Meeting: Scrutiny Commission Date/Time: Wednesday, 12 September 2018 at 10.00 am Location: Sparkenhoe Committee Room, County Hall, Glenfield Contact: Mrs R Whitelaw (Tel: 0116 305 2583) Email: [email protected]

Membership

Mr. S. J. Galton CC (Chairman)

Mr. D. C. Bill MBE CC Mrs. R. Page CC Mr. M. H. Charlesworth CC Mr. A. E. Pearson CC Dr. T. Eynon CC Mr. T. J. Pendleton CC Dr. R. K. A. Feltham CC Mr. T. J. Richardson CC Mrs. H. J. Fryer CC Mrs B. Seaton CC Mr. J. Morgan CC Mr. M. B. Wyatt CC

Please note: this meeting will be filmed for live or subsequent broadcast via the Council’s web site at http://www.leicestershire.gov.uk – Notices will be on display at the meeting explaining the arrangements.

AGENDA

Item Report by

1. Minutes of the meeting held on 6 June 2018. (Pages 5 - 14)

2. Question Time.

3. Questions asked by members under Standing Order 7(3) and 7(5).

4. To advise of any other items which the Chairman has decided to take as urgent elsewhere on the agenda.

5. Declarations of interest in respect of items on the agenda.

Democratic Services ◦ Chief Executive’s Department ◦ Leicestershire County Council ◦ County Hall Glenfield ◦ Leicestershire ◦ LE3 8RA ◦ Tel: 0116 232 3232 ◦ Email: [email protected]

www.twitter.com/leicsdemocracy www.http://www.leicestershire.gov.uk 6. Declarations of the Party Whip in accordance with Overview and Scrutiny Procedure Rule 16.

7. Presentation of Petitions under Standing Order 36.

8. 2018/19 Medium Term Financial Strategy Director of (Pages 15 - 38) Monitoring (Period 4). Corporate Resources 9. Medium Term Financial Strategy Update. Director of (Pages 39 - 58) Corporate Resources A copy of a report to be considered by the Cabinet at its meeting on 14 September is attached for the consideration of the Commission.

10. Corporate Asset Investment Fund Annual Director of (Pages 59 - 122) Performance Report 2017-18 and Strategy for Corporate 2018 to 2022. Resources

A copy of a report to be considered by the Cabinet at its meeting on 14 September is attached for the consideration of the Commission.

11. Whole Life Disability Strategy. Director of Adults (Pages 123 - and Communities 166) and Director of Children and Family Services 12. Dates of future meetings.

Future meetings of the Commission are scheduled to take place on the following dates:-

Wednesday 31 October 2018 at 10.30am; Wednesday 14 November 2018 at 10.30am; Monday 28 January 2019 at 10.30am; Wednesday 6 March 2019 at 10.30am; Wednesday 10 April 2019 at 10.30am; Wednesday 12 June 2019 at 10.30am; Wednesday 4 September 2019 at 10.30am; Wednesday 6 November 2019 at 10.30am.

13. Any other items which the Chairman has decided to take as urgent. QUESTIONING BY MEMBERS OF OVERVIEW AND SCRUTINY

The ability to ask good, pertinent questions lies at the heart of successful and effective scrutiny. To support members with this, a range of resources, including guides to questioning, are available via the Centre for Public Scrutiny website www.cfps.org.uk.

The following questions have been agreed by Scrutiny members as a good starting point for developing questions:-

 Who was consulted and what were they consulted on? What is the process for and quality of the consultation?  How have the voices of local people and frontline staff been heard?  What does success look like?  What is the history of the service and what will be different this time?  What happens once the money is spent?  If the service model is changing, has the previous service model been evaluated?  What evaluation arrangements are in place – will there be an annual review? This page is intentionally left blank 5 Agenda Item 1

Minutes of a meeting of the Scrutiny Commission held at County Hall, Glenfield on Wednesday, 6 June 2018.

PRESENT

Mr. S. J. Galton CC (in the Chair)

Mr. D. C. Bill MBE CC Mrs. R. Page CC Mr. M. H. Charlesworth CC Mr. A. E. Pearson CC Dr. T. Eynon CC Mr. T. J. Pendleton CC Dr. R. K. A. Feltham CC Mr. T. J. Richardson CC Mrs. H. J. Fryer CC Mrs B. Seaton CC Mr. J. Morgan CC Mr. M. B. Wyatt CC

In attendance.

Mr J T Orson CC, Chairman of the Police and Crime Panel (minute 10 refers)

1. Appointment of Chairman.

RESOLVED:

That it be noted that Mr. S. J. Galton CC has been appointed Chairman of the Scrutiny Commission for the period ending with the Annual Meeting of the County Council in 2019 in accordance with Article 6.05 of the Constitution.

2. Election of Vice-Chairman.

RESOLVED:

That Mrs. R. Page CC be elected Deputy Chairman of the Scrutiny Commission for the period ending with the date of the Annual Meeting of the County Council in 2019.

3. Minutes.

The minutes of the meeting held on 7 March 2018 were taken as read, confirmed and signed.

4. Question Time.

The Chief Executive reported that no questions had been received under Standing Order 35.

5. Questions asked by members under Standing Order 7(3) and 7(5).

The Chief Executive reported that no questions had been received under Standing Order 7(3) and 7(5). 6

6. Urgent Items.

There were no urgent items for consideration.

7. Declarations of interest.

The Chairman invited members who wished to do so to declare any interest in respect of items on the agenda for the meeting.

Members of the Commission who were also District Councillors declared a personal interest in all matters which affected district councils.

Mr M B Wyatt CC declared a disclosable pecuniary interest in the report on Market Towns (minute 12 refers) as he owned two local businesses in the town of Coalville. Mr Wyatt undertook to leave the room during consideration of that item, subject to him being permitted to make representations first as members of the public were also allowed to attend the meeting for the same purpose.

Dr T Eynon CC declared a personal interest in the report on Market Towns (minute 12 refers) as she was a volunteer at Hermitage FM Radio which was situated in Coalville town centre.

8. Declarations of the Party Whip in accordance with Overview and Scrutiny Procedure Rule 16.

There were no declarations of the party whip.

9. Presentation of Petitions under Standing Order 36.

The Chief Executive reported that no petitions had been received under Standing Order 36.

10. Update on Police and Crime Panel Activity.

The Commission considered a presentation from the Chairman of the Police and Crime Panel which provided details of the activity undertaken by the Panel since the previous report to the Scrutiny Commission. A copy of the presentation marked ‘Agenda Item 10’ is filed with these minutes.

In introducing his presentation, Mr Orson advised the Commission that the Police and Crime Panel (PCP) continued to mature. He felt that it had become less confrontational and had a good relationship with the Police and Crime Commissioner (PCC).

Arising from discussion the following points were raised:-

(i) The PCP’s role was to support and challenge the PCC. In terms of ensuring that the police force received adequate funding, the PCP had written a letter for the PCC to use as part of his campaign for fairer funding. No formal response had been received. The PCP continued to press this issue and 7

used its scrutiny of the performance report to encourage the PCC to find efficiencies.

(ii) The PCP’s role in the appointment of a new Chief Constable was to hold a confirmation hearing, where it had the power of veto. However, this power could only be used once and the second candidate chosen by the PCC would have to be accepted.

(iii) There was a tension between having police officers who were visible in the community and the need for intelligence-led policing to respond to threats such as cyber-crime. It was agreed that the visibility of police officers improved public confidence and could lead to increases in the reporting of incidents like hate crime. The role of Police Community Support Officers in increasing public confidence was welcomed, although it was recognised that, as they had less powers than a uniformed police officer, they had been left vulnerable to service reductions. It was suggested that the PCP should consider a report on rural crime issues in order to assure itself that there was sufficient visibility of police officers in these areas.

(iv) Mr Orson considered the PCP’s most successful meeting to have been when the previous PCC had disagreed with Blaby District Council and the County Council over Section 106 monies. Everyone had performed well at the meeting and the desired outcome had been achieved. Generally, Mr Orson felt that the PCP was most successful through its ability to highlight issues in a public forum and challenge the PCC when necessary.

(v) Some members disagreed with the current arrangements as they felt that they had reduced the level of elected member involvement with the police. However, the Commission was assured that monthly crime statistics were shared with the Community Safety Partnerships. The next performance report to be considered by the PCP could also be shared with the Commission.

(vi) Members queried how the PCP assured itself of the effectiveness of work with neighbouring police forces, for example where crime crossed the county border. It was confirmed that relationships were good and that any concerns could be raised with the PCC through the district council representatives on the PCP. Mr Orson also undertook to encourage district council representatives to share information with other elected members on the council on a regular basis.

(vii) All Community Safety Partnerships had information relating to Project Darwin, a move towards more locality based policing; however this information, including the geographic areas and number of officers involved in each investigation unit, could also be shared with the Scrutiny Commission. One of the areas that would be addressed by Project Darwin was the timeliness of police responses.

(viii) It was confirmed that the PCP had questioned the PCC regarding the police response to burglaries, where there was anecdotal evidence that some residents were given a crime number but were not visited by the Police. The PCP had also considered satisfaction rates and noted with concern that the 8

satisfaction rate was higher for the first call or visit than for any subsequent activity. This was an area of continued focus for the PCP.

(ix) As a result of reports from Her Majesty’s Inspectorate of Constabulary and Fire and Rescue Services, the PCP had scrutinised the PCC on the accuracy of crime recording by Leicestershire police. The PCP was reassured that the police had taken the matter seriously and had made changes to the way it dealt with crime recording. It was estimated that 5,820 of the 13,171 additional crimes recorded during the last year could be attributed to improvements in crime recording activity.

(x) In response to a query regarding the high level of reserves held by the PCC, it was confirmed that some reserves had been invested in new technology at the start of the current financial year. The PCP would continue to scrutinise the level of reserves. It was not known whether funding for unfilled posts in the Office of the PCC was reallocated or added to reserves but Mr Orson undertook to find this out and report back to the Commission.

(xi) The PCC set out his priorities in his Police and Crime Plan 2017-2021. The role of the PCP including scrutinising his progress in addressing these priorities. The 101 non-emergency telephone service was one of the current priorities, actions being taken included training to improve the quality of call handling.

RESOLVED:

(a) That the Chairman of the Police and Crime Panel be thanked for his presentation and the information now provided;

(b) That the Chairman of the Police and Crime Panel be invited to provide an update on the Panel’s work to the Commission in a year’s time;

(c) That the following information be circulated to all members of the Commission:- (i) The performance report due to be considered by the Police and Crime Panel in July 2018; (ii) Whether funding for unfilled posts in the Office of the Police and Crime Commissioner is reallocated or carried forward; (iii) The geographic areas and number of officers involved in each investigation unit under Project Darwin.

(d) That the Police and Crime Panel be requested to consider receiving updates on Project Darwin and Rural Crime later in the year;

(e) That the Chairman of the Police and Crime Panel be requested to remind Panel Members representing District Councils to disseminate information to their colleagues as appropriate.

11. Leicester, Leicestershire and Rutland Resilience Preparedness.

The Commission considered a presentation from the Chief Executive regarding the work of the Leicester, Leicestershire and Rutland (LLR) Resilience Partnership. A copy of the slides forming the presentation is filed with these minutes. 9

It was confirmed that the arrangements for the LLR Resilience Partnership reflected the best practice highlighted in the report of the Manchester Terror Attack. There was also sufficient strength and depth in the Partnership to provide a 24/7 service in an emergency situation.

With regard to the Hinckley Road fire in Leicester, members were advised that a Recovery Co-ordination Group had been set up the morning after the fire and a public meeting had been held early on in order to dispel any myths that might be circulating. This had been positively received. London Fire and Rescue Service had also undertaken a real time peer review during the fire which had reported that Leicestershire was responding well and had a good grip on the situation.

In terms of education and prevention for the public, the LLR Resilience Partnership worked with district councils, produced newsletters and information packs for residents and attended community events. An LLR-Prepared week took place annually in October to ensure people were ready for winter and the Partnership also supported young people working towards the Duke of Cornwall Community Safety Award.

RESOLVED:

(a) That the resilience arrangements across Leicester, Leicestershire and Rutland be noted;

(b) That officers be requested to provide an update on resilience preparedness to the Commission in a year’s time, including details of any lessons learnt from the public report into the Grenfell Tower disaster.

12. Market Towns.

Mr M B Wyatt CC declared a disclosable pecuniary interest in this item but, under the County Council’s Code of Conduct, was permitted to make representations as members of the public were also allowed to attend the meeting for the same purpose. Mr Wyatt requested that consideration be given to a bypass for Bardon Road in Coalville, given the amount of building work and new businesses moving into the area. It was confirmed that the County Council was currently working with the Leicester and Leicestershire Enterprise Partnership (LLEP) to identify priorities for investment and with the City Council transport team to model the transport requirements for growth. Alleviating traffic in Coalville would form part of these considerations. Mr Wyatt then left the room until the conclusion of discussion on this item.

The Commission considered a report of the Chief Executive which advised of County Council activity which was supporting the development and economic prosperity of Leicestershire towns. A copy of the report marked ‘Agenda Item 12’ is filed with these minutes.

Arising from discussion the following points were raised:-

(i) It was noted that the Strategic Growth Plan was still in draft form and that therefore the growth areas identified in that Plan had yet to be confirmed. However, there would definitely be housing growth in Leicestershire in the 10

future and it would be important to start planning the infrastructure, including health, schools and other services, required to deliver it at an early stage and to have conversations with the Government about funding and support. The Council’s response to the National Planning Policy Framework Consultation had raised the need for the implementation of a wide range of infrastructure to be supported at a national level.

(ii) The County Council’s property portfolio was managed in order to maximise revenue whilst also contributing towards the Council’s strategic outcomes. It was recognised that the Council’s property developments should have regard to place and where feasible, the Council should work with the public and private sector to promote tourism in an area. The Economic Growth Team worked closely with Strategic Property to manage the tension between maximising revenue return and delivering outcomes for communities and businesses

(iii) The County Council had recently become a signatory to the UK100 campaign, committing to using 100 per cent clean energy by 2050. Clean growth was one of the challenges in the National Industrial Strategy which would need to be reflected locally.

(iv) The free Wi-Fi through the Digital High Street project was popular; Hinckley town centre had 7000 registered users. It had enabled the Council to collect data such as age and gender profiles on people using town centres. This was compliant with General Data Protection Regulations (GDPR) and helped in developing a more targeted offer. Towns that did not have free Wi-Fi had decided that they could not collectively meet the cost of installation and ongoing maintenance.

(v) The Government had recently produced a retail and leisure trends report which highlighted issues such as the decline in the evening economy and closure of shops. This would be considered by the Market Town Steering Group and consideration would be given to how the approach to town centres could be adapted, for example to improve the overall leisure experience and reduce the focus on retail.

(vi) The business community decided whether to establish a Business Improvement District (BID) in a town. This would result in an additional levy on business rates, but the benefits of the BID, such as free commercial waste schemes and joint promotion and branding of the town centre, usually outweighed this. The County Council and district council, along with local businesses, would have a vote and pay a levy if they owned premises in the BID area.

(vii) Concern was expressed that not all local members were represented on BID boards and that those local members who were not represented were not kept informed of developments. The Commission was advised that consideration would be given to ways of improving communication with local members.

Mr D C Bill CC asked for his concerns that not all local members were represented on BID boards to be placed on record, along with his concerns that the Hinckley zone 4 town centre improvements seemed to be focused on attracting staff to the 11

Horiba MIRA Technology Park Enterprise Zone and that the implementation of zones 1 to 3 had not improved traffic conditions in Hinckley.

RESOLVED:

(a) That the County Council activity which is supporting the development and economic prosperity of Leicestershire towns be noted;

(b) That officers be requested to meet with the Scrutiny Commissioners to discuss the sharing of information with local members on developments affecting market towns.

The meeting adjourned at 1.15pm and reconvened at 2.00pm.

13. Change to the Order of Business.

The Chairman sought and obtained the consent of the Commission to vary the order of business from that set out on the agenda.

14. 2017/18 Provisional Revenue and Capital Outturn.

The Commission considered a report of the Director of Corporate Resources which set out the provisional revenue and capital outturn for 2017/18. A copy of the report marked ‘Agenda Item 14’ is filed with these minutes.

In his introduction to the report, the Director of Corporate Resources advised that the Council’s financial position was likely to remain challenging. An announcement of a multi-year settlement of between three and four per cent for the NHS was expected; this would limit the amount of funding available for the rest of the public sector.

Arising from discussion the following points were raised:-

(i) The current Medium Term Financial Strategy (MTFS) contained higher growth estimates for children and family services than had previously been the case. It was expected that this would address the overspend that had been reported during the last couple of years and reduce the likelihood of an overspend being reported this year.

(ii) The underspend on the transportation budget had partially been redirected to support overspends in social care and special educational needs transport. It was confirmed that the £0.4 million saving on bus services in the current MTFS was still required, despite the underspend during 2017/18. Indeed, all future savings needed to be seen in the overall context for the County Council, which was that £50 million savings needed to be found over the next four years.

(iii) The underspend on residential and nursing care was caused by the average level of need not being as high as anticipated, not by a reduction in service. The County Council had a policy of managing demand where appropriate but this did not prevent the service from meeting people’s needs. It was difficult to forecast demand accurately; there had previously been years where the adult social care budget had been overspent and additional needs had been 12

made available. This would continue to be the case if there were overspends in the future.

(iv) It was queried whether delayed transfers of care were caused by a reluctance from patients to choose residential and nursing care; however it was confirmed that this issue had recently been scrutinised by the Adults and Communities Overview and Scrutiny Committee, which was satisfied with current performance. Residential and nursing care fees were reviewed annually and had increased to reflect the national living wage.

(v) The County Council currently received £25 million from the NHS to support adult social care. The expected multi-year settlement for the NHS should restate this commitment and give some long term stability to this funding stream. It was not known whether the NHS settlement would include any additional funding for adult social cate.

(vi) The additional business rates income, caused by a higher return than had originally been forecasted, would be added to the reserve used to fund future developments. Forecasting the level of business rates could be very complicated although the County Council would discuss with district councils whether improvements could be made to the accuracy of forecasting.

(vii) It was confirmed that there was a central maintenance fund for all County Council facilities, including the Century Theatre. Where commercial services required investment this would be addressed on a case by case basis, with a business case being required.

RESOLVED:

That the provisional revenue and capital outturn for 2017/18 be noted.

15. Outline Commercial Strategy and Workplan 2018-2022.

The Commission considered a report of the Director of Corporate Resources which sought its views on the Outline Commercial Strategy and Workplan 2018-2022 as part of the consultation prior to the Strategy being considered by the Cabinet on 6 July 2018. A copy of the report marked ‘Agenda Item 15’ is filed with these minutes.

The Scrutiny Commission gave its strong support to the Commercial Strategy, recognising that traded services provided an income which protected frontline services. It was hoped that the Council would continue to identify new commercial opportunities.

It was pleasing to note the change in the County Council’s financial policy. From 2010, the focus had been on paying off debt, identifying efficiencies and service reductions. The focus was now on generating income and efficiencies. Although there were some risks involved, it was important to maximise opportunities for income.

Managing relationships with academies could be challenging, but the risk was reduced because the County Council provided services to academies across a number of areas. Therefore, even if some academies decided to commission some services from elsewhere, there was still sufficient business coming in. 13

RESOLVED:

(a) That the outline Commercial Strategy and Workplan 2018-2022 be welcomed;

(b) That the Cabinet be advised of the views of this Commission at its meeting on 6 July. 16. Corporate Complaints and Compliments Annual Report 2017-18.

The Commission considered a report of the Director of Corporate Resources which presented the Corporate Complaints and Compliments Annual Report covering the period 1 April 2017 to 31 March 2018. A copy of the report marked ‘Agenda Item 16’ is filed with these minutes.

Arising from discussion the following points were raised:-

(i) In the context of efficiency savings and reductions to service, it was felt that the report told a positive story. The improvements made in terms of the information available to customers online were particularly pleasing. It was noted that drainage was still an area where the quality of information could be improved.

(ii) Complaints about the sensitivity and empathy of staff referred to the tone and perception of responses, rather than rudeness or a refusal to answer a question. It was felt that the increase in acknowledgement of fault in these circumstances was positive and reflected a more open and honest style of management.

(iii) Quality of work was a large category covering a range of issues such as an administrative process going wrong or poor pothole repairs. It was difficult to articulate trends within this category.

(iv) It was suggested that future reports should include some context regarding the level of demand faced by the system. It would also be helpful if the report could give an indication of the cost of complaints.

(v) Complaints received by elected members were only recorded corporately if they had been referred into the corporate complaints process, as the County Council had agreed to give members the freedom to deal with complaints as they wished. It was agreed that the Customer Service Centre, which was often the first point of contact for elected members, needed to be more responsive to them. Consideration would be given to ways in which improvements could be made.

(vi) It was noted that the first call about an issue, such as grass catting, by a complainant was treated as a request rather than a complaint. It would become a complaint if repeated calls were made or if there were complications such as poor workmanship or undue delay.

(vii) There were 81 cases relating to on-going correspondence around complaints which had already been considered and responded to. These were caused by a small number of serial complainants who raised a range of points 14

through their correspondence which were then recorded as different cases. Lessons had been learnt from this type of complaint; dealing with matters correctly at the first point of contact was essential to prevent ongoing correspondence.

(viii) The time taken to respond to complaints was not necessarily the same as the time take to complete works requested as a result of the complaint. The process usually involved the Council agreeing to undertake some work and the complainant being advised of the timescale and asked to come back if the work was not completed by the scheduled date.

(ix) Members welcomed the ‘report it’ app, which was generally felt to be a useful way of reporting highways problems. However, it would be helpful if members could be alerted once the work was completed. There were also issues regarding limits to the size of files that could be uploaded to the app.

RESOLVED:

(a) That the Corporate Complaints and Compliments Annual Report be noted;

(b) That officers be requested to consider incorporating context regarding the level of demand going into the system and an indication of the cost associated with complaints in the following year’s report;

(c) That officers be requested to give consideration to the process for members to contact the Customer Service Centre.

17. Draft Overview and Scrutiny Annual Report 2017/18.

The Commission considered the draft Overview and Scrutiny Annual Report which summarised some of the key highlights of scrutiny work during 2017/18. A copy of the report marked ‘Agenda Item 13 is filed with these minutes.

Members were supportive of the report and suggested that, in the summary of the Scrutiny Commission’s activity, the positive nature of the discussion with Severn Trent Water should be highlighted.

RESOLVED:

That the draft Overview and Scrutiny Annual Report 2017/18 be approved for submission to the County Council on 27 June 2018, subject to it being amended in the light of the comments now made.

18. Date of next meeting.

RESOLVED:

It was noted that the next meeting of the Commission would be held on 12 September at 10.30 am.

10.30 am - 3.48 pm CHAIRMAN 06 June 2018 15 Agenda Item 8

SCRUTINY COMMISSION - 12 SEPTEMBER 2018

REPORT OF THE DIRECTOR OF CORPORATE RESOURCES

2018/19 MEDIUM TERM FINANCIAL STRATEGY MONITORING (PERIOD 4)

Purpose

1. To provide members with an update on the 2018/19 revenue budget and capital programme monitoring position.

Policy Framework and Previous Decisions

2. The 2018/19 revenue budget and the 2018/19 to 2021/22 capital programme were approved by the County Council at its budget meeting on 21st February 2018 as part of the Medium Term Financial Strategy.

3. The Cabinet on 22nd May 2018 approved the following revisions to the 2018-22 MTFS:  An additional investment of £5m for highways maintenance, funded from returns generated by the Corporate Asset Investment Fund over the next 2 years;  The expected increase in 2018/19 business rates income of £1.2m be allocated to the future developments fund.

Background

4. The latest revenue budget monitoring exercise shows a net projected underspend of £3.4m.

5. The latest capital programme monitoring exercise shows a net projected underspend of £6.1m.

6. The monitoring information contained within this report is based on the pattern of revenue and capital expenditure and income for the first four months of this financial year. 16

REVENUE BUDGET

7. The latest revenue budget monitoring exercise shows a net projected underspend of £3.4m. The results of the exercise are summarised in Appendix 1 and details of major variances are provided in Appendix 2.

Children and Family Services

Dedicated Schools Grant

8. Dedicated Schools Grant (DSG) is forecast to overspend by £3.3m due to continued pressure within the High Needs Block.

9. The number of Education Health and Care Plans (EHCP) is increasing through population increases as a result of Special Educational Needs and Disabilities (SEND) reform and results in an estimated overspend of £3.2m. Lower cost local provision continues to be developed as an alternative to more costly independent provision; three further units for children with Autism Spectrum Disorders will open in the new academic year. Under SEND reform students can access high needs support where they have an EHCP up to the age of 25, and numbers are increasing. The forecast includes expected destinations for pupils for the 2018/19 academic year, which will only be determined as destinations are confirmed in October.

10. Some staff within the department are employed on Teachers’ terms and conditions and the Department for Education has announced a 3.5% pay award for this group of employees. It has not yet been possible to ascertain the impact of this pay award but this will further increase the pressure on budgets. Whilst the Department for Education have announced that there will be additional funding for schools to meet the pay award, no funding is expected for centrally employed staff. This will increase the pressure on the DSG as the grant has not been increased to cover this additional cost.

11. A deficit on DSG can be carried forward with the permission of the Schools Forum and becomes the first call on the following years grant; should approval not be granted the local authority can seek adjudication from the Secretary of State. Based on the current position the forecast overspend would be part funded from the DSG earmarked fund which totals £2.2m, with the balance (£1.1m) potentially carried forward to 2019/20 as a deficit on the DSG earmarked fund to be a first call on the 2019/20 schools budget. There is a risk that the balance may need to be met from the overall County Council budget and this is reflected by a contingency to use part of the overall net underspend to increase the DSG earmarked fund, as noted in paragraph 34 below.

Local Authority Budget

12. The local authority budget is reported to overspend by £1.3m (1.8%).

13. The recruitment of social workers is a concern nationally and that position is reflected in Leicestershire resulting in the need to use agency workers to fill vacancies. The 17

financial impact of this is an estimated overspend of £0.5m (children’s social care, and safeguarding and quality assurance budgets).

14. The Unaccompanied Asylum Seeking Children budget is forecast to overspend by £0.4m. This is a volatile area of the budget where numbers of children and associated costs can change rapidly. The grant received from the Home office does not fully cover costs.

15. The Children’s Social Work Act 2017 extended the statutory duty to provide personal advisors to care leavers from age 18 to 25. Whilst grant has been received it is insufficient to meet the additional cost, resulting in a forecast overspend of £0.2m on the Children in Care Service budget.

16. Expenditure on placements for Looked after Children (LAC) is in line with budget expectations and includes additional costs arising from the increase in foster fees and invest to save costs arising from the Therapeutic Wrap Around Support contract (MISTLE). The position will continue to be closely monitored.

Adults and Communities

17. A net underspend of £3.4m (2.5%) is forecast. This is after inflation of £5.7m mainly due to Fee Review increases, offset by £2m of the 2017/18 underspend that was not adjusted for in the original 2018/19 budget.

18. The main variances are:

 Residential Care £1.2m underspend due to a reduction in number of service users, a reduction in the cost of packages and an increase in service user income.  Supported living £0.7m underspend due to Transforming Care service users that have not yet transferred to Supported Living from Health.  Direct Payments £0.5m net underspend due to changes in service users and their packages.  Homecare £0.4m overspend relating to increased costs of service user packages.

19. In addition, staffing and overhead budgets across the department are forecasting an underspend of £1.1m. As last year following the restructure of the Department there are a high number of social care vacancies; some of these will be offset by the use of agency staff or are held in advance of savings. Recruitment is in progress and the level of agency staff is reducing.

