PROJECTS 735 70 0 0 805 Community 36 Engagement Highways and Transport ICT Framework 76 0 0 0 76 RBK resources Existing project in 2019/20 - 2022/23 capital programme Community 37 Engagement CRM Business System 36 0 0 0 36 RBK resources Existing project in 2019/20 - 2022/23 capital programme ICT PROGRAMME - OVERSIGHT PROJECTS 112 0 0 0 112 Community 38 Engagement Technology Investment Fund - Unallocated 1,464 1,500 1,500 1,500 5,964 RBK resources Addition to existing rolling programmes of £1.5m per annum to 2023/24 TECHNOLOGY INVESTMENT FUND 1,464 1,500 1,500 1,500 5,964 ICT PROGRAMME TOTAL 2,311 1,570 1,500 1,500 6,881

REGENERATION PROGRAMME Finance & 39 Partnerships Cocks Crescent Development Mobilisation 250 50 0 0 300 Invest to save Existing project in 2019/20 - 2022/23 capital programme Environment & 40 Sustainable Transport Borough Water Fountains 70 70 0 0 140 RBK resources Existing project in 2019/20 - 2022/23 capital programme Environment & RBK resources/ 41 Sustainable Transport Electric Vehicles Lamp Column Charging 135 0 0 0 135 Invest to save Existing project in 2019/20 - 2022/23 capital programme

101 Enclosure 1 to Annex 11

Capital Programme 2020/21 to 2023/24 2020/21 2021/22 2022/23 2023/24 TOTAL Ref Strategic Committee PROJECT £000s £000s £000s £000s £000 FUNDING COMMENTS Environment & 42 Sustainable Transport School Streets Enforcement Cameras 53 106 53 53 265 RBK resources New project to purchase camera for School Streets safety Environment & 43 Sustainable Transport Engine Idling Enforcement 8 5 3 0 15 RBK resources New project installing signage to raise awareness Environment & 44 Sustainable Transport Neighbourhood Rangers replacement vehicle 22 0 0 0 22 RBK resources New project to purchase a Neighbourhood rangers vehicle Environment & 45 Sustainable Transport Parking improvement signage programme 81 30 100 100 311 RBK resources New project for digital directional signage Finance & 46 Partnerships Large Sites Development Programme Mobilisation 325 388 60 0 773 RBK resources New project to develop a programme to meet service improvements Children's & Adults 47 Care & Education Shop Mobility and Access Hub 25 0 0 0 25 RBK resources New project to provide equipment to Shopmobility users PUBLIC REALM 968 649 216 153 1,986 Environment & 48 Sustainable Transport Go Cycle Complementary Measures (Infrastructure) 125 0 0 0 125 RBK resources New project for cycling storage and infrastructure MINI HOLLANDS 125 0 0 0 125 REGENERATION PROGRAMME TOTAL 1,093 649 216 153 2,111

ENVIRONMENT PROGRAMME Environment & 49 Sustainable Transport Waste Transfer Station Compliance works Phase 3 120 0 0 0 120 RBK resources Existing project in 2019/20 - 2022/23 capital programme Environment & 50 Sustainable Transport Community Parks Programme 250 350 350 150 1,100 RBK resources Phase 2 of improvement works Environment & 51 Sustainable Transport Garden waste containers 50 50 50 0 150 RBK resources Existing project in 2019/20 - 2022/23 capital programme PUBLIC REALM - ENVIRONMENT 420 400 400 150 1,370 ENVIRONMENT PROGRAMME TOTAL 420 400 400 150 1,370

HIGHWAYS PROGRAMME Environment & 52 Sustainable Transport Tfl Local Implementation Plan 1,310 0 0 0 1,310 Grant TfL grant allocation CORRIDORS & NEIGHBOURHOODS 1,310 0 0 0 1,310 Environment & 53 Sustainable Transport Street Lighting Column Replacement Programme 440 440 440 440 1,760 RBK resources Addition to existing rolling programmes of £0.44m per annum to 2023/24 Environment & 54 Sustainable Transport LED street lighting 972 0 0 0 972 RBK resources Existing project in 2019/20 - 2022/23 capital programme Environment & 55 Sustainable Transport Horse Fair street lighting replacement 350 0 0 0 350 RBK resources Phase 2 to replace the existing tunnel lighting with LED lighting STREET LIGHTING 1,762 440 440 440 3,082 Environment & 56 Sustainable Transport Planned Maintenance for c/w f/w works 1,750 1,750 1,750 1,750 7,000 RBK resources Addition to existing rolling programmes of £1.75m per annum to 2023/24 Environment & 57 Sustainable Transport Hook Flood Alleviation Scheme 1,265 0 0 0 1,265 RBK resources Existing project in 2019/20 - 2022/23 capital programme Environment & 58 Sustainable Transport Fountain roundabout retaining wall 80 0 0 0 80 RBK resources New project to replace the retaining wall of the roundabout Environment & New flood alleviation scheme within New Malden to reduce surface water 59 Sustainable Transport New Malden North Flood Alleviation Scheme 90 0 0 0 90 RBK resources and reducing flooding of at risk residential homes PRINCIPAL ROAD MAINTENANCE 3,185 1,750 1,750 1,750 8,435 HIGHWAYS PROGRAMME TOTAL 6,257 2,190 2,190 2,190 12,827

Total New Bids 3,408 1,754 1,006 4,543 10,711

102 Enclosure 1 to Annex 11

Capital Programme 2020/21 to 2023/24 2020/21 2021/22 2022/23 2023/24 TOTAL Ref Strategic Committee PROJECT £000s £000s £000s £000s £000 FUNDING COMMENTS Total Existing Approved Programme 85,573 32,895 5,180 0 123,648

CAPITAL PROGRAMME TOTAL 90,291 34,649 6,186 4,543 135,669

103 ANNEX 12

TREASURY MANAGEMENT STRATEGY STATEMENT, MINIMUM REVENUE PROVISION POLICY STATEMENT AND ANNUAL INVESTMENT STRATEGY 2020/21

SUMMARY This annex addresses the requirements of the prudential and treasury management codes and sets out the treasury management strategy, borrowing and investment strategies and a policy statement on the minimum revenue provision required for the repayment of debt.

1. INTRODUCTION

1.1 Background 1.1.1 The Council is required to operate a balanced budget which broadly means that income raised during the year will meet planned expenditure. Part of the treasury management operation is to ensure that the cashflow for this is adequately planned, with cash being available when it is needed. Where surplus monies are available these are invested in counterparties or instruments commensurate with the Council’s low risk appetite, providing security and adequate liquidity initially before considering investment return.

1.1.2 The second main function of the treasury management service is the funding of the Council’s capital plans. These plans provide a guide to borrowing need, essentially the longer term cash flow planning, to ensure that the Council can meet its capital spending obligations. This management of longer term cash may involve arranging long or short term loans, or using longer term cash flow surpluses. On occasion, when it is prudent and economic, any debt previously drawn may be restructured to meet Council risk or cost objectives.

1.1.3 The contribution the treasury management function makes to the authority is critical, as the balance of debt and investment operations ensure liquidity or the ability to meet spending commitments as they fall due, either on day-to-day revenue or for larger capital projects. The treasury operations will see a balance of the interest costs of debt and the investment income arising from cash deposits affecting the available budget. Since cash balances generally result from reserves and balances, it is paramount to ensure adequate security of the sums invested, as a loss of principal will in effect result in a loss to the General Fund Balance.

1.1.4 Whilst any commercial initiatives or loans to third parties will impact on the treasury function, these activities are generally classed as non-treasury activities, (arising usually from capital expenditure),and are separate from the day to day treasury management activities.

1.1.5 CIPFA defines treasury management as: ‘The management of the organisation’s borrowing, investments and cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks’

1.1.6 Revised reporting is required from 2019/20 due to revisions of the Ministry of Housing, Communities and Local Government (MHCLG) Investment Guidance, the MHCLG Minimum Revenue Provision (MRP) Guidance, the CIPFA Prudential Code and the CIPFA Treasury Management Code. The primary reporting changes include the introduction of a capital strategy, to provide a longer-term focus to the capital plans, and greater reporting requirements

104 ANNEX 12

surrounding any commercial activity undertaken under the Localism Act 2011. The capital strategy is being reported separately (See Annex 11 to the Main Budget Report for 2020/21).

1.2 Reporting Requirements 1.2.1 The Council is required to receive and approve as a minimum, three reports each year, which incorporate a variety of policies, estimates and actuals. These reports are required to be adequately scrutinised by Members before being recommended to the Council. This role is undertaken by the Audit Governance and Standards Committee for the mid year and annual report and Finance and Partnership Committee for the strategy, which then reports to Full Council. The three reports are outlined in more detail below:

(1) Treasury Management Strategy and Prudential and Treasury Indicators (this report) covering: ● Capital plans (including prudential indicators); ● Minimum Revenue Provision Policy Statement (how residual capital expenditure is charged to revenue over time); ● Treasury Management Strategy (how the investments and borrowings are to be organised) including treasury indicators; and ● Investment Strategy (the parameters on how investments are to be managed).

(2) Mid Year Treasury Management Report –This report updates members on the progress of the capital and treasury management positions, amending prudential indicators as necessary and assesses whether the treasury strategy is meeting needs or whether any policies require revision.

