AGENDA ITEM NO. 5 REPORT TO: Executive Board REPORT NO: HF/02/14 DATE: 14 January 2014 LEAD MEMBER: Councillor Malcolm King OBE (Policy, Finance Performance and Governance) CONTACT OFFICER: Mark Owen (Tel: 292704) SUBJECT: Revenue Budget 2014/15 WARD: N/A 1. PURPOSE OF THE REPORT 1.1 To enable the Board to make a recommendation to Council on the 2014/15 Revenue Budget and Council Tax. 1.2 To receive feedback on the consultation exercises. 1.3 To recommend the Medium Term Financial Strategy Statement for the period 2014/15 to 2016/17 to Council. 1.4 To recommend the Treasury Management Strategy Statement and Investment Strategy 2014/15 to Council. 2. EXECUTIVE SUMMARY 2.1 Appendix 1 summarises the 2014/15 proposed budget. The net expenditure is £227,333,600 and results in an increase in council tax at Band D of 3%. 2.2 It is a requirement of the Local Government Act 2003 that Members have an assessment of the robustness of the estimates made for the purposes of calculating the net budget requirement and the adequacy of the Council’s reserves and balances. The report draws attention to a number of key risk areas identified in the budget and how these may be managed. These are outlined in Appendix 6. 2.3 In accordance with the CIPFA Code of Practice on Treasury Management the Council is required to approve the 2014/15 Treasury Management Strategy Statement and Investment Strategy prior to the beginning of the financial year. The Treasury Management Strategy Statement and Investment Strategy for 2014/15 is outlined in Appendix 5. 1 3 RECOMMENDATIONS 3.1 That Members: a) approve the savings identified in Appendix 2 for the following departments • Environment • Housing and Public Protection • Adult Social Care • Lifelong Learning • Community Well Being and Development • Assets and Economic Development • Finance • Corporate and Customer Services • Corporate and Central and Cross Cutting • Prevention and Social Care – staff review and grants. b) approve those savings identified by the Lead Member for Children’s services and Education in Appendix 2 for Prevention and Social Care - contracts. 3.2 Subject to recommendation 3.1 that the Board agrees its final recommendation on the budget and council tax for consideration by Council and that: (a) the revenue budget totalling £227,333,600 be approved (b) a sum of £50,812,685 be raised from council tax which equates to £967.40 at band D and of that sum:- (i) £72,480 be raised as special expenses on the community areas of Acton, Caia Park, Offa and Rhosddu (£1.38), £4,325 on the community of Glyntraian (£0.08), £12,605 on the community of Llangollen Rural (£0.24) and £15,942 on the community of Chirk (£0.30) (ii) £50,707,333 be raised as general expenses (£965.40). 3.3 The Medium Term Financial Strategy Statement outlined in Appendix 4 is recommended to Council. 3.4 The 2014/15 Treasury Management Strategy Statement and the Investment Strategy outlined in Appendix 5 are recommended to Council. REASON FOR RECOMMENDATIONS To enable the Council to determine its revenue budget for 2014/15 and set the council tax for that year. 2 4. BACKGROUND INFORMATION 4.1 The 2014/15 revenue budget was first developed using the following parameters: a) An assumed increase in grant funding of 0.86%, (revised to -3.4% following announcement of the provisional and final settlement) b) Council tax increase of 3% c) Inflationary assumptions as follows: teachers and non teachers pay inflation of 1% general price increases of 2% no change in specific grant income d) known unavoidable commitments e) the outcome agreement grant will be received f) no service pressures 4.2 Following the above parameters a budget shortfall of approximately £4.1m was estimated for 2014/15. The shortfall was revised to £13m following the announcement of the provisional settlement. 4.3 At its meeting on 12 November 2013 the Executive Board agreed to a draft budget with a shortfall of £577k for consultation. This draft budget assumed no inflation allocation to schools, no inflation allocation for general prices to all other services, service savings of £9,985k (Appendix 2) and unavoidable commitments of £2,278k (see column E - Appendix 3). 