20. Other budgets forecast a net underspend of £0.3m which is mainly due to changes in demand and implementing changes at in house accommodation.

21. As in previous years the profile of service users and their care needs are constantly changing which may impact on the services commissioned. Overall demand led expenditure totals circa £160m. 18

Public Health

22. The department is forecasting an overspend of £0.1m comprising a number of small variances across various commissioned activities. The Public Health grant for the year is £24.9m.

Environment & Transport

23. The Department is forecasting a net overspend of £1.2m (1.8%).

Highways

24. A net overspend of £1.1m is forecast comprising the following items:

 Staffing and Administration (£0.9m) due in part to the introduction of market premia, staffing costs which will not be fully met by income, a delay in the charging in the pre application advice service, slightly offset by additional Section 38 and Section 278 income and savings from some vacant posts.  Winter maintenance (£0.2m) due to the necessity to treat roads in April, an under provision for charges in 2017/18 and additional costs to fill empty barns.

Transportation

25. A net overspend of £0.4m due mainly to is forecast including:

 Special Educational Needs transport (£0.5m) due to an increased number of solo occupancy journeys. Work is ongoing to minimise these costs in 2018/19.  Fleet transport (£0.1m) due to additional staffing costs and vehicle repairs.  Mainstream school transport (-£0.2m) underspend arising from a reduction in pupil numbers.

Environment and Waste

26. A net underspend of £0.3m is forecast which is made up of the following key items: Overspend

 Landfill (£0.1m) due to increased waste tonnages. This is partly due to increased trade waste and also because rigid plastics now go to landfill. Underspends

 Treatment Contracts (£0.1m) due to contract price reduction for wood.  Composting Contracts (£0.1m) due to decrease in green waste tonnage due to weather (drier and therefore lower growth).  Haulage and Waste Transfer (£0.1m) due to an increase in direct deliveries.  Income (£0.1m) extra income forecast from increased trade waste.

27. The department is reviewing the overall position and is taking effective management to reduce where possible the overall position, including ensuring that all income is 19

being forecast and included in recharges. A further update on the overall position will be provided in period 5.

Chief Executives

28. The department is forecasting an underspend of £0.3m (3.1%) which is mainly due to staff vacancies.

Corporate Resources

29. The department is forecasting a net underspend of £0.2m (0.6%). This is primarily the result of savings through staff attrition. These are partially offset by increased cost pressures associated with maternity leave, building running costs, locality offices and libraries and community facilities property costs.

Contingencies

30. An underspend of £0.1m is forecast regarding the Carbon Reduction Commitment expenditure. There has been a significant fall in the scale of CO2 tonnages relating to energy consumption, particularly following the Council’s investment in switching street lighting to LEDs.

31. Transfers of £10.0m have been made from the inflation contingency, mainly relating to the 2018/19 pay award, increases in employer pension contributions and the Adult Social Care Fee Review. This results in a revised budget of £5.0m in the contingency, of which £2m can be released due to a lower net inflation requirement for A&C as a consequence of additional income continuing from 2017/18 as described earlier in the report. The balance of £3m is held for other inflation issues to be finalised during the year.

Central Items

32. The Central Grants and Income budget shows additional income of £2.4m, relating to the following:

 The late notification of the Adult Social Care Support Grant (£1.5m, 2018/19 only). The additional income has been added to the Future Developments Fund (and is shown on the Revenue Funding of Capital line) to provide funding for proposals to reconfigure the Council’s in-house learning disability residential accommodation, approved by the Cabinet on 12th June 2018.  Prior year adjustments, mainly due to provisional estimates from the continuation of a detailed review of prior year open purchase orders that are no longer required (£0.9m).

33. An underspend of £0.1m is reported on Central expenditure. The underspend is made up of several small items, the largest relates to a £30,000 underspend on pre 1997 Local Government Reorganisation and LGR-related pension costs. 20

34. As set out in paragraphs 8 to 11 above, the DSG budget is forecast to overspend by £3.3m, £2.2m of which can be funded from the current balance on the DSG earmarked fund, with the remaining £1.1m shortfall potentially carried forward to 2019/20 as a deficit on the DSG earmarked fund to be a first call on the 2019/20 schools budget. There is a risk that the balance may need to be met from the overall County Council budget and this is reflected by a contingency to use part of the overall net underspend to increase the DSG earmarked fund by £1.1m.

Business Rates

35. The County Council is undertaking quarterly monitoring with the District Councils and Leicester City Council regarding the 2018/19 Leicester and Leicestershire Business Rates Pool. The latest forecasts show a potential surplus of around £6.6m in 2018/19 compared with a forecast of around £6.0m in January 2018.

Overall Revenue Summary

36. Overall there is a forecast underspend of £3.4m. At this stage it is anticipated that the underspend will be added to the Future Developments Fund to reduce the potential shortfall on the fund. Potential commitments on the Fund exceed current resources by circa £45m. Further details on the fund are provided later in the report.

CAPITAL PROGRAMME

37. The capital programme for 2018/19 totals £110.5m, including net slippage of £0.4m from 2017/18. At this stage an underspend of £6.1m is forecast. The main variances are reported below.

Children and Family Services

38. The latest forecast shows an underspend of £5.5m compared with the updated budget. The underspend will be carried forward at year end and included in the refresh of the capital programme as part of the 2019-23 MTFS. The main variances are:  Provision of Primary Places – £4.4m underspend. A contingency was held within the programme for any issues arising from September 2018 admission which was not required.  SEND Initiatives – additional places for children with Autism have been established from September 2018. An underspend of £0.8m has been held whilst the department establishes actions that may arise as a result of the High Needs block overspend.

Adults and Communities

39. The latest forecast shows net slippage of £0.4m compared with the updated budget. The main variances are:

 Mobile Library Vehicles - £0.3m slippage, no further vehicles planned to be purchased in 18/19. 21

 Changing Places - £0.2m slippage while further applications are sought.

Environment and Transport – Transportation Programme

40. The latest forecast shows net slippage of £3.0m compared with the updated budget. The main variances are:

 Melton Mowbray Eastern Distributor Road - £0.8m acceleration due to design work brought forward from 2019/20.  County Council Vehicle Programme - £0.8m acceleration of spend from future years’ allocations after evaluation of the fleet leading to some assets being identified as no longer being economical/safe to continue repairing and running.  Advance design - £0.5m acceleration due to works brought forward on the microsimulation project which will enable the project to finish earlier and the tool available for use earlier than planned.  Highways Capital Maintenance schemes - £0.4m acceleration of highways schemes.  Zouch Bridge - £2.5m slippage due to a public enquiry which took place in August 2018. The Department for Transport can take 12 weeks to publish their decision. Subject to the outcome the majority of spend is not anticipated until 2019/20; forecast start date in spring 2019. Works will take 18 months to complete.  Strategic Economic Plan (SEP) Anstey Lane A46 - £1.7m slippage due to identifying appropriate contractors to complete the work through the Medium Schemes Framework 3 (MSF3) which has now been issued. There is no forecast impact on the final completion date.  Strategic Economic Plan (SEP) M1 Junction 23 - £0.6m slippage due to identifying appropriate contractors to complete the work through the MSF3 framework. Also securing S106 agreements with developers has delayed progress but no impact on final completion date.  Croft Office Blocks Improvements - £0.3m slippage. Works have slipped primarily due to changes in key personnel to progress the project.

Chief Executives

41. Overall slippage of £1.9m is reported on the Rural Broadband Scheme, Phase 3 as delays have resulted from a longer than expected Open Market Review stage of the procurement, due to additional information being requested from a potential supplier to support their response. This was necessary to ensure the procurement met the requirements of the Broadband Programme Authority (BDUK). The contract is now expected to commence in January 2019.

Corporate Resources

42. The latest forecast shows net slippage of £0.6m compared with the updated budget. The main variances relates to the Snibston Country Park Future Strategy – slippage of £0.5m as a result of the delay in being granted planning permission and the subsequent need to review plans to reflect planning conditions and changes to the scheme. Work will now begin on site in January 2019. 22

Corporate Programme

43. The latest forecast shows net acceleration of £5.3m compared with the updated budget. The main variances relate to the Corporate Asset Investment Fund (CAIF):

 CAIF – East of Lutterworth Strategic Development Area (land purchase for residential and employment development) – acceleration £8.0m, land purchases expected to be completed in 2018/19, earlier than anticipated.  CAIF – Airfield Business Park (development of industrial units on part of the site) – acceleration £1.4m per the latest estimates of the spend profile.  CAIF – Loughborough University Science and Enterprise Park (LUSEP - development of an office block plus car parking spaces) slippage £2.7m due to delay in exchanging contracts with the University and the proposed tenant access. Contracts have been exchanged in July 2018 with a view to commencing works on site in February 2019.  CAIF - Coalville Workspace Project Vulcan Way (development of industrial units) – slippage £1.3m, works on site delayed to October/November 2018.

Capital Receipts

44. The requirement for capital receipts for 2018/19 is £15.4m, comprising £14.6m general and £0.8m earmarked capital receipts.

45. The latest forecast of receipts is £8.7m and a shortfall of £6.7m to the target. The shortfall relates to delays of the sale of five sites which are now expected to take place in 2019/20. Funding for the shortfall in the timing of capital receipts will be managed by temporarily using the capital financing earmarked fund, which is not required until later years of the MTFS.

Future Developments Fund

46. The overall balance of funding available for future developments currently totals £35m by 2021/22, excluding the £4.5m mentioned earlier in the report. The forecast position is after the following allocations made in 2018/19:

 Highways Maintenance – Restorative patching of roads, £5m, (Cabinet 22 May 2018).  ERP Replacement, £5m, (Cabinet 9 Feb 2018).  Reconfiguration Inhouse Short Breaks Accommodation, £1.5m (Cabinet 12 June 2018)  Embankment House, Nottingham – land appraisal works, £0.2m

47. There is a long list of projects requiring funding over the next 4 years. These include investment in infrastructure for schools and roads arising from increases in population, investment in supported living accommodation, investment in community speed enforcement (depending on the outcome of the pilot), a new records office and collection hub, major IT system replacements (mainly Oracle which the Council has had in place since the early 1990s) and a contribution and underwriting of section 106 developer contributions for the Melton Mowbray distributor road. As schemes 23

develop, they will be assessed and if agreed, funding released from the future development fund.

Corporate Asset Investment Fund

48. A summary of the Corporate Asset Investment Fund (CAIF) position as at period 4 for 2018/19 is set out below:

Capital Forecast Opening Expend- Net Forecast Income Capital iture Income Income Return Asset Class Value Incurred YTD FY FY £000 £000 £000 £000 %

Office 25,610 6 804 1,846 7.2% Industrial 12,034 - 380 708 5.9% Distribution 980 - 35 13 1.3% Development 15,015 142 17 10 0.1% Rural 18,751 154 -7 739 3.9% Other 1,115 - 0 92 8.3% Pooled Property 20,423 0 244 975 4.8% Private Debt 7,126 3,000 125 500 4.9%

TOTAL 101,054 3,302 1,598 4,883 4.7%

49. Overall the fund is forecasting to achieve a 4.7% income return for 2018/19. Excluding the ‘Development’ classification, which includes Airfield Farm, Bardon and works at Lutterworth South, the return would increase to 5.5%.

50. It should be noted that the above table excludes capital growth which is assessed annually as part of the asset revaluation exercise. The overall position will be included in the Annual Report produced after year end.

51. During April 2018, a further £3m was invested in Private Debt, increasing the total held to £10m (of a potential maximum of £20m).

Recommendation

52. The Scrutiny Commission is asked to note the contents of this report.

24

Background Papers

Report to County Council – 21 February 2018 – Medium Term Financial Strategy 2018/19 to 2021/22 http://politics.leics.gov.uk/documents/s135701/MTFS%20report.pdf

Report to Cabinet - 22nd May 2018 – 2017/18 Provisional Revenue and Capital Outturn http://politics.leics.gov.uk/documents/s137593/Cabinet%2022%20May%20-%20Prov%20Outturn%20v5.pdf

Circulation under the Local Issues Alert Procedure

None.

Appendices Appendix 1 – Revenue Budget Monitoring Statement Appendix 2 – Revenue Budget – Forecast Main Variances Appendix 3 – Capital Programme Monitoring Statement Appendix 4 – Capital Programme – Forecast Main Variances and Changes in Funding

Officers to Contact Mr C Tambini, Director of Corporate Resources, Corporate Resources Department, 0116 305 6199 E-mail [email protected]

Mr D Keegan, Assistant Director (Strategic Finance and Property), Corporate Resources Department, 0116 305 7668 E-mail [email protected]

Equality and Human Rights Implications

There are no direct implications arising from this report. 25

APPENDIX 1

REVENUE BUDGET MONITORING STATEMENT FOR THE PERIOD : APRIL 2018 TO JULY 2018

Updated Projected Difference Budget Outturn from Updated Budget £000 £000 £000 % Schools Budget Delegated 116,511 116,511 0 0.0 Centrally Managed 99,379 102,639 3,260 3.3 Dedicated Schools Grant (DSG) -215,890 -215,890 0 0.0 Balance to/from DSG Earmarked Fund 0 -3,260 -3,260 n/a 0 0 0 n/a

LA Budget Children & Family Services (Other) 71,785 73,045 1,260 1.8 AMBER Adults & Communities 137,085 133,655 -3,430 -2.5 GREEN Public Health * -615 -555 60 n/a AMBER Environment & Transport 65,062 66,222 1,160 1.8 AMBER Chief Executives 10,402 10,082 -320 -3.1 GREEN Corporate Resources 32,759 32,559 -200 -0.6 GREEN DSG (Central Dept recharges) -922 -922 0 0.0 GREEN Carbon Reduction Commitment 275 175 -100 -36.4 GREEN Other corporate savings -250 -250 0 0.0 GREEN Contingency for Inflation 4,968 2,968 -2,000 -40.3 GREEN Total Services 320,549 316,979 -3,570 -1.1

Central Items Financing of Capital 22,500 22,500 0 0.0 GREEN Revenue Funding of Capital 29,700 31,210 1,510 5.1 RED Central expenditure 3,084 2,984 -100 -3.2 GREEN Central grants and other income -13,344 -15,694 -2,350 17.6 GREEN Total Central Items 41,940 41,000 -940 -2.2

Potential Transfer to DSG earmaked fund 0 1,100 1,100 n/a RED

Total Spending 362,489 359,079 -3,410 -0.9

Funding Revenue Support Grant -8,549 -8,549 0 0.0 GREEN Business Rates - Top Up -38,813 -38,813 0 0.0 GREEN Business Rates Baseline / retained -22,960 -22,960 0 0.0 GREEN S31 Grants - Business Rates -2,822 -2,822 0 0.0 GREEN Council Tax Collection Funds - net surplus -3,556 -3,556 0 0.0 GREEN Council Tax -285,475 -285,475 0 0.0 GREEN Total Funding -362,175 -362,175 0 0.0

Net Total 314 -3,096 -3,410

* Public Health funded by Grant (£24.9m)

Underspending / on budget GREEN Overspending of 2% or less AMBER Overspending of more than 2% RED This page is intentionally left blank 27

APPENDIX 2

Revenue Budget 2018/19 – forecast main variances

Children and Family Services

Dedicated Schools Grant A net overspend of £3.3m is forecast, which will be funded from the DSG earmarked fund. The main variances are:

% of £000 Budget High Needs Special Educational Needs 3,160 6% The 2018/19 MTFS included potential savings of £1.5m . Some savings have been acheived but the increased school population, increased demand for support and full year effect of changes in SEND legislation is offsetting these savings. The final choice of place often is not made until the young people get their exam results in August and is not known at the time of budget setting. A full reconciliation of July leavers and September starters has been started and will be completed in October. Some budget areas could have additional pupils arriving during the remainder of the year if they move into the area or are assessed later. Additional complex cases moved into the county after the budget was set and the forecast reflects these additional costs. A number of savings options are being considered to reduce the overspend.

Education of Children with Medical Needs 100 17% An overspend is reported based on pupil numbers for April and May and the reduction in hours offered from 10 hours down to 5 hours. The overspend is expected to reduce from £260k in 2017/18 to £97k in 2018/19. Forecast based on pupils numbers to date and expected leavers in July 2018. Unknown factors are the number of high cost placements and new starters in September 2018; numbers usually rise in the autumn term. A main provider has stopped taking new cases and alternative more costly provision may be needed if more pupils are identified that need support. TOTAL 3,260 n/a

Local Authority Budget

The Local authority budget is forecast to overspend by £1.3m (1.8%). The main variances are:

% of £000 Budget Asylum Seekers 420 128% Demand on this budget has significantly increased over the last couple of financial years and is projected to do the same this financial year, which has resulted in increased need for additional staffing to manage demand. The majority of these children arrive ‘spontaneously’ and on arrival are the statutory responsibility of the local authority in which they arrive. Children's Social Care Field Work Teams / First Response / CSE 375 3% Recruitment and retention pressures among the Children Social Workers workforce across various teams have resulted in a number of positions being filled by agency workers. Children in Care Service 165 9% Legislation changes around the Personal Advisor duty has resulted in budget pressures for 2018/19 which will require close monitoring. The Social Care Act 2017 has extended the duty for local authorities to provide support for young people through personal advisors from age 21 to age 25. Safeguarding and Quality Assurance 140 8% Part year additional staffing costs above budgeted establishment levels as a result of inherent unfunded posts in the service which were required to manage demand and Ofsted recommendations. Fostering and Adoption Service 125 4% Staff absence has resulted in an interim period where external providers will complete assessments for fostering kinship carers. LCC recruitment drive for foster carers and adopters has led to further need for assessment to be completed externally where internal capacity is at maximum. Other variances 35 n/a TOTAL 1,260 n/a 28 29

Adults & Communities The Department is forecasting a net underspend of £3.4m (2.5%). The main variances are: % of £000 Budget Home Care 400 3% Increase in service user numbers (£250k) and increase in package hours (£50k), in addition backdated payments (pre-18/19) are now in excess of estimated accruals - an additional forecast £100k has been forecast for the rest of the year, £420k has been incurred to date. There are 1,775 home care packages at an average cost of £160. Community and Wellbeing Efficiency Saving 190 n/a Efficiency saving of £188k forecast is to be achieved by staff vacancies, reduction in running costs, a range of one-off income and underspends through the service (contained within Other variances (under £0.1m) below). Extra Care 145 20% Overspend due to a combination of factors. New contracts from Nov-18 to Mar-19 are more expensive than budgeted for £45k and other one off contract payments of £100k. Commissioning & Quality Team 125 9% Additonal Commissioning staffing required to manage contracts and find placements. Community Income 110 1% Reduced income from Learning Disability pooled budget due to lower number of transitioning service uses than expected. Residential Care and Nursing -1,235 -2% Reduction in number of service users and lower average cost of packages (£0.7m) and increased service user income is anticipated (£0.5m). There are 2,317 service users with an average gross care package cost of £751 per week. Supported Living -670 -5% Transforming Care service users have not yet transferred to Supported Living from health. Direct Payments (DP) -505 1% The main underspend relates to the clawback of unused balances on direct payment cards (£1.7m), offset by increasing costs of service users packages (£1.2m). There are 2,613 service users per week receiving an average package of £270.56 and 415 carers per week receiving an average package of £45.20.

Community Life Choices (CLC) / Day Services -390 -14% Underspend due to changes within the services and service users (CLC policy) and vacancies being held pending the implementation of action plans for co-location as part of saving AC6. Review of service users is still ongoing, action plan will take place once this has occured. Supported Living,Residential and Short Breaks -310 -6% Reduction in service users in Hamilton Court residential and managing vacancies at Hamilton Court and The Trees. Reviews of service users are still ongoing. Action plans for The Trees and Carlton Drive are due for implementation in late Autumn. Business Support -240 -14% Staffing vacancies pending stablisiation of services. Reablement (HART) & Crisis Response -205 4% Staffing underspend caused by vacancies to deliver savings and lower health referrals. Community Care Finance -155 -11% Staffing vacancies pending action plan. Adult Learning -140 N/A Additional Transitions Learning Project income being forecast (£40k) and additional income from Skills Funding Agency expected for overperformance in 17/18 academic year (approx £100k). Care Pathway West -Working Age Adults Team -125 -4% Staffing underspend caused by vacancies. Aids, Adaptations and Assistive Technology -120 -5% Staffing budget and running cost budget being held as a saving for AC1 - Review of Equipment and Therapy Services. Care Pathway West - Older Adults Team -110 -4% Staffing underspend caused by vacancies. Other variances (under £100k) 205 n/a 30

TOTAL -3,430 n/a 31

Public Health

A net overspend of £60k is forecast. The main variance is:

% of £000 Budget Other Commissioned Activity 50 18% Increased resources are being directed to Mental Health Promotion, however it is expected that during the year this will be met from underspends in demand led areas. Other variances 10 n/a TOTAL 60 n/a

Environment and Transportation

The Department is forecasting a net overspend of £1.2m (1.8%). The main variances are: % of £000 Budget Highways Highways Delivery - Staffing, Admin & Depot Overhead Costs 555 22% Forecast overspend is in part linked to the introduction of the agreed market premia in 2018/19. In addition, it looks unlikely that staffing costs will be fully met by the level of income that can be generated. This position will be kept under review during 2018/19. Highways Commissioning - Staffing & Admin Commissioning 370 22% Overspends are forecast for Transport Strategy and Policy (£209k) due to lower than originally budgeted expected recharges to the capital programme, Highway Development Management (£211k) due to a delay in commencing charging for pre application advice and Asset Management & Major Projects (£144k) arising from additional staffing costs over and above the budgeted level. Traffic and Signals team (£38k) arising from additional agency staff and market premia. These overspends are partially offset by forecast underspends for Infrastructure (£146k) due to anticipated additional S38 and S278 income Safe and Sustainable Travel (£77K) additional contribution from the Access fund. Winter Maintenance 215 13% Overspend forecast due to: - necessity to treat roads in April, - under-accruing for the cost of farmers ploughing roads in 2017/18 behalf of the County Council, - additional costs for yardmen and loading shovel to fill empty barns with salt. Management & Training Costs -70 -9% Underspend forecast due to two graduate vacancies. Recruitment of replacements is underway. Traffic Controls -65 -5% Underspend from additional income relating to Developer Traffic Regulation Order and savings in the traffic signals energy budget Transportation Special Educational Needs 510 5% Overspend forecast due to the increased number of solo occupancy journeys for pupils since the start of the new financial year, the need for which has been highlighted as part of the risk assessment process. Work is being undertaken to examine how these additional costs can be minimised in 2018/19 by optimising the number of pupils travelling on Fleet transport. Fleet Transport 75 36% Overspend forecast due to high staff costs, including higher than expected use of agency staff. There is a continued focus on attendance management in an attempt to reduce costs. Unexpected significant repairs to a number of vehicles have also contributed to the overall forecast overspend position. Public Bus Services 70 3% Overspend forecast due to the cost of subsidising additional bus services / routes that are no longer commercially viable. Concessionary Travel & Joint Arrangements 60 1% Forecasting overspend largely due to £42k payment relating to 2017/18 being made in 2018/19. Mainstream School Transport -195 -4% Underspend forecast based on reduction in pupil numbers and fewer contracted services required. 32

Environment & Waste Management Landfill 75 12% Overspend forecast due to increased waste tonnages. This is partly due to increased trade waste and also because rigid plastics now go to landfill. Treatment Contracts -140 -1% Underspend forecast due to contract price reduction for wood. Composting Contracts -100 -6% Underspend forecast due to decrease in green waste tonnage due to weather (drier and therefore lower growth). Income -80 -6% Extra income forecast from increased trade waste. Haulage & Waste Transfer -60 -4% Underspend forecast due to an increase in direct deliveries. Management & Admin 75 6% Forecast overspend due to additional staffing costs, including £50k for Special Projects Coordinator post.

Other variances (under £50k) -135 n/a TOTAL 1,160 n/a

Chief Executives

A net underspend of £0.3m (3.1%) is forecast. The main variances are:

% of £000 Budget Democratic Services and Administration -140 -10% There are vacancies due to staff turnover, however these posts are not being recruited to at the moment whilst an assessment of the workloads is being carried out. Planning Services -105 -22% The underspend is due to vacancies for which recruitment is progressing. Planning fee income and Section 106 income is also higher than budgetted. Legal Services -75 -4% The underspend is on staffing, mainly due to delays in recruiting to new posts. TOTAL -320 n/a

Corporate Resources

An underspend of £0.2m (0.6%) is forecast. The main variances are:

% of £000 Budget Strategic Property 110 7% Staff maternity leave and subsequent cover has led to spend higher than budgeted. County Hall and Locality Premises Costs 95 4% Uncertainty remains over level of charge from Harborough District Council towards capital works to replace lifts and roof at Symington Building which has not been included in the budget. Library & Community Premise Costs 90 0% Awaiting outcome of Rates revaluation exercise by a ratings expert with regards to former Snibston Industrial Museum site. Information & Technology -250 -3% Underspends as a result of vacancies across several teams within the service. Human Resources -125 -11% Variance principally as a result of staff vacancies which are not currently intended to be filled (including a post being funded by the Fit For The Future project). Commissioning Support Unit -115 -12% Service carrying vacancies which it has been unable to fill, alongside additional income generation for external works. Other variances -5 n/a TOTAL -200 n/a 33

APPENDIX 3

CAPITAL PROGRAMME MONITORING STATEMENT (PERIOD 4)

Updated Original Outturn Changes in Updated Budget v Forecast Budget adjustment Funding Budget Forecast Variance

£000 £000 £000 £000 £000 £000 Children & Family Services* 16,620 5,800 210 22,630 17,097 -5,533 Adults and Communities 6,160 388 -731 5,817 5,406 -411 Public Health 480 0 0 480 480 0 E&T-Transportation 36,820 -480 9,958 46,298 43,260 -3,038 E&T-Waste Management 400 183 0 583 583 0 Chief Executive’s 3,900 1,027 0 4,927 2,985 -1,942 Corporate Resources 3,540 866 2,070 6,476 5,909 -567 Corporate Programme 30,590 -7,338 0 23,252 28,599 5,347 Total 98,510 446 11,507 110,463 104,319 -6,144 *Excludes Schools Devolved Formula Capital This page is intentionally left blank 35 APPENDIX 4

Capital Budget 2018/19 – forecast main variances

Children and Family Services

Net underspend of £5.5m is forecast compared with the updated budget. The main variances are:

£000 Provision of Additional Primary Places -4,462 Contingency set aside for issues arising from September admissions not needed. Underspend from 2017/18 has not been scheduled against schemes. One scheme identified for acceleration but 2018/19 spend will be minimal.

SEND Initiatives Programme -771 New provision has been created from September, no further schemes being developed. 10+ Retention -300 Held as a contribution to 10+ scheme, scheme not progressing as scheme not approved by DfE . This was a contribution to a wider school expansion where funding by the DfE through the Condition Improvement Fund, the school was one undertaking age range change and this was recognised hence the contribution. It has no impact on the provision of school places.

Other variances 0 TOTAL -5,533

Adults & Communities

Net slippage of £0.4m is forecast compared with the updated budget. The main variances are:

£000 Mobile Library Vehicles -285 Funding carried forward from 2017/18. At this stage there are no further vehicles planned to be purchased in 18/19. However a case is being drafted proposing one vehicle to be purchased in 18/19 but until this is approved the forecast spend is nil at this stage. Changing Places / Toilets -164 At this stage there are 2 schemes expected to be delivered in 18/19 for £50k. The remaining funding will be slipped into 19/20 while further applications are sought. Other variances 38 TOTAL -411

Public Health

The forecast expenditure is in line with the updated budget

Environment and Transportation - Transport

Net slippage of £3.0m is forecast compared with the updated budget. The main variances are:

£000 Melton Mowbray Eastern Distributor Road 800 Acceleration of budget due to additional AECOM design work anticipated this year rather than next. 36 County Council Vehicle Programme 776 Acceleration of spend from future years' allocations due to evaluation of the fleet leading to some assets being identified as no longer being economical/safe to continue repairing and running. Advanced Design 511 Accleration due to additional works advanced on the microsimulation project which will enable the project to finish earlier and the tool available for use. Additional emerging priorities work which will be accelerated and a review of the budgets is underway, additonal works identified for the HIF bidding process.