(3) Annual Treasury Report – This provides details of a selection of actual prudential and treasury indicators and actual treasury operations after the year end compared to estimates within the strategy.

1.3 Treasury Management Strategy for 2020/21 1.3.1 The proposed strategy for 2020/21 covers the following:

Capital issues ● the capital expenditure plans and the associated prudential indicators; ● the minimum revenue provision (MRP) policy.

Treasury management issues ● the current treasury position; ● treasury indicators which limit the treasury risk and activities of the Council; ● prospects for interest rates; ● the borrowing strategy; ● policy on borrowing in advance of need; ● debt rescheduling; ● the investment strategy; and ● creditworthiness policy.

105 ANNEX 12

1.3.2 These elements cover the requirements of the Local Government Act 2003, the CIPFA Prudential Code, the MHCLG Minimum Revenue Provision Guidance, the CIPFA Treasury Management Code and MHCLG Investment Guidance.

1.4 Knowledge & Skills 1.4.1 The CIPFA Code requires the responsible officer to ensure that Members with responsibility for treasury management receive adequate training in treasury management. This especially applies to members responsible for scrutiny. Training is provided for all new members overseeing treasury management and other sessions can be arranged as required.

1.4.2 Officers responsible for treasury management are suitably trained to ensure that the appropriate level of skills and knowledge are available to the Council. Officers and members are also supported through the skills and knowledge provided by the Council’s external treasury management advisors, Link Asset Services, Treasury Solutions. However the Council also recognises that responsibility for treasury management decisions remains with itself and ensures that undue reliance is not placed upon its external service providers.

2. CAPITAL PRUDENTIAL INDICATORS FOR 2020/21 TO 2023/24 The prudential code requires the Council to have set a number of forward looking prudential indicators to both support and record local decision making with regard to capital expenditure and treasury management decisions. The full set of indicators is shown in Enclosure 1 to this report. Each is now discussed in turn.

2.1 Capital expenditure 2.1.1 The Council’s capital expenditure plans are the key driver of treasury management activity. The first prudential indicator is a summary of the Council’s capital expenditure plans as detailed in the capital strategy shown in Annex 11 to the main budget report.

2.2 The Council’s net financing need (Capital Financing Requirement) 2.2.1 The second prudential indicator is the Council’s Capital Financing Requirement (CFR). The CFR is the total historic outstanding capital expenditure which has not yet been financed from either revenue or capital resources. It is essentially a measure of the Council’s indebtedness and, hence, its underlying borrowing need. Any capital expenditure shown within the capital programme in Annex 11 to the budget report, which has not immediately been paid for through a revenue or capital resource, will increase the CFR. 2.2.2 The CFR does not increase indefinitely, as the minimum revenue provision is a statutory annual revenue charge which broadly reduces the indebtedness in line with each asset’s life, and thereby charges the economic consumption of capital assets as they are used.

106 ANNEX 12

2.2.3 Current CFR projections are as follows:

Capital Financing 2019/20 2020/21 2021/22 2022/23 2023/24 Requirement (CFR) Estimate Estimate Estimate Estimate Estimate

£000 £000 £000 £000 £000 General Fund 157,073 153,593 148,170 140,368 131,561 HRA 133,623 135,128 148,117 148,117 148,117 Commercial Activities / Non Financial Investments 70,664 125,000 152,000 152,000 152,000 Total CFR 361,360 413,721 448,287 440,485 431,678 Movement in CFR 19,949 52,361 34,566 (7,802) (8,807) Movement in CFR represented by Net financing need for the year 26,965 59,994 44,037 2,587 1,787 Less Minimum Revenue Provision, Voluntary Revenue Provision and other financing movements (7,016) (7,633) (9,471) (10,389) (10,594) Movement in CFR 19,949 52,361 34,566 (7,802) (8,807)

2.2.4 The tables above demonstrate the size and scope of commercial activity in relation to the Council’s overall financial position. For the Royal Borough of Kingston Upon Thames this commercial activity relates to commercial property investment and leaseholder property acquisitions for the Cambridge Road Estate Regeneration scheme. 2.2.5 In March 2019 the Finance and Partnerships Committee took the decision to enter into a 50:50 Joint Venture with Countryside Properties (UK) to deliver the regeneration of the Cambridge Road Estate. This decision is subject to the outcome of a voluntary ballot which is due to take place in Spring 2020. The estimated CFR currently includes planned capital expenditure on the continued buyback of leasehold interests on the CRE as part of the regeneration plans. 2.2.6 As plans for commercial property investment and the CRE joint venture progress the estimated CFRs and treasury strategy will be revised accordingly and reported and approved by Finance and Contracts Committee and Full Council if and where necessary.

2.3 Minimum Revenue Provision Policy Statement 2.3.1 Where capital expenditure has been funded through the use of borrowing, the Council is required to set aside an amount from revenue each year to provide for the eventual repayment of this debt. The Council is required to provide an annual policy statement on how the methodology has been implemented. This is set out in Enclosure 2. 2.3.2 There is no requirement for the HRA to make a minimum revenue provision but there is a requirement for a charge for depreciation to be made. The HRA business plan will determine how and when the Council can afford to repay the HRA self financing loans of £115.5m which mature between 2028 and 2062.

107 ANNEX 12

2.4 Core funds and expected investment balances 2.4.1 The application of resources either to finance capital expenditure or other budget decisions to support the revenue budget will have an ongoing impact on investments unless resources are supplemented each year from new sources (asset sales etc.). Estimates of year-end balances, for each resource and anticipated year-end cash flow balances are taken into account to establish the likely level of resources available for investment.

3. BORROWING

3.1 Current portfolio position 3.1.1 The capital expenditure plans set out in Section 2 provide details of the service activity of the Council. The treasury management function ensures that the Council’s cash is organised in accordance with the relevant professional codes, so that sufficient cash is available to meet this service activity and the Council’s capital strategy. This will involve both the organisation of the cash flow and, where capital plans require, the organisation of appropriate borrowing facilities. The strategy covers the relevant treasury and prudential indicators, the current and projected debt positions and the annual investment strategy. 3.1.2 The Council’s actual and projected treasury portfolio position is summarised below. The table shows the actual external debt, against the underlying capital borrowing need (the CFR), highlighting any over or under borrowing. 3.1.3 In September 2018, the Council received the remainder (£6.6m) of the total £26.6m interest -free loan facility, for the Cambridge Road Estate regeneration property buybacks.

2019/20 2020/21 2021/22 2022/23 2023/24 External debt Estimate Estimate Estimate Estimate Estimate

£000 £000 £000 £000 £000 Estimated Debt at 1 April 300,038 307,764 366,983 407,745 409,557 Expected change in debt 7,726 59,219 40,762 1,812 1,012 Estimated Gross debt at 31 307,764 366,983 407,745 409,557 410,569 March Capital Financing 361,360 413,721 448,287 440,485 431,678 Requirement Under / (Over) borrowing 53,596 46,738 40,542 30,928 21,109

Note: The table assumes all new commercial activity is funded by new borrowing, the cost of which is self financing. For other expenditure to be funded by borrowing the council will assess the most appropriate action re undertake new borrowing or use internal resources where available.

108 ANNEX 12

3.1.4 Within the above figures the level of debt relating to commercial activities / non-financial investment is:

2019/20 2020/21 2021/22 2022/23 2023/24 Commercial Activity Estimate Estimate Estimate Estimate Estimate

£000 £000 £000 £000 £000 Actual debt relating to commercial activity as at 31 March 53,289 107,625 134,625 134,625 134,625 Percentage of total external debt 17% 29% 33% 33% 33%

3.1.5 At the end of the third quarter 2019/20, the Council had external debt totalling £308.2m with an average annual borrowing rate of 3.9%. Of the total, £220.5m has been borrowed from the Public Works Loan Board (PWLB), £61.0m from individual banks and £26.6m as an interest-free loan from the Greater London Authority.

3.1.6 The borrowing from individual banks includes £46m of Lender Option Borrower Option (LOBO) loans held with six counterparties with interest rates in the range 3.75% to 5.50%. These are simple structured loans with no complicated mechanisms, which are present in other LOBOs e.g. inverse floating rate structures. Under these arrangements, the lender has the option to increase rates but, should it do so, the Council can choose to redeem without penalty. Although the Council understands that lenders are unlikely to exercise their options in the current low interest rate environment, there remains an element of refinancing risk. The Council will take the option to repay LOBO loans at no cost if it has the opportunity to do so, and will also consider any other options to repay LOBO loans if economically advantageous to do so, following advice from the Council’s treasury advisors.