4.4 Following that meeting additional savings were identified from the analysis of a workforce wide invitation to employees to declare an interest in voluntary early retirement or voluntary redundancy. A revised balanced budget was presented to the Executive Board on 10 December 2013 which included savings of £10,778k and an amendment to the unavoidable commitments of £212k as provision for commercial estates income shortfall to £2,491k (see column F – Appendix 3). Income Shortfall 4.5 There continue to be pressures for Assets & Economic Development, Community Well Being & Development and Environment due to shortfall in income. The projected shortfalls in 2014/15 for public offices, commercial estates, planning fees, car parks and waste management grant income are £75k, £500k, £200k and £130k. At a meeting of the Employment, Business and Investment Scrutiny Committee on 8 January 2014 it was proposed to recommend to the Executive Board that the 2014/15 projected shortfall in public offices income of £75k be funded corporately. It is proposed that the additional provision for shortfall in income of £212k is increased to £411k and it is allocated as £75k for public offices, £202k commercial estates, £81k planning fees and £53k for waste management grant. Local Government Final Revenue Settlement 4.6 The Minister announced the final local government settlement details on 11 December 2013 and the Welsh Government will debate the final Local Government report on 14 January 2014. The final settlement gives local authorities on average a decrease of 3.4% on the previous year’s revenue settlement. 4.7 The final settlement includes actual taxbase figures and Wrexham’s grant decrease is 3.4%. The Council’s Standard Spending Assessment (SSA), the notional assessment 3 for grant distribution purposes of the Council’s need to spend on its services, has been calculated as £228,769,251. Protection for schools 4.8 The Minister for Local Government and Government Business, in a written statement has suggested that the settlement together with an element of the Pupil Deprivation Grant includes the resources necessary to protect funding for schools at 1% above the overall change in the Welsh budget i.e 0.89%. Based on further clarification from Welsh Government officials it would appear that the 0.89% uplift for schools has been achieved from £8.6m (equivalent to 0.45% uplift) in the revenue settlement and the remainder £7.4m from the additional Pupil Deprivation grant. If the Council is to protect schools in line with the level in the settlement then the schools cash limited budget will need to increase by 0.45% i.e. £344k. £177k of the additional non- teachers’ pension contribution has already been allocated to schools and so it is proposed that a further provision of £167k is included in unavoidable commitments. 4.9 As a consequence of the amendments outlined in paragraph 4.5 and 4.8 the revised total for unavoidable commitments is £2,856k (see column G – Appendix 3). Medium Term Plans 4.10 Budget plans are under construction for 2015/16 and 2016/17. These are currently using the following parameters, although it is recognised that they will need to be updated as more information becomes available. a) an assumed decrease in grant funding of -1.5% for 2015/16 and 2016/17. b) Inflationary assumptions as follows: pay award of 1% for both teachers and non teachers in 2015/16 and 2% in 2016/17 price increases of approximately 2% for 2015/16 and 2016/17 c) known unavoidable commitments d) the outcome agreement will be received for both years e) preliminary estimates of council tax increases of 3% for 2015/16 and 2016/17. 4.11 The Council’s Medium Term financial strategy is outlined in Appendix 4. Annual Capital Provisions 4.12 The Council’s policy since 1997 has been to consider each year, a phased transfer from the capital programme to the revenue budget. This has not been implemented in any year because of spending pressures on the revenue budget and the implications for council tax levels. It is recommended that the Council does not transfer any amounts to revenue. Balances 4.13 A local authority requires a prudent level of working balances to maintain adequate cash flow, especially during the first part of the financial year prior to the receipt of council tax income, and to meet unforeseen expenditure. 4.14 The 2014/15 budget does not include any contribution to balances. I am satisfied that the level of balances and reserves is adequate for the forthcoming financial year and the Council’s medium term financial strategy. 4 4.15 An analysis of the Council’s key estimated earmarked reserves and balances for the year ahead is as follows: Actual Estimated Estimated Estimated Balance at Balance at 2014/15 Balance at 1 April 1 April Movement 31 March 2013 2014 in year 2015 £k £k £k £k Council Fund 7,018 6,587 0 6,519 balance School Balances 1,695 1,579 0 1,579 Service Reserves 1,653 774 ( 626) 148 Other Earmarked 11,006 6,794 (1,874) 4,920 Reserves(excl grant reserves) Total Balances 21,372 15,734 (2,500) 13,166 and Reserves 4.16 The estimated balances at 1 April 2014 in the table above are based on the best estimates available at the time of writing the report.