Transport Asset Management - Maintenance 440 Acceleration of highways scheme at West Lane/Victoria Road to mitigate traffic management by doing all the works now rather than some in this year and the rest in next financial year . Zouch Bridge Replacement -2,504 Slippage of budget due to a public enquiry which took place in August 2018. The DfT can take 12 weeks to publish their decision. Therefore the majority of spend for this project is now not anticipated to be until 2019-2020. Likely start Spring 2019 and the scheme would take 18 months to complete.

SEP - Anstey Lane A46 -1,716 Slippage of budget due to identifying appropriate contractors to complete the work through the MSF3 framework which has now been issued. Delays in appointing Highways England’s design consultant but no impact on final delivery.

SEP - M1 Junction 23 -628 Slippage of budget due to identifying appropriate contractors to complete the work through the MSF3 framework which has now been issued. Also securing S106 agreements with developers has delayed progress but no impact on final delivery.

Croft Office Blocks Improvements -335 Works at the workshop have slipped, primarily due to changes in key personnel to progress the project.

Melton Depot - Replacement -220 Planning permission for the site at Sysonby Farm is due to be submitted imminently but there are unlikely to be significant works on site this financial year. Transport Asset Management - Flood Alleviation -150 Slippage of budget due to further site investigation on identified projects. However, work is commencing on identifying and advancing other appropriate projects.

Other variances -12 TOTAL -3,038

Environment and Transportation - Waste Management

The forecast expenditure is in line with the updated budget

Chief Executives

Net slippage of £1.9m is forecast compared with the updated budget. The main variances are:

£000 Rural Broadband Scheme - Phase 3 -1,940 37 There is slippage as delays have resulted from a longer than expected Open Market Review stage of the procurement, due to additional information being requested from a potential supplier to support their response. This was necessary to ensure the procurement met the requirements of the Broadband Programme Authority (BDUK). The contract is now expected to commence in January 2019.

Other variances -2 TOTAL -1,942

Corporate Resources

Net slippage of £0.6m is forecast compared with the updated budget. The main variances are:

£000 Snibston Country Park Future Strategy -521 As a result of the delay in being granted planning permission and the subsequent need to review plans to reflect planning conditions and changes to the scheme. Work will not begin in earnest on site until January 2019, necessitating a slippage of the capital budget into 2019/20.

Other variances -46 TOTAL -567

Corporate Programme

Net acceleration of £5.3m is forecast compared with the updated budget. The main variances are:

£000 CAIF - East of Lutterworth SDA 7,988 Acceleration of scheme based on anticipated timing of land purchases.

CAIF - Airfield Business Park 1,409

Acceleration of scheme as per the latest estimates of the spend profile. CAIF - Loughborough University Science & Enterprise Park (LUSEP) -2,721 Slippage due to delay in exchanging contracts with the University and the proposed tenant Access. Contracts have been exchanged in July 2018 with a view to commencing on site in February 2019. This is an extremely complex deal involving many stakeholders. CAIF - Coalville Workspace Project -1,308 Works on site delayed to Oct/Nov 2018. Resolution of tenant issues delayed the build programme. Other variances -21 TOTAL 5,347 38 Capital Programme - Changes in Funding

Outturn Adjustments - 2017/18 £000 Children & Family Services 5,800 Adults & Communities 388 E&T - Transportation -480 E&T - Waste Management 183 Chief Executives 1,027 Corporate Resources 866 Corporate Programme -7,338 446

2018/19 Budget Adjustments Children and Family Services Healthy Pupils New Capital Grant - New Announcement 202 School Condition Grant - Confirmation of 2018/19 allocation (difference) 8

Adults & Communities Supported Living Scheme Great Glen (purchase of building and refurbishment) - funding approved Cabinet 6 July 2018 from Future Developments (additional Adult tbc Social care Precept) not yet included in the programme pending confirmation of purchase which is likely to take place later in 2018/19. Mountsorrel Transforming Care - scheme removed which was subject to NHS bid -440 Hinckley, The Trees - scheme removed, will now take place in 2019/20 -390 Danemill Annex - revenue funding contribution 84 Carlton Drive - capital contributions unapplied (capital funding received in advance of need). 15

Environment and Transportation - Transport Highways Maintenance Restorative Patching - funding approved Cabinet 22 May 2018 (part of £5.0m) from Future Deveopments 2,700 Transport Asset Management Programme - DfT Flood Resilience Fund - New Grant allocation 608 Highways Capital - Capital Financing Earmarked Fund 1,160 Vehicle Programme and Safety Scheme - Capital Financing Earmarked Fund 782 DfT Pothole Fund and Incentive Fund Grant - Adjustment per announced grant allocation -299 A50 Markfield Overbridge -capital contributions unapplied 302 Advance Design SEP - LLITM earmarked fund 208 Sapcote Fleet Depot - capital contributions unapplied 191 Markfield, Shaw Lane - £233k section106 Developer and £700k capital contributions unapplied 933 Externally funded schemes - Section 106 Developer contributions 1,709 Speed Camera Replacement - Leicester, Leicestershire, Rutland Road Safety Partnership (LLRRSP) contribution 913 M1 Bridge to Growth - £150k capital contributions unapplied and £601k developer contribution 751

Corporate Resources Fit for the Future - funded from Future Developments Fund 2,000 CSC Telephony System Replacement - Transformation earmarked fund 70

Sub Total 11,507

Overall Total 11,953 39 Agenda Item 9

CABINET – 14TH SEPTEMBER 2018

MEDIUM TERM FINANCIAL STRATEGY UPDATE

REPORT OF THE DIRECTOR OF CORPORATE RESOURCES

PART A

Purpose of the Report

1. The purpose of this report is to explain the approach to updating the current Medium Term Financial Strategy (MTFS), to set out and seek approval of the proposed response to the Technical Consultation on the 2019/20 Local Government Finance Settlement and advise members of the recent Government announcement with regard to 75% business rates retention pilots for 2019/20.

Recommendation

2. The Cabinet is recommended to:

a) Note the significant financial challenge faced by the County Council; b) Note the approach outlined in the report to updating the Medium Term Financial Strategy; c) Note the updated information regarding Savings under Development, as set out in Appendix A; d) Approve the response to the Technical Consultation on the 2019/20 Local Government Finance Settlement, as set out in Appendix B; e) Authorise the Director of Corporate Resources following consultation with the Lead Member for Corporate Resources for the County Council to: i) submit an application (as part of a Pool) to participate in the 75% business rates retention pilot programme for 2019/20; (ii) take all action necessary to proceed with the pilot if the application is successful.

Reasons for Recommendation

3. To inform members of the County Council’s intended approach to develop plans to address the latest financial position.

4. To respond to the Government consultation on proposals for the 2019/20 Local Government Finance Settlement.

40

5. To enable an application to be made to participate in the 2019/20 business rates retention pilot and, if successful, to ensure that arrangements are put in place at the earliest opportunity.

Timetable for Decision (including Scrutiny)

6. The Cabinet will be asked to approve the draft MTFS for consultation in December 2018. All Overview and Scrutiny Committees and the Scrutiny Commission will consider the MTFS in late January 2019 and the Cabinet will then make a final recommendation to the County Council in February 2019.

7. The deadline for responses to the technical consultation on the 2019/20 Local Government Settlement is 18th September 2018. 8. The MHCLG has requested applications for 75% business rates retention pilots to be submitted by 25th September 2018.

9. The Scrutiny Commission will consider this report on the on 12th September 2018 and its comments will be reported to the Cabinet. Policy Framework and Previous Decisions

10. The Medium Term Financial Strategy for 2018/19 to 2021/22 was approved by the County Council in February 2018. Over the autumn and winter of 2018 it will be reviewed and updated.

Resource Implications

11. The financial position faced by the County Council is both serious and extremely challenging. This is particularly so for a low funded authority such as Leicestershire as room for further savings is limited. The updated MTFS (2019/20 to 2022/23) will set out the County Council’s response to the financial position.

12. It is very unlikely that the council, when it rolls forward the MTFS into 2022/23, will be able to identify sufficient savings to bridge the funding gap in the later years. To balance the budget without a significant impact on services will require a major efficiency initiative and a successful outcome to the fair funding campaign.

13. The technical consultation on the 2019/20 Local Government Finance Settlement seeks views on a range of issues regarding the 2019/20 Settlement. This includes a proposal to continue to implement the “four year offer”, which the County Council and the vast majority of local authorities accepted in 2016, for the period 2016/17 to 2019/20.

14. The consultation outlines proposals regarding reforms to the New Homes Bonus Grant (NHB). The Government diverted funding from NHB to Adult Social Care (ASC) in the 2017/18 Settlement and the draft response urges the Government to continue to make adults and children’s social care a priority.

15. The consultation also outlines the Government’s proposals regarding the council tax referendum principles for 2019/20, which remain broadly the same as those 41

which applied in 2018/19. This will allow the County Council to increase core council tax by up to 3% and there will be a “core principle” of increases being less than 3% and a maximum of 1% for the ASC “precept”.

16. The Savings under Development will be reviewed further during the autumn and winter and will be incorporated into the 2019-23 MTFS as appropriate.

17. Modelling of a 75% Business Rates Pilot for the Leicester and Leicestershire Pool shows a gain of around £13.8m for the area, before taking account of any real terms growth. Subject to agreement between the Pool members, that additional income could be used to fund infrastructure linked to housing developments, city and town centre improvements and improved sustainability for services, including social care.

18. The Director of Law and Governance has been consulted on the content of this report.

Circulation under the Local Issues Alert Procedure

None.

Officer to Contact

Mr C Tambini, Director of Corporate Resources, Corporate Resources Department, 0116 305 6199 E-mail [email protected]

Mr D Keegan, Assistant Director (Strategic Finance and Property), Corporate Resources Department, 0116 305 7668 E-mail [email protected] 42

PART B

National Position in the Medium Term

19. There is little if any prospect of austerity budgets coming to an end within the medium term. While there has been better recent economic news, the economy remains at a low base, with growth below 2% and the fiscal deficit unlikely to be closed before the mid 2020’s. There is the possibility of a recession in the medium term and great uncertainty over the impact of Brexit.

20. Financial pressure exists across the public sector. A decision to boost NHS funding has already been made and spending on services such as Welfare, Education, Defence and Police may also be increased or protected. It is unlikely that Local Government will receive additional funding.

21. There are a growing number of local authorities in financial trouble. Despite low funding, Leicestershire is in a relatively good position due to difficult decisions that have been taken over recent years. However, finding savings to balance growth and income pressures is not sustainable over the longer term.

22. The Government is still not showing a full appreciation of the sector-wide issues facing local government. The, delayed, green paper on Adult Social Care, which is the subject of a separate report on the September Cabinet agenda, is an opportunity for the Government to address one of the most serious issues, but there appears to be little recognition of pressures in children’s social care or special educational needs.

23. The Chancellor’s budget due in November 2018 may give a clearer picture of the Government’s priorities for funding pressures, but is unlikely to be before the Comprehensive Spending Review (CSR) in 2019 that implications for local government are known. There will then be a further period after this before the implications for the County Council are known.

Leicestershire Position

24. The current MTFS includes a savings requirement of £50m over the four years to 2021/22, of which £13m are still to be identified. An additional year of austerity, growth and inflation causes a financial gap of circa £10-£15m. The option to increase Council Tax by a further 1% gives some mitigation but continued savings will be necessary.

25. Since the current MTFS was approved by the County Council in February 2018 there have been factors that will have a positive impact on the medium term position:

Positive  Potential removal of “negative Revenue Support Grant” (2019/20 £2.1m).  Potential increase in “core” council tax of 1% in 2019/20 only (circa £3m).  Corporate Asset Investment Fund (circa £5m towards revenue and capital)  Additional Business Rates income (£1.2m) 43

Negative  Growth set aside for increases in Children’s Social Care may not be sufficient.  Uncertainty on Government savings intentions to fund new spend promises e.g. NHS.  No details of potential continuation of the Adult Social Care “precept” or referendum limits for 2020/21 and later years.  Supporting Leicestershire Families – Government grant funding is expected to cease after 2019/20 (£2.3m). No indication of a continuation has been given.  Funding for new school places is not fully covered by Government grant – 23 new schools are required in the medium to long term, depending on the timing of schools an annual shortfall in funding of circa £2m could occur from 2022/23  Dedicated Schools Grant (DSG) – increasing pressure on the High Needs block, with a £3.3m overspend forecast. The statutory duty to meet need rests with the local authority and should there be no feasible recovery options costs may fall to the local authority budget.  Business Rates Baseline reset, potential loss of up to £3m.  Demand on Future Developments contributions continues to outstrip available funding e.g. resource to take a proactive role in maximising opportunities and minimising adverse impacts from High Speed 2 across the county.

26. Attention will need to be given to the services funded by specific grants. These services are also exposed to grant cuts and demand increases, with shortfalls typically needing to be addressed through the Council’s budget. The High Needs block is a particular concern.

27. The position is clearly extremely serious. The Leicestershire position is compounded by being the lowest funded county council in the country. The County Council continues to press for the development of a fairer system of allocation for local government funding.

Future Funding

28. A Comprehensive Spending Review (CSR) is anticipated in 2019, which will provide details of the Government’s overall spending plans for Government Departments for a period from 2020/21 onwards.

29. The CSR will be reflected in the overall total of funding available for Local Government. The provisional Local Government Settlement in December 2019 will be framed within that total and the distribution over individual authorities will reflect the decisions of the Government regarding the Fair Funding and Business Rates reset processes. The County Council should receive a larger slice of the funding cake as a result of Fair Funding but the Settlement is likely to include an element of “damping” and it may take several years before the results are fully reflected.

30. Other Local Government funding reforms may also affect the County Council’s future funding position; the key one is the Government’s intention to change the Business Rates Retention Scheme from 50% to 75%. Details on how this will work, including the grants and services affected, are still scant. 44

MTFS Refresh

31. The MTFS will be refreshed over the autumn, with a similar approach to that taken in previous years; namely continued investment in organisational change, planning and robust delivery of savings and a realistic allowance for growth. This needs to be done in the context of significant uncertainty ahead that will need to be mitigated by the used of contingencies.

32. A further year of austerity combined with the current savings gap would cause the MTFS shortfall to increase to £20m to £30m by 2022/23.

33. To reduce the shortfall the 2018-22 MTFS included a set of Savings under Development. The savings proposals have been reviewed over the summer and an update on progress is provided in Appendix A.

34. As this will be the ninth austerity budget and savings of £196m, to the end of 2018/19, have already been achieved, the identification of new savings will be very challenging. New savings are likely to require much more radical service transformation.

35. The savings under development and the savings and growth items incorporated in the 2018-22 MTFS, will be reviewed over the autumn and winter as part of the process to produce the draft 2019-23 MTFS.

36. The approach for refreshing the MTFS will be to maintain a strong financial position until the position is clearer on funding reforms and funding of legislation changes.

Planning Framework

37. The next two key Government announcements will be;

 The Budget in late November. This may give an indication of the scale of the challenge faced by local government.

 The local government finance settlement. Although no date for this has been given it is expected to be announced in late December. However, a four-year settlement was announced in 2016 for the period 2016/17 to 2019/20 and it is unlikely this will change.

38. The broad MTFS timetable is:

 September to November 2018 – Refresh growth and savings including consideration by Lead Members.  December 2018 – the Cabinet is requested to approve the draft MTFS for consultation.  December 2018 – receipt of the Local Government Finance Settlement  January 2019 – consultation on the draft MTFS, including Overview and Scrutiny Committees and the Scrutiny Commission. 45

 February 2019 – the Cabinet is requested to approve the final draft MTFS for submission to the County Council.  February 2019 – County Council is requested to approve the MTFS for 2019/20 to 2022/23.

Technical Consultation – 2019/20 Local Government Finance Settlement

39. On 24 July 2018 the Ministry of Housing, Communities and Local Government (MHCLG) issued a Technical Consultation on the 2019/20 Local Government Finance Settlement. The deadline for responses to the technical consultation is 18th September 2018. 40. The consultation seeks views on a number of issues regarding the 2019/20 Settlement. This includes a proposal to continue to implement the “four year offer”, which the County Council and the vast majority of local authorities accepted in 2016, for the period 2016/17 to 2019/20.

41. The consultation outlines proposals regarding reforms to the New Homes Bonus Grant (NHB). The Government diverted funding from NHB to Adult Social Care (ASC) in the 2017/18 Settlement and the draft response urges the Government to continue to make adults and children’s social care a priority.

42. The consultation also outlines the Government’s proposals regarding the council tax referendum principles for 2019/20, which remain broadly the same as those which applied in 2018/19. There will be a “core principle” of increases being less than 3% (effectively capped at 2.99%) and the ASC “precept” will remain, allowing flexibility to increase the precept by between 1% and 3% in 2019/20, provided that increases do not exceed 6% between 2017/18 and 2019/20. The County Council increased its ASC precept by 2% in 2017/18 and by 3% in 2018/19 and current plans are based on further increase of 1% in 2019/20.

43. The proposed response is included in Appendix B.

Business Rates Retention Pilots 2019/20

44. On 24 July 2018 MHCLG issued an invitation to local authorities to submit proposals to pilot 75% Business rates retention in 2019/20. There are five 100% pilots which have been in operation since 1 April 2017 and a further ten 100% pilots were established from 1 April 2018.

45. The Leicester and Leicestershire Business Rates Pool submitted a bid in October 2017 to be a pilot area from 1 April 2018 but that bid was unsuccessful.

46. The 2019/20 pilots will retain 75% of locally-collected business rates, rather than 50% under the existing retention scheme. The creation of the pilots will be “fiscally neutral” at baseline, but authorities will gain from retaining 75% of growth in their business rates income, above baseline. The safety net threshold for the pilots will be set at 95% of the baseline funding (instead of 92.5% as now), however the ‘no detriment’ clause included in the first two waves of pilots will no longer be available. 46

47. Not all bids may be successful and there is likely to be a competitive process with existing pilots also able to apply.

48. To be accepted as a pilot for 2019/20, agreement must be secured locally from all relevant authorities to be designated as a pool for 2019/20 and set out proposals for using any additional business rates income. Applications are required to be submitted by 25 September 2018, with a decision on the successful pilots to be announced in December 2018.

49. Modelling is being undertaken to review options and preliminary discussions have been held with finance officers from the Pool member authorities regarding the submission of a pilot bid. Given the timescales the Cabinet is recommended to authorise the Director of Corporate Resources following consultation with the Lead Member for Corporate Resources, to submit an application and if successful to enter a pilot for 75% business rates retention in 2019/20.

Equality and Human Rights Implications

There are no equality or human rights implications arising from this report.

Background Papers

Report to County Council -21 February 2018 – Medium Term Financial Strategy 2018/19 to 2021/22

http://politics.leics.gov.uk/documents/s135701/MTFS%20report.pdf

MHCLG - The 2019-20 Local Government Finance Settlement – Technical Consultation

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/728573/Settlement_Technical_Consultation_2019-20.pdf

MHCLG – Invitation to Local Authorities in England to Pilot 75% Business Rates Retention in 2019/20

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/728722/BRR_Pilots_19-20_Prospectus.pdf

Appendices

Appendix A – Savings under Development Appendix B – Response to the Technical Consultation on the 2019/20 Local Government Finance Settlement APPENDIX A Savings Under Development Update

Children and Family Services

Outline Full Forecasted Savings (£’000s) Business Business RAG MTFS Ref Emerging Project Name Priority Case Case Status

18/19 19/20 20/21 21/22 TDB TDB

SUD1 Fostering Service N/A N/A N/A R

TBC

New Innovation Partner H 2019 A 47

Fostering Service

A number of actions have been implemented in 2018/19:  A fostering recruitment plan has been implemented and is being monitored and reported against the 2018/19 MTFS savings.  Cabinet agreed a revised structure for fostering fees in July 2018.  The contract for the Therapeutic Wrap Around Service (MISTLE) has been awarded and is operating ahead of schedule, the MTFS scheduled savings in 2020/21.

Recruitment of foster carers has significantly increased running at 200% of 2017/18 figures and is on track to achieve the original 2018/19 target. This has supported the current containment of cost pressures within the placement budgets, with high cost residential placements down by 17%. However, additional costs are arising from the review of foster fees, an increase in the internal unit cost from increased staffing and the introduction of the therapeutic wrap around service. This has required an increase in the MTFS target to offsetting additional costs and the service will need to increase its performance to achieve this. This is currently under review and investigation to understand the impact on the savings requirement in the current MTFS. Development of the fostering service is expected to be supportive of the existing MTFS savings rather than generating additional ones.

As a result the Cabinet agreed in July 2018 to the procurement of an innovation partner. The Children’s Innovation Partnership will develop a more efficient, and cost-effective approach to the provision of care placements for children and young people and would greatly benefit from the expertise of an external organisation to deal with the challenges. The Invitation to Tender will shortly be issued and the expectation is that a partner will be appointed and commence work on developing the approach to meeting the needs of children in care early in 2019. Adults and Communities

Outline Full Forecasted Savings (£’000s) Business Business RAG MTFS Ref Emerging Project Name Priority Case Case Status

18/19 19/20 20/21 21/22 TDB TDB

SUD2/SUD3 Place To Live* H - 100+ 200+ 200+ 2019 TBC A

OCT 18 – TBC SUD4 Home First M - - - - A TBC

SUD5 Improvements to ASC Operating Model H - - - - OCT 18 TBC A

*Note that from the original list of Savings Under Development Place to Live and Lower Cost Adult Social Care savings have been combined 48

Place to Live The most significant cost in Adult Social Care is for residential placements. A Place to Live Board has been established with support from the Transformation Unit to co-ordinate the Council’s Accommodation Strategies, the plans for capital investment in accommodation and the MTFS saving related to developing accommodation options. To date the board has focussed on overseeing the delivery of the current MTFS savings requirements and on managing the dependencies and risks of the multiple deliverables dependent on increasing the availability of suitable accommodation based support. Work has been undertaken to map the future requirements for accommodation based support in each locality for 2019 to 2037.

Supply options being investigated include:  Capital investment by the Council to develop more capacity in the sector, e.g. develop appropriate accommodation support for service users.  A partnership with a care and/or accommodation provider could both increase capacity to deliver a more sustainable market whilst at the same time reduce average care costs.  Supporting the building of extra care and supported living accommodation. For example in 2019/20 developing Brookfield in Great Glen into 20 units for working age adults with learning disabilities. This will cost approximately £2.5m and will deliver annual social care savings of £50k pa plus net rental income of £150k pa. Other schemes are still be to be identified for the future MTFS 2020.

A strategic business case is being prepared for Cabinet in October with the intention to issue a Prior Information Notice (PIN) to undertake market testing on the options. Home First The proposed development of Home First services across the county aims to care for people at home wherever possible to prevent hospital admissions and ensure timely discharge should people require hospital admissions. If people can be cared for at home rather than being admitted to a hospital bed, and if people can be supported at home through reablement, or provided with a reablement bed on discharge, the number of long term care admissions and long term community packages should be reduced.

Further development work is to be undertaken to determine the potential opportunities for delivery of home first services in the county in collaboration with NHS partners, based on the specifications and design principles developed this year. The first step toward this is the recruitment of a 24/7 crisis support team. Implementation of Home First services is dependent on developing a more integrated health and social care response to people experiencing a crisis in the community, and to patients on discharge from hospital. In Leicestershire the County Council has set up a working group to look at an integrated health and social care offer for Crisis and Reablement support, including the potential requirement for a dedicated reablement and assessment unit. The Council is aiming to have an agreed model ready to pilot for October 2018 and mapping of current activity and spend has been completed.

Current delivery will be refocussed to provide the new model of service and a key dependency is the review of Community Health Services provision being undertaken by the CCG. Saving are still to be identified but will be through managing demand, hence reducing growth requirements in future 49 MTFS’s.

Improvements to the Operating Model for the Department The department is seeking to develop its Target Operating Model (TOM) to articulate how the flow of activity and demand will be managed going forward. The TOM will seek to reduce variation, improve systems and processes, ensure proportionate responses, explore simplification and thereby deliver a more efficient and effective service both for service users and staff.

Following a successful tender, Newton Europe have been commissioned and have undertaken a detailed diagnosis of care pathway activities during August 2018. Their findings and recommendations are to be considered in October by Cabinet with the aim of having identified savings for the MTFS 2019.

Public Health

Outline Full Forecasted Savings (£’000s) Business Business RAG Emerging Project Name Priority Case Case Status

18/19 19/20 20/21 21/22 TDB TDB

SUD18 0-19 Health Visiting and School Nursing H - - TBC TBC Dec 18 July 19 A

SUD19 Integrated Lifestyles H - 20 65 65 Done Sept 18 A

SUD20 Schools Offer M - - TBC TBC TBC TBC A

0-19 Health Visiting and School Nursing

This £8.6m contract was commissioned for 3 years with the opportunity to extend for a further 2 years. This provides an opportunity to 50 renegotiate the contract in April 2020 and look at potential redesign around new ways of delivery. The savings are expected to be in the range between 5-10% of the contract value, based upon prior experience.

Work will start shortly to look at the future needs of the population as well as an appraisal of the infrastructure needed to deliver the service effectively. This is expected to be completed by April 2019. It is likely that any proposed changes will require public consultation which is expected to take place in summer 2019. Should the contract be renegotiated this would take place by October 2019.

Integrated Lifestyles The department is looking to combine aspects of the delivery of lifestyle services into a single lifestyle hub which would support a more integrated systems approach to tier 1 and potentially some aspects of tier 2 delivery. A saving of £65k is proposed to be found from Adult Weight Management Services. The current contract value is £260k.

It was agreed at Cabinet on 9th March 2018 that a public consultation would take place between May and July 2018. The public consultation has been completed and work is currently being undertaken to finalise the new delivery model for the provision of Adult Weight Management services. This will be included in a Full Business Case to be considered by Cabinet in October. If approved, the new service will come into operation in October 2019. Schools Offer There are a number of services currently delivered to schools including young person’s physical activity as well as various specialist training elements. The department are exploring the option of moving these to a traded service model. Work is underway to identify which strands of the delivery could be included in such an offer as well as identifying an aligned date for possible transition. 51 Environment and Transport

Outline Full Forecasted Savings (£’000s) Business Business RAG MTFS Ref Emerging Project Name Priority Case Case Status

18/19 19/20 20/21 21/22 TDB TDB

SUD7 Highways Delivery Model L - - - - Aug-18 n/a R

Income generation/S278 and related SUD8 M - 100+ 100+ 100+ Nov-17 tbc G service reviews:

SUD9/10 Future RHWS (inc. Reuse) M - - TBC TBC May-18 Feb-19 G

SUD6 Future Residual Waste Strategy M 300 Aug-18 G 52

Highways Delivery Model Work on this is on hold as it is not currently expected that it would be fruitful to pursue, and there is limited appetite for progressing. It is considered that the current mixed economy between combining internal delivery with some services contracted out and delivered by external providers offers an approach which allows flexibility and responsiveness whilst still providing value for money.