3.1.7 The Public Works Loan Board (PWLB) has been the main source of long term loans for the Council. However, following the decision by the PWLB on 9 October 2019 to increase their margin over gilt yields by 100 bps to 200 basis points for standard rates on loans lent to local authorities, consideration will also need to be given to sourcing funding at cheaper rates from the following:

● Local authorities (primarily shorter dated maturities up to 5 years) ● Financial institutions (primarily insurance companies and pension funds but also banks, out of spot or forward dates for long term maturities) ● Municipal Bonds Agency (bond issues for medium to long term maturities) ● Public or private markets via own bond issue ● Community Municipal Bond (this is a bond issued by a Local Authority direct to the public via a crowdfunding platform)

109 ANNEX 12

3.1.8 A graph showing the maturity profile of the Council’s long term debt as at the end of the third quarter 2019/20 is shown in Enclosure 3. The Council’s loan portfolio will be kept under review to see if savings can be made by further debt restructuring. No restructuring has been undertaken during 2019/20 as market conditions have not been favourable. Any opportunities in the coming year will continue to be explored although this position is not expected to change in the short term. 3.1.9 It has not been necessary for the Council to undertake temporary borrowing during the first nine months of 2019/20. The Council may arrange temporary borrowing to cover unplanned cash flow shortages. The temporary borrowing limit for 2020/21 will be set at 20% of the Operational Boundary Limit (shown in Enclosure 1) 3.1.10 Within the range of prudential indicators there are a number of key indicators to ensure that the Council operates its activities within well-defined limits. One of these is that the Council needs to ensure that its gross debt does not, except in the short term, exceed the total of the CFR in the preceding year plus the estimates of any additional CFR for 2020/21 and the following two financial years. This allows some flexibility for limited early borrowing for future years, but ensures that borrowing is not undertaken for revenue or speculative purposes. The Director, Corporate & Commercial reports that the Council complied with this prudential indicator in the current year and does not envisage difficulties for the future. This view takes into account current commitments, existing plans, and the proposals in this budget report.

3.2 Treasury Indicators: limits to borrowing activity 3.2.1 The operational boundary. This is the overall limit which external debt is not normally expected to exceed. This would usually be a similar figure to the CFR, but may be lower or higher depending on the levels of actual debt and the ability to fund under-borrowing by other cash resources.

2019/20 2020/21 2021/22 2022/23 2023/24 Operational boundary Estimate Estimate Estimate Estimate Estimate

£000 £000 £000 £000 £000 Non Commercial Activities 290,696 288,721 296,287 288,485 279,678 Commercial Activities / Non Financial Investments 70,664 125,000 152,000 152,000 152,000 Total 361,360 413,721 448,287 440,485 431,678

3.2.2 The authorised limit for external debt. A further key prudential indicator represents a control on the maximum level of borrowing. This is a legal limit beyond which external debt is prohibited, and this limit needs to be set or revised by the full Council. It reflects the level of external debt which, while not desired, could be afforded in the short term, but is not sustainable in the longer term. This is the statutory limit determined under section 3 (1) of the Local Government Act 2003. The Government retains an option to control either the total of all councils’ plans, or those of a specific council, although this power has not yet been exercised. The Council is recommended to approve the authorised limit as part of the approval of the Treasury Strategy and Prudential Indicators.

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2019/20 2020/21 2021/22 2022/23 2023/24 Authorised limit Estimate Estimate Estimate Estimate Estimate

£000 £000 £000 £000 £000 Non Commercial Activities 300,696 298,721 306,287 298,485 289,678 Commercial Activities / Non Financial Investments 70,664 125,000 152,000 152,000 152,000 Total 371,360 423,721 458,287 450,485 441,678

3.2.3 To manage interest rate exposure, loans at fixed rates can be arranged up to the authorised limit, whilst those at variable rates are limited to 40% of this level. Exposure levels are monitored on a continuing basis.

3.2.5 Maturity structure of borrowing These gross limits are set to reduce the Council’s exposure to large fixed sums falling due for refinancing. The indicators that the Council is asked to approve are shown in Enclosure 1.

3.3 Prospects for interest rates 3.3.1 Interest rates are dependent on the outlook for inflation which in turn reflects the prospects for the economy. The Bank of England increased base rate to 0.75% in August 2018 when Consumer Prices Index (CPI) was above the 2% target at 2.7%. Since then UK economic growth has been subdued, increasing by only 1% in 2019 due to the global economy and uncertainties over Brexit. Inflation has fallen to 1.5% in October 2019 and therefore does not threaten an immediate rise in Bank Rate. 3.3.2 In the Bank of England’s November monetary policy report inflation is forecast to fall even further to 1.25% by spring 2020 aided by fall in regulated energy and water prices. Inflation will remain low over the forecast period and will not exceed the 2% target until Q4 2022. UK GDP growth is forecast to increase over the next 3 years as investment spending by firms is made together with support from consumer spending being maintained as real incomes increase. In 2020 growth is forecast at 1.6% and gradually increasing to 2.1% in 2022. The economic forecasts assume that the stock of UK government debt purchased by central bank reserves remains at £435 billion and also the stock of corporate bonds remains at £10 billion 3.3.3 The Bank of England’s forecasts assume a smooth transition out of the European Union. The MPC has stated that depending on the nature of the UK’s departure, monetary policy could go in either direction. A successful departure would increase business and consumer confidence with a corresponding impact on GDP and inflationary pressures. An unsuccessful departure would likely have the reverse impact except that inflation may increase if Sterling depreciates further. 3.3.4 In the light of these uncertainties Link Asset Services have provided some forecast rates as shown in the table below. Their forecast for bank rate is for an increase of 0.25% in March 2021 and a further increase in June 2022 to stand at 1.25%. This contrasts with the market implied bank rate based on forward market interest rates as quoted in the BoE’s November report falling to 0.5% in 2020 and remaining at that level over the forecast period. PWLB rates are expected to increase by around 20-30 basis points per annum from 2020 to end the forecast period 100 basis points higher than January 2020.

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Link Asset Services Interest Rate View Interest Rates Current Forecast Forecast Forecast Forecast

Jan 2020 Mar 2020 Mar 2021 Mar 2022 Mar 2023

Bank Rate 0.75% 0.75% 1.00% 1.00% 1.25%

PWLB 25 yr rate* 3.12% 3.30% 3.60% 3.90% 4.10% PWLB 50yr rate* 2.94% 3.20% 3.50% 3.80% 4.00%

3.4 Borrowing strategy

General 3.4.1 Currently the Council’s actual long term borrowing is well below its CFR limit. This difference represents the extent to which the Council has been financing capital investment from internal cash balances. This is a consequence of the Council’s treasury management strategy which manages the Council’s cash flows in an integrated way so that external borrowing arises as a consequence of all the financial transactions of the Council and not simply those arising from capital expenditure. This approach has ensured that debt levels, and the associated revenue costs of financing that debt, have been kept to a minimum. The Director, Corporate & Commercial will monitor interest rates in financial markets and consider necessary action if interest rates appear to be on an upward trend.

HRA Borrowing 3.4.2 A major influence on the Council’s borrowing strategy in the future is the inclusion of significant HRA debt through the settlement payment made to Government under HRA Reform (self financing) in March 2012. The payment totalled £115.5m and significantly increased the level of debt that the Council holds. The HRA business plan determines how and when the Council can afford to repay the HRA debt settlement and the additional borrowing to support the Council’s housing investment programme.

3.4.3 The Council is applying the two pool option to calculate interest due from the HRA and the General Fund in relation to external loans. This option splits the Council’s borrowing into two pools, one for the General Fund and one for the HRA. Within this arrangement the underlying principles are: ● there is no detriment to the General Fund ● any solution is broadly equitable for both the HRA and General Fund ● the HRA is given a greater degree of independence, certainty and control over its borrowing charges, subject to the overriding corporate interests of the Council

General Fund Borrowing 3.4.4 Long term funding needs have traditionally been met from the PWLB. However, long term fixed market loans rates such as LOBOs can often be below the PWLB rates for the equivalent maturity periods, although it is important that an appropriate balance is maintained between PWLB and this type of market debt in the debt portfolio. This is because LOBO’s are only fixed during the initial primary period of the loan (typically 3 to 5 years) and beyond that the lender has the option to change the interest rate and, should it do so, the Council has the option to repay the loan. This introduces a level of interest rate risk if the Council has a large proportion of

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its debt in the form of LOBOs. The current split between PWLB / banks / and LOBO market loans is 78/6/16. 3.4.5 The Local Government Association has been working with local authorities to set up a Municipal Bonds Agency. The Council has become a shareholder, having invested in the establishment of the Agency. The Agency is now in operation and is due to be offering loans to local authorities in the near future. It is envisaged that the borrowing rates will be lower than those offered by the PWLB. The Council will consider making use of this new option when it becomes necessary to take on additional external borrowing.

3.4.6 The Council will continue its policy of maintaining a planned and stable maturity pattern for its loans whilst borrowing as cheaply as possible using all available prudent market instruments.

3.5 Policy on borrowing in advance of need 3.5.1 The Council will not generally borrow more than or in advance of, its needs purely in order to seek to profit from the investment of the extra sums borrowed. A proportion of the increase in CFR will be linked to the commercial activity that the authority is carrying out. Borrowing will take place for this on the basis that the commercial activity will involve acquiring assets with a value to the authority, generate an income stream to support service provision and be self financing.

3.5.2 Risks associated with any borrowing in advance activity will be subject to prior appraisal and subsequent reporting through the appropriate reporting mechanisms.

3.6 Debt rescheduling 3.6.1 The Council will continue to look for opportunities to reduce the cost of outstanding debt such as looking at options involving switching from long term to short term debt or refinancing using other sources of loan finance such as LOBOs. Any such exercises will be undertaken in line with the Council’s treasury management strategy and the reasons for any rescheduling will be either to generate cash savings and/ or discounted cash flow savings, helping to fulfil the borrowing strategy for 2020/21 or to enhance the balance of the overall debt portfolio.

