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Local Government Finance Settlement and Integrated Planning Process

Mike Parsons

Overview & Scrutiny Committee

3 February 2012

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Finance Settlement 2012/13 - Headlines

• 2nd year of 2 year settlement – figures unchanged from previous announcement

• No change to formula methodology from 2011/12

• Further council tax freeze grant for 2012/13 (but unlike the 2011/12 grant, this is one-off)

• New distributional system planned from 2013/14 (Bill published just before Christmas)

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Baseline Adjustments

- Academy & Free School adjustment for local authority central services

- No change to previously announced adjustments for 2011/12 or 2012/13

- Entirely new methodology proposed from 2013/14

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Hertfordshire’s Figures 2012/13- Formula Grant2011/12 Actual Formula Grant £200.7m- Baseline adjustments £ 2.4m= 2011/12 Baseline £198.3m

2012/13 Raw Formula Grant £162.0m + Damping £ 15.7m= Comparative Formula Grant £177.7m (-10.4%) + Freeze Grant 2011/12 £ 12.6m= 2012/13 Formula Grant £190.3m

• comprising £3.6m RSG + £186.7m NNDR

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Hertfordshire’s Figures 2012/13- Other significant grants• Council Tax Freeze Grant 12/13 £12.6m [one-off]

• Early Intervention Grant £37.0m

– additional £1.4m for targeted 2 year olds

• Learning Disability Grant £38.4m

• NHS Social Care Funding £10.6m

• New Homes Bonus £2.0m

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Revenue Spending Power

• Calculated by Government as

– Council tax requirement (2011/12)

– Formula grant (adjusted)

– Specific grants (where available)

– NHS funding for Social Care

• 2011/12 Adjusted estimate £791.5m

• 2012/13 Estimate £773.4m

• Change -£18.1m or -2.3%

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Conclusions• Formula grant as expected; other grants little changed

from 2011/12

• Great uncertainty from 2013/14 onwards, with anticipated new grant methodology (business rates, council tax benefit, school central services) and transfer of functions (public health)

• IPP needs to reflect reduced grant funding and pressures

– Inflation, inc. energy– Demography, numbers and complexity– Legislation, e.g. landfill tax, carbon commitment– Other, e.g. capital financing

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Revenue Pressures 2012/13

• Inflation: £ 3.9m

– Pay 0%; electricity 10%-26%; gas 17.7%-17.8% business rates 5.6% …

• Demography: £9.3m– Learning Disability £5.3m;– Older People £2.9m; – Physical Disability £0.6m; – Mental Health £0.4m

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Revenue Pressures 2012/13

• Legislation: £ 2.6m– e.g. Landfill Tax £2.2m

• Capital Financing & Contingency: -£17.7m– reduction mainly due to reduced borrowing

• Previous Policy Decisions:-£1.5m

• Other: £ 1.1m

NB only major items shown; totals include some negative items

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Revenue Savings 2012/13

Previously delivered 2011/12 £88.5m

Further savings identified* 2012/13 £38.2m

= Total savings£126.7m

*still to be delivered …

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Revenue Savings 2012/13

• Significant areas already subject to member process, including:

– Home to school Transport - £2.9M

– Street Lighting - £0.7M

– Libraries Hours - £1.5M

– SMS - £1.4M

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Other Revenue Savings 2012/13

• LEAN reviews in HCS

• Transfers to Serco

• Standards & School Effectiveness

• CLA strategy

• Careers – shift to schools

• Enablement

• MH services review

• Preventative and voluntary services review

• Highways, property & HR resourcing procurements

• Delayering and structural changes – inc SMB

• Terms & Conditions

• Day Crewing (F&R)

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Looking ahead …

2013/14 2014/15 £m £m

Identified 146 151Gap - 33Total 146 184

• Figures for 2013/14 and 2014/15 will depend on changes to grant distribution system