Income Generation / Section 278 and Related Service Reviews Savings of £100k have already been identified through a review of the management structure within Highways Delivery combined with the implementation of an alternative risk based approach to Gulley emptying, the latter to be considered by E&T Overview and Scrutiny Committee in September 2018. Additional income from S278 works and other chargeable services cannot currently be identified as more work is needed to ensure costs (primarily time spent) are captured accurately against each specific scheme. Further business as usual work streams are being set up to ensure data is collated in such a way, and external charging processes developed to progress this. Also, through the commercial strategy work stream, work is being undertaken to progress a one-stop shop for securing work from developers. Depending on the outcome of these work streams, additional income may be able to be generated which would allow additional savings to be built into the MTFS. Future RHWS Service Offer & Re-use A single Business Case is being developed which is considering a range of options for the future RHWS service to consider what opportunities exist for reducing costs and/or increasing income. There are three distinct elements to the business case:  Looking to the various options available for the delivery of the RHWS and transfer station at Whetstone;  How the Council may be able to increase levels of re-use and in so doing generate additional income;  What other changes can be made around service configuration at all the current sites, especially post insourcing

At this stage it is very difficult to estimate what the potential savings might be from pursuing these initiatives, and what potential level of investment may be required. Work in the next few months will consider this with the full business case providing more detail in January.

Future Residual Waste Strategy The County Council’s overall approach to the management / disposal of residual waste post 2020 was as agreed by the Cabinet in December 2016. This was for the Council to enter into medium term (up to 2028 – 2031) merchant arrangements to utilise available waste treatment and disposal capacity within the marketplace. In line with this approach, LCC have entered into an agreement to enable up to 80,000 tonnes of waste to be delivered to the Energy for Waste (EfW) facility at Coventry – twice the volume of the existing arrangement.

Nonetheless a further 50,000 tonnes of waste, currently going to Cotesbach Landfill at the rates secured under the Mechanical and Biological 53 Treatment contract will end in 2020. This, together with the expiry of a number of other smaller contracts, will require a further procurement process to be undertaken. The aim is to at least negate the increased costs that would be faced if this waste continued to go to Cotesbach Landfill from April 2020 (which has been allowed for in the MTFS). This will be subject to the outcome of the procurement exercise.

Alongside this, the initial market engagement has suggested the best options available to LCC will require additional local waste transfer capacity to bulk up waste for onward delivery outside the County. This is due to worsen due to planned closures of further landfill sites utilised by the Service over the period of the MTFS. For these reasons, funding has been earmarked in the capital programme future developments to fund the construction of a new waste transfer station in the County. Prior to the procurement exercise it is difficult to predict savings, but the target is to at least save the £300k growth currently provided for in the MTFS and aim for further savings on top of this. Corporate

Outline Full Forecasted Savings (£’000s) Business Business RAG MTFS Ref Emerging Project Name Priority Case Case Status

19/20 20/21 21/22 22/23 TDB TDB

SUD11/ Corporate Asset Investment Fund M - - - - n/a n/a G CR10

SUD12 IT and Digital Strategy Implementation M 50 100 150 200 Nov-18 Feb-19 G

SUD13 Commercialism L - - - - tbc tbc A

SUD14 Property Initiatives M - 50 100 300 Sep-18 Jan-19 G

SUD15 People and Performance Management L TBC A 54 SUD16 Fit for the Future H - 400 900 900 Done Done G

SUD17/CI1 Financial Arrangements L 400 400 400 400 n/a n/a G

Corporate Asset Investment Fund (CAIF) In May 2014, the Cabinet approved the establishment of the CAIF to be used to purchase commercial properties and land assets. The Council already held an existing stock of Industrial Properties and County Farms, and in 2017/18 have invested in Office Developments at Embankment House, Nottingham and Lichfield South, Lichfield. New savings will be dependent upon completion of developments within the fund and will relate to the revenue income received (not any capital appreciation which would be realised if an asset was sold). On the basis of a total fund of £200m by 2022/23 there is the potential to increase the current £3m p.a. revenue contribution in the MTFS by £5m p.a. When opportunities are identified the income will be included in the MTFS.

I&T Digital Strategy Implementation The I&T Digital & Strategy 2017-20 outlines the direction of travel for the service, which is seeking to provide more efficient and effective Council services, empower people and introduce digital ways of working through easier to use, customer focused and joined up services across the Council and with partners. Additionally, the “Investing In Innovation” workstream (known as 3i) will develop ideas on an over-arching risk management portfolio basis to deliver an overall net benefit – the first of these ideas to be progressed is the Robotic Process Automation (RPA) scheme in the CSC and within ICT, with further schemes in the pipeline where ICT can act as an enabler to change and drive savings within departments. ICT will work with departments across the Council to identify areas in which digital innovation and technology can be used as an enabler to generate efficiencies and promote change. The ‘Incubation Team’ will look to promote many of the measures identified in the Digital Strategy, including delivering easy-to-use digital services which help people do things for themselves and enabling better ways of working. Staff resources to drive this function have been identified from within existing resources and will aim to be in place to start work on this initiative by June 2019. The enterprise will operate in a trial format for year one, after which officers will review the effectiveness and successes of the scheme and consider whether there is scope to deliver further savings.

Commercialism Leicestershire Traded Services (LTS) was created by bringing services in Corporate Resources together creating a new brand and introducing a commercial approach involving sales, marketing and regular financial reporting. LTS has a target to increase the contribution to the revenue budget by £2m p.a. Activity is now rolling out across the whole Authority in order to identify and enhance current trading activity and identify potential new areas. Support is being given in two pilot areas; Services to Schools and Highways Development as well as identifying any potential commercial opportunities within the Children’s Innovation Partnership. The intention is to increase the contribution from trading activity further.

Property Initiatives 55 A new Workplace Strategy is being finalised which will set out how the County Council can maximise the use of its property portfolio and reduce operational property costs. This has entailed a review of all lettings, property occupancy and analysis of the total financial implications of running each property within the estate including the cost of maintaining the buildings. Other revenue generating initiatives are also being considered. Savings are anticipated through a rationalisation of our use of satellite offices and increased usage of County Hall, as well as the potential to rent out further areas of the building.

People and Performance Management The initiative includes a variety of work to improve the performance across the organisation. The majority of these are enabling other MTFS savings, for example the sickness absence target, rather than being a direct saving.

Work continues to reduce the use of agency staff and this work fits well with the New Initiatives outlined below.

The introduction of the Apprenticeship Levy has required £1m of growth but has provided a source of funding towards additional Apprenticeships and training. Whilst the use of the apprenticeship levy has resulted in a considerable increase in the number of apprentices, there is a risk (which reflects the national position) that we do not spend all of the levy. However, as different types of apprenticeships are accredited, we will seek to take advantage of relevant ones. Where these result in a saving to our core L&D budget, a reduction will be made. Fit For the Future This project will replace the existing Oracle ERP system and the improvement of the related processes. Savings have been secured through a new contract that combines the software licencing and hardware hosting. Further savings are being targeted from improvements to the working practices of the ICT, Finance, HR and Procurement functions, as well as EMSS.

Financial Arrangements The County Council makes provisions from the revenue budget for a range of future liabilities and these provisions can be changed in line with expected liabilities and regulations. A review of these financial arrangements is expected to yield savings. For example, the County Council’s insurance claims experience has improved to the extent that the earmarked funds held are deemed to be in excess of what is required.

New Initiatives

Based on research from other organisations an opportunity exists to create a programme that provides a systematic framework for reviewing services and teams across the council, including those with smaller budgets that may have not been part of a formal review before. Through an assessment of the services based on looking at strategy, staff, finance and performance data, the intention will be to introduce a coordinated programme drawing on the wider support services offer to utilise continuous improvement tools and techniques with the aim of exploiting a number of lower level opportunities simultaneously right across the council that can be enacted within the teams (i.e. process improvements) to find cashable savings. 56 57

APPENDIX B

Local Government Finance Settlement 2019-20: Technical Consultation

Question 1

Do you agree that the Government should confirm the final year of the 4-year offer as set out in 2016-17?

No

Additional comments:

The County Council reluctantly signed up to the 4-year offer, in the hope that it might at least create a back-stop to any further steep declines in government funding. Given the Council’s very low level of government funding, it urges the government to urgently address the current funding position and to introduce a much fairer solution as quickly as possible.

The County Council has planned prudently to achieve budgets within the constraints of the offer, which will require significant savings to be made.

The Government needs to address the acute financial position faced by many local authorities by allocating funding to the lowest funded authorities in 2019/20, prior to the implementation of the Fair Funding Review.

The County Council looks forward to further consultations on the Fair Funding Review and views the general direction indicated at this stage positively.

The LGF Settlement in recent years has been announced relatively late in December. An earlier announcement would be welcomed.

Question 2

Do you agree with the council tax referendum principles proposed by the Government for 2019-20?

No

Additional comments

It is useful to have early sight of the Government’s intentions for 2019/20 as this will aid authorities with their medium term financial planning. However, the Council would urge the Government to allow greater latitude for Councils to consider more significant increases before triggering a referendum, allowing council tax payers to hold Councils to account via local elections. 58

Question 3

Do you agree with the Government’s preferred approach that Negative RSG is eliminated in full via forgone business rates receipts in 2019-20?

No

Additional comments

The County Council is a gainer from the abolition of negative RSG and many of the councils impacted by Negative RSG are amongst the lowest funded, but not all are, including many District Councils. If the Government can effectively find c£150m in additional funding (as has been the case in recent years), that funding could be allocated in a far more targeted way to the lowest funded authorities.

Question 4

If you disagree with the Government’s preferred approach to Negative RSG please express your preference for an alternative option. If you believe there is an alternative mechanism for dealing with Negative RSG not explored in the consultation document please provide further detail.

See above

Question 5

Do you have any comments on the impact of the proposals for the 2019-20 settlement outlined in this consultation document on persons who share a protected characteristic? Please provide evidence to support your comments.

Yes

Additional comments

The funding reductions clearly have an impact on services provided to the people of Leicestershire, many of whom have a protected characteristic. The current unfair distribution of funding means that the impact of funding reductions on services varies by geography.

New Homes Bonus Grant

The Technical Consultation includes some details on NHB, including the possibility of an increased baseline for 2019/20 and further consultation on NHB from 2020 onwards. There are no specific questions in the consultation but the County Council would continue to urge that priority is given to providing additional funding for social care (adult and children) and that the 80%/20% split between Districts and Counties be reversed. 59 Agenda Item 10

CABINET – 14th SEPTEMBER 2018

CORPORATE ASSET INVESTMENT FUND ANNUAL PERFORMANCE REPORT 2017-18 AND STRATEGY FOR 2018 TO 2022

REPORT OF THE DIRECTOR OF CORPORATE RESOURCES

PART A

Purpose of the Report

1. The purpose of this report is to set out the performance of the Corporate Asset Investment Fund (CAIF) to date and to seek the Cabinet’s approval of the revised Corporate Asset Investment Fund Strategy for 2018 to 2022 (attached as Appendix B to this report) which sets out the Council’s approach to future asset investments utilising the CAIF.

2. The Cabinet is also asked to agree amended Terms of Reference for the Corporate Asset Investment Fund Advisory Board (the Board) and revisions to the existing delegations to officers to support the continued growth of the CAIF in a safe and secure way.

Recommendations

3. It is recommended that:

(a) The performance of the Corporate Asset Investment Fund as set out in Appendix A attached to this report, be noted;

(b) The Corporate Asset Investment Fund Strategy for 2018 – 2022, attached as Appendix B to this report, be approved;

(c) The revised Terms of Reference for the Corporate Asset Investment Fund Advisory Board and the amended delegations to the Director of Corporate Resources as set out in Appendices C and D respectively, be approved.

Reasons for Recommendations

4. The Strategy has been updated to reflect the level of investment within the CAIF which is proposed to be increased over previously approved levels and to reflect changes to the range of investments held in the CAIF, as its scope is 60

expanded from pure direct property investments to include indirect and non- property investments such as pooled property funds and private debt.

5. In accordance with the Cabinet’s decision in September 2017, this report fulfils the requirement to report annually on the performance of the CAIF to both the Cabinet and the Scrutiny Commission.

6. The Terms of Reference for the Board and the delegations to the Director of Corporate Resources have been updated to align with the aims and objectives of the revised Strategy.

Timetable for Decisions (including Scrutiny)

7. This report will be considered by the Scrutiny Commission at its meeting on 12th September 2018 and the Commission’s comments will be reported to the Cabinet.

8. The period covered by the Strategy has been aligned to the MTFS, but like the MTFS this will continue to be reviewed and refreshed on an annual basis and reported to the Cabinet and the Scrutiny Commission as appropriate.

Policy Framework and Previous Decisions

9. The creation of the CAIF was included in the Medium Term Financial Strategy 2014/15-2017/18 (MTFS), which was approved by the County Council in February 2014. This has been renewed and increased annually in the MTFS.

10. In May 2014 the Cabinet established the Corporate Asset Investment Fund Advisory Board, comprising five Cabinet members.

11. The Council’s latest Corporate Asset Management Plan was approved by the Cabinet in June 2016. This promotes the rationalisation of the Authority’s property assets, reducing property running costs, generating new property income streams, ensuring cost effective procurement of property and property services, and creating capital receipts to support the capital programme or other beneficial investment proposals. This Plan has also been reviewed and refreshed and is the subject of a separate report to be considered elsewhere on the agenda.

12. The Medium Term Financial Strategy 2018-22 capital programme was approved by the Council on 21st February 2018 and this includes provision (£96m) for CAIF projects up to 2022. This is in addition to £100m of assets already held in the fund.

13. The Strategy has been revised to ensure its objectives are aligned with the outcomes set out in the Council’s Strategic Plan for 2018 – 2022 which was adopted by the County Council in December 2017. 61

Resource Implications

14. The County Council faces a very difficult financial outlook. The MTFS sets out the need for further savings of £50m to be made by 2021/22, of which £13m is unidentified. This gap is expected to grow in later years.

15. The revised Strategy envisages growing the CAIF from the original target of £200m (already funded by the capital programme) to £260m over the MTFS period. The exact level of investment will be dependent on the availability of good investments, the actual cost of development and the level of funding available. The expectation is that the returns (a combination of revenue income and capital growth) generated by the CAIF will have a meaningful impact on the Council’s budget to reduce the funding gap with a targeted return of 7%, eventually generating circa £18m per annum by the time all developments are completed.

16. The current value of the fund is around £100m. The MTFS 2018-22 capital programme included a provision of £96m spread over the four years 2018/19 to 2021/22 to fund further CAIF investments. However, with the expectation that the CAIF will grow to £260m (at current values) by 2022, there is a need to identify a further £64m of funding.

17. Options to fund the increase will be considered as part of the refresh of the MTFS capital programme later in the year. Options include using the current and forecast overborrowed position on the capital programme. This would mean incurring additional prudential borrowing on the capital programme, but due to the overborrowed position there would be no need to raise new external debt to fund the additional investment. This would require a change to the prudential indicators and would need to be approved by the County Council.

18. There is an operational cost of running the CAIF. This will be reviewed in the light of the increased size.

19. The Director of Law and Governance has been consulted on this report.

Circulation under the Local Issues Alert Procedure

20. None.

Officers to Contact

Chris Tambini, Director of Corporate Resources Tel: 0116 305 7830 Email: [email protected]

Jonathan Bennett, Head of Strategic Property, Corporate Resources Department Tel: 0116 305 6358 Email: [email protected]. 62 63

PART B Background

21. The Council has owned and managed ‘investment properties’ in the form of the Industrial and County Farms estate for many years. These properties are held for the purposes of supporting the delivery of various economic development objectives and also to generate revenue and capital returns to the County Council.

22. In May 2014, the Cabinet approved the establishment of the CAIF to be used to purchase commercial properties and land assets with a view to:-

a) Ensuring that there is a more diverse range of properties available to meet the aims of economic development;

b) Increasing the size of the portfolio;

c) Improving the quality of land and property available;

d) Ensuring the sustainability of the County Farms and industrial portfolio by replacing land sold to generate capital receipts; and

e) Generating an income/surplus to support County Council services.

23. The Cabinet also established the Corporate Asset Investment Fund Advisory Board, chaired by the Cabinet Lead Member for Resources and comprising four other Cabinet members. The Board is supported by an officer group formed from strategic property, finance and legal services to provide advice on risks, deliverability and financial implications. Specialist property investment support and advice is also available to provide an independent view and robust challenge.

Current Performance of the CAIF

24. The CAIF has a significant and growing value and has provided a means by which the Council can continue to provide high quality services to the people of Leicestershire despite significant pressures on public finances.

25. Since 2014 income generated by CAIF investments have made a real impact towards supporting Council services without which further savings would have been required and service provision to residents and businesses in the County would have been adversely affected.

26. Originally, funding of £15m was allocated to the CAIF to fund new investments over four years from 2014/15, and this was directed to direct property investments to support those aims detailed in paragraph 21 above. In addition, other Council assets held for investment purposes have also been included in the CAIF, mainly county farms and industrial properties. Since 2014/15, funding allocated has been renewed and increased annually and used to invest more widely in indirect and non-property investments such as pooled property 64

funds and private debt, totalling just over £100m by the end of 2017/18. Funding allocated in the current MTFS totals £96m.

27. The Annual Report attached as Appendix A to this report sets out in detail the overall performance of the CAIF during the 2017/18 financial year. This shows that overall the direct property investment assets in the CAIF increased in capital value by £30.9m to £73.7m and these are generating a net rental income of £2.7m which will rise significantly in future years.

28. As at the end of 2017/18, the overall value of the CAIF was £101.2m which comprised £18.8m of rural estate, £39.2m of office/commercial estate, £14.6m of development estate, £1.1m of other property, £7.1m of private debt and £20.4m of pooled property investments.

29. Included in the CAIF value are the financial investments that have been made in vehicles outside direct property ownership. This diversification, to spread risk, is in line with the Council’s aim to increase its commercial activities in order to generate greater income that will support the Council’s MTFS and future service delivery costs. In total £20m is invested in Pooled Property Funds and £7m in Private Debt. More detail is included in Appendix A.

30. With respect to two major CAIF developments from 2017/18, the following specific update is provided:

(i) Loughborough University Science and Enterprise Park (LUSEP) - Contracts have been exchanged with Loughborough University and tenant, The Access Group Ltd, for a 100,000 sq. ft. new build office. The development budget is £22m and will generate £1.6m pa in income once completed (and post rent free period). Works on site and planned to begin in January 2019.

(ii) Lutterworth East Strategy Development Area (SDA) - The Authority is continuing to promote the 516 acre Lutterworth East SDA site through the emerging Harborough Local Plan. The Local Plan will be tested at the Examination in Public by a Planning Inspector in October 2018 and is expected to be adopted by Harborough District Council in late Spring 2019. The Authority will submit an outline planning application in January 2019 for housing, employment and necessary infrastructure (including a new bridge over the M1). Land acquisition is proceeding well to demonstrate to the Planning Inspector the SDA that the development can be delivered. Consideration is now being given to the method of delivery.

The Strategy for 2018 – 2022

31. The County Council first introduced a CAIF Strategy in 2017 and this has been refreshed to support the continued growth of the Fund up to 2022 in alignment with the MTFS timetable and to further improve the Council’s financial resilience as government grants continue to fall, but demand on services and operating costs rise. It outlines how the Council will look to make asset investments 65

during 2018 to 2022 and manage its asset investment resources to support the objectives of the MTFS and the delivery of front line services, reduce operating costs, support economic development in the County and the wider economic region, and help achieve the Council’s wider strategic priorities.

32. Whilst the key priority of the revised Strategy is to continue to increase the income/revenue generated for the Council, investment criteria and processes have been reaffirmed to ensure this is done in a safe and secure way.

33. The updated Strategy reflects the Council’s aspirations to invest in assets that will secure long term returns whilst also protecting, as far as possible, the initial capital invested. It provides a framework that is flexible enough for the Council to compete in the commercial market whilst also ensuring governance processes are in place, proper due diligence is carried out, and risks identified are minimised and managed.

34. By specifically restructuring the Council’s property portfolio, capital receipts will be generated through the disposal of surplus and/or underperforming assets which can then be reinvested or reallocated as appropriate.

35. Expanding the investments made through and held in the CAIF that would normally be outside the scope of the Council’s Treasury Management Policy will also enable an increase in the interest earned.

36. For the future, consideration will be given to projects that will reduce the Council’s operating costs particularly in the relation to the Adult Social Care accommodation market. It is yet to be determined how such projects might be managed and funded and this will be considered over the coming year and as part of the MTFS refresh and the Strategy will be amended to reflect such decisions.

37. A copy of the revised Strategy is attached as Appendix B to this report.

Governance and Risk Management

38. The Strategy seeks to minimise risk principally by ensuring robust governance arrangements are in place and that investment decisions are only made in light of appropriate financial, commercial and legal advice. However, property investment and development will always have an element of risk much of which is outside the control of the Council as it relates to the strength of the wider economy. The County Council is not alone in pursing this approach and there has been much comment in national press on the level of borrowing incurred by some local authorities. It is worth noting that no borrowing is being proposed for the investments outlined in this report.

39. The Strategy sets out procedures to ensure risks associated with investments are monitored, assessed and mitigated and the Corporate Asset Investment Fund Advisory Board will continue to play a vital role in this. Its Terms of Reference have been updated to reflect the growth and broadening focus of the CAIF and to align its functions with the objectives of the revised Strategy for 66

2018-22. The updated Terms of Reference for the Board are attached as Appendix C to this report.

40. In addition, the Cabinet and the Scrutiny Commission will receive regular MTFS monitoring reports which will include information on the operation of the CAIF, as well as an annual report on investment activity undertaken during each financial year which will provide an update on ongoing projects, like the one attached at Appendix A.

41. It is worth noting that any risks identified will form part of the managing departments Risk Register which will be managed and mitigated and reassessed regularly in accordance with the Council’s usual practice. Where appropriate, any significant risks will be captured on the Council’s Corporate Risk Register which will also be overseen and monitored by the Council’s Corporate Governance Committee.

42. To complement the updated Strategy and Terms of Reference for the Board, the current delegations to the Director of Corporate Resources have been reviewed and refreshed to ensure these allow for timely action to be taken on investments, but ensuring significant investments are reported to the Cabinet where possible.

43. Where it is not possible to refer a proposed investment to the Cabinet, as action is required quickly to secure agreed terms or to ensure investments are not lost to a competitor, such investments will be captured in the regular and annual reports to the Cabinet and Scrutiny as detailed above, and will in any event be considered and closely monitored by the Board. The changes to the delegations to the Director are outlined in Appendix D.

Conclusion

44. The Corporate Asset Investment Fund Strategy for 2018 to 2022 is aimed at generating a long term and relatively stable source of income to offset the funding gap in the MTFS. The Strategy is not without risk and there is a possibility that in light of significant borrowing entered into by other councils to purchase property the Government may impose restrictions on local authorities in the future. The County Council has not borrowed to fund these investments. Any future decisions regarding the financing of investments will be taken in line with the County Council’s agreed MTFS, Treasury Management Strategy and Annual Investment Strategy.

Equality and Human Rights Implications

45. There are no equality or human rights implications directly arising from this report. 67

Background Papers

Report to the Cabinet on 15th September 2017 - Draft Corporate Asset Investment Fund Strategy 2017/18 http://politics.leics.gov.uk/ieIssueDetails.aspx?IId=50106&PlanId=0&Opt=3#AI52287

Report to the Cabinet on 18th July 2016 – Corporate Asset Management Plan http://politics.leics.gov.uk/ieListDocuments.aspx?CId=135&MId=4604&Ver=4

Medium Term Financial Strategy 2017/18 – 2020/21 http://politics.leics.gov.uk/ieListDocuments.aspx?CId=134&MId=4433&Ver=4

2016/17 Provisional Revenue and Capital Outturn http://politics.leics.gov.uk/ieListDocuments.aspx?CId=135&MId=5120&Ver=4

Appendices

Appendix A - Annual Performance Report for 2017/18 Appendix B - Draft Corporate Asset Investment Fund Strategy 2018 - 2022 Appendix C - Revised Terms of Reference for the Corporate Asset Investment Fund Advisory Board Appendix D - Revised Delegated Powers to the Director of Corporate Resources This page is intentionally left blank 69

Corporate Asset Investment Fund

ANNUAL REPORT 2017/18

Building Business. Boosting Communities. 70

FOREWORD

The council has a long and strong track record in owning and managing property. Over the past 12 months, we’ve stepped up our approach to investment and our portfolio has grown from £43m to £101m – not only boosting the local economy but also generating vital income for front line council services.

Our premises range from office to industrial and from development opportunities to the rural sector. Businesses want quality accommodation – and we know that start-ups are looking for space, and that firms want to expand. By bringing new life to old commercial sites – and building new workspaces - we’re making it attractive for companies to set up shop in Leicestershire, creating hundreds of jobs and investment. Multi-million-pound business parks in Market Harborough and Coalville are already moving forward, and more are on the way. Innovative plans to build a 62-acre solar farm – producing clean, green energy – are also under development. Our portfolio is performing well - and an above average return of nearly 12 per cent generated £2.7m of net income in 2017-18 as well as significant capital growth. We’re ploughing this money back into our front line services to reduce the impact of national funding reductions. It means we can spend extra cash tackling potholes, bringing down the cost to business and inconvenience to people who use our roads, and bolster social care services, supporting vulnerable people. Leicestershire is the lowest funded county in the country, meaning our scope for savings is limited. This report underlines that by being more commercial and innovative, we’re not only boosting Leicestershire’s economy, but also doing everything we can to lever more funding for our Council Taxpayers.

Byron Rhodes Deputy Leader Leicestershire County Council

2 Corporate Asset Investment Fund - Annual Report 2017/18 71

SUMMARY

This report forms the annual review of the Corporate Asset Investment Fund (CAIF) portfolio, reporting on the property performance for the year to 31st March 2018.

The CAIF is fundamental to the economic, social and environmental wellbeing of the people of Leicestershire especially given the current financial climate coupled with service demand growth (56.3% reduction in government funding for local authorities by 2019-20 (CIPFA). The income generated by investment in high quality property assets provides increased financial resilience and will underpin the Council’s ability to deliver a comprehensive range of quality services in the future. The report examines the development and performance of the overall property portfolio, the potential of the future investment programme to deliver enhanced returns and the future outlook for the wider investment market and how it might impact on investment strategy.

2016/17 Total £42.9m 2017/18 Total £101.1m

£2.9m £7m Office £25.8m Industrial £9.7m £20.4m Distribution £19.9m £0.8m Development Rural £12.4m Other £9.6m £1.1m £18.8m Pooled Property £14.6m Private Debt £1m

As at 31st March 2018, the capital value of the property portfolio was £101.2 million compared with the value as at 31st March 2017 of £42.9 million which represents a net uplift of £58.3million (135% increase).

3 Corporate Asset Investment Fund - Annual Report 2017/18 72

Capital Value of Fund

Value at Transactions Valuation Value at Transfer 31st March Acquisitions Capital Sales Change 31st March (£m) 2017 (£m) (£m) spend (£m) (£m) (£m) 2018 (£m) Office 2.9 23.9 0.1 - - -1.1 25.8 Industrial 9.7 - 0.4 -0.3 - 2.6 12.4 Distribution 0.8 - 0.2 - - - 1.0 Development 9.6 2.3 0.2 - - 2.5 14.6 Rural 19.9 - 0.7 -5.2 - 3.4 18.8 Other Prperties - - - - 1.1 - 1.1 Pooled Property - - - - 19.2 1.2 20.4 Private Debt - 7.0 - - - - 7.0 TOTAL 42.9 33.2 1.6 -5.5 20.3 8.6 101.1

Comparisons between years on capital valuations are affected by a change in valuation rules between years. This won’t impact on comparisons in future years. At 31st March 2018 the Fund held direct property assets of £73.7 million together with pooled property fund and private debt investments totalling £27.5 million. Net income from the Fund has increased to £2.7m over the year as a result of investment acquisitions and rental income increases (net of income producing disposals). This is expected to grow to about £10m per year by 2022 as developments are completed and tenants secured. In addition to the increase in the value of the Fund, the balance between sectors also showed a significant shift from the pattern that existed at the start of the year reflecting the influence of the purchases, disposals, transfers of other property in the Fund, changes in valuation that occurred during the year. These changes can be seen in the pie charts above There were two significant acquisitions during the year (multi let office schemes in Lichfield and Nottingham).