4. ANNUAL INVESTMENT STRATEGY 4.1 Current portfolio position 4.1.1 During the first nine months of 2019/20 the Council has had surplus funds available for investment. Available balances totalled £34.0m at the beginning of the financial year and had risen to £57.5m at the end of December. During the year these funds were available to lend on a temporary basis, with the in year fluctuation largely dependent on the timing of payments, receipt of Council Tax and grants and progress of the capital programme. Interest earned during the period totalled £0.44m and represented a weighted average interest rate earned by the Council of 0.93%. This compares favourably with the average 7 day LIBID (London Interbank Bid Rate) figure of 0.57%.

4.1.2 In 2019/20 the majority of the Council’s surplus cash has been invested in short-term unsecured bank deposits and Money Market Funds.

4.2 Investment policy 4.2.1 The MHCLG and CIPFA have extended the meaning of ‘investments’ to include both financial and non-financial investments. This report deals solely with financial investments.

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Non-financial investments, essentially the purchase of income yielding assets, are covered in the Capital Strategy (Annex 11 to the Budget Report).

4.2.2 The Council’s investment policy has regard to the following: -

● MHCLG’s Guidance on Local Government Investments (“the Guidance”) ● CIPFA Treasury Management in Public Services Code of Practice and Cross Sectoral Guidance Notes 2017 (“the Code”) ● CIPFA Treasury Management Guidance Notes 2018

4.2.3 The Council’s investment priorities will be security first, portfolio liquidity second and then yield, (return).

4.2.4 In accordance with the above guidance from the MHCLG and CIPFA, and in order to minimise the risk to investments, the Council applies robust due diligence comprising minimum acceptable credit criteria in order to generate a list of highly creditworthy counterparties. This also enables diversification and thus avoidance of concentration risk. The key ratings used to monitor counterparties are the Short Term and Long Term ratings.

4.2.5 Ratings will not be the sole determinant of the quality of an institution; it is important to continually assess and monitor the financial sector on both a micro and macro basis and in relation to the economic and political environments in which institutions operate. The assessment will also take account of information that reflects the opinion of the markets. To achieve this consideration the Council will engage with its advisors to maintain a monitor on market pricing such as “credit default swaps” and overlay that information on top of the credit ratings.

4.2.6 Other information sources used will include the financial press, share prices and other such information pertaining to the banking sector in order to establish the most robust scrutiny process on the suitability of potential investment counterparties.

4.2.7 The Council has defined the list of types of investment instruments that the treasury management team are authorised to use. This list is shown in Enclosure 4. This included the categories of ‘specified’ and ‘non-specified’ investments.

● Specified investments are those with a high level of credit quality and subject to a maturity limit of one year. ● Non-specified investments are those with less high credit quality, may be for periods in excess of one year, and/or are more complex instruments which require greater consideration by members and officers before being authorised for use.

4.2.8 Non-specified investments limit. The Council has determined that it will limit the maximum total exposure to non-specified investments as being 75% of the total investment portfolio. Under Non-specified investments, the Council will continue to provide revolving credit loan finance to a number of entities controlled or significantly influenced by the Council such as the revolving credit arrangement agreed with Achieving for Children (AFC) by the Royal Borough of Kingston Upon Thames, the London Borough of Richmond upon Thames and the Royal Borough of Windsor and Maidenhead.

4.3 Creditworthiness policy

4.3.1 The Council applies the creditworthiness service provided by Link Asset Services. This service employs a sophisticated modelling approach utilising credit ratings from the three main credit

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rating agencies - Fitch, Moody’s and Standard & Poor’s. The credit ratings of counterparties are supplemented with the following overlays: ● credit watches and credit outlooks from credit rating agencies; ● Credit Default Swaps (CDS) spreads to give early warning of likely changes in credit ratings; ● sovereign ratings to select counterparties from only the most creditworthy countries.

4.3.2 This modelling approach combines credit ratings, credit watches and credit outlooks in a weighted scoring system which is then combined with an overlay of CDS spreads. The end product is a series of colour coded bands which indicate the relative creditworthiness of counterparties. These colour codes are used by the Council to determine the duration for investments. The Council therefore uses counterparties within the following durational bands:

Yellow (AAA rated Government debt or its equivalent) unlimited monetary amount, up to 5 years; Purple £10m, up to 2 years; Blue £10m, up to 1 year (only applies to nationalised or semi nationalised UK banks); Orange £10m, up to 1 year; Red £5m, up to 6 months; Green £5m up to 100 days; No colour - not to be used.

4.3.3 The investment limits for each banking counterparty has been reduced from the current treasury management strategy to reflect the relatively low cash balances held by the Council. All new investments in 2020/21 will be made within these limits. Any investments made prior to 1 April 2020 that are above these limits will continue to maturity or until the end of any notice period required.

4.3.4 All credit ratings are monitored weekly. The Council is alerted to changes to ratings of all three agencies through its use of the Link Asset Services’ creditworthiness service. If a downgrade results in the counterparty / investment scheme no longer meeting the Council’s minimum criteria, its further use as a new investment will be withdrawn immediately. In addition to the use of credit ratings the Council will be advised of information in movements in credit default swap spreads against the iTraxx benchmark and other market data on a daily basis via its Passport website, provided exclusively to it by Link Asset Services. Extreme market movements may result in downgrade of an institution or removal from the Council’s lending list.

4.4 UK banks – Ring Fencing

4.4.1 The largest UK banks, (those with more than £25bn of retail / Small and Medium-sized Enterprise (SME) deposits), were required, by UK law, to separate core retail banking services from their investment and international banking activities by 1st January 2019. This is known as “ring-fencing”. Whilst smaller banks with less than £25bn in deposits are exempt, they can choose to opt up. Several banks are very close to the threshold already and so may come into scope in the future regardless.

4.4.2 Ring-fencing is a regulatory initiative created in response to the global financial crisis. It mandates the separation of retail and SME deposits from investment banking, in order to improve the resilience and resolvability of banks by changing their structure. In general, simpler, activities offered from within a ring-fenced bank, (RFB), will be focused on lower risk, day-to-day core transactions, whilst more complex and “riskier” activities are required to be housed in a

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separate entity, a non-ring-fenced bank, (NRFB). This is intended to ensure that an entity’s core activities are not adversely affected by the acts or omissions of other members of its group.

4.4.3 While the structure of the banks included within this process may have changed, the fundamentals of credit assessment have not. The Council will continue to assess the newly-formed entities in the same way that it does others and those with sufficiently high ratings, (and any other metrics considered), will be considered for investment purposes.

4.5 Approved countries for investments

4.5.1 Other than the UK the Council will only use approved counterparties from countries with a minimum sovereign credit rating of AA- from Fitch Ratings (or equivalent from other agencies if Fitch does not provide).

4.6 Investment Strategy

4.6.1 Over the last few years the Council has used internal resources where possible to fund capital expenditure through internal borrowing instead of undertaking external borrowing. This has ensured the most efficient use of resources since currently the cost of external borrowing significantly exceeds the level of interest that can be earned on cash investments. However eventually the Council will reach a point whereby internal resources are at the minimum level required to cover fluctuations in the monthly cash flow requirements. In which case any new capital expenditure is likely to be funded by external borrowing. Estimates of the capital financing cost of that borrowing have been included within the medium term financial plan.

4.6.2 Investments are made with reference to core balances and cash flow requirements and the outlook for short term interest rates (i.e. rates for investments up to 12 months). Greater returns are usually obtainable by investing for longer periods. While most cash balances are required in order to manage the ups and downs of cash flow, if cash sums can be identified that could be invested for longer periods, the value to be obtained from longer term investments will be carefully assessed.

● If it is thought that Bank Rate is likely to rise significantly within the time horizon being considered, then consideration will be given to keeping most investments as being short term or variable.

● Conversely, if it is thought that Bank Rate is likely to fall within that time period, consideration will be given to locking in higher rates currently obtainable, for longer periods.

4.6.3 Given the low investment rate environment and the relatively low level of internal resources available for longer term investment the Council will continue to use Money Market Funds that are AAA rated with at least one of the three credit ratings agencies. The Council may also use enhanced money market funds with a minimum AAA fS1 rating or equivalent. It will also use call accounts and notice accounts with approved counterparties for deposits placed directly with institutions to minimise risk.

4.7 Investment returns benchmarking

4.7.1 The Council will use the 7 day LIBID rate to assess the performance of its investment portfolio.

4.8 Derivatives 4.8.1 The Council will only consider using derivatives for risk management purposes and would seek additional professional advice including a legal opinion should such a need arise.