• Assumes Council Tax freeze in all years – assumption only: decision will be required when setting budget in future

years

Transformation Savings by Work StreamWork Stream

14/15£m

WS 1: Simplifying the Customer Journey 3.9

WS 2: Children's Services Transformation 32.3

WS 3: Promoting independence, personalisation and early intervention

27.8

WS 4: Localism & Engagement 0.4

WS 5: Enhanced commissioning and procurement 33.5

WS 6: Best Use of Assets 11.2

WS 7: Organisational Design & Delivery 11.9

WS 8: Working for HCC

Sub-total Efficiency Savings

8.7

129.7 [85%]

WS 9: Right level of publicly financed services 21.4

Total identified savings 151.1

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Value for Money / Benchmarking

• Detailed work undertaken – starting to see impact of transformation in some areas

• Analysis will inform search for the further £33m savings required for 2014/15

• Next slide is 2009/10 CIPFA VFM analysis … the following slide is provisional and unverified 2010/11 version [note some data is clearly incorrect – e.g. Fire, Early Years]

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Value for Money

Early Years

BS, Welfare and Inclusion

School Improvement

Highway Maintenance

Adults<65 with LD

Public Transport

Planning and admissionsSpecial Educational Needs

Children's Social Care

Road SafetyOld People's Social CareWaste Disposal

Libraries

Fire Service

Adults<65 with MHN

High

Cost Percentile

Pe

rfo

rman

ce P

erc

enti

le

Provisional and unverified VFM 2010/11

Adults<65 with LD

Adults<65 with PD

Early Years

Fire

Libraries

School Improvement

School Planning & Admissions

Special Educational Needs

Street Lighting

Adult Education

Public Transport

BS, Welfare & Inclusion

Children's Social Care

Road Safety

Waste Disposal

Adults<65 with MHNs

Highways Maintenance

Older Peoples Social Care

0

10

20

30

40

50

60

70

80

90

100

0 10 20 30 40 50 60 70 80 90 100Relative Cost (%)

Rela

tive P

erf

orm

an

ce (

%)

Source: Cipfa VFM Toolkit 2010/11. Significant changes from 2009/10 content and methodology noted. Further work being undertaken to analyse and verify the information, particularly for Fire and Early Years areas.

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Capital Programme 2012/13 - 2015/16

• Proposed programme based on following principles– Major schemes in existing programme preserved

• but Stevenage Fire Station now refurbishment, rather than new build

• Croxley Rail updated for latest figures; and• Vehicle replacement programme reviewed

– Continuation of current levels of funding for highways maintenance

– New schemes only where funded principally from grant or s106

• e.g. Broadband, Fire Station improvements

– Where possible grant used to substitute for prudential borrowing, and so reduce debt

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Prudential borrowing & debt

• One-off investment of £37.5m revenue funding (including the 2012/13 council tax freeze grant) to support 2012/13 capital programme

• Significantly reducing need for prudential borrowing (which would otherwise have been required to fund the programme) and so reduces cost of debt in future years

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Schools Budget

• Funding per pupil (including mainstreamed grants) frozen at 2011/12 cash level

• Minimum Funding Guarantee (MFG) for schools - set at -1.5% of their 2011/12 per pupil funding, before pupil premium

• Pupil premium grant - additional to DSG and increased for 2012/13 to £600 per pupil entitled to free school meals* and Children Looked After (£250 for Service Children)

*now includes those who have been in receipt at any time in previous 6 years

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Reserves

• Contingency 2012/13 £3.1m

• General Fund balance – recommended increase in minimum prudent level to 3% (from 2.5%) of net revenue budget (=£24m)

• plus Specific Reserves for particular purposes (the largest individual reserve being accumulated school balances)

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Outstanding information

• Final government formula grant settlement (though no changes expected)

• Some further minor grant announcements from government departments

• Lee Valley Park and Environment Agency levies

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Timetable

• Service Cabinet Panels 31 January – 7 February

• Overview & Scrutiny 3 and 8 February

• P&R Cabinet Panel 10 February

• Cabinet 20 February [final]

• Council 21 February

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Questions