4 Corporate Asset Investment Fund - Annual Report 2017/18 73

35

26.5% 30

25

20 13.9% 13.9% 20.3% 16.7%

15 Total Return % Return Total 9.6%

10 6.4% 5.3%

3.6% -2% 6.5% 6.3% 6.3% 4.5% 4.3% 5 % 4.3% 5 3.5% 2% 1.4% -0.2% 1.3% 8% 4% 3.1% 0 -3.9% LCC Capital Growth % Income Return %

Rural

Office

IPD Rural

Industrial IPD Office IPD

Distribution

Development

IPD Industrial Capital Growth %

IPD Distribution

Other Properties

Pooled Properties Pooled All Direct Property Income Return %

IPD All Direct Property

• It is estimated that the internal costs of managing the Fund’s assets total £0.35m. These are not included in the table below but if it was it would reduce the overall income figure from 2.8% down to 2.5%; • The projected income returns for Offices are constrained by the Lichfield South and Embankment House as both assets were acquired in Quarter 4. Also, there was no appreciable capital growth in the year. Furthermore, the initial costs of acquisition over and above the capital valuation result in an overall negative capital performance (for the portion of the year that the assets were held). Assessment of the future capital performance of these assets over a full financial year will result in a true indication of capital growth and income performance for future years. • Development income is low but this reflects the fact that tenants won’t be in place until the development is complete. However, the high capital yields reflect the future earning potential from the sites; • The investment in Private Debt was made late in the financial year and so it is too early at present to properly assess the performance; • Overall, the Fund produced a total return for the year to 31st March 2018 of 11.8% compared to the IPD All Property Quarterly Index of 10.3.

5 Corporate Asset Investment Fund - Annual Report 2017/18 74

Fund Performance

LCC IPD Comparator Income Capital Total Income Capital Total Office 2.0% -3.9% -1.9% 4.3% 3.6% 8.3% Industrial 6.5% 26.5% 33.0% 6.3% 13.9% 20.2% Distribution 1.4% 4.5% 5.9% 6.3% 13.9% 20.2% Development -0.2% 20.3% 20.1% Rural1 3.5% 16.7% 20.2% 1.3% 4.3% 5.6% Other Properties 8.0% -2.0% 6.0% Pooled Property 4.0% 6.4% 10.4% All Direct Property 3.1% 9.6% 12.7% 5.0% 5.3% 10.3% Private Debt - - - TOTAL 2.8% 9.0% 11.8% 5.0% 5.3% 10.3%

1 IPD comparators not available for Rural – Figures quoted are Savills England Wales Benchmark report 2018

6 Corporate Asset Investment Fund - Annual Report 2017/18 75

CHANGES TO THE PORTFOLIO DURING THE YEAR

Summary of Changes During the year, the property portfolio increased in value from £43m as at 31st March 2017 to £101m as at 31st March 2018. This increase was due to a combination of valuation changes and further investment in assets and indirect holdings, as set out in the chart below. Value at year start Change during year Value at year end £42.9m £58.2m £101.1m Net transactions Valuation/transfer Miscellaneous £27.7m change net capex Purchases Sales +£28.9m +£1.6m £33.2m -£5.5m

Transactions During the Year

Direct property acquisitions

Lichfield South

Description 42,943 sq ft of Offices Completion Date 28th December 2017 Purchase Price £10,800,000 Rental Income £805,971 per annum Yield 7%

7 Corporate Asset Investment Fund - Annual Report 2017/18 76

Embankment House Nottingham

Description 59,448 sq ft of Offices Completion Date 23rd February 2018 Purchase Price £11,850,000 Rental Income £879,940 per annum Yield 7%

In addition, the Fund acquired Walton Holt Farm and 23 acres of potential development land at Lutterworth.

Private debt acquisitions

In December 2017, the Cabinet agreed to use cash balances to make an investment of £20m in Private Debt. By the 31 March 2018, a total of £7m had been invested with the balance due to be invested in early 2018/19. Investment in Private Debt funds will provide an increase in the interest earned relative to what could be earned by utilising cash deposits [with banks and other counterparties]. Private Debt can be broadly defined as loans from one party to another that are not tradeable on a recognised securities exchange. For many years the banking sector originated the vast majority of debt required by medium-sized companies (who are the main borrowers from the Partners Group funds) but a much tighter regulatory capital regime means that there are now attractive investment opportunities for investors with capital to commit to the asset class.

Disposals

In line with agreed strategy, the following disposals were achieved during the year and resulted in total capital receipts of £5.38 million through a combination of realising development potential and the restructuring of the farms and industrial portfolios.

Property Disposal Date Receipt Sector Springboard Centre, Coalville 22nd June 2017 £310,000 Industrial Limes Farmstead, Kilby 6th October 2017 £550,911 Rural Land at Heather Lane, Ravenstone 3rd April 2017 £2,108,000 Rural Land at Ashby Road, Ullesthorpe 22nd March 2018 £2,200,000 Rural Buildings, Walton Holt Farm 21st February 2018 £210,000 Rural

8 Corporate Asset Investment Fund - Annual Report 2017/18 77

Transfers

Other properties A number of existing properties that are owned by the authority, but were held outside of the Corporate Asset Investment Fund, have been transferred into the fund during the year. These are shown in the table below.

Property Value 31/3/18 Nanpantan nursery 101,000 Epinal Way, Loughborough 405,000 Glebe House, Loughborough 386,000 Swallow Walk, Hathern 99,000 Cotton Croft, Shepshed 99,000 Geeta Bhawan Centre, Loughborough 25,000 TOTAL 1,115,000

Pooled property The authority’s investment in Pooled Property was also previously held outside the Fund. During 2017/18 they have been transferred in. Details are shown below.

Product Value 31/3/18 Hermes Property Unit Trust 7,800,000 Lothbury Unit Trust 7,600,000 Threadneedle Unit Trust 5,000,000 TOTAL 20,400,000

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PERFORMANCE AND COMPARISON AGAINST INDUSTRY BENCHMARK

The Fund’s benchmark is the “All Property” total return (capital growth plus income return) of the IPD Monthly Index (All Assets). The total return for the property portfolio for the year to 31st March 2018 is 11.8%, 106 bps in excess the IPD Monthly Index benchmark total return of 10.3%.

Office Sector

The office sector was relatively small at the commencement of the year comprising 20% of the commercial portfolio. During the year, as a result of strong demand for premises in the Loughborough Technology Centre and positive rental growth the sector a total return of 16.6% (IPD Office return 7.9%). With the purchase of Lichfield South and Embankment House, increasing its proportion of the commercial portfolio to 36.9%, the performance of the office sector will have a major influence on future year’s results.

Industrial Sector

In common with the general market, the Industrial sector was strong in the year to 31st March 2018 producing a total return of 14.2% (IPD Industrial return 19.6%) . Demand and rental growth have both remained strong during the year for all grades of property within the sector which coupled with the strong demand for pre-lets of those units under construction underlying market conditions seem set to continue.

Rural Sector

Once again the rural sector has performed very well producing a return of 31.6% (rural benchmark figures yet to be released). Income return was strong at 13.3%. Capital growth at 18.3% results largely from the realisation of development potential with the expectation that positive results will continue in the medium term.

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PORTFOLIO REVIEW

Current Yield The current yield from the portfolio is 6.0% compared to IPD at 5.7%. Yields fell slightly during the year, both for the Fund and in the IPD index, but the relative margin was largely maintained.

Sector Proportions (indirect holdings apportioned to their relevant sectors)

The effect of purchases, sales and movements in value during the year has resulted in a significant shift in the sector weightings as illustrated earlier in the report. The long term aim is to maintain a balance between sectors that maximises the potential for achieving financial resilience. However, during the year to 31st March 2018 given the primary aim of increasing both the extent and quality of the portfolio over a relatively short time frame, the Fund has focussed on the purchase of assets that deliver the prospects of good long term income, sound tenant covenant and produce a better than market yield rather than maintaining the desired sector balance. Over time as new developments and further acquisitions come on stream it is envisaged that the desired long term balance will be restored.

Rent Reviews and Lease Expiries and Tenant Only Breaks

There are 37 rent reviews, 11 lease expiries and 20 tenants only break options that are falling due this financial year. The negotiations regarding the reviews, lease renewals and dealing with the break options will form part of normal day-to-day property management.

Future Investments

During the year the CAIF has on the basis of further funding made available through the Medium Term Financial Strategy (MTFS) committed to the following investments that will have the effect of further transforming the portfolio, achieving excellent rates of return and delivering significant additional income. In addition to further phases of investment at Airfield Farm Business Park and Leaders Farm, Lutterworth, a pipeline of future development schemes have been identified with proposals for the sites at Bardon Interlink and Quorn progressed to the detailed feasibility/business case stage. In addition funds have been committed to acquisition of further properties including that required to complete Land Assembly to facilitate the delivery of the East of Lutterworth SDA.

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Airfield Farm Business Park (Phase 1)

Description 80,000 sq ft B1/B2/B8 units Completion Date September 2019 Development Cost £7,130,000 Rental Income £480,000 per annum Yield 6.8%

Loughborough Science and Enterprise Park (LUSEP)

Description 100,000 sq ft offices Completion Date June 2020 Development Cost £24,250,000 Rental Income £1,600,000 per annum Yield 6.6%

Leaders Farm Lutterworth (Phase 1)

Description 90,000 sq ft industrial units Completion Date June 2019 Development Cost £2,080,000 Rental Income £140,000 per annum Yield 6.7%

Vulcan Business Park Coalville

Description 40,000 sq ft industrial units Completion Date June 2019 Development Cost £4,037,000 Rental Income £325,000 per annum Yield 8.0%

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Voids With the exception of those properties held vacant to facilitate restructuring or future disposals, at 31st March 2018 the level of voids across the portfolio stood at 3.1% reflecting strong market demand.

Rent Arrears (direct portfolio)

At 31st March 2018 total unsecured 90 day debt amounted to £29,017 which equates to 1.4% of gross income and represents a fall of 0.9% on 2017. Payment of all outstanding debts is being actively pursued through debt management procedures. In the longer term as the proportion of properties devoted to economic development continues to fall in line with the CAIF Strategy the covenant status profile should improve significantly reducing the fund’s exposure to debt risk.

Lease Expiry Profile (direct portfolio)

The graph below shows the percentage of rents held on leases expiring in each year within the portfolio. Where a tenant has an option to break within a lease, we have assumed the worst case scenario that the tenant will exercise such an option, whereas in practice it is likely that not every tenant will elect to do so. The largest bar in the graph above relates to the year 2025. Income in this year is derived from the tenants in Embankment House, Nottingham. We will approach the tenants in due course to see if

the tenants will be renewing their leases. 800

Sum of Annual Net Amount

700

£780,232.50 600

500 £603.645.50

400

£k value £k

300 £341,515

200

£282,000 £299,450.98

£215,194

100 £82,572.50

£71,107.17

£48,216

£45,404 £35,038

£24,180

£125,797 £16,480

£100,080 0

2018 2019 2020 2021 2022 2023 2024 2025 2026 2021 2022 2023 2024 2025 2026

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PROPERTY INVESTMENT MARKET REVIEW

Property Investment Market Review

2.5%

2%

1.5%

1% 0.5%

0

Quarterly (LHS) Annual (RHS)

Q3 - 2015 Q4 - 2015 Q1 - 2016 Q2 - 2016 Q3 - 2016 Q4 - 2016 Q1 - 2017 Q2 - 2017 Q3 - 2017 Q4 - 2017 Q1 - 2018

Chart 1 – GDP growth (source : ONS) Economic growth slowed towards the end of last year (GDP growth figure for Q1 2018 of 0.1%, confirms a slowing down in economic activity over the past year (Chart 1); the main source of growth being the service sector in which transport, storage and communication services performed particularly well. Encouragingly, industrial production increased driven by a rise in manufacturing output in comparison with the construction sector which has now experienced three successive quarters of negative growth. Household spending growth has remained very subdued and whilst government spending has accelerated business investment is flat and net trade has continued to decline. Performance in the Q1 2018 is likely to be constrained by weather related events in a similar way to those which occurred in 2010 however it is thought that more positive performance will come through in Q2. Business confidence data suggests that sentiment improved at the start of 2018 but remained negative as a consequence of the base rate rise in November 2017 and ongoing political uncertainty.

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The pound appreciated by more than 8% against the dollar as a result of the base rate rise. Any further increase in this year is likely to strengthen the pound further. In response annual consumer price inflation has already started to fall back from January’s 3% figure. Signs of a return to positive real wage growth are now apparent given falling inflation and under supply in the labour market. As a consequence the potential exists to boost household spending which will be the cornerstone of future economic performance. Against this background it is anticipated that the economy will experience modest growth of 1.5 - 2% over the period to 2020. These weaker GDP figures have eased any immediate upward pressure on interest rates. The previously strongly anticipated increase in the base rate by the MPC in May did not take place. However, commentators suggest that this has just been deferred rather than cancelled out.

Property forecasts

Commercial property returns are predicted to fall to 6.1% in 2018 down from 10.2% in 2017 comprising 1.2% capital growth and 4.9% income return. At 5.6% yields are expected to remain virtually unchanged due to stable investment demand before rising to 5.8% over the period to 2022. Beyond 2018 returns may fall back further as capital growth flat lines and income becomes the main component of returns. However, this flat projection disguises the significant variations in the future performance forecasts across the main commercial sectors. Industrial is expected to remain the best performing sector with yield predicted to contract by a further 0.25%. Total returns, including 7.4% capital growth, are expected to reach 12.5%. The ongoing lack of good quality space throughout the country will continue to support rental growth of 3.7% in 2018 and 3.2% over the period to 2022. A similar picture exists for Distribution with returns of 10.8% predicted for this year and 7% through to 2022. The office sector is likely to see much weaker returns this year, with total returns across the market falling from 7.9% to 4.7%. However, this reduction is largely attributable to the poor performance predictions for Central London which up to the end of 2017 has remained resilient against an uncertain economic and political backdrop. However, in the coming year Central London rents are likely to be subject to downward pressure and with yields set to move out negative capital growth is predicted. However, within the provincial office market with low vacancies and a limited development pipeline there remains a steady demand for Grade A offices leading to modest rental growth leading to returns of 8.6% being forecast for 2018. The retail sector will struggle in 2018 with weak consumer confidence and increased costs, especially business rates and staff cost driven by the National Living Wage. Positive real wage growth by mid-2018 would support a recovery in consumer confidence and bring respite to many retailers. Returns are predicted to be 3.5% reflecting an income return of 5.3% and negative capital growth of -1.7%. Yields are predicted to soften by 0.5% over the next two years as a general repricing of the market driving capital values into negative territory. Changing consumer behaviour and increasing on-line sales are driving the demand for retail warehouse space resulting in stable rents and the prospect of modest capital growth beyond 2019.

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The rural sector remains a safe haven for many investors. Whilst in the short term there is strong demand in the let sector and good rental growth in the longer term, with Britain’s exit from the EU, uncertainty around future farm incomes could have significant impact on rental levels and overall returns. However, there is still a good demand for sound investments with good diversification potential.

Investment Strategy Update The CAIF Strategy was reviewed in 2017 and adopted by Cabinet at its meeting held on 15th September 2017. The key objectives of the strategy are as follows:-.

• Ensuring that there is a more diverse range of properties available to meet the aims of economic development; • Increasing the size of the portfolio; • Improving the quality of land and property available; • Ensuring the sustainability of the County Farms and industrial portfolio by replacing land sold to generate capital receipts; and, • Providing a revenue income stream that can be used to support ongoing service delivery. The implementation of this strategy coupled with the development of robust performance monitoring measures will ensure that the portfolio operates effectively and delivers value for money.

CAIF Strategy continues to be reviewed on an ongoing basis to take account of market trends and wider Council strategy in order to maximise the benefits the Fund delivers. An updated strategy is being presented to Cabinet alongside this report.

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S0171 This page is intentionally left blank 87 DRAFT Corporate Asset Investment Fund

STRATEGY 2018/2022

Building Business. Boosting Communities. 88

FOREWORD

Byron Rhodes Deputy Leader Leicestershire County Council and Chair of the Corporate Asset Investment Fund Advisory Board The Council has a long and strong track record in owning and managing a diverse portfolio of property and other investment assets. In recent years, the Council has taken a more proactive commercial approach to investment expanding the portfolio, thereby boosting the local economy and generating vital income for front line council services.

This strategy helps ensure there is a strong and resilient foundation to the Council’s property holdings and that council taxpayers’ money is invested safely and wisely to ensure the services can continue to be supported against the background of tight financial settlements from central government.

Chris Tambini, Director of Corporate Resources The Corporate Asset Investment Fund is an important source of funding for the Council.

As central government support is reducing, it is important for the Council to ensure its long term financial viability and stability. One important way this is achieved is by becoming more commercial and looking for new and innovative ways to safeguard the Council’s services that people of Leicestershire rely on.

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TABLE OF CONTENTS

1. Introduction �������������������������������������������������������������������������������������������������������������������������������������������� 4

2. Strategic Objectives ����������������������������������������������������������������������������������������������������������������������������� 5

3. Legal Context ������������������������������������������������������������������������������������������������������������������������������������������ 7

4. Investment Strategy 2018 to 2022 ����������������������������������������������������������������������������������������������� 8

5. Investment Criteria ������������������������������������������������������������������������������������������������������������������������������� 8

6. Financial Returns ��������������������������������������������������������������������������������������������������������������������������������12

7. Investment Assessments �����������������������������������������������������������������������������������������������������������������14

8. Risk ����������������������������������������������������������������������������������������������������������������������������������������������������������17

9. Sectors ����������������������������������������������������������������������������������������������������������������������������������������������������21

10. Performance Monitoring / Benchmarking ����������������������������������������������������������������������������������22

11. Staff Resources �����������������������������������������������������������������������������������������������������������������������������������24

Appendix A - Approval Template �������������������������������������������������������������������������������������������������������������25

Appendix B - Assessment Of Potential Acquisitions ��������������������������������������������������������������������������26

3 Draft Corporate Asset Investment Fund Strategy - 2018/19 90

INTRODUCTION

1.1 Leicestershire County Council (the Council) owns and manages property and other investments, some of which are held for the purposes of generating income to support front line services. These types of investments are held in and funded through the Corporate Asset Investment Fund (the Fund) which the Council established in 2014. 1.2 Such investments have a significant and growing value that represent a means by which the Council can continue to provide high quality services to the people of Leicestershire despite the ongoing pressure on public finances. Since 2014, income generated by the Fund has reduced the amount of savings required to be made, and the impact on service provision to residents and businesses in the County which might otherwise have been adversely affected. 1.3 The Corporate Asset Investment Fund Strategy for 2018 to 2022 is aimed at supporting the growth of the Fund to further improve the Council’s financial resilience as government grants continue to fall, and demand on services and operating costs continue to rise. It outlines how the Council will look to make investments during this period utilising the Fund and how it will manage these to help achieve the strategic priorities of the Council. 1.4 Whilst a key priority is to continue to increase the income/revenue for the Council from its investments, the Strategy sets out processes to ensure this is done in a transparent and safe and secure way, ensuring adequate liquidity should the Council ever need to call upon the capital invested, that risks are properly identified and managed and that performance is monitored continuously. 1.5 The Strategy for 2017/18 included reference to indirect and non-property investments. In the last year these forms of investments have gained greater prominence within the Fund which now includes investments in Pooled Property Funds and private debt. The Strategy for 2018-22 has been amended to reflect this area of growth. 1.6 The Strategy is an integral part of the Council’s Medium Term Financial Strategy (MTFS) and intrinsically linked with the Corporate Asset Management Plan (CAMP) and the Treasury Management Strategy and Annual Investment Strategy and it should be read in conjunction with these documents.

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STRATEGIC OBJECTIVES

2.1 The aims of this Strategy have been aligned with the five Strategic Outcomes set out in the Council’s Strategic Plan (below) which will play a key role, alongside the Medium Term Financial Strategy, in shaping the Council’s investment activities over the next four years. The continued growth of the Fund during 2018 to 2022 will be at the heart of the Council’s ability to deliver these objectives and other Council policies and programmes going forward.

Strong Economy - Leicestershire’s economy is growing and resilient so that people and businesses can fulfil their potential.

Wellbeing and Opportunity - The people of Leicestershire have the opportunities and support they need to take control of their health and wellbeing.

Keeping People Safe - People in Leicestershire are safe and protected from harm.

Great Communities - Leicestershire communities are thriving and integrated places where people help and support each other and take pride in their local area

Affordable and Quality Homes - Leicestershire has a choice of quality homes that people can afford.

2.2 The specific aims of this Strategy are to ensure investments funded or held in the Fund – • Support the objectives of the Council’s MTFS • Generate an income stream which increases the Council’s financial resilience given the decrease in government funding • Supports the delivery of front line services through increased income generation, or through capital investments that will reduce operating costs. • Supports the Council’s strategic objective of affordable and quality homes through helping to unlock and accelerate developments. • Manage investment risk by investing in diverse sectors • Meet the objectives of the Council’s Corporate Asset Management Plan, Strategic Plan, its Economic Growth Plan and the County-wide Local Industrial Strategy • Maximise returns on Council owned property assets

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• Support growth in the County and its economic area of influence and ensure there is a more diverse range of properties and land assets available to meet the aims of economic development • Support the Council in maximizing the benefit from its financial assets in a risk aware way (not including standard treasury management activity)1

1 Treasury Management activity with banks, local authorities and the capital market are not in the scope of this Strategy, such activities being undertaken in accordance with the Treasury Management Strategy and Investment Strategy agreed annually by the County Council.

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LEGAL CONTEXT

3.1 Section 12 of the Local Government Act 2003 (the 2003 Act) provides a general power to invest: - “(a) for any purpose relevant to its functions under any enactment or

(b) for the purposes of the prudent management of its financial affairs”

3.2 The power contained in Section 12 (a) cannot be used for investing purely to create a return as this is not considered to be a purpose relevant to the Council’s functions whereas the power in Section 12 (b) may be used for investing to create a return as it may be prudent when used with other measures to manage the Council’s financial affairs. 3.3 Section 120 of the Local Government Act 1972 (the 1972 Act) provides the power for the acquisition of land by agreement (whether inside or outside the authority’s area) for the purpose of: “Any of their functions under this or any other enactment, or the benefit, improvement or development of their area”

3.4 Acquisition can take place notwithstanding that the land is not immediately required for that purpose. 3.5 Further power is conferred upon an authority by the Localism Act 2011 (the 2011 Act). Section 1 of this Act introduced a new General Power of Competence which gave local authorities the power to do anything that individuals generally of full legal capacity may do. This Act is widely drawn and includes reference to commercial activities which do not necessarily have to benefit the local authority’s area. However, this power is subject to a requirement that any actions being carried out for a “commercial purpose” must be done “through a company”, (i.e. a company within the meaning of s.1 (1) Companies Act 2006). 3.6 The approach of the County Council to date has been to rely on the powers set out in the 2003 Act. At present, this has not required the setting up of a company for its property and non-property investment activities using the Fund. However, it is likely to be necessary in the future, if the Council wishes to expand and diversify the scope of its investments. Such arrangements are not detailed in this Strategy at this stage. 3.7 The Strategy should be read in conjunction with the Capital Strategy, Treasury Management Strategy and Annual Investment Strategy. The strategies were approved by County Council in February 2018 and taken together take into account the statutory guidance issued by the Secretary of State under the Local Government Act 2003.

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INVESTMENT STRATEGY 2018 TO 2022

4.1 The Corporate Asset Investment Fund Strategy is a high level summary of the Council’s approach to investments made for the purposes of generating an income. It sets out the criteria and the processes and practices that will be considered and followed when carrying out such activities. 4.2 The Strategy developed for 2018 to 2022 has been aligned with the Council’s MTFS timetable and reflects the aspiration of the current Capital Programme to invest in assets that will secure a long term return. It is designed to provide a framework that is flexible enough for the Council to compete in the commercial market whilst ensuring governance processes are in place, full assessments are made and risks are minimised.

Use of the Fund 4.3 The primary use of the Fund will be to - 4.3.1 develop new or existing assets to meet Council service needs where this will reduce operating costs or, for example, meet local housing needs, whilst at the same time securing a return for the Council; 4.3.2 continue to acquire both parcels of land for development and standalone income producing investments; 4.3.3 continue to make better use of underperforming investment assets already owned by the Council, to redevelop these where appropriate to ensure they meet the needs of local businesses, meet current market expectations and achieve a higher economic return; 4.3.4 maintain progress in the restructuring and rebalancing of the property portfolio (including the use of pooled property funds). 4.4 In addition, the Fund will cover investment in Private Debt. Approval was granted by the Cabinet in December 2017 to invest up to £20m in private debt. Such investments are covered by the treasury management strategy agreed annually by the County Council. However, the funding, and overall monitoring of these investments are being picked up under the Corporate Asset Investment Fund to reflect the potential higher risk/higher reward nature of the investment and also to provide diversification to the overall portfolio of the Fund. 4.5 The Fund will be reviewed and performance of individual investments assessed on an annual basis. Where performance of an investment cannot be improved to an acceptable level this will be disposed of. The sale proceeds from such disposals will either be reinvested or directed to other service needs.

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Growth of the Fund 4.6 The overall value of the Fund as at 31st March 2018 is in excess of £100m from which an annual income of approximately £2m per annum is derived. This is expected to increase to £4m by the end of the current financial year. In addition, there is also underlying growth (capital growth) being achieved on the value of the assets. 4.7 In the Corporate Asset Investment Fund Strategy for 2017/18, the Fund had an investment ceiling of £200 million, based on values at that time. The Fund celling was to increase in line with RPI to give real terms numbers. 4.8 The investment ceiling of the Fund for the 2018/19 financial year taking account of RPI therefore increases to £206.68 million. 4.9 Notwithstanding this, from September 2018, the Fund will have a revised notional ceiling of £260 million to take into account the anticipated build costs for development opportunities that have either been acquired or transferred into the Fund in the past year. 4.10 An overall target return for the fund is 7%, made up of a combination of capital growth and revenue income. Furthermore, there is a specific income producing target of £10 million by the end of the four years covered by this strategy. 4.11 Decisions on how the investment programme is funded will be defined by the Council’s Treasury Management strategy and considered as part of the MTFS.

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INVESTMENT CRITERIA

5.1 When investing the Council’s financial resources action will be taken to ensure:- • That principal sums invested are safeguarded as far as possible; • That they provide adequate liquidity; • That investment returns or yield are considered and balanced against potential risk factors. 5.2 Once liquidity (the ability to ensure as far as is practicable that should the Council wish to divest itself of an asset it can do so without incurring any material loss) has been confirmed, the following criteria will be considered as appropriate when assessing a potential investment: • Security of the principal capital to be invested (both for land acquisitions and development/construction proposals); • Return on investment (revenue and capital growth); • Sensitivity analysis (i.e. returns pre and post rent reviews, voids assumption, end of life repair/disposal etc.); • Any legal issues (restrictive covenants etc.) with regard to the title of the land/ property; • Any potential liabilities (such as land contamination/asbestos); • Sustainability (the energy performance of the property and its use); • Full cost of the acquisition (land value, fees, end of life costs etc.); • Fit with the current portfolio; • Exit strategy. In addition, any property investment opportunities will also be considered with particular regard to: - • Actual income: The income produced by the asset is the most important element of a potential acquisition. The income from an asset is governed by the lease length, rent review pattern, break options, vacancy rates and management costs. • Development potential income: The total income assuming the site is fully developed (with cash flow timescales). • Tenant: The financial standing and viability of any existing (or potential) tenants’ covenants is to be considered. • Location: More weighting is given to acquiring assets or land in an area that is viewed to be economically buoyant and has the ability of sustainable financial and economic growth, over the life time of the investment. There is a need, however, to be mindful of the ratio of investments within and without of the county.