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Enclosure 1

STATUTORY PRUDENTIAL 2019/20 2020/21 2021/22 2022/23 2023/24 INDICATORS (to support Estimate Estimate Estimate Estimate Estimate the Council’s capital financing requirement)

£000 £000 £000 £000 £000 Capital expenditure:

General Fund 65,721 90,291 34,649 6,186 4,543

HRA 17,085 18,644 24,739 8,827 2,518

Total 82,806 108,935 59,388 15,013 7,061 Proportion of financing costs to net revenue stream:

General Fund (%) 11.73 13.80 15.51 16.12 16.09

Capital Financing Requirement as at 31 March:

General Fund 157,073 153,593 148,170 140,368 131,561

HRA 133,623 135,128 148,117 148,117 148,117

Commercial Activities 70,664 125,000 152,000 152,000 152,000

Total 361,360 413,721 448,287 440,485 431,678 Annual change in Capital Financing Requirement

Brought forward 1 April 341,411 361,360 413,721 448,287 440,485

Carried forward 31 March 290,696 288,721 296,287 288,485 279,678

Change in CFR (50,715) (72,639) (117,434) (159,802) (160,807)

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STATUTORY TREASURY 2019/20 2020/21 2021/22 2022/23 2023/24 MANAGEMENT Estimate Estimate Estimate Estimate Estimate INDICATORS

£000 £000 £000 £000 £000 Authorised limit for external debt

Non Commercial 300,696 298,721 306,287 298,485 289,678

Commercial 70,664 125,000 152,000 152,000 152,000

Total 371,360 423,721 458,287 450,485 441,678 Operational boundary for external debt:

Non Commercial 290,696 288,721 296,287 288,485 279,678

Commercial 70,664 125,000 152,000 152,000 152,000

Total 361,360 413,721 448,287 440,485 431,678 Annual borrowing requirement based on operational boundary

Total Change 19,949 52,361 34,566 (7,802) (8,807) Upper Limit on investments in excess of 365 days 50,000 10,000 10,000 10,000 10,000

Maturity Structure of fixed rate borrowing (Across all years)

Upper Limit Lower Limit

Under 12 months 50% 0%

12 months – under 2years 50% 0%

2 years – under 5 years 50% 0%

5 years – under 10 years 70% 0%

10 years – under 20 years 70% 0%

20 years – under 30 years 70% 0%

30 years – under 40 years 70% 0%

40 years – under 50 years 70% 0%

50 years and above 70% 0% Temporary Borrowing Limit 20% of the operational 72,272 82,744 89,657 88,097 86,336 boundary

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Enclosure 2

ANNUAL MINIMUM REVENUE PROVISION STATEMENT 2020/21

1. Where the Authority finances capital expenditure by debt, it must put aside resources to repay that debt in later years. The amount charged to the revenue budget for the repayment of debt is known as Minimum Revenue Provision (MRP), although there has been no statutory minimum since 2008. The Local Government Act 2003 requires the Authority to have regard to the Department for Communities and Local Government’s (now the Ministry of Housing, Communities and Local Government’s -MHCLG) Guidance on Minimum Revenue Provision (the MHCLG Guidance) most recently issued in 2017.

2. The broad aim of the MHCLG Guidance is to ensure that debt is repaid over a period that is either reasonably commensurate with that over which the capital expenditure provides benefits.

3. The MHCLG Guidance requires the Authority to approve an Annual MRP Statement each year. RBK’s statement is as follows:

“The Council will set aside an amount each year within its General Fund budget which it deems prudent and appropriate, having regard to statutory requirements and relevant guidance issued by MHCLG.”

During 2017/18 the Council had undertaken a review of its MRP calculation. The review looked in particular at the methodology applied to capital expenditure financed by borrowing before 1 April 2007, unsupported capital expenditure financed by borrowing incurred after 31 March 2007 and the scope for providing exemptions under the MRP policy for commercial property acquisitions.

4. The following revised policy is as follows and is now in place:

● For capital expenditure incurred before 1 April 2007 MRP provision from 1st April 2017 will be determined over the remaining useful life of the assets.

● For unsupported capital expenditure incurred after 31 March 2007, MRP will be determined by charging the expenditure over the expected useful life of the relevant assets starting in the year after the asset becomes operational.

● Where a past overprovision has been identified, the council will spread any resulting reduction in MRP across multiple years

● No MRP will be charged in respect of assets held within the Housing Revenue Account.

● Capital expenditure incurred during 2019/20 will not be subject to a MRP charge until 2020/21.

● No MRP will be charged on expenditure for commercial investment. The properties are held for investment purposes and are managed on a fully commercial basis. The purchase of these properties will be treated as capital expenditure and will increase the CFR. The Council is holding these properties solely for investment purposes and they are leased to tenants on a fully repairing basis. As the Council has the ability to sell these properties to repay any outstanding debt liabilities related to their purchase, there is no need to set aside prudent provision to repay the debt liability in the interim period, so there is no MRP application. The market value of the assets will be reviewed on a regular basis and if the asset value significantly decreases, a prudent MRP policy will commence.

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Enclosure 3

120 ANNEX 12

Enclosure 4 Schedule of Approved Instruments

Call and Term Deposits Colour (and long Money and/or % Time term rating where Limit Limit applicable) Banks & Building Societies yellow Unlimited 5yrs Banks & Building Societies purple £10m 2 yrs Banks -Building Societies orange £10m 1 yr Banks (part nationalised) blue £10m 1 yr Banks & Building Societies red £5m 6 mths Banks & Building Societies green £5m 100 days Banks & Building Societies No colour Not to be used Not to be used Limit 3 category – Council’s No Colour £10m 1 day banker (where “No Colour”) DMADF UK sovereign unlimited 6 months rating Local authorities n/a £10m per entity 5yrs

Funds Fund rating Money and/or % Time Limit Limit Money Market Funds LVNAV AAA £15m per fund liquid

Ultra-Short Dated Bond Dark pink / AAA £10m per fund liquid Funds with a credit score of 1.25 Ultra-Short Dated Bond Light pink / AAA £10m per fund liquid Funds with a credit score of 1.50

121 Annex 13

ROYAL BOROUGH OF KINGSTON UPON THAMES

PAY POLICY STATEMENT 2020 - 2021

General Principles

In setting pay, remuneration for council staff at all levels needs to be adequate to secure and retain high-quality employees dedicated to the service of the public, while not being unnecessarily generous or otherwise excessive or perceived as such. At the same time there must be sufficient flexibility to cope with a variety of circumstances (foreseeable or not), such as local or occupation-specific labour market conditions.

As well as affordability, transparency and fairness will be our first principles when setting pay at all levels and this will be reflected in:

● ‘Clean pay’ (avoidance wherever possible of additions to basic pay)

● Pay rates and terms and conditions are set outside the organisation and the Council is a signatory to all relevant national agreements.

● Job evaluation used to ensure fairness and equality and Equal Pay Audits carried out from time to time.

● Performance pay not operated but ability exists to postpone or withhold increments in the case of poor performance or attendance or to award additional increments or make one-off, non-consolidated payments (within strict limits) to recognise most exceptional performance.

● Where a member of staff at any level takes on a role which is incidental to their substantive role this will not be remunerated separately and will be taken into account in job evaluation. Conversely, where a member of staff at any level is required to take on a role which is distinct from their substantive role, this will be remunerated separately and appropriately (e.g. election duties, Major Incident Team).

● In general, the Council will not re engage staff who have previously been made redundant and received their Pension benefits and/or a redundancy payment.

● However, when considering job applications from those made redundant, we will be mindful of the public interest in re employing them, taking into account the time which has elapsed, the level which they were employed at, and the level of the vacancy concerned. The Government has proposed a cap on termination payments in the public sector at £95,000, and for the recovery of exit payments in certain circumstances where an employee subsequently takes up work with another public body. A consultation took place on the proposed legislation from April to July 2019 and Royal Borough of Kingston

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contributed to a consultation response along with other London Boroughs via London Councils. The government's response to the consultation feedback has not yet been published and an implementation date for this legislation is still to be confirmed.

● The Council deducts Income Tax at source for all direct employees, and when it engages contractors/interims it seeks the fullest assurance that their affairs are properly managed and will ask them to commit to this as part of the contractual agreement. The Council is taking account of IR35 in it’s employment decisions.

● Staff at any level will not be directly involved in setting their own pay, and, wherever necessary external sources will be used.

● The Government implemented mandatory gender pay gap reporting requirement for employers including Local Authorities with 250 or more employees in April 2017. Public sector organisations are required to report their gender pay gap figures annually for 31 March each year by the following 31 March and publish the figures and report on the council website. At 31 March 2018 the gender pay gap was 3.8% based on mean hourly rates and 4.76% based on median hourly rates, both gaps had decreased slightly when compared to the March 2017 figures.

The report and action plan is published on the following link:

https://data.kingston.gov.uk/wp-content/uploads/2019/03/Gender-Pay-Gap-R BK-1.pdf

● A two year pay deal was agreed by the NJC/GLPC effective from 1 April 2018. As part of this agreement, from 1 April 2019, a new GLPC pay spine took effect. As a result of the assimilation advice, some of the pay grades in the lower portion of the pay spine require changes to ensure compliance with equal pay requirements which were implemented effective from 1 April 2019. Work has started on a review of pay and grading, given the issues with some grades as a result of the April 2019 pay spine implementation and that the current Pay and Rewards Strategy has been in operation for over fifteen years. Recommendations have been submitted to senior management following data analysis and focus groups with managers and employees on pay and benefits which took place in Autumn 2019, with proposed implementation in 2021.

● For the 2020 pay claim, UNISON’s NJC Committee has proposed that the pay claim be for 10% or £10 per hour, whichever is the greater. The employers side responded that they would not be in a position to respond to the pay claim until the General Election outcome was known, which they expected to be in early 2020.

