Date: / 24th January 2011
Report of: / Director of Corporate Resources / Report No:
Contact Officer: / S. M. Arnfield / Tele No: / ext 1502
Report Title: /
Budget 2011/12 and 2012/13 – Revenue Support Grant Settlement
Non Confidential:Purpose: / To outline to the Executive the impact of the Revenue Support Grant Settlement on the Council’s financial position, both in 2011/12 and 2012/13.
Recommendations: / That the Executive
· note the updated financial situation following the Revenue Support Grant Settlement
· approve the budget proposals outlined in this report
1. INTRODUCTION
Members will recall that at their meeting on the 15th December 2010 a report outlining the overall financial situation facing the Council in 2011/12 was submitted. At the meeting the Director of Corporate Resources made a presentation which provided the latest figures from Government. This highlighted the overall position being a requirement for savings in the order of £38M. This was mainly due to a reduction in specific grants to Children’s Services, reductions in grants around Community Safety and a general reduction in the Council’s overall Revenue Support Grant.
The Executive agreed that further work should be undertaken to verify the overall budget position, particularly in view of the very complex changes being made to grants and that proposals be worked up to meet the additional savings required and that they be reported back to this Executive meeting.
The Government’s Grant Settlement has provided figures for both 2011/12 and 2012/13 and it is felt appropriate that both years should be considered at the same time. This report therefore deals with the 2011/12 budget in detail and the 2012/13 budget in outline.
2. FINANCIAL SITUATION
Prior to the Grant Settlement the Government announced their Comprehensive Spending Review (CSR).
The estimated impact on Local Government of the Comprehensive Spending Review can be summarised as follows:-
· Revenue Support Grant to Councils will overall reduce by 28% over the next 4 years (this also includes funding to offset a Council Tax freeze in 2011/12 and when this is excluded, the real terms reduction is over 30%)
· A freeze on Council Tax in 2011/12 offset by a Government Grant representing an increase of 2.5%
· The ending of the Working Neighbourhoods Fund (WNF) Grant from 1st April 2011. Bolton currently spends £7M per year
· The CSR confirmed that a range of specific grants, predominantly in Adult Services but also including some elements relating to Children’s Services, are continuing into the next 4 years. These amounted to approximately £32M but will not be ringfenced to these specific activities, £17M was to be included within the overall Revenue Support Grant and just under £15M included in the new grant called the Early Interventions Grant
· The introduction of a “Carbon Tax” which will cost the Council £500,000 in 2011/12, rising over the following few years to up to £750,000
· A 10% reduction in Council Tax benefit paid for by Government from April 2013. This equates to £2.5M for Bolton
· When the CSR was issued the Council could not identify funding for £15M worth of grants, mainly Education but some in Community Safety, within the CSR.
3. REVENUE SUPPORT GRANT SETTLEMENT
The Revenue Support Grant Settlement was issued on the 13th December 2010. The main changes from the CSR were as follows:-
· £7/10M of specific grants were confirmed as ending on the 31st March 2011 in addition to £2m of grants which ended during 2010/11
· General grants (RSG) was reduced by £7M more than anticipated. The total reduction was £17.7m or £21.4m if you include the promised £3.7m of additional Adult Care grant outlined in the CSR. This increased reduction was due to all the grants being processed through the RSG mechanism and Bolton Council losing a greater proportion of its grants.
Also the Government reduced our grant by over £700,000 to reflect the numbers of schools that they anticipate will transfer to new Academies and £100,000 was lost in relation to private sewers. We have also identified that the grant figures for Bolton include £165,000 in relation to the Greater Manchester Road Safety Partnership and £163,000 in relation to the staff transferred from the Learning and Skills Council.
· The Government confirmed that for 2011/12 £3.7M has been included within the PCT’s budget specifically to fund Local Government expenditure. However, the details of how this money is to be transferred to the Council has to be agreed with the PCT
· The total grants lost by the Council in 2011/12, excluding those which still need to be announced, now amount to approximately £35M or 19%. However if the grant for the Council Tax freeze and the £3.7M included in the NHS are taken into account the reduction would be £28M or 15%
· A list of the grants now included within RSG is attached at Appendix A
4. EXPENDITURE FORECAST 2011/12
As a reminder the main factors impacting on the Council’s budget for 2011/12 are as follows:-
Demand Growth
There are 3 areas where demand for service has resulted in the need to build additional resources into the forecast. In Adult Services the increased number of clients has put significant pressure on the budget in the current year and the numbers are growing. £1M has therefore been built into the forecast in both 2011/12 and 2012/13. In Children’s Services the number of Looked After Children has increased over the last 12 months. Whilst some economies have been made by placing more children locally with foster parents or through adoption, there is an increased demand amounting to £1M.