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• Sector: The strength of the investment or development sector should be considered in relation to its location, rather than in isolation. (E.g. a hotel in Leicester would be scored lower than a hotel in London). • Building: The age and construction of any existing buildings should be taken into account in the decision-making process. This should include how energy efficient the building/s is/are. The potential for future structural repairs, retro fits and refurbishment expenses for both the Fund and the occupiers should be limited as much as possible. The Fund should not purchase a property let on a term which exceeds the economic life expectancy of the buildings. 5.3 Once an asset/investment opportunity has been identified, it should be considered as objectively as possible to ensure that the overall aims of the Fund are achieved in a coordinated and measured way. 5.4 The adequacy of the estimated financial return will be judged against the certainty of the return materialising, with riskier investments expected to demonstrate a potential for higher returns. External Expert Support and Advice 5.5 To support proposed investments, expert external advice will be required, including the following areas: • Legal aspects of the proposal (lease terms, historic liabilities etc.); • Condition survey; • Current and future market performance and expectations in relation to the subject property and its location. Other forms of investment will have their own appropriate independent advice and oversight; • Valuation advice.

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FINANCIAL RETURNS

Yield 6.1 The level of yield required balances security and liquidity. The term ‘yield’ can be defined as: “The annual return on an investment, expressed as a percentage of the capital value”

6.2 For example, the annual rent received on a property investment is currently £50,000 per year gross. If the property has been valued at £1,000,000 then the revenue yield is 5%: Yield = Annual Rental Income x 100 Capital Value 5% = (50,000/1,000,000) x 100

6.3 However, in addition there is also the potential capital growth which reflects how the value of an asset changes over time. If, for example, the value of the £1,000,000 investment had risen to £1,025,000 by the end of the first year; this would give capital growth of 2.5% and a combined gross yield / return of 7.5% 6.4 The yield figure will reflect the various risks involved in the investment. By and large, the higher the level of uncertainty (e.g. a tenant with a poor credit rating) the higher the required yield would be. 6.5 The average/balanced target yield for investments made by the Fund is 7% nominal. There will be costs incurred in managing the Fund and also costs associated with abortive work (feasibility studies, consultant work/staff time unsuccessful acquisitions bids). 6.6 Individual lot sizes can each be considered on their merits as long as they conform to the agreed overall portfolio mix. 6.7 Assuming that investment/development property is the only asset class of investment that is being considered, the overall return of a standalone investment will vary depending on the market sector, the nature of the property asset acquired and the characteristics of the tenant in the acquired property. 6.8 Whilst aiming for a yield of 7%, the Fund will seek to invest in a balanced way over several market sectors and types of investment in order to balance risk with securing the best return on investment.

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Internal Rate of Return 6.9 Whilst yield is a useful measure for assessing the merits of an investment, yield will change over the life of an investment. To give a longer term perspective, the Internal Rate of Return (IRR) is a metric that is used to assess the strength of an investment. The IRR is the interest rate at which the net present value of all cash flows arising from an investment is equal to zero. In calculating an estimated IRR a number of assumptions need to be made in terms of projecting future expenditure and income streams including the future capital value of the investment holding. As a guide a minimum IRR of 7% is a high level assessment for whether an investment is worthwhile.

Other Balancing Factors 6.10 Other balancing factors to be reviewed regularly with respect to property investments(with the following approximate targets) are:

Out of In County County In terms of amount of fund Location invested. 75% 25%

Standalone Development site investment In terms of amount of fund Asset type invested. 75% 25%

Look for spread of risk Low Medium High Risk (higher risk for small Tenant Risk industrial units, lower risk for large office investments/ 25% 50% 25% development)

Short Medium Long Look for spread of leases <5 years 5-10 years 10 years + lengths (shorter for small Lease length low value assets, longer for high value investments/ 25% 50% 25% developments

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INVESTMENT ASSESSMENTS

7.1 This Strategy places emphasis on openness, transparency and consistency. It aims to ensure maximum benefit from the effective purchase and subsequent management of the Council’s assets, but within a framework which can be adaptable to market conditions. Within this framework, the Council must act within the appropriate legal framework, in a demonstrably fair and open manner, and consider whole life costs.

Direct Property Investments 7.2 Each proposed direct property investment proposal (including both proposals to acquire and/or develop property) will be subject to a three stage appraisal process as detailed below, although given the need to respond quickly to opportunities as they become available, a degree of flexibility is required and some of these stages may be combined.

STAGE 1 - Initial Assessment 7.3 The first phase of determining whether or not a direct property investment opportunity is worth proceeding with consists of a number of separate assessments:- 1. Strategic Fit 2. Risk Profile 3. Yield Profile 4. Tenancy Terms 5. Planning Overview 6. Site Inspection 7. Potential capital Growth 8. Valuation 7.4 Strategic Property Services, will first prepare an Initial Appraisal Report (IAR) which is intended to answer the basic question – ‘is the asset worth acquiring?’. 7.5 The IAR considers the likelihood of the proposed investment achieving the return required, the size and barriers to entry of the market, plus its suitability to the Council’s own ethical standards, the quantum of risk and complexity, the payback period and how much the Council knows about the proposal (i.e. are there just too many unknowns?). Initial basic property details are also recorded at this time. 7.6 The answers to these key points will give a simple yet effective picture of the proposal and will allow an early decision to be made by the Director of Corporate Resources as to whether or not an investment is worth pursuing. 7.7 The process is run by the Strategic Property Services team and the decisions summarised in a regular report to the Director of Corporate Resources. 7.8 A challenge can be raised through the Strategic Property Services team, ultimately to the Director of Corporate Resources, but there must be no multiple consideration of the same proposal during the initial process. Once it has been deemed a fail, unless there is a fundamental error in the data provided or a paradigm shift on the proposal itself then the activity must cease.

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STAGE 2 – Financial Appraisal and Business Case 7.9 Once the asset/site has passed the initial evaluation, a financial appraisal and business case will be prepared to establish the financial/budgetary implications of acquiring the property at the negotiated price. 7.10 An independent property advisory firm will also be consulted on the opportunity and their report made known to the Board if the proposal is progressed beyond stage two. 7.11 The aim of the financial appraisal and business case is to assess how the acquisition will perform. It will consider all the acquisition costs and any potential income, the associated risks and then assess whether the asset is a suitable acquisition from a financial perspective. This process will be led by the Strategic Finance Service but the Director and the Board will be kept advised as projects are assessed and negotiated.

Other Council Consultees 7.12 After the identification of an asset, it will be incumbent on Strategic Property Services as Fund Manager to establish whether there may be constraints on the development or use of the asset. 7.13 In some cases, it may be appropriate to seek planning permission for a form of development prior to acquiring land. Strategic Property Services will consult with planning and highways colleagues (and other departments as appropriate) together with external consultants to decide whether planning permission should be sought prior to acquisition (conditional contract). 7.14 As part of this consultation, advice will be sought on suitable alternative uses for the site/asset. In case the existing or proposed use becomes unviable in the future, it is useful to have an alternative use value. The relative monetary risk of the investment can be quantified using this information. 7.15 Contemporaneously with the planning audit, the Council’s legal section will be asked to undertake title searches of the land to ensure that the title is clean and there are no abnormal issues with the land that would be detrimental from a legal perspective. 7.16 Any existing or proposed tenant will also be credit checked.

Valuation 7.17 Valuation advice will usually be provided by a professionally qualified member of the Council’s Estates team. Where the advice required is particularly specialist or, if otherwise appropriate, valuation advice may be provided by another suitably qualified external surveyor.

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STAGE 3 - Approval to Acquire/Develop 7.18 If the investment satisfies both stages one and two of the appraisal process, then on reaching agreement in principle as to the terms of acquisition, a detailed report will be prepared for consideration by the Board. Subject to the Board’s support, acquisitions will then either be presented to the Cabinet for approval (necessary due to the size, complexity or risk (financial or reputational) of the proposed investment) or will be progressed by the Director of Corporate Resources under delegated powers. This report will set out how the acquisition is in accordance with agreed Council priorities and this Strategy. 7.19 Each business case will be approved by the Director of Corporate Resources (Section 151 officer) prior to presentation and discussion at the Board, which is chaired by the Lead Member for Resources. 7.20 All acquisitions shall have the necessary budgetary and relevant approvals before the acquisition is completed. 7.21 For clarity any decision that requires an approval of expenditure of more than £100,000 but less than £5 million can be made by the Director of Corporate Resources under the powers delegated by the Council. 7.22 Any decision that requires an approval of expenditure of less than £100,000 (and is line with a previous approved budget/scheme) can be made by the Head of Strategic Property Services’. 7.23 Any decision that requires an approval of expenditure of more than £5m will require Cabinet approval. 7.24 Cabinet approval is required for any ‘out-of-county’ direct property investment acquisitions. 7.25 Any indirect or non-property investment acquisitions ‘out-of-county’ are within the delegated authority of the Director of Corporate Resources

Surveys and Instructions 7.26 When all appropriate surveys (which must include an asbestos survey where the acquisition involves a building erected prior to 1999) have been satisfactorily completed or provided, the Council’s legal services team will be instructed to complete the documentation associated with the acquisition.

Other Investments 7.27 Other investments, such as into pooled property funds and private debt, will be subject to approval as part of the Council’s overall financial management processes. This will include a specific report to Cabinet outlining the potential risks and benefits of the investment.

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RISK

8.1 In respect of every investment there will be a number of risks that need to be assessed prior to a project being taken forward and then managed, mitigated and monitored throughout the life of a project. The key risks faced by the County Council in respect of its investment activities are set out below.

Investment Risk 8.2 The main risk with any investment lies with the ability to ensure the ongoing income stream and original investment is maintained and safeguarded. 8.3 For direct property, measures can be taken through, for example, ensuring that the tenant is of good covenant and is financially secure. 8.4 If the tenant defaults then whilst there are procedures to recover the rent, this is not guaranteed and can be time consuming and costly. 8.5 There are also issues with voids (periods of time when the investment is not income producing but the asset is incurring costs such as insurance, security, business rates, repairs etc.). 8.6 The ability to attract tenants of sufficient quality/sound covenant will also be affected by the macro-economic situation and also more regional/location factors. 8.7 Holding an element of the fund in pooled property funds helps to mitigate against these risks although for these, and non-property based investments, there will always be a dependency on the overall economic situation, including specifically the prevailing interest rate.

Financing Risk 8.8 The Council is to ensure compliance with the Prudential Code for Capital Finance in Local Authorities and ensure liquidity and security of the principal capital and not to tie up resources into long term situations whereby short term cash needs cannot be met or cannot be met without a significant financial penalty. 8.9 The returns generated by the Fund need to reflect the potential for the principal invested to reduce and for lost liquidity. A minimum total nominal return of 6.1% is sought in every investment (3.5% Green Book * 2.5% average inflation). This is reviewed (at least) annually for changes in the opportunity cost of the Council’s resources (e.g. borrowing) and other factors such as inflation and returns available elsewhere. Detail of how financial returns on investments will be assessed is set out in Appendix B of this Strategy below. 8.10 Decisions relating to the financing of investment and/or development will be taken in conjunction with the Council’s Treasury Management Strategy Statement and Annual Investment Strategy both approved each year as part of the Council’s MTFS.

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Reputational Risk 8.11 It is important that the reputation of the Council is protected during both times of financial restraint or otherwise in the investments that it makes.

Development Risk 8.12 This risk is specifically associated with developing property and these are higher than those risks associated with acquiring an already built property investment or investing in pooled property funds. This is therefore reflected in the potential returns. 8.13 Build cost over runs and delays during the pre and the main construction phases will directly affect the profitability of the scheme and (as above) the risk of not securing a tenant to pay the rent is higher when dealing with new builds. 8.14 This can be mitigated by not building speculatively but only with an identified occupier tenant already in place, legally secured through an Agreement to Lease. However, this may not always be the best strategy as some prospective tenants may wish to see the building in place first before entering into a contract. Each of these scenarios will be judged on a merit basis as they arise. 8.15 Officers will continue to keep the Director of Corporate Resources updated on projects to ensure that risks are monitored, eradicated or mitigated (or, in project management risk terms, the strategies to be employed are: treat, tolerate, transfer, terminate) where possible.

Managing Risks Direct Property Investment Appraisal Process

8.16 In order to minimise the risks associated with any investment being considered the Director of Corporate Resources will:- 8.16.1 Consider the level of return required from the capital that is invested. Each proposal should review the liquidity of the proposed acquisition and a fully costed exit strategy should the asset underperform and is not capable of being improved. 8.16.2 Undertake a cost/benefit analysis to fully understand the likely returns, identify any hidden costs and include key metrics such Expected Yield, Internal Rate of Return and Payback period. 8.16.3 Undertake a market analysis to ascertain the likelihood of success across a full range of indicators. 8.16.4 Consider the use of external expertise where required to enhance the internal knowledge/ skills of officers and provide a greater level of assurance on the risks and mitigations involved, with the quality of the advice measured through the performance of each individual proposal against the benchmark/ target rate as set in the original business case and reported through to the Board regularly.

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8.16.5 Produce a risk register for each property investment opportunity and update this annually. As each risk is analysed, a score which is a factor of probability and impact will be calculated (as per chart below) to ascertain the need for prioritising any actions to either tolerate, treat, terminate or transfer each particular highlighted risk.

Impact (Negative) Minor Moderate Major Critical 1 2 3 4 4 Almost Certain Medium (4) High (8) Very High (12) Very High (16) 3 Likely Medium (3) High (6) High (9) Very High (12) 2 Possible Low (2) Medium (4) High (6) High (8)

Probability 1 Unlikely Low (1) Low (2) Medium (3) Medium (4)

8.17 The property investments will be considered as part of a diverse asset portfolio, to mitigate the risk associated with any single investment proposal. This diversification will include selecting a range of proposals with mixed payback, investment levels, returns, geographical locations, investment liquidity, specialist’s skills and markets.

Fraud and Corruption 8.18 The Director of Corporate Resources will ensure that risks of loss through fraud, error, corruption or other such eventualities in its investment dealings are mitigated as far as is practicable and that these systems and procedures in place to tackle this are robust. 8.19 The Director and officers are alert to the possibility that it may become the subject of an attempt to involve it in a transaction involving the laundering of money. Accordingly, procedures for verifying and recording the identity of counterparties (e.g. tenants) will be maintained, as will arrangements for reporting suspicions, and ensuring that all members of staff involved in such dealings are properly trained. 8.20 Items that will be regularly reviewed as part of every transaction will include: - 8.20.1 Powers to own property investments 8.20.2 Money laundering risks 8.20.3 Property fraud risks 8.20.4 Changes to property legislation (e.g., Energy Act) 8.20.5 Appropriate third party checks before transacting 8.20.6 Due diligence in transactions 8.20.7 Keeping abreast of impact of legislative changes 8.20.8 Regular inspections of the assets 8.21 Full records of the purchase process will be kept in a separate file relating to the property and these records shall include details as to the valuation relied on in making the decision to acquire, the financial appraisal together with consents, approvals and papers recording the decisions taken under delegated powers. Such documents will form part of the public record.

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Member and Officer Oversight 8.22 The Council will continue to ensure the prudent management of its investments and for giving priority firstly to the security of the capital. 8.23 The Council will continue to ensure that procedures for monitoring, assessing and mitigating the risk of loss of invested sums are robust. The Board will play a vital role in assessing investment proposals early on and thereafter monitoring projects and overall performance of the Fund. 8.24 Financial performance of the Fund is monitored by officers and members on a regular basis. The Cabinet and the Scrutiny Commission will receive regular MTFS monitoring reports which include information on the operation of the Fund. These bodies also receive an annual report on investment activity undertaken during each financial year which also provides an update on ongoing projects. 8.25 Officers have continuous oversight of matters relating to property assets held for both service delivery and investment purposes. These are monitored through the Asset Management Working Group and the Corporate Property Steering Group chaired by the Director of Corporate Resources. 8.26 Effective management and control of risk are prime objectives in the management of the Fund. Any risk identified will form part of the managing departments Risk Register Which will be managed and mitigated and reassessed regularly in accordance with the Council’s usual practice. Where appropriate, any significant risks will be captured on the Council’s Corporate Risk Register which is overseen and monitored by the Council’s Corporate Governance Committee.

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RISK SUMMARY

9.1 The Fund is to acquire property investments (where the Fund is purely buying an income stream), property development sites (where the Fund will be involved in finding tenants and building schemes out) and other property/strategic land (where there is an expectation of a future capital gain). 9.2 This could be either directly or indirectly as part of the managed fund (pooled property). The Fund is also acquiring debt but not considering, at this stage, investing in other investable assets (commodities, FTSE shares etc.). 9.3 The Fund is unlikely to acquire surplus operational property (that is being disposed of) where it has no development potential. 9.4 The Council must consider its ability to recall invested funds; including the length of time and the ease and cost with which said investments can be returned in their entirety. 9.5 It is important for the Council to consider the key requirement of the Prudential Code which requires authorities not to tie up resources into long term situations whereby short term cash needs cannot be met or cannot be met without a significant financial penalty. There must be a clear understanding and forecast of short term cash needs which will need to be fully provided for by the Council before it considers longer term capital tie in. 9.6 This portfolio view, as well as individual asset classes, will be regularly reported to the Board, the Cabinet and the Scrutiny Commission. 9.7 Each individual proposal will have an exit strategy clearly articulated in the original business case which will provide an indicative timeline for the repayment of capital/ returning of funds once the decision has been made to divest, subject to market conditions.

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PERFORMANCE MONITORING/ BENCHMARKING

10.1 CIPFA guidance states that:- “Performance measurement is a process designed to calculate the effectiveness of a portfolios or managers investment returns or borrowing costs, and the application of the resulting data for the purposes of comparison with the performance of other portfolios or managers, or with recognised industry standards or market indices.” 10.2 It is clearly important to monitor performance to ensure that any judgements being made are the right ones. 10.3 The Fund is subject to regular valuations – with a regular review of investment methods as well as the delivery models. This will also include a regular assessment of the credit worthiness etc. of the Fund’s tenants. 10.4 It is the Council’s aim to achieve a stable long term surplus, profit and value for money from its investment activities. 10.5 As part of the performance reporting of the commercial programme the Board will consider not only new investment proposals, but also ongoing reporting of commercial activity outlining: 10.5.1 the performance of the portfolio, 10.5.2 the future pipeline of opportunities, 10.5.3 the investment forecast, 10.5.4 the risks and mitigations, 10.5.5 the detailed performance and commentary of each investment/ development proposal within the portfolio. 10.6 The reporting will be effective enough to allow the Board to support decisions on the future of each investment proposal considering four key outcomes: Increase - the proposal is performing well, and every indicator shows that the Council should increase the amount invested to generate a greater return Continue - the proposal is performing well, and every indicator shows that the Council should continue with the existing levels of investment Warning - the proposal is not performing well, and should be closely monitored and remedial action taken. If the proposals poor performance hasn’t been reversed The Board should consider alternate strategies Exit/Disinvest/Stop - the proposal is not performing well, despite the Council’s best efforts, the proposal should be considered for closure as soon as practicable and the exit strategy evoked. 10.7 The commercial approach of the Council has to be considered against the wider CIPFA financial regulations and MHCLG guidelines.

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10.8 Each investment made by the Council will need to be regularly valued as part of the year end accounts closure process, with different asset types requiring differing valuation methods and timings. 10.9 There will be an annual analysis of the portfolio mix and re-profiling of the portfolio. This includes the current estate as well as new acquisitions. There will be more regular reviews in changeable/volatile economic circumstances. 10.10 The Fund should continue to consider its exposure to both macro and local economic downturns and monitor financial market commentaries and reviews on the likely future courses of interest rates, exchange rates and inflation and their potential impact on the property market and yields. 10.11 The Fund should allow sufficient flexibility both to take advantage of potentially advantageous changes in market conditions and to mitigate the effects of potentially disadvantageous changes. 10.12 Officers will report regularly to the Director of Corporate Resources and will provide an annual report to Cabinet and to the Scrutiny Commission as well as updates throughout the year. 10.13 The Fund uses the Investment Property Databank (IPD) Benchmark as its performance yardstick. 10.14 More financial technical benchmarks such as Expected Yield and Internal rate of Return are also used to provide accounting rigor with regard to the Fund’s performance. 10.15 Other items such as total investment, risk profile, liquidity and exit costs for the individual activities above a certain threshold are summarised in the regular reports to The Board.

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STAFF RESOURCES

11.1 The Fund is managed by the Head of Service with support from colleagues in Strategic Property Services. The Director of Corporate Resources will ensure that there are adequate resources employed to ensure the Fund is managed in a safe and productive manner.

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APPENDIX A - APPROVAL TEMPLATE

DIRECT PROPERTY INVESTMENT APPRAISAL REPORT – UPRN xxxx Date of Report

Property

Description

Tenure

Agent dealing

Price

Yield

Tenant/s & Credit scores

Risk Analysis Summary

Development /asset improvement opportunities SPS comments

Comments Finance comments: -

Legal comments: -

Planning comments:-

Highways comments:-

Site/Building Surveyor reports:-

External advisor comments:-

Recommendation

CAIFAB meeting

Appendices Plan/marketing details

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APPENDIX B - ASSESSMENT OF POTENTIAL ACQUISITIONS

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S0350 This page is intentionally left blank 115 Appendix C

CORPORATE ASSET INVESTMENT FUND ADVISORY BOARD

TERMS OF REFERENCE AND GOVERNANCE ARRANGEMENTS

Function

To support the increase, improvement and management of the County Council’s investment portfolio which -  Supports the objectives of the Council’s Medium Term Financial Strategy.

 Generates an income stream which increases the Council’s financial resilience given the decrease in government funding.

 Supports the delivery of front line services through increased income generation, or through capital investments that will reduce operating costs.

 Supports the Council’s strategic objective of Affordable and Quality Homes through helping to unlock and accelerate developments.

 Manages investment risk through the opportunity to invest in diverse sectors.

 Meets the objectives of the Council’s Corporate Asset Management Plan, Corporate Asset Investment Fund Strategy, Strategic Plan and Single Outcomes Framework, the Economic Growth Plan and Local Industrial Strategy.

 Increases the size of the property portfolio and improves the mix and quality of land and property available across the County and the sub- region.

 Maximises returns on Council owned property assets.

 Supports growth in the County and its economic area of influence and ensures there is a more diverse range of properties and land assets available to meet the aims of economic development.

 Supports the Council in maximising the benefit from its financial assets in a risk aware way (not including standard treasury management activity).

Note: Treasury Management activity with banks, local authorities and the capital market are not in the scope of this Board, such activates being undertaken by the Director of Corporate Resource in accordance with the Treasury Management Strategy and Investment Strategy agreed annually by the County Council.

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Role

To consider matters relating to assets held, or to be held, in the Corporate Asset Investment Fund, including:

 Property transactions which would require a decision by the Cabinet or a decision by the Director of Corporate Resources under delegated powers where there is an obligation to first consult the Board. (http://cexmodgov1/documents/s137291/Director%20of%20Corporate%20Re sources.pdf)

 Proposals to acquire property for development, or to develop or redevelop existing property assets currently used for service delivery into economic development/investment assets.

 Proposals to acquire property assets which are out of County and are for investment purposes only.

 Proposals to acquire land to support housing development within the County

 Significant disposal proposals.

 Other investment proposals aimed at generating an income and return where this is considered appropriate by the Director of Corporate Resources.

 The development of investment policies and strategies covering property and financial investments not categorised as ‘specified’ in the Council’s Investment Strategy.

 Performance (financial and non-financial) in relation to investment activity.

Governance Arrangements

The Board will comprise of 5 Cabinet members to be appointed by the Leader, including the Cabinet Lead Member for Resources who will be Chairman of the Board.

A quorum of three Members will be required to conduct business.

The Board will meet as and when required.

Support will be given to the Board by the following (or their representative) –

 The Director of Corporate Resources  The Head of Strategic Property  The Director of Law and Governance

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 The Head of Planning, Historic and Natural Environment (as required)  Independent investment advisors (as required)

Meetings of the Board will be held in private in view of its function and the nature of business to be considered.

Independent Investment Advisors

Support is primarily expected from a specialist advisor with proven expertise and experience in the property investment market and access to specialist industrial, agricultural, office and retail investment areas will be appointed to provide property investment consultancy advice to the Board and to officers regarding proposed property investment activities.

The Independent Advisor will also –

 Provide market information and strategic advice on an ongoing basis in order that the Corporate Asset Investment Fund Strategy can be reviewed and updated to respond quickly to changing economic and market conditions.

 Upon request by the Director of Corporate Resources, actively source investment opportunities and pursue those and such other investment opportunities as directed by the Authority on behalf of the Council, providing detailed property appraisals to assist the governance process as necessary.

Where non-property investments are being considered external advice will be taken, as appropriate. Depending upon the nature of the investment this could range from an advisor specialising in the investment area or utilisation of advice received by the Pension Fund.

Ongoing Reporting Arrangements - Management and Monitoring of Investments

Regular performance reports regarding the CAIF portfolio will be presented to the Board as is considered appropriate by the Director of Corporate Resources.

Financial performance of the CAIF will be monitored regularly through a specific section in the MTFS Monitoring reports presented to the Cabinet and the Scrutiny Commission on a regular basis.

Reports will be presented to the Cabinet and the Scrutiny Commission annually in the summer regarding matters considered and supported by the Board and actions taken by the Director of Corporate Resources under delegated powers. Such reports will also set out the performance of the portfolio against the targets set out in the Corporate Asset Investment Fund Strategy.

Decisions taken by the Director of Corporate Resources under delegated powers will be published on the Council’s website in accordance with the Local Authorities (Executive Arrangements) (Meetings and Access to Information) Regulations 20102.

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The Corporate Asset Investment Fund Strategy will be reviewed and refreshed on an annual basis and the Corporate Asset Management Plan will be reviewed and refreshed every three years. Both will be presented to the Scrutiny Commission for consideration, and thereafter the Cabinet for approval.

July 2018 APPENDIX D

DELEGATED POWERS TO THE DIRECTOR OF CORPORATE RESOURCES

10. Sales and Acquisitions

Existing Proposed Explanation

Power to declare land surplus to requirements, to dispose of it and earmark (No change) the proceeds of sale where required for another facility;

Power to dispose of land at less than the best value which might reasonably be expected, (No change) where either the undervalue is considered to

be de minimis or the Director is satisfied the 119 disposal will meet the wellbeing test in the General Disposal Consent in force for the time being, and the following criteria:

(a) A positive business case for the (No change) proposed disposal/transfer;

(b) The proposed use is demonstrated (No change) through the business case to be more beneficial to the wider community and locality than alternative uses;

(c) The proposed means of transfer is the (No change) most effective way to realize the benefits being sought; (d) The County Council’s interest is (No change) protected by appropriate safeguards.