125 Annex 13

Application of General Principles to Pay of Chief Officers, Directors and Chief Executive

The principles above will apply at all levels of the organisation, including the senior management team. The Council’s Senior Staff Panel, comprised of elected councillors and reporting to full council, is responsible for appointments and pay and grading matters relating to the senior management team.

Job evaluation and advice to the Panel on pay structures and scales will be provided externally by the Local Government Employers and recommended to the Council’s Senior Staff Panel for approval.

For Royal Borough of Kingston upon Thames non school staff the ratio of highest pay to median pay is approximately 1:5.68 (comparison on basis of full-time equivalents at December 2018), revised from 1:5.2 last year.

The Council publishes via its website (https://data.kingston.gov.uk/transparency-code/):

● a schedule of all council employees earning £50,000 or more including names (where required), role title & salary band on an annual basis, in accordance with the recommended code of practice for data transparency ● structure charts as recommended by the government code of practice for data transparency ● Trade Union facility time information

Low Pay

As a signatory to all national pay agreements applicable, the Council will apply those agreements to all its staff except where this is prevented by other factors such as a TUPE transfer. The Council was an early implementer of the Local Government Services’ Single Status Agreement which did much to correct pay differentials for previously undervalued occupations and the Council will continue to work within the framework of national pay agreements to improve pay and conditions.

The Authority monitors the number of non-school based staff and the nature of the roles for those employees whose evaluated grade results in pay based on a spine point below the London Living Wage (currently £10.75 per hour). The Council introduced the London Living Wage for staff outside schools from 1 April 2016. Affected staff receive an additional payment to bring their hourly earnings up to the London Living Wage level. In November 2019, the council celebrated becoming a Living Wage (LW) accredited employer meaning that everyone working for the council, regardless of whether they are permanent employees or third-party contractors and suppliers will receive the London Living Wage. The accreditation is a signed licence between the Living Wage Foundation and the council which sets out clear guidance and requirements. The council joined over 4,700 organisations

126 Annex 13 across the country already paying the wage and will support local businesses in the borough to become London Living Wage employers.

Review of Policy

This policy was first published in 2012. It will be reviewed and re-published annually.

127 Annex 14 Schools’ Budget Estimates and Schools’ Funding Formula By the Director of Children’s Services

Purpose To recommend the Schools Budget for 2020/21. Recommendations To resolve that the following be RECOMMENDED to the Finance and Partnerships Committee to RECOMMEND to full Council: 1. the Schools Budget for 2020-21 be approved in line with paragraph 17 and Enclosure 1 of this report;

2. the proposals outlined for the Central School Services Block be approved including the transfer of £16k to the High Needs Block (ref. paras 26-28); 3. the proposals outlined for the Early Years Block be approved including the transfer of £121k to the High Needs Block (ref. paras. 29 - 34); 4. the proposals outlined for the High Needs Block be approved (ref paras. 35-38) 5. the proposals outlined for the Schools Block (ref. paras 20-25) and the Schools Funding Formula outlined in Enclosure 2 and the Schools Allocations in Enclosure 3 be approved, including a Minimum Funding Guarantee of +0.5% per pupil (ref. paras 22-23).

Benefits to the Community: The aim of the proposals is to recommend a DSG funded education budget for 2020/21.

Key Points A. The Borough has been allocated £149.622m in Dedicated Schools Grant for 2020/21. This provides an overall increase in funding relative to 2019/20 of £9.2m (+6.6%). B. The Borough is facing a significant amount of financial pressure on services for high needs education. A cumulative overspend of up to £20.6m is anticipated at 31 March 2020. The SEND Transformation Plan outlines how expenditure will be brought closer to Government funding levels as well as how services can be improved over the coming years. D. The Schools Forum has agreed a Targeted High Needs Fund of £300k for 2020/21 which constitutes a transfer from the Schools Block to the High Needs Block. No further transfers from the Schools Block are proposed. E. A ‘minimum funding guarantee’ of +0.5% is proposed for individual schools’ budgets. This will ensure that schools will gain between 0.5% and 6.66% on a per pupil basis. F. It is proposed that nursery hourly rates increase by 5 pence per hour to £5.97 for hourly two year old funding and £5.26 per hour for three and four year old funding. An additional budget has also been set aside to improve the local therapies offer for children under the age of five. It is recommended that £121,000 is transferred from the early years block to the high needs block to assist with high needs pressures. G. A high needs budget of £25.683m is proposed with the recognition that there remains a significant budget gap for high needs services and this gap will be addressed through the SEND Transformation Plan and a further increase in the DSG deficit carried forward at the end of the financial year. 128 Context 1. Education services are principally funded via the ring-fenced Dedicated Schools Grant (DSG). The DSG is the main source of income for the schools budget and can only be used in the provision of education services. The Schools Budget is a ring-fenced account within the authority’s overall funds and this report sets out the draft budget and funding formulae for 2020/21. The Schools Budget has been prepared in accordance with the national funding arrangements effective for 2020/21. 2. The Schools Budget funds individual schools’ delegated budgets and certain defined activities for the direct benefit of pupils or schools, including special educational needs and compliance with free child care entitlements for children under the age of five. 3. The Schools Forum, as the body representing the interests of schools and academies, is consulted regarding formula changes and has the power to agree to proposals made by the authority regarding certain issues. The Schools Forum met in September, November and January noted the changes regarding schools funding 2020/21 and approved central and de-delegated budgets. 4. The Kingston DSG fund has had an in year overspend for the past five years and is now in a cumulative deficit position. An anticipated deficit of up to £20.6m is expected at the end of the 2019/20 financial year. 5. The current level of spending on services funded by the high needs education element of the DSG is running at an unaffordable level. The Transformation Plan (discussed elsewhere on this agenda) aims to bring spending more in line with the grant allocation and a summarised version of the financial elements of the plan (Deficit Recovery Plan) has been submitted to the Department for Education in accordance with DfE requirements. - Overview of Education Funding 6. On 1 April 2018 Government began the transition towards a new national funding formula for education funding. The Government have reconfirmed their commitment to a national funding formula and 2020/21 will be another transitional year where local authorities and schools will transition towards the new formula. It will still be for the Council in consultation with Schools Forum to set a local formula to distribute this funding between schools in 2020/21. 7. DSG funding is split into four blocks; the Schools Block, the High Needs Block; Early Years Block and the Central School Services Block (explained in paragraphs 8-13 overleaf). Although the overall DSG is ring fenced, the blocks themselves are not, although the amount that can be transferred is limited under the funding scheme.

8. The Schools Block can be broken down into two areas: ● Schools Block (delegated) – This funding is delegated to schools. At least 80% of the funding must be allocated through pupil led factors. These must include a basic entitlement funded through the age weighted pupil unit (AWPU) and a factor for deprivation. It can also include optional factors. In Kingston this includes a prior attainment factor to provide additional funding for schools with a high incidence of low level special educational needs, a lump sum for each school, funding for English as an additional language, a mobility rate for pupils that join after the October census date, additional funding where schools deliver services on multiple sites and funding for business rates. There is a mandatory mechanism within the funding formula to limit variations in the amount of funding received by schools from this block. The Minimum Funding Guarantee (MFG) limits the minimum increase to +0.5% on per pupil

129 funding and is funded by applying a cap to schools that may have received more funding. The schools block operational guidance clearly outlines that the cap may only be applied to offset the MFG and must be applied consistently for all schools. The MFG can be set at a level between plus 0.5% and plus 1.84%. ● Schools Block (growth fund) – This funding is top sliced from the DSG to support growth in pre-16 pupil numbers to meet basic need and to support additional classes needed to meet the infant class size regulations. 9. The High Needs Block supports provision for pupils with special educational needs or disabilities (early years to 25) and provision for children who receive an alternative provision because they are unable to attend school. 10. At a very summary level, maintained schools, academies and free schools receive £10k per place (£4k from Schools Block and £6k from High Needs Block) where the place is within a SEN Unit, Specialist Resourced Provision or Pupil Referral Unit (core funding). The Local Authority agrees a separate per pupil funding for children under the age of five. Where the cost of making the special educational provision required by a pupil cannot be met from the place funding, the local authority provides additional ‘top up’ funding. 11. The High Needs block also pays for placements in independent schools and colleges and non maintained special schools where these placements have been named in a pupils’ EHCP, usually because the pupil cannot be supported in a maintained school or academy or mainstream college. 12. The Early Years Block supports pupils under the age of five in maintained schools, academies, relevant pupils in private, voluntary and independent providers and under fives in alternative provision. 13. The Central Schools Services Block provides funding for central functions and for services that schools wish to procure centrally from the Council. Examples include the Admissions Service and a contribution towards the Emotional Health Service.

- Government Education Funding Settlement 2020/21 14. The draft 2020/21 Dedicated Schools Grant (DSG) allocation for Kingston is £149.622m compared to £140.401m in 2019/20. This provides increased funding of £9.221m which relates to both increased pupil numbers and additional funding allocated to education by the Government. The grant amounts include funding for both maintained schools, academies and high needs funding paid out directly by the Education Skills Funding Agency (ESFA). A proportion of the Schools Block and High Needs Block relating to academies and non-maintained special schools will be recouped by the ESFA for payment directly to these organisations. The following table breaks down the grant allocation by block:

130 15. The following table breaks down the change in funding buy those associated with pupil population growth and those associated with an increased / reduced rate of Government funding.