An additional £200,000 has also been built in to the Waste Disposal Levy following a review of the allocation of precept charges across Greater Manchester. Because of reductions in other Authorities’ waste tonnages, the cost to Bolton has increased and will continue to do so until such time as we are able to put in place additional measures to further reduce our tonnages. In order to minimise this increase, proposals will be put forward to move the paper and bottles/plastic recycling collection to monthly and introduce food recycling to those households with garden waste recycling which will remain on a fortnightly basis (both from October 2011).
Airport
Following the re-negotiation of the Council’s loans to the Airport, the overall return has increased enabling an additional £500,000 income to be built into the budget.
Free Care
The original forecast included £700,000 for the free care initiative in the 2010/11 budget. As this initiative is not now proceeding, this provision can be deleted.
Pensions
Provision has been made for a 0.7% increase in pension costs in both 2011/12 and 2012/13 in line with the latest actuaries forecast.
Grants
The CSR indicated that the Council would not receive the WNF from April 2011. The Council spends £7M which has been built into the forecast. Members will recall that the Council received £4M as part of our Public Service Agreement (PSA) Reward Grant and this was held in reserves to be used as transition funding should the WNF grant be ended. The forecast includes £2M from this funding in 2011/12 to enable some projects to continue with some resources retained to facilitate the transition in subsequent years.
In addition, a range of specific grants that the Council received mainly towards Children’s Services and Community Safety, have ended. These amount to £10M but of this, £3.4M is subject to further consideration by the Government and clarification is expected during January 2011. Loss of these grants adds to the Council’s spending pressures for 2011/12.(These are in addition to £2m of grants lost during 2010/11)
As indicated in the section on the Grant Settlement, the Council has also seen a fairly significant reduction in its general RSG. This is a combination of the National reduction in RSG announced as part of the CSR and a further reduction in the amount of grant the Council receives due to the way in which the grant distribution across the country is worked out and reductions for the anticipated number of Academies. Generally Councils in Metropolitan/Urban areas lost a greater amount of grants than the Shire Counties/rural areas.
The amount received by schools via the Direct Schools Grant (DSG) has been reduced following the transfer of funding to the 3 Secondary Academies. This adjustment has also been reflected in the 2010/11 budget figure in the table below. In addition, £29.2M of other grants received by schools has now been transferred into the DSG.
The revised forecast for 2011/12 and 2012/13 is as follows:-
2011/12 2012/13
£000 £000
Previous Year’s Budget 403,252 456,387
Schools Grant - Increase 3,292 2,500
- Grants transferred to DSG 29,199 -
Non Schools
Inflation 4,342 4,177
Capital Financing 600 800
Waste/PTA Precepts 2,820 2,757
Corporate Changes 440 200
Pensions 750 750
Impact of the Economy 500 -
Airport Income -500 -
Remove Free Care Initiative -700 -
Children’s Growth 1,000 -
Adult’s Growth 1,000 1,000
Spend on WNF 7,000 -
Grants transferred into RSG 17,897 -
Children’s Grants 21,498 -
Children’s Grants – awaiting announcement 2,176 -
Children’s Grants in DSG (need to recover) 1,710 -
Other Services lost Grants 1,314 -
Climate Change Levy 482 118
------
498,062 468,689
------
Resources Available
Direct Schools Grant 207,100 209,600 RSG/NNDR 127,888 117,134
Council Tax at 0% (11/12) and 2% (12/13) 102.043 104,806
Early Interventions Grant 14,830 15,100
Council Tax additional Grant 2,526 2,526
Contribution from LPSA Reward Grant 2,000 1,000 ------
456,387 450,166 ------
Savings required 41,685 18,523
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The above indicates that over the next 2 years the Council will need to find £60M in savings. This is significantly higher than any savings target that the Council has faced previously and the savings will need to be delivered within a short space of time. It is important that a robust budget is achieved for 2011/12 and therefore a pragmatic approach to achieving savings will need to be adopted and one where full year savings from the 1st April 2012 can be achieved as far as possible.
5. PROPOSED SAVINGS OPTIONS 2011/12
The Executive will recall that at the meeting on the 