Power to authorise the change of use of (No changes) property;

Power to agree accommodation work and (No change) allied or associate matters where land is acquired for statutory purposes, subject to the costs being met from the approved capital programme, or as agreed in consultation with the Chief Officer of the Department for which the land has been acquired;

In respect of the purchase and development Power to purchase and develop land for schemes To specifically refer to all

of Operational Properties (i.e. properties for within the approved capital programme, excluding property purchases and 120 schemes within the approved Capital those identified within the Corporate Asset Investment developments that relate to Programme), power to – Fund, and for other operational purposes up to a operational matters and maximum of £2m per transaction. which are listed in the capital (a) Purchase and develop land for programme or which are schemes within the approved capital subsequently added in programme; accordance with the Financial Procedure rules up to a (No change except renumbered) maximum value. (b) To take all necessary steps to complete the purchase of land following the making of a Compulsory Purchase Order; (c) To acquire replacement land where (No change except renumbered) required by statute (e.g. for a replacement recreation/ sports facility) in order to achieve the best value disposal of an asset.

In respect of the purchase and development Power to purchase and develop land for investment Amended to include financial of Investment Properties, power, following schemes identified in the Corporate Asset Investment limits on the delegation; to consultation with the Corporate Asset Fund within the capital programme, and for other allow purchases below the Investment Fund Advisory Board, to agree to investment purposes: value of £1m to proceed purchase and develop land using funding without prior consultation with allocated to the Corporate Asset Investment (a) Up to a maximum of £1m per project (including the Board; to positively Fund (CAIF) and/or for Future Developments acquisition and development costs combined, require Board support for provided that such decisions are in line with but not including any transaction costs); those projects valued £5m the CAIF Strategy. (b) Provided that, for projects over £1m but less and over. 121 than £5m (including acquisition and development costs combined, but not including any transaction costs), such projects have been supported by the Corporate Asset Investment Fund Advisory Board.

Note: References to “land” in the above (No change) paragraphs include buildings, as well as existing and new rights and interests in both land and buildings. This page is intentionally left blank 123 Agenda Item 11

SCRUTINY COMMISSION: 12 SEPTEMBER 2018

WHOLE LIFE DISABILITY STRATEGY

JOINT REPORT OF THE DIRECTOR OF ADULTS AND COMMUNITIES AND THE DIRECTOR OF CHILDREN AND FAMILY SERVICES

Purpose of report

1. The purpose of this report is to present the County Council’s Whole Life Disability Strategy and associated document “Preparing for adulthood – A protocol for young people with special education needs or a disability” which describes how children and young people should be involved in decisions about their care and support.

Policy Framework and Previous Decisions

2 The Strategy (Appendix A) supports the Council’s ambitions as established in the Strategic Plan, "Working together for the benefit of everyone: Leicestershire County Council’s Strategic Plan 2018-22" which was approved by the County Council in December 2017. The delivery of the Whole Life Disability Strategy will contribute to all five strategic outcomes.

Background

3 The Whole Life Disability Strategy will ensure that all disabled people, their families and other stakeholders receive a co-ordinated and proportionate response from Council services to enable them to live a healthy, safe, independent and fulfilling life in their own community.

4 Being born with or acquiring a disability can have a major impact on people’s life chances and opportunities.

5 The Council’s aim is to take a whole life approach to ensure that disabled people of any age can live healthy, safe, independent and fulfilling lives in their own communities. By doing so, individuals will have greater employment opportunities, better health, enhanced community relationships, and increasing independence and control over what they want to do and how they wish to be supported.

6 Living with a disability should not be a barrier to living full independent successful lives. This Strategy sets out how the Council, will work alongside all disabled people of all ages, along with their families and other key stakeholders to make sure that when they are in contact with Council services, they have access to a co-ordinated, proportionate response. This will focus on promoting inclusion, independence and self-reliance to enable people to live their lives, recognising the inequalities that people with disabilities often experience in society. 124

7 The Preparing for adulthood protocol has been developed to address the agenda set out in the Care Act 2014 and Children and Families Act 2014. The aims of the protocol are to ensure that young people, and their families, have appropriate information and advice, contact with lead professionals and appropriate support services to enable a smooth transition from children and young people’s services to adult services.

Partnership Strategy Development

8 A key recommendation early in the review process was for the Council not to work in isolation, but to develop the Strategy with partners and to seek to establish integrated service pathways for disabled people in Leicestershire. Thus, the scope was widened to the Leicester, Leicestershire and Rutland (LLR) sub-region and included the relevant local authorities and health partners, from the Clinical Commissioning Groups, Leicestershire Partnership NHS Trust and University Hospitals of Leicester. A Partnership Officer Board with representatives from across the partnership was established, chaired by the Chief Executive of Leicestershire County Council.

9 As part of the process in January 2017, the Council commissioned Peopletoo, an independent organisation, to review the Council’s provision for disabled people and to support the development and implementation of a Whole Life Disability Strategy. Peopletoo conducted a significant consultation exercise between January and May 2017 (details of which are given in paragraphs 27 to 31 below) which culminated in an engagement report to the Partnership Officer Board in June 2017 and to the Integration Executive (the senior officers supporting work of the Health and Wellbeing Board) in July 2017. The key findings were largely drawn from direct dialogue with disabled people, parents, and carers, backed up by the findings from engagement with a broad section of professionals from voluntary, community, private and statutory sector organisations that directly provide and/or commission services for disabled people.

10 Following this, Peopletoo conducted a series of interviews with key officers and practitioners within the partnership organisations throughout June and July 2017 which culminated in a series of workshops. The aim of the workshops was to build on the findings from the engagement work with disabled people and professionals working in the field and, in relating these directly to the priorities of the partner organisations, develop strands of work that could be taken forward to implementation.

11 The workshops were completed and the results of these were collated into a draft Whole Life Disability Strategy which was presented to the Partnership Officer Board on 7 November 2017.

Engagement of Partnership Agencies in the Strategy Development

12 One of the main challenges in developing the Partnership Strategy was ensuring that partners engaged with the development activity in terms of making officers available for discussions and providing data. Similarly, it was a challenge to ensure that partners continued to commit to the end goal of a single Whole Life Disability Strategy and action plan, despite their other organisational pressures and drivers. 125

13 Following the presentation of the draft Strategy in November 2017, the Council attempted to gain a firm commitment formally by writing to partners reaffirming the need for both organisational commitment and a financial commitment to enact change. However, this was unsuccessful. It has therefore been determined that it is not possible to develop a cross sector LLR wide Strategy at this time.

14 Notwithstanding the failure of partners to commit, all departments of the Council support the Whole Life Disability approach and the adoption of the Strategy document as a standalone County Council document is therefore sought.

Leicestershire County Council Whole Life Disability Strategy

15 The process of developing the Strategy identified the key concerns that disabled people have around the support they receive. These were as a result of an extensive engagement exercise with a wide range of disabled people and their parents/carers across Leicestershire. Individuals and groups had taken the time to engage with the process and provided a valuable insight.

16 The overarching theme emerging from the Strategy is to ensure a person-centred approach to promoting the independence of all disabled people.

17 Although each of the priorities that have emerged from the Strategy were based on the views of disabled people speaking about their experiences across a number of health and social care providers, the County Council recognises it has a significant impact on that experience. Furthermore, it is clear that the improvements that disabled people and their parents and carers want to see are aligned with ‘Working together for the benefit of everyone: Leicestershire County Council’s Strategic Plan 2018-22’ for example, having the opportunities and support to take control of their health and wellbeing, keeping people safe, and enabling thriving and integrated communities.

Preparing for adulthood protocol

18 The Whole Life Disability Strategy takes an all age approach to supporting people who have a disability and aims to support people throughout the stages of their lives. However, it is recognised that certain life stages and transitions between them create more challenges for disabled people and their families.

19 One such life stage is the transition from childhood to adulthood. This is sometimes a difficult transition for people without disabilities but for disabled young people there is an added complexity due to the challenges of accessing and establishing new and different support services, and of understanding the opportunities and options available to them.

20 The Children and Families Act 2014 introduced a new Special Educational Needs and Disabilities (SEND) system and extended the age range for education support to 0-25 years, as such significantly more post-16 pupils are now being supported. At the heart of the changes is a commitment to ensure that children, young people and their families are at the centre of decision making in order that they achieve better outcomes. The majority of children and young people with SEND can be successful with support from their schools, family and the community. Some young people will require additional support to meet their needs. 126

21 The Care Act 2014 places a duty on local authorities to conduct transition assessments for children, children’s carers and young carers where there is a likely need for care and support after the child in question turns 18 and a transition assessment would be of ‘significant benefit’.

22 However, the timing of this assessment will depend on when it is of significant benefit to the young person or carer. This will generally be at the point when their needs for care and support as an adult can be predicted reasonably confidently, but will also depend on a range of other factors.

23 There are three groups of people who have a right to a transition assessment:

. Young people, under 18, with care and support needs who are approaching transition to adulthood; . Young carers, under 18, who are themselves preparing for adulthood; . Adult carers of a young person who is preparing for adulthood.

24 Early identification and assessments that build on a person’s strengths and what they do well, gives local authorities an opportunity to put in place enabling services that will help young people to become more independent as they move into adulthood.

25 The Preparing for adulthood protocol (Appendix B) sets out how services will work together to support young people with SEND to prepare for adult life.

26 The protocol has been developed jointly between the Children and Family Services and Adults and Communities Departments and outlines how children and young people should be involved in decision making, careers advice, the Local Offer, Post- 16 programmes and funding arrangements. Partners have been engaged in the development of the protocol and pathway that sets out clearly what needs to happen at each stage with the young person.

Consultations

27 Peopletoo conducted a significant consultation exercise between January and May 2017 with disabled people, parents, and carers, including engagement with a broad section of professionals from voluntary, community, private and statutory sector organisations that directly provide and/or commission services for disabled people.

28 This included extensive engagement undertaken by Peopletoo and officers in the development and preparation of the Strategy document with feedback from over 1,000 people, including 15 existing service user groups across Leicestershire and Leicester. Peopletoo and officers also organised workshops for parent and carer groups and disabled workers groups. The engagement with disabled people was all carried out through face to face contact, often using card systems to ensure understanding, backed up by ‘easy read’ documents to help people assimilate the messages.

29 Professionals across LLR partners were also engaged through a series of meetings with senior officers and workshops were held with 146 practitioners being invited. Whilst partners did engage in a number of the consultation events and provided valuable feedback, the commitment from those organisations at a senior decision- making level was inconsistent. 127

30 The consultation document which resulted is framed on the themes and responses from disabled people and their families. These themes were broad but included:

 Disabled people desire greater independence  Disabled people and parents/carers find it difficult to navigate health and social care systems  Disabled people and parents/carers experience difficult transitions, mainly from children to adult service.

31 Further engagement has also been undertaken with partners, educational institutions and the Parent Carer Forum to develop the Preparing for adulthood protocol and further engagement will take place to co-produce the implementation plans which will support the delivery of the Strategy.

Resource Implications

32 The resource requirements to support the implementation of the Whole Life Disability Strategy will be met within existing budget allocations or separately identified through the annual Medium Term Financial Strategy (MTFS) process.

33 In Leicestershire, there are estimated to be 36,100 children and young people living with a long standing illness or disability, including Special Educational Needs (SEN) and about 16,816 of them are known to schools and the local authority. The number of children with Education, Health and Care Plans (EHCPs) has risen by nearly 1,000 since 2015, with a total of 3,703 children and young people (aged 0-25 yrs) with EHCPs in the County as at March 2018.

34 The Children and Family Services Department forecast spend of £67m on the commissioning and provision of services for children and young people with SEN and are funding a growing number of Post 16 students.

35 There are around 3,000 disabled people aged under 65 in receipt of support from Adult Social Care. In 2015, the Adults and Communities Department spent approximately £64m on the provision of services for these people - 42% on community based services and 58% on residential accommodation. A total of 81% of physically disabled people had community-based provision compared to only 52% of people with a learning disability.

36 The existing MTFS identifies a growth requirement of £600,000 in 2018/19, rising to £2m by 2021/22 to meet the care requirements of an estimated 184 young people who will transition into adult social care services.

37 In addition to these care costs, both Departments will outline additional funding requirements for implementing and administering the Preparing for adulthood protocol during the MTFS 2019 planning round.

38 The Director of Corporate Resources and the Director of Law and Governance have been consulted on the content of this report. 128

Timetable for Decisions

39 The Whole Life Disability Strategy and associated protocol for young people with special educational needs or a disability, “Preparing for adulthood”, will be presented to Cabinet for approval on the 14 September 2018.

40 The Whole Life Disability Strategy will be presented, for information, to the Health and Wellbeing Board at its meeting on the 27 September 2018 and the Integration Executive on the 2 October 2018.

Conclusions

41 The Commission is invited to comment on the Whole Life Disability Strategy and associated Preparing for adulthood protocol and its comments will be submitted to the Cabinet.

Background papers

 Leicestershire County Council Strategic Plan 2018-22 - https://www.leicestershire.gov.uk/about-the- council/council-plans/the-strategic-plan  Medium Term Financial Strategy 2018 - https://www.leicestershire.gov.uk/about-the-council/council- spending/medium-term-financial-strategy-mtfs

Circulation under the Local Issues Alert Procedure

42 The report being presented to Cabinet on the 14 September 2018 will be circulated to all Members of the County Council via the Members’ News in Brief.

Equality and Human Rights Implications

43 An Equality and Human Rights Impact Assessment (EHRIA) screening exercise was conducted and concluded that the Strategy is focused on improving life chances for disabled people by promoting greater access to employment, better health and community relationships and increasing independence and control over what they want to do and how they are supported. It is anticipated that as the impact on protected groups will be positive a full EHRIA is not required at this stage.

Appendices

 Appendix A– Whole Life Disability Strategy  Appendix B – Preparing for adulthood – A protocol for young people with special educational needs or a disability

Officers to Contact

Jon Wilson, Director of Adults and Communities Adults and Communities Department Tel: 0116 305 7454 Email: [email protected]

Paul Meredith, Director of Children and Family Services Children and Family Services Tel: 0116 305 7441 Email:[email protected] 129 DRAFT

Whole life disability strategy 130 DRAFT

Contents

Foreword 3 The purpose of the strategy 4 Introduction 5 The context for Leicestershire’s strategy 6 12 pillars of independence 7 What are we doing about the concerns raised by disabled people? 12 What next ? 15

2 | Whole life disability strategy 131 DRAFT Foreword

We are proud to present, Leicestershire County Council’s, first whole life disability strategy that sets out an initial plan for how disabled people can live happy, independent, and successful lives. Joining together Children and Adult health and social We want disabled people to be independent and equal care services, Leicestershire demonstrates how important in society, have choice and control over their own lives. we feel this agenda is and how we believe, by working Disability should never be a barrier to live a happy, together, we can achieve more for disabled people and independent, and successful life. Our aim for this their families. strategy is to support removing barriers for all types of disability through challenging and changing attitudes and An estimated 210,000 (20%) of residents in Leicester, understanding that this is everyone’s responsibility. Leicestershire, and Rutland have some form of disability or long term health problem1: each and every one of those people deserves to be able to access support, develop their skills and to meet life’s challenges, and make the most of their opportunities.

Richard Blunt Ivan Ould Cabinet lead member for Adults and Communities Cabinet lead member for Children and Family Services

1 Source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/692771/family- resources-survey-2016-17.pdf.

Whole life disability strategy | 3 132 DRAFT The purpose of the strategy

The whole life disability strategy supports the integration of health and social care services for disabled people within Leicestershire. This strategy has been co-produced with disabled Our strategy is about everyone: disabled children and people and statutory health and social care services. adults; family members; carers; friends; neighbours; Building on the best practice in the statutory services the employers; educators; decision makers; funders and strategy establishes that co-production will be adopted planners. It aims to challenge thinking, change attitudes, as the way in which services will work with disabled and recognises that disability and removing barriers is people, their parents and carers going forward. everyone’s responsibility and everyone has an important part to play. The strategy identifies the key concerns disabled people have around the support they receive from health and We want disabled people to be independent and equal social care services and details the initial response from in society, and have choice and control over their own these services in addressing the concerns raised. lives. This document does not provide a comprehensive Throughout this strategy there are a number of direct list of all the services available for disabled people, quotes from disabled people and members of their but responds to the themes clearly expressed by support networks that were provided through the disabled people as we have engaged with them in the engagement process. development of this work.

Jon Wilson Paul Meredith Director of Adults and Communities Interim Director, Children and Famiy Services

4 | Whole life disability strategy 133 DRAFT Introduction

Our Vision • Promote Personalisation and Progression – Services Leicestershire County Council’s Strategic Plan 2018-22: will demonstrate how they are responding to Working together for the benefit of everyone includes meeting the identified outcomes of everyone they its vision for Leicestershire. We want to have a strong support, and how they can demonstrate when they economy that creates the best life chances for all. A are met. place where people are well and safe, living as part • Champion increased independence and of great communities where people enjoy life with employment – People should be able to live, work maximum independence in quality homes that are and be active contributors in their community, affordable. The Whole Life Disability Strategy focuses making the best use of their own and other available on how we will deliver these outcomes for disabled resources and opportunities. people throughout their lives. • Promoting Choice and Control with shared The vision starts with the moral imperative that we make responsibility and community resilience – People sure disabled people living, working, studying, and should be able to exercise choice and control over visiting our communities are supported, empowered, and as many matters as they can, but with these rights enabled to live their lives to the full. goes responsibility. We will be adopting a strengths- Within Leicestershire our aim is to take a whole life based approach that takes account of informal as approach to ensure that disabled people of any age well as formal networks of support to link people can live healthy, safe, independent, and fulfilling into their own community capacity rather, than wrap lives in their own communities. They’ll have greater services around them. employment opportunities, better health and community • This strategy sets out, initially, how the statutory relationships, and increasing independence and control agencies will work together with disabled people, over what they want to do and how they wish to be their families and others who support them to make supported. the vision a reality. To deliver our vision, we will: • Take a Whole Life Approach - We will aim to reduce the impact of transition between different ages and stages of life by working with individuals, their families and others who support them, to create a seamless experience. • Focus on early help, intervention, integration, and prevention – Starting at birth we will aim to ensure that disabled people and their families will have access to the right information and support to enable them to be actively included within their local communities. We aim to ensure they are supported to start developing the skills they will need to lead a more independent life.

Whole life disability strategy | 5 134 DRAFT The context for Leicestershire’s strategy

Our strategy is aligned with the many forms of legislation Social model of disability and policy relating to disability, equality and improving Through the engagement, we explored with people the quality of life for disabled people. the Social model of disability, a concept which says it We have been keen to establish foundations for the is not a person’s condition or impairments that disable work that are relevant to disabled people, parents, them, but environmental and societal conventions and carers, and professionals working within the field. The the way society is organised that creates barriers and elements considered below now form foundations for the do not accommodate difference and therefore disable final strategy as they have been widely accepted in the people. This model has been widely accepted as positive engagement process by disabled people. by people who have participated in the engagement workshops, whilst we adopt this model as a positive Definition of disability statement way of reshaping services, we acknowledge The definition of disability adopted and agreed with that disabled people have physical, medical, and people through the initial engagement workshops is from emotional needs that needs that should never be the Equality Act 2010. It states: disregarded You are classed as disabled if you have a mental or physical impairment that has a ‘substantial’ and ‘long- term’ negative effect on your ability to do normal daily “A whole life disability strategy activities. makes sense, as disability is for ‘Substantial’ is more than minor or trivial, e.g. it takes life… I need help to know what is much longer than it usually would to complete a daily going to happen next…” Teenager task like getting dressed. ‘Long term’ means 12 months or more, e.g. breathing condition developed because of a lung infection. People with progressive conditions (ones that get worse over time) can be classed as disabled.

6 | Whole life disability strategy 135 DRAFT

12 pillars of independence

The initial engagement process was established in a way that allowed us to hear the voice of disabled people and their parents and carers. A very clear message that has influenced all conversations is the desire of people to have greater independence, choice, and control over their lives. To focus thinking around this area we are adopting the 12 pillars of independence, often referred to as the 12 basic rights of disabled people, which state disabled people should have:

1. Appropriate and Accessible 7. Availability of accessible and Information adapted housing 2. An adequate income 8. Adequate provision of personal assistance 3. Appropriate and accessible health and social care provisions 9. Availability of inclusive education and training 4. A fully-accessible transport system 10. Equal opportunities for employment 5. Full access to the environment 11. Availability of independent advocacy 6. Adequate provision of technical aids and self-advocacy and equipment 12. Availability of peer counselling

Whole life disability strategy | 7 136 DRAFT We expect The United Nations Convention on the All disabled people will need access to good quality, Rights of Persons with Disabilities accessible information, advice, and universal services to The Convention on the Rights of Persons with Disabilities help Prevent need. is an international human rights treaty of the United Many disabled people benefit from early help or Nations intended to protect the rights and dignity of targeted support to Reduce need later in life. disabled people. Parties to the Convention are required to promote, protect and ensure the full enjoyment of Some disabled people will need help and support human rights by disabled people, and ensure that they quickly, doing this well can Delay increased need. enjoy full equality under the law. The Convention has A Few people will have need for ongoing support to served as the major catalyst for viewing disabled people Meet their needs. as full and equal members of society with human rights, rather than as objects of charity, medical treatment, and Equality Act 2010 social protection. The Equality Act 2010 is a major piece of legislation that brings together and strengthens the various existing pieces of anti-discrimination legislation that have been passed since the 1970s. “I am autistic, I create computer Under the Act, disability is one of nine protected games, I want to make a characteristics that all public bodies must have due computer game that changes the regard to in their policies, procedures and when carrying out activities so as to eliminate discrimination, advance world for me and my friends – equality of opportunity and foster good relations between can you help me? Teenage boy different people. Leicestershire County Council does this through its Equality Strategy which is supported by annual delivery plans setting out specific actions and timescales for completing them.

8 | Whole life disability strategy 137 DRAFT What we know Learning Disability about people with Medical estimates of learning disability prevalence indicate there are nearly 15,000 people with a learning a disability disability in the County4. In 2018 there are 65.6m people living in the UK, of The no. of children with Education, Health and Care these it is estimated that 14.4m people 22% report a Plans (EHCPs) has risen by nearly 1000 since 2015, disability or long term health problem (8% children, 19% with a total of 3703 children and young people (0-25yrs) working age adults and 45% pension age adults), an with EHC Plans in the County as at March 2018 (SEN 2 increase from 18.6% in 2011/22. Data). In Leicester, Leicestershire, and Rutland (LLR) at the GPs are asked annually how many of the adults on their time of the 2011 Census, there were 168,000 usual practice list have a learning disability. The 2016/17 residents reporting a long-term health problem or Quality Outcomes Framework shows that 2.1% of disability, which is 16.5% of the population, compared Leicestershire’s GP registered population had a learning with 18.6% for England3. Aligning with 3.5 percentage disability. This is significantly lower than the England point increase in national trends it is estimated there are average of 2.6%5. now 210,000 disabled people in LLR, 20% of the 1.1m People with learning disabilities are more likely to have population. co-morbid conditions such as autism, mental health conditions, physical and sensory impairments. At the most complex end of the scale of learning disabilities are people who are described as having a “profound and multiple learning disability” (PMLD) or a profound and “We need to work together multiple intellectual disability (PMID). creatively to ensure existing Government figures in 2017 suggest that 6,655 of resources meet the increasing school aged pupils with an Education and Health Care needs presented to us.” Plan in state maintained schools in Leicestershire are identified as having specific, moderate, severe, profound, Frontline practitioner or multiple learning disabilities. This compares to the East Midlands at 5.5% and England average of 5.2%. In Leicestershire the figure increases to approximately 7,000 with the inclusion of pupils in Independent provision and Further Education6.

2 Source: DWP, 2017. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/ file/692771/family-resources-survey-2016-17.pdf 3 Source: 2011 Census, ONS. Available at: https://www.nomisweb.co.uk/census/2011/qs303ew 4 Based upon CCG GP populations 2018- NHS East Leicestershire and Rutland (326713) and NHS West Midlands (391237) at a rate of 2.1% 5 Source: Fingertips, PHE, 2017. Available at : https://fingertips.phe.org.uk/search/learning%20disability 6 Source: Department of Education. SFR37/2017 tables 15, 16,17,18. Available at: https://www.gov.uk/government/statistics/special- educational-needs-in-england-january-2017

Whole life disability strategy | 9 138 DRAFT Carers Mental health At the time of the 2011 Census, 10.4% of the usual In 2015, 8.7% of children in Leicestershire aged 5-16 resident population of LLR (105,000 people) provided were estimated to have a mental health disorder. This some kind of unpaid care. This is compared with 10.8% is compared to 9.2% for England and 9.4% for East in the East Midlands and 10.2% in England. Of these, Midlands9. The most common problems across the 2.2% (23,000 people) in LLR provided 50 or more region were conduct disorders, emotional disorders and hours per week. This is compared with 2.5% in the East hyperkinetic disorders. Midlands and 2.4% in England7. Data on adult mental health is reported at Clinical Many carers do not think of themselves as a carer and Commissioning Group (CCG) level. In 2014/15, 12.2% so do not know about the services and support which is of the adult population of East Leicestershire and Rutland available to them highlighted by the fact that just 12,190 CCG were estimated to have a common mental health people (all ages) were in receipt of Carers Allowance disorder. In West Leicestershire CCG the figure was in LLR in 20178. The rising older people population 11.6% and in Leicester City CCG the figure was 14.8%. highlights the importance of carers and the services they In comparison, the rate was 15.6% for England and provide - given that the majority of carers care for older 14.2% for Central Midlands NHS Region10. people. People with a long term health problem or disability The median age of death of people with learning are two to three times more likely to develop mental disabilities in Leicestershire is 57 which is comparable health problems, particularly anxiety and depression. to the population of people with learning disabilities in The 2015/16 GP Patient survey found 4.8% of England, but is significantly worse than the average age Leicestershire’s population report long term mental of death (75.5) for the general population in the most health problems. In 2016/17, almost 60,000 patients deprived areas of Leicestershire. in Leicestershire were recorded with depression on GP practice disease registers. This accounts for 10.6% of the practice population which is significantly higher than England’s average of 9.1%11.

“Everybody is different, how we communicate and understand is different but we all have a voice – please listen!” Young disabled woman

7 Source: 2011 Census, ONS. Available at: https://www.nomisweb.co.uk/census/2011/qs301ew 8 Source: NOMIS, ONS, 2017. Available at: https://www.nomisweb.co.uk/query/construct/summary. asp?mode=construct&version=0&dataset=116 9 Source: Fingertips, Public Health England, 2017. Available at: https://fingertips.phe.org.uk/profile-group/mental-health/ profile/cypmh/data#page/0/gid/1938133090/pat/6/par/E12000004/ati/102/are/E10000018 10 Source: Fingertips, Public Health England, 2017. Available at: https://fingertips.phe.org.uk/profile-group/mental-health/profile/common- mental-disorders/data#page/3/gid/1938132720/pat/46/par/E39000030/ati/153/are/E38000010/iid/90853/age/240/sex/4 11 Public Health England. Mental Health Dementia and Neurology. Common Mental Health Disorders (2018). Available at: https://fingertips. phe.org.uk/profile-group/mental-health/profile/common-mental-disorders

10 | Whole life disability strategy 139 DRAFT • Disabled people and Parent/carers told us they Engagement experience difficult transitions, particularly from Between January and September 2017, we carried children’s services to adult services. Many people out extensive engagement with disabled people, their described the anxiety they felt during this phase. parents and carers and with professionals working in this • Across the region duplication of services was field. highlighted by disabled people, parents and carers, and professionals as frustrating and wasteful. It was We ran workshops, attended existing groups, and met agreed that ensuring services and agencies work with bodies set up to represent the views of disabled better together will make life easier for disabled people. people and their families. During this engagement work we spoke to and took the • Disabled people expressed a desire to see better views of over 1,000 people. transport policies. Many felt the outlying districts The engagement with disabled people was all carried out of Leicestershire were not well served by public through face to face contact, often using card systems transport which meant they had to use more to ensure understanding, backed up by ‘easy read’ expensive transport options on a regular basis. documents to help people assimilate the messages. Disabled people felt the current restriction on The voice of disabled people, being central to our the use of bus passes before 9.30am impacted thinking, planning, and delivery of services has driven on their ability to take up work and volunteering the priorities for the strategy. opportunities. Also, making it difficult to take part in morning activities. The transport services across This strategy has also been developed in consultation Leicester City were generally viewed as meeting with health and social care professionals, a range people’s needs. of public, private, voluntary and community sector organisations, including care and support providers. • It is essential to involve disabled people, their families and disabled people’s organisations and groups in decision making about services and access to places using their expertise from What disabled people experience. told us • To challenge thinking, support change in attitudes and inform that disability and making places • Disabled people are telling us they are frustrated accessible is everyone’s responsibility and everyone at having to repeatedly tell their story to different has an important part to play. professionals, sometimes workers from the same teams. People with Mental health conditions have spoken about the stress they experience when reliving traumatic experiences through this process. • Disabled people have described, in many of the forums, their desire for greater independence and to gain choice and control over their own lives. • Many disabled people and parents/carers told us they find it difficult to navigate health and social care systems and feel they would benefit from a named individual to be able to call on at their time of need. They also described the many wasted hours for themselves and the many professionals trying to gain an understanding of their specific needs to provide the correct support.