- Pupil Premium 16. The pupil premium is additional funding for publicly funded schools to raise the attainment of disadvantaged pupils of all abilities and to close the gaps between them and their peers. Pupil Premium for maintained schools remains a separate grant from the DSG. The allocations for 2020/21 will be calculated using the Spring 2019 schools and alternative provision censuses. The rates for 2020/21 have not yet been published by the ESFA and so the table summarises the minimum amounts anticipated:

PROPOSALS - Application of the DSG in 2020/21 17. The proposed application of the 2020/21 DSG is summarised in the following table. As DSG allocations to each block are not ring-fenced, the totals for each block do not need to match the DSG block provisions set out above.

18. The DSG Operational Guidance allows certain amounts to be transferred between blocks to fund specific pressures and allow for local circumstances. Transfers from the Schools Block must be approved by the Schools Forum. Transfers from the High Needs Block, Early Years Block and Central Schools Services Block must be done in consultation with Schools Forum but are ultimately a Council decision. If the Local Authority wishes to overrule a Schools Forum decision or disregard a funding formula rule then an application can be submitted to the Secretary of State.

131 19. At its meeting in November 2019, the Schools Forum agreed to allocate £300k from the Schools Block to create a ‘targeted high needs fund’. This money will be used to provide additional funding to schools who support a disproportionate number of pupils requiring SEN support. It is also recommended that further transfers from the Early Years and Central Schools Services Blocks be agreed.

- Schools Block

20. The funding formula for the Schools Block has been discussed by the Schools Forum and this formula has now been rerun with the actual data from the October 2019 census. The Schools block budget is proposed at £109.748m as follows:

21. Details of the proposed 2020/21 formula are shown in Enclosure 2 and details of the allocations to individual schools are shown in Enclosure 3. 22. A Minimum Funding Guarantee (MFG) of between +0.5% and +1.84% can be applied in 2020/21 under the funding formula rules. Where a school’s funding under the local funding formula does not increase by the MFG amount, the MFG provides a per pupil funding protection. This protection is funded by capping the amount other schools can gain. The MFG is intended to be a time limited mechanism to move a school towards being funded in line with the formula allocation. Four schools qualify for MFG funding in 2020/21. 23. A Minimum Funding Guarantee of +0.5% is recommended and this is in line with the level recommended by the Schools Forum. This will ensure that as a minimum per pupil funding will increase by 0.5%. Schools funding the MFG at this level will have their increases per pupil capped at 6.66% per pupil. 24. The Schools Block allocation must fund the Growth Fund which supports the funding of new classes which are necessary from September 2020. These additional classes are not funded through the DSG allocation from Government until the following April. The Growth Fund also provides protection for schools who support the borough in providing bulge classes where there is a shortfall of pupil places. The Growth Fund is estimated at a value of £200k. 25. Schools Forum have also agreed to fund a number of items centrally for maintained schools. This money forms part of schools’ budgets and is de-delegated to the Council for the provision of the agreed services. The budgets were agreed by Schools Forum in September as follows:

132

- Central School Services Block

26. In November 2019 the Schools Forum were consulted on and agreed a number of items to be funded from the Central School Services Block. These items are detailed in the table below and it is recommended that any unallocated funds are transferred to the High Needs Block to be spent on high needs early intervention services.

27. Following discussions with Schools Forum, regarding the funding of historic borrowing that enabled capital expenditure on St Philip’s School between 2005 and 2011 it has been proposed that the Council continue to match fund this amount by allowing £141k investment from the general fund to provide pump priming for high needs priorities.

28. The Committee is asked to recommend the application of the Central Schools Services Block.

133 - Early Years Block

29. The Early Years Block comprises funding for the free early education entitlements for three and four year-olds and disadvantaged two year olds, supplementary funding for maintained nursery schools; the early years Pupil Premium, the Disability Access Fund, the SEN Inclusion Fund and centrally provided early years services.

30. The Government allocation is £13.266m for 2020/21. Government is providing an 8 pence increase in hourly rate funding increasing the hourly rates to £6.00 per hour for two year olds and £5.85 per hour for three and four year olds. The Local Authority must set local hourly rates that provide for central services that are needed in the local area. At least 95% of the Government funding for three and four year olds must be passported directly to providers.

31. The following table breaks down the proposed budget for 2020/21 by the various elements:

32. The proposed hourly rates for the 2020/21 financial year are detailed in the table below. The rates passport 99.5% of Government funding for two year olds to providers and over 95.91% of funding for three and four year olds to providers. These rates have been discussed with and are also recommended by the Schools Forum.

134 33. All boroughs are required to set a budget aside to provide for a SEN Inclusion Fund. The DfE believe such a structure will support local authorities to work with individual providers to resource support for the needs of individual children with SEN. It will also enable local authorities to carry out an effective strategic role in their local area to increase the capacity of their childcare market so that it appropriately supports and develops children with SEN in the early years. The DfE believe that an aspect of the local funding system dedicated to supporting children with SEN will help local authorities in developing their plans for strategically commissioning services as required under the Children and Families Act 2014. It is recommended that the SEND Inclusion Fund is maintained at the 2019/20 level of £546,000.

34. The rates allow for the following central services to be funded from the Early Years Block. These items were discussed and agreed by Schools Forum in January 2020:

In addition it is recommended that £121,000 be transferred from the Early Years Block to the High Needs Block to assist with ongoing funding shortfalls for high needs education.

135

- High Needs Block

35. Financial pressure has continued on the needs-led SEN budgets within the High Needs Block. There will be an anticipated cumulative debt of £20.610m by March 2020. 36. The proposals outlined in this report allow for a DSG funded high needs budget of £25.683m. If no further action is taken there could be a gap of up to £8m next year. This level of overspend is not affordable for the Council and theTransformation Plan outlines how the Council can continue to meet the needs of children and young people whilst working towards a position where the cost of supporting children and young people who need additional support with their education is brought more into line with the amount of money that is provided by Government for these services. 37. It is anticipated that the Council will need to spend more than £25.683m next year to ensure that whilst transformation plans are introduced the Council continues to provide appropriate support to pupils and their families. The Transformation Plan is discussed elsewhere on this agenda. The detail of the plan is being discussed on an ongoing basis and will be reviewed periodically to ensure that it reflects the latest information in terms of what is achievable and also the desired approach of partners and stakeholders. 38. A high needs budget of £25.683m is proposed with the recognition that there remains a significant budget gap for high needs services and this gap will be addressed through the SEND Transformation Plan and a further increase in the DSG deficit carried forward at the end of the financial year. The needs-led SEN budgets will continue to be closely monitored throughout 2020/21 and regular updates provided to both Schools Forum and the Council in terms of progress against the Transformation Plan and associated expenditure levels.

Consultations

39. All primary and secondary schools (academies and maintained) were consulted on the local formula. Early years providers have also been given the opportunity to comment on early years proposals. The Schools Forum considered these proposals at their meetings in September, November 2019 and January 2020.

Timescale 40. The Council is required to set a DSG budget as part of its annual budget setting process and in advance of the Council Tax being set in March 2020.

Resource Implications

41. The full Dedicated Schools Grant allocation will be used for schools related services in line with the guidance.

42. It is untenable to continue the current level of expenditure within the High Needs Block compared to the resources available from the Dedicated Schools Grant . This situation is unsustainable for both complying with DfE requirements for the DSG and for the wider Council’s financial health.

136 Legal Implications

43. The Council is required by the School Standards and Framework Act 1998 to set a non-schools education budget and a schools budget each year and to provide delegated funding to schools from the schools budget in accordance with the Schools and Early Years Finance Regulations and DfE Guidance. The Dedicated Schools Grant is a specific grant under the Education Act 2002 provided to support the schools budget. The DSG is the main source of income for the schools budget. The Council is required to comply with the published conditions of grant for the DSG. Relevant conditions and Operational Guidance are referenced in the report above.

44. Education funded by the High Needs Block of the DSG is provided to meet the Council’s statutory duties under section 19 of the Education Act 1996 to provide education for pupils needing alternative education and the Council’s statutory duties under the Children and Families Act 2014 to meet the needs of pupils and young people up to the age of 25 with special educational needs.

45. The Council has duties under the Children and Families Act to make special educational provision for children and young people whose needs cannot reasonably be met from the resources normally available to schools and post-16 institutions. If provision from the Council may be necessary, the Council is required to carry out an assessment of a child or young person’s education health and care needs. Following assessment, the Council must make and maintain an education health and care plan for the child or young person if it is necessary for the local authority to make special educational provision for them.

46. Where the Council maintains an EHCP for a child or young person, it must arrange and fund the special educational provision set out in the Plan and must name an appropriate school or college placement. Placement decisions must be made with regard to parental preference and the efficient use of resources as well as avoiding unreasonable public expenditure. Where an independent or non-maintained school or college is named in an EHCP, the local authority is under a duty to pay any fees for the placement. Parents and young persons have the right of appeal to an independent tribunal if a request for an EHC assessment is refused and about the content of an EHCP, including the placement named. Decisions about provision to meet special educational needs under the High Needs Block are therefore based on need and are subject to independent scrutiny. Any reduction in provision which would mean that the Council was not able to make a decision based on individual needs or fully provide for special educational needs as set out in EHCPs is likely to lead to legal challenge.