Whole life disability strategy | 11 140

What are we doing about the concerns raised by disabled people?

We are committed to addressing the concerns raised, Partners have acknowledged how disabled people are in many instances, as concerns have been raised, staff concerned about the lack of integration and how that have been deployed to consider how to take a response creates confusion for them. To start to address this forward and action has already commenced, which concern a high-level workshop was organised for all the further underlines a strategy of this nature has to be partners of the strategy to work together to address the constantly evolving to truly reflect the needs of disabled specific concerns raised. people. The outcomes of the workshop will form a high-level action plan and associated detailed action plans. Key elements of the work are captured below.

“We are tired of fighting for our children’s care, please work with us, we can identify where there is wasted time and energy, we want to help to shape the services now and for the future.” Mother of child with PMLD

Disabled people and parents/carers tell us they find it difficult to You said navigate health and social care systems

• Work with disabled people and their families to explore what good care navigation 4 could look like We will • Work with partners to explore the training needs for primary care staff in relation to supporting disabled people

• People will experience improved navigation of services through developing lead professional roles Required • Front line workers will have a good awareness of the legal framework regarding outcomes Special Educational needs (SEN and Disability and have in place effective mechanisms to support the Education, Health and care assessment, review and transition process. • We are developing a Pathway to Adulthood” protocol to support effective transition from 14yrs onwards

12 | Whole life disability strategy 141

Disabled people desire greater independence You said

• Work with all partners to promote and extend opportunities for supported 4 employment for disabled people We will • Through the Learning Disabillity transforming care programme target the reduction in hospital admission by providing greater levels of community care • Increase the number of opportunities for disabled people to have a home of their own through investing in more supported accommodation • Continue to roll out local area co-ordination across the County to support disabled people to be active members of their communities • Increase the numbers of people who are supported to manage their own care through increasing access to personal budgets, including personal health budgets and the development of Individual Service Funds • There are various potential travel options available for disabled people across the county ranging from the commercial and County Council supported bus networks to Community Transport and Demand Responsive Transport etc. We will seek to ensure that disabled people are aware of the range of travel options that are available to them and what of these options the County Council is able to cost effectively provide within the resources available

• More disabled people will feel that they are being supported to be have choice and control over their own lives through having increased independence and being part of Required the community in which they live outcomes

Disabled people are frustrated at having to tell their story many times. You said

• Work together to improve the way we share information particularly between 4 children’s and adult services We will • Ensure that disabled people have copies of their assessment and support plans so that they can control who their information is shared with

• Disabled people and their parents/carers will have greater control over their own information Required outcomes

Whole life disability strategy | 13 142

Disabled people and parents/carers experience difficult transitions, You said mainly from children to adult services

• Establish a ‘Pathway to Adulthood’ document that sets out how services will work 4 together, from when a young person is 14yrs of age, through to adulthood. We will • Work closely with young people and their parents/carers to ensure that the pathway is accessible and easy to navigate, with the views and aspirations of young people being central to decision making. • Develop a clear ‘offer’ so that young people and their parents/carers have the information that they need to make an informed choice. • Develop better joined up working between Children and Families Services and Adult Services so that changes and transitions can be managed carefully and at a pace that suits the young person. • Work with Colleges, employers and other organisations to develop the range of education and employment opportunities, including supported internships. • Take into account all aspects of the young person’s life, including steps towards employment, independent living, community inclusion and health in the pathway to adulthood. • Ensure we investigate the key issues for disabled people as they transition into their old age • We are reviewing our ‘School Readiness Strategy’ to ensure that parents of a disabled child experience a joined up approach to early indentification and support. (Children and Families Plan, Priority One “Ensure the Best Start in Life”)

• A person-centred process to support navigation through transition, from child to adulthood and on to older age Required outcomes

14 | Whole life disability strategy 143

What next ?

This Strategy document supports the Council’s ambitions as established the Strategic Plan, “Working together for the benefit of everyone: Leicestershire County Council’s Strategic Plan 2018-22”. The delivery of the strategy will contribute to all 5 strategic outcomes, however the implementation of the strategy will be overseen through the governance of the Wellbeing and Opportunity Outcome led by the Director of Adults and Communities. We will review the strategy annually and a reference group will be developed to ensure that disabled people are partners in developing the detailed action plans and can hold us to account if we do not deliver on the things we have said we will do.

Whole life disability strategy | 15 Published June 2018 DRAFT 144

S0367 145 DRAFT

Preparing for adulthood A protocol for professionals working with young people with special educational needs or a disability 146 DRAFT

Contents Introduction 3 Our vision 3 Principles 3 Young people preparing to make their own decisions 5 Careers advice for children and young people 8 Post 16 Options 8 Progressing beyond an EHCP 10

The Care Act 2014 10 The Local Offer 11 Reference/Toolkit 11 Preparing for adulthood pathway 12

2 | Preparing for adulthood 147 DRAFT Introduction The Children and Families Act 2014 introduced a new The pathway to adulthood is sometimes referred to as special educational needs and disabilities (SEND) ‘Transition’ to adult life and services. ‘Transition’ is not system. At the heart of the changes is a commitment to a word that young people tend to use when discussing ensuring that children, young people and their families their future; instead they might talk about ‘growing up’ are at the centre of decision making in order that they which may include ordinary things like: achieve better outcomes. • Forming views about their own future; The majority of children and young people with SEND • Increased right to make requests and decisions; can be successful with support from their schools, family • Leaving school; and the community. • Starting further education or training; This document focusses on those young people with SEND, aged 13 years up to 25 years who need • Having boyfriends/girlfriends; additional support. It sets out the vision and principles • Leaving home; for how services will work together to support young • Moving on to higher education/university; people with special educational needs and disabilities to • Travelling; prepare for adult life. • Getting a job. From Year 9 (the academic year during which a child/ young person becomes aged 14), those supporting young people must focus on enabling young people to achieve outcomes such as paid employment, independent living, community inclusion and health and wellbeing.

Our vision Young People with SEND in Leicestershire are prepared for a successful adulthood and their voice is heard

Principles • Promoting independence; • Preparation for life; • Well informed and able to make choices; • Opportunities for work, education and leisure; • Access to information and advice to support health and wellbeing.

Preparing for adulthood | 3 148 DRAFT Good preparation for adult life needs to start early and high aspirations are crucial to success. The focus should be on the young person’s strengths and capabilities and the outcomes they want to achieve. To plan successfully, all services involved in the young person’s life need to actively engage and support the planning for adulthood. Schools and other service providers should start having discussions with young people about long-term goals, ideally before they reach the age of 14.

As children get older and become young adults, it is important that they are provided with opportunities to take more control over their lives, including health care and become directly involved with choices. They should be supported to make decisions for themselves, wherever possible, and workers should take account of the Mental Capacity Act. Discussions about their future should focus on what they want to achieve and the best way to support them to do this. Aspirations and needs will vary and change over time as young people get older and approach adult life.

4 | Preparing for adulthood 149 DRAFT Young people preparing to make their own decisions As young people develop and form their own views, The specific decisions which apply to young people they should be more involved in decisions about their directly from the end of compulsory school age include own future. After compulsory school age (the end of the the right to: academic year in which they turn 16) the right to make • request an assessment for an Education Health requests and decisions under the Children and Families and Care (EHC) Plan; Act 2014 applies to them directly, rather than to their parents/carers. Parents/carers and other family members • make representation about the content of their can continue to support young people in making EHC Plan; decisions, or act on their behalf, provided the young • request a particular institution is named in their person is happy for them to do so. EHC Plan; Within Health services, Gillick competency and Fraser • request a Personal Budget for elements of an guidelines are widely used to help assess whether EHC Plan; a young person has the maturity to make their own • appeal to the First-tier Tribunal (SEN and Disability). decisions and to understand the implications of those decisions in relation to treatment - https://www.nspcc. org.uk/preventing-abuse/child-protection-system/ This does not mean that parents/carers are excluded. legal-definition-child-rights-law/gillick-competency- The local authority, schools, colleges, health services fraser-guidelines/. and other agencies should continue to involve parents/ carers, particularly when the young person is not yet 18 years. Typically, young people this age will still want support and advice from their parents/carers on decisions that affect them, but the final decision rests with the young person.

Preparing for adulthood | 5 150 DRAFT Recognising the increasing independence of young In keeping the young person’s voice central to what people once they reach age 16 and beyond - the local we do, we will follow the law and help those involved areas have a number of legal responsibilities such as understand this. making sure: For children and young people under 16 the Gillick or • information, advice and support is available and Fraser Test is used and this broadly allows them to make accessible directly to young people; independent of decisions for themselves where they understand it and their parents/carers if that is want they want; the possible consequences of making it. • that all reviews of EHC Plan for young people from The Mental Capacity Act applies to 16 and 17 year olds age 13-14 onwards, include a focus on preparing for and makes it clear that they have the right (with very few adulthood; exceptions) to make their own decisions. The statutory • that young people have access to support from an principles in the Act fully support the approach in this independent skilled supporter if they want or need pathway and must be followed by all those involved. this; Professionals should understand the law and be able to • services they provide, such as housing and put it into practice. They should assume the person has adult social care, help young people prepare for capacity and support them to make their own decisions adulthood; even if these are unwise. • an adult care transition assessment is carried out for Where it is shown that they lack capacity to make a young people approaching or aged 18 and over with particular decision then all acts and decisions made on SEN or disabilities, if they think it will benefit that their behalf have to be in their best interests and be done young person; in the least restrictive way. • where a young person is in receipt of continuing Supporting young people and their families with health care that a transition assessment is decisions making is therefore a vital part of preparing completed at 17 years. for adulthood. There needs to be good communication and co-ordination between the young person’s family (if involved with young person) and service providers to maintain choice and control for the young person

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Advocacy is about speaking up for young people and helping them make decisions that affect their lives, making sure their rights are respected and their views and wishes are heard and acted upon by decision makers.

For many young people, parents/carers and professionals • Self-Advocacy: recognises that people are experts advocate with and on behalf of the young person. by experience and involves them in speaking out for However there are times and circumstances when an themselves about the things that are important to independent advocate may be needed or requested them. by the young person to ensure their views, wishes and • Professional Advocacy: Paid independent advocates feelings are heard when decisions are made about their support to enable people to speak up and represent lives. This is particularly the case when a young person their views, usually during times of major change or feels vulnerable, isolated, disempowered, is Looked After, crisis is issue-based and may only need to work with or has different views to their parents/carers. the person for a short time. There are several types of advocacy available including:

• Citizen Advocacy: partnerships are long term, not Successful advocacy involvement can lead to a young time-limited; are ordinary members of the local person having more choice, control and their voice heard community. They are unpaid and usually operate leading to improved empowerment and an increased with support from a coordinated scheme; awareness of access to rights and raised expectations. • Peer Advocacy: one-to-one support provided by advocates with a similar disability or experience. Trained and supported volunteers are often part of a coordinated project.

Preparing for adulthood | 7 152 DRAFT Careers advice for Post 16 Options children and young Further education Study programmes should be individually tailored but people will typically combine the elements below: Schools and colleges should ensure that students are Substantial academic, applied or vocational provided with independent careers guidance. Schools qualifications, English and maths where students have and colleges should raise the career aspirations of their not yet achieved a GCSE grade 4, work experience and students with special educational needs and disabilities work placement in external settings to give young people and broaden their employment horizons. They should the opportunity to develop their career choices and to use taster opportunities, work experience, mentoring, apply their skills in real working conditions and other role models and inspiring speakers to assist young non-qualification activity to develop students’ character, people to make informed decisions. skills, attitudes and confidence, and to support progression All students are expected to take part in other meaningful non-qualification activity alongside work experience. This should take account of their needs and career plans, as well as preparation for adult life more generally. For example: • Activities to develop confidence, character and resilience, group work to develop team working, leadership and problem solving, tutorials and seminars (including careers education), life skills, such as the ability to travel independently, how to cook and to eat healthily, stay safe, personal finance, or preparation for University life.

8 | Preparing for adulthood 153 DRAFT Training Post 16 Funding Traineeships are study programmes for young people Many young people with SEND will have their needs met without level 3 qualifications to help prepare them for an from the colleges’ core funding, also referred to as ‘place’ apprenticeship or other sustainable employment where funding. If the cost of an individual’s support is over and training is ‘on the job’. Traineeships should last for a above the core funding additional funding can be paid by minimum of six weeks and a maximum of six months. the local authority in which the student resides to enable a student to participate in education and learning; this is Supported internship referred to as top-up funding (sometimes called element Supported internships offer young people with an EHC 3) and is part of the High Needs Funding system. plan an opportunity to develop the skills, experience High Needs Funding is for: and confidence they need for employment. A supported internship is a substantial work placement with the • pupils or students aged 5 to 18 (inclusive of students support of an expert job coach. who turn 19 on or after 31 August in the academic year in which they study) with high levels of SEN in Apprenticeship schools and academies, further education (FE); Apprenticeships combine work and study by mixing • institutions, specialist post-16 institutions (SPIs) – it on-the-job training with classroom learning doing a real is not necessary for these pupils or students to have job while studying for a formal qualification, usually for a statement of SEN or EHC Plan in order to receive one day a week either at a college or a training centre. high needs funding; By the end of the apprenticeship, gained the skills and knowledge needed to either succeed in chosen career or • those aged 19 to 25 in general Further Education progress onto the next apprenticeship level. institutions and Specialist Post-16 Institutions (SPIs) who have an EHC Plan and require additional support costing over £6,000.

High Needs Funding cannot be used to fund students aged over 19 who do not have an EHC Plan. The Skills Funding Agency is responsible for funding adult learning, this includes learning for those aged 19 and over with learning difficulties and/or disabilities that do not have an E H C P.

Preparing for adulthood | 9 154 DRAFT Progressing beyond The Care Act 2014 an EHCP Under the Care Act the local authority has a duty to carry out a transition assessment for a young person or The EHC Plan will end when a child or young person carer, in order to help them plan, if they are likely to have no longer requires the special educational provision needs once they (or the child they care for) turn 18. If specified in the plan as educational or training outcomes a young person or young carer is likely to have needs have been achieved, or a young person aged over 16 when they turn 18, the local authority must assess them leaves education to take up employment or higher when it considers there is a significant benefit to the education, or a young person aged over 18 no longer individual in doing so. wishes to engage in further learning the Local Authority will notify parents/carers and/or young people of their The kind of support you can get depends largely on decision to begin the process of ceasing the EHC Plan. your needs. This means the type of health problem Support for a child or young person may still accessed you have, or the severity of your disability. The aim will from identified services. be to maximise your independence and build on your strengths and your network of support. This is normally done through a personal budget, which is an agreed amount of money allocated to you personally to meet your care and support needs. The range of support available is very broad but includes equipment, care services, employing personal assistants, support to access a range of community activities, short stays to give you or your carers a break and accommodation with support. Clinical Commissioning Groups have a duty under Section 3 of the NHS Act 2006 to arrange health care provision for the people for whom they are responsible to meet their reasonable health needs.

10 | Preparing for adulthood 155 DRAFT The Local Offer Reference/Toolkit The Leicestershire Local Offer provides information about The Leicestershire Local Offer; information for children help and support services in Leicestershire for children and young people with SEND and their families and young people with SEND and their families. The https://www.leicestershire.gov.uk/education-and- Local Offer provides clear, comprehensive, accessible children/special-educational-needs-and-disability/ and up to date information about the available provision about-the-local-offer and how to access it. It also informs commissioning and so makes the provision more responsive to local needs and aspirations by directly involving disabled children Preparing for Adulthood website; provides a range of and those with SEN and their parents, and disabled information and resources. young people and those with SEN, and service providers https://www.preparingforadulthood.org.uk/ in its development and review.

‘Preparing for Adulthood’: a useful benchmarking tool for measuring progress. http://www.helensandersonassociates. co.uk/wp-content/uploads/2015/03/ ProgressinPreparingforAdulthoodweb-2.pdf

Tools to enhance local transition pathway and transformation programmes: http://www.uhs.nhs.uk/OurServices/Childhealth/ TransitiontoadultcareReadySteadyGo/ Transitiontoadultcare.aspx

NICE Guidance: Transitions from children’s to adult’s services for young people using health or social care services: https://www.nice.org.uk/guidance/ng43

Preparing for adulthood | 11 156 Preparing for adulthood pathway

Person Having Being listened advice about Centred to and being Planning education, involved in training and planning employment support and services

Having dreams and aspirations

Making Being my own involved choices and in my decisions community Being as healthy as possible

12 | Preparing for adulthood 157 Preparing for adulthood pathway

Friends and Family Being supported Person by agencies Centred working Planning together

Being involved in work related activities

Making my own choices and decisions Being as independent as possible

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Preparing for adulthood pathway Transition planning starts with the aspirations of • School / college should make clear the actions, the young person. This may include employment, timescales and responsibilities and should cover independent living, community participation, friendships transition from school to further learning and from and relationships. child to adult services. Transition planning also thinks about transport needs, • School / college need to consider any actions to health care, personal care, living arrangements, support make appropriate services as accessible as possible ratios, personal budgets, and social care provision. for the young person. For example: Universal Health Services, Specialist Health Services, Technological The school / college will need to consider and plan for: Support, Access to Social Care Services, Access • How they will help the young person to become to Benefits, Housing and adaptation needs, more independent Community, leisure and voluntary services. • How they will help the young person to be active in • Disabled Children’s Service involvement with families the school community so aspirations and abilities are identified. What a • How the school / college will help the young person disabled child can achieve must be discussed with to take on new roles parents. • How the school / college will help to develop skills, • The ‘Preparing for Adulthood’ conversation needs to knowledge and experience to achieve aspirations happen at the very best time for the family. • Which agencies should be involved in the future

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Employment - Steps towards outcomes

Year 9 – Year 11 Post 16 – 16 – 19 years of age Post 19 – 19 – 25 years of age

Choosing academic / vocational Enter college / training provider on Consolidate or finish learning subject options chosen study programme to gain Complete outcomes in EHC Plan further academic and vocational Thinking about which college to qualifications Careers Guidance for young people. attend Careers Guidance for young people. Adult Education / Community Exploring different careers and Learning Programmes planning for employment including Planning for post 19 – higher choosing a study programme education, vocational training, Voluntary Work employment Starting to access structured Supported Internships information and guidance sessions Supported Internships Apprenticeships Having work experience or being Apprenticeships Supported Employment involved in enterprise projects Supported Employment Paid Employment Transition to new setting Paid Employment Accessing support from Job Centre Careers Guidance for young people. Employment for young people post Education and understanding Support for parents/carers benefits ‘Access to Work’ is the Government SENCO’s in schools, Teachers and organisation that assists people with Employment for young people Head-teachers often see parents and additional needs who get Internships Access to Work support assists hold Parents/Teacher meetings where or have full employment people with additional needs who get advice is provided for parents Access to Work support is for young Internships or have full employment Parents Carer Groups people aged 16 years and over Guidelines are on: https://www.gov. Carers Services in Leicestershire are Guidelines are on: https://www.gov. uk/access-to-work/eligibility funded through LCC uk/access-to-work/eligibility Carers can request a Carers Welfare Benefits Assessment The Benefits System changes when There are support groups for Young a young person reaches their 18th Carers – these are funded by LCC Birthday. Information on the Local and delivered by Barnardo’s Offer website Helping parents/carers to see what is possible – videos, young people’s journey stories There will be ‘Holistic’ Transition Events for Parents/Carers to attend where all services are represented and so that information can be provided and news shared about the support and services which are available

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Independent Living - Steps towards outcomes

Year 9 – Year 11 Post 16 – 16 – 19 years of age Post 19 – 19 – 25 years of age

Developing travel training skills Learning to manage income and Arranging potential independent or expenses supported living Making decisions about what to spend money on Learning to manage time, Understanding correspondence, bills, independent living skills, personal appointments Learning to make own food and safety being healthy Continue to develop independent Schools and colleges offer ‘Life living skills as part of a study Learning to socialise unsupervised Skills’ programmes, often these are programme Developing independent living skills accredited awards. To assist transition Schools offer ‘Life Skills’ programmes, planning the outcome of the work often these are accredited awards. To in school will be shared with Adult assist transition planning the outcome Services to assist with making of the work in school will be shared assessments that inform Transition with Adult Services to assist with Planning making assessments that inform Looking at living options and local Transition Planning learning options Children’s Disabled Services Mental Capacity Assessments if Referrals are received from parents appropriate and professional agencies Understanding different types of There is Eligibility Criteria that living arrangements determines whether a child/young Actively planning for future living person can receive services and arrangements with family and support. agencies Transition into care Referrals to Adult Services Referrals are received from: •DCS •Children in Care •SENA •Adults can self-refer into the Service

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Community Inclusion - Steps towards outcomes

Year 9 – Year 11 Post 16 – 16 – 19 years of age Post 19 – 19 – 25 years of age

Making decisions about how to Developing and maintaining Accessing adult social care post 18 spend free time friendships and relationships Maintaining friendships and social Managing social media and other Exploring personal budgets – how groups outside of an educational technology could they be spent post 16 for setting further Preparation for Adulthood On line gaming and staying safe aspirations Belonging to different groups Knowing how to manage own time Learning about friendships and effectively relationships Being safe on the streets Understanding the bigger picture and Understanding alcohol and drugs developing resilience Volunteering Understanding the criminal justice system Knowing where to go for help and how to use the emergency services

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Health – Steps towards outcomes

Year 9 – Year 11 Post 16 – 16 – 19 years of age Post 19 – 19 – 25 years of age

Access to sex education Taking responsibility for dental and Managing health appointments optical appointments Age related immunisations Managing own health Managing own health Managing more complex health Maintaining positive relationship and needs Transition to adult health services friendships Understanding what the GP can help Knowing when to see the GP with Staying physically active and healthy Annual Health Check with GP if Understanding relationships including registered Learning Disability sexual relationships, choices, safety Understanding mental health and and good health well-being Having drug and alcohol education Switching screens off and having a good night’s sleep Annual Health Checks Annual Health Checks for people aged 14 years and over have been instigated by the NHS in recognition that people with learning disabilities who often have poorer physical and mental health than other people. Further information is available on the NHS website: https://www.nhs.uk/conditions/ learning-disabilities/annual-health- checks/ The Annual Health Check scheme is for adults and young people aged 14 or above with learning disabilities who need more health support and may otherwise have health conditions that go undetected Adults and young people aged 14 or above with learning disabilities who are known to their local authority social services, and registered with a GP who knows their medical history, should be invited by their GP practice to come for an Annual Health Check and needs to be included in the Transition Plan

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Process Chart for Staff to implement the Transition Plan

What needs to happen alongside School Year - EHCP Review Extending the EHCP Review the EHCP Review?

Year 9 - EHCP Review

Who will be present: Parents are reminded to set up the Roadshows in each school to provide GP Health Check for young people information for parents – these are to SENCO Leading aged 14 years and over who have be ‘joint’ events – Special Education Parents Learning Disabilities Needs Assessment Team, Disabled Children’s Service, Education Young Person Written information about Adult Life Providers, and Adult Services Specialists may also be invited will be presented to the family. This will be on the Local Offer website 6 Meetings each year of Transitional Specialist Services: Special Education Operation Group - staff are from The Scoping Questions are made Needs Assessment Team, Disabled relevant health, education, social care into an ‘Early Notification Form.’ Children’s Service Health Services, professionals , OT, SALT, Specialist Teachers, GP, This is completed at the review – Family Carers signed by parents to give consent for (This work is repeated each year) information to be shared with Adult What happens at the review: Services Person Centred Planning documents are discussed in the meeting and the EHC Plan is reviewed SENCO starts Transition Planning process

Year 10 - EHCP Review

Who will be present: Parents are reminded to set up the SENCO gives update on Transition GP Health Check for young people Planning SENCO Leading aged 14 years and over who have 6 Meetings each year of Transitional Parents Learning Disabilities. Operation Group - staff are from Young Person Written information about Adult Life relevant health, education, social care Transition Worker will be presented to the family. This professionals will be on the Local Offer website Specialists may also be invited (This work is repeated each year) Specialist Services: Health Services, Special Education Needs Assessment Team, Disabled Children’s Service, OT, SALT, Specialist Teachers, GP, Family Carers What happens at the review: Person Centred Planning documents are discussed in the meeting and the Plan is reviewed SENCO gives update on Transition Planning

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What needs to happen alongside School Year - EHCP Review Extending the EHCP Review the EHCP Review?

Year 11 - EHCP Review

SENCO Leading Transition Worker should start at age Adult Services use the Moving On 16. Assessments at their Resource Parents Allocation Panel to determine the Moving On Assessment will have Young Person level of support that would be started by age 16 years. Transition Worker provided for a young person Parents are reminded to set up the Specialists may also be invited GP Health Check for young people Specialist Services: Health Services, aged 14 years and over who have Special Education Needs Assessment Learning Disabilities Team, Disabled Children’s Service, Written information about Adult Life OT, SALT, Specialist Teachers, GP, will be presented to the family. This Family Carers will be on the Local Offer website What happens at the review: Person Centred Planning documents are completed prior to the review, are discussed in the meeting and the Plan is reviewed SENCO gives update on Transition Planning

Year 12 - EHCP Review

SENCO Leading Completion of Moving On Adult Services use the Moving On Parents Assessment Assessments at their Resource Allocation Panel to determine the Young Person Parents are reminded to set up the GP Health Check for young people level of support that would be Specialists may also be invited aged 14 years and over who have provided for a young person. Specialist Services: Health Learning Disabilities Services, Special Education Needs Assessment Team, Disabled Children’s Service , OT, SALT, Specialist Teachers, GP, Family Carers What happens at the review: Person Centred Planning documents are completed prior to the review, are discussed in the meeting and the Plan is reviewed SENCO gives update on Transition Planning

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What needs to happen alongside School Year - EHCP Review Extending the EHCP Review the EHCP Review?

Year 13 - EHCP Review

EHCP Review Parents are reminded to set up the Adult Services take on case SENCO Leading GP Health Check for young people responsibility at age 18 aged 14 years and over who have Parents Learning Disabilities. Young Person Specialists may also be invited Specialist Services: Health Services, Special Education Needs Assessment Team, Disabled Children’s Service, OT, SALT, Specialist Teachers, GP, Family Carers What happens at the review: Person Centred Planning documents are completed prior to the review, are discussed in the meeting and the Plan is reviewed. SENCO gives update on Transition Planning

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