47. The overspend on the High Needs Block will need to be addressed in the context of ensuring that the Council continues to be able meet its statutory duties under the Children and Families Act 2014. The Council will also need to have regard to its duty under the Equality Act to have due regard to the need to eliminate discrimination, harassment and victimisation and other conduct prohibited by the Act and to advance equality of opportunity and foster good relations between those who share a ‘protected characteristic’ under the Act and those who do not share a protected characteristic. A ‘protected characteristic’ is defined in the Act as age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex and sexual orientation. The Council must also ensure that its functions are discharged having regard to the need to safeguard and promote the welfare of children under section 11 of the Children Act 2004.

137 Risk Assessment 48. The demand led nature of the high needs spend means that expenditure levels can be volatile. A single high cost placement can cost in excess of £250k per year. The DSG budgets are monitored at a detailed placement level to ensure that information for decision making is accurate and up to date.

49. The 2020/21 budget setting process for education in Kingston has been complicated by the significant difference in funding and expenditure levels for Kingston pupils requiring additional support with their education (high needs). The decisions about how to prioritise the funding that is available, must be considered alongside the associated risks of those decisions and impacts on pupils who access all categories of DSG funding.

Equalities Impact Assessment 50. An equality assessment was completed to assess the impact of the proposals in the Kingston SEND Transformation Plan.

Author of the report - Ian Dodds, Director of Children’s Services, [email protected]

Background documents held by Lucy Kourpas, Achieving for Children Director of Finance, 02084875018, [email protected] . o None other than those referred to in this report

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Enclosure 1

2020/21 Schools Budget

Block 2020/21 Application of Funding Allocation (£)

Schools Block £109,748,393

Central School Services Block £1,046,300

High Needs Block £25,681,950

Early Years Block £13,145,258

Total Dedicated Schools Grant £149,621,901

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Enclosure 2

2020/21 Schools Block Local Formula Rates

2019/20 Rates 2020/21 Rates Funding Factors (£) (£) AWPU - Primary 2,911.69 3,133.87 AWPU - Key Stage 3 4,201.52 4,407.39 AWPU - Key Stage 4 4,762.52 5,003.00 FSM - Primary 893.07 813.06 FSM - Secondary 1,214.03 1,104.73 FSM6 - Primary 655.60 725.73 FSM6 - Secondary 976.49 1,034.33 EAL - Primary 565.49 587.98 EAL - Secondary 1,520.77 1,582.59 Mobility - Primary 1,922.60 961.64 Mobility - Secondary 1,922.60 1,373.78 Prior Attainment - Primary 1,122.19 1,170.46 Prior Attainment - Secondary 1,701.95 1,769.42 Lump Sum - Primary 175,000.00 175,000.00 Lump Sum - Secondary 175,000.00 175,000.00 Minimum Funding Guarantee -1.50% 0.50% Cap 4.16% 6.66%

140 School level delegated budgets 2020/21 (Schools Block) Enclosure 3

2019/20 2020/21 Minimum Number of Number of Allocation after Allocation after Change Funding pupils on pupils on allowing for de- Per Pupil allowing for de- Per Pupil School Name Change per Pupil Guarantee role role delegated Allocation delegated Allocation (%) Change 2019/20 2020/21 budgets budgets (%) Burlington Junior School 476 476 0 1,967,210 4,078.46 2,050,437 4,249.00 4.18% 4.60% Burlington Infant and Nursery School 359 358 -1 1,515,170 4,115.21 1,598,221 4,358.25 5.91% 6.66% Coombe Hill Infant School 299 300 1 1,235,617 4,063.31 1,309,646 4,293.06 5.65% 6.66% Ellingham Primary School 378 392 14 1,569,534 4,004.32 1,714,818 4,223.71 5.48% 6.66% Lime Tree Primary School 439 390 -49 1,796,310 4,006.17 1,712,178 4,275.39 6.72% 6.07% Tolworth Junior School 361 361 0 1,529,636 4,129.60 1,609,148 4,354.24 5.44% 6.16% Tolworth Infant and Nursery School 302 322 20 1,326,872 4,256.81 1,465,465 4,429.64 4.06% 5.68% Coombe Hill Junior School 420 418 -2 1,662,828 3,882.39 1,750,661 4,106.57 5.77% 6.41% Maple Infants' School 271 266 -5 1,147,970 4,120.05 1,194,461 4,363.65 5.91% 6.66% Alexandra School 403 426 23 1,669,047 3,944.30 1,833,451 4,151.94 5.26% 6.58% King Athelstan Primary School 406 415 9 1,995,402 4,875.09 2,073,203 4,887.96 0.26% 0.50% Grand Avenue Primary and Nursery School 616 613 -3 2,386,371 3,722.96 2,496,761 3,935.72 5.72% 6.15% Malden Manor Primary and Nursery School 396 396 0 1,661,248 4,107.97 1,734,599 4,281.98 4.24% 4.75% King's Oak Primary School 436 414 -22 2,294,859 5,091.02 2,208,736 5,135.80 0.88% 0.50% Lovelace Primary School 543 563 20 2,186,882 3,962.55 2,365,623 4,132.95 4.30% 5.00% Fern Hill Primary School 660 659 -1 2,549,383 3,729.90 2,699,024 3,961.13 6.20% 6.66% Christ Church New Malden CofE Primary School 411 413 2 1,648,902 4,024.92 1,748,687 4,045.07 0.50% 6.36% Christ Church CofE Primary School 535 532 -3 1,935,758 3,635.32 2,038,014 3,852.51 5.97% 6.51% Malden Parochial CofE Primary School 267 239 -28 1,067,034 4,015.51 1,011,658 4,248.82 5.81% 4.66% St Andrew's and St Mark's CofE Junior School 322 327 5 1,295,210 4,027.09 1,372,892 4,207.95 4.49% 5.43% St John's C of E Primary School 207 200 -7 870,887 4,212.65 891,635 4,466.57 6.03% 6.66% St Paul's CofE Primary School 207 208 1 868,949 4,211.68 917,126 4,425.30 5.07% 6.47% St Paul's CofE Primary School, Kingston Hill 360 347 -13 1,392,556 3,872.97 1,423,532 4,107.05 6.04% 6.37% St Matthew's CofE Primary School 392 394 2 1,491,290 3,805.83 1,584,491 4,027.37 5.82% 6.66% St Mary's CofE (Aided) Primary School 225 200 -25 955,430 4,246.19 910,186 4,549.32 7.14% 5.94% Corpus Christi Catholic Primary School 413 416 3 1,605,131 3,891.90 1,709,757 4,119.89 5.86% 6.66% Our Lady Immaculate Catholic Primary School 410 402 -8 1,559,094 3,819.23 1,620,281 4,051.29 6.08% 6.59% St Joseph's Catholic Primary School 215 195 -20 984,716 4,590.30 958,782 4,925.36 7.30% 6.66%

141 St Luke's CofE Primary School 270 270 0 1,073,848 3,983.46 1,122,393 4,165.47 4.57% 5.46% Chessington School 402 440 38 2,585,264 5,801.03 2,939,708 6,120.89 5.51% 6.66% Castle Hill Primary School 403 403 0 1,784,633 4,420.64 1,805,769 4,440.57 0.45% 0.50% Knollmead Primary School 192 189 -3 904,828 4,681.63 942,441 4,947.27 5.67% 6.66% Green Lane Primary and Nursery School 369 377 8 1,553,004 4,143.14 1,574,638 4,151.42 0.20% 0.50% Latchmere School 871 880 9 3,166,697 3,607.28 3,367,288 3,797.18 5.26% 5.64% Robin Hood Primary and Nursery School 196 191 -5 944,903 4,722.79 987,731 4,967.80 5.19% 5.79% St Agatha's Catholic Primary School 403 406 3 1,534,115 3,773.11 1,634,997 3,992.34 5.81% 6.66% Kingston Community School 107 140 33 589,814 5,517.33 745,820 5,328.21 -3.43% 5.15% The Kingston Academy 821 899 78 4,414,020 5,340.85 5,073,800 5,611.91 5.08% 5.65% Coombe Girls' School 1,086 1,115 29 5,586,898 5,092.89 6,101,889 5,417.25 6.37% 6.66% Southborough High School 645 668 23 3,540,783 5,447.92 3,891,319 5,783.45 6.16% 6.66% The Tiffin Girls' School 839 871 32 4,070,415 4,800.00 4,399,991 5,000.00 4.17% 4.52% Tolworth Girls' School and Sixth Form 1,024 1,077 53 5,397,480 5,232.16 6,030,503 5,507.01 5.25% 6.66% Tiffin School 870 903 33 4,220,722 4,800.00 4,570,171 5,000.00 4.17% 4.51% Richard Challoner School 778 791 13 3,976,582 5,043.80 4,268,907 5,328.34 5.64% 5.98% The Holy Cross School 761 764 3 3,898,105 5,076.43 4,160,754 5,398.39 6.34% 6.66% Coombe Boys' School 719 773 54 3,967,808 5,463.97 4,464,136 5,722.27 4.73% 5.27% The Hollyfield School and Sixth Form Centre 862 889 27 4,507,115 5,185.54 4,938,964 5,511.31 6.28% 6.66%

* amounts exclude Business Rates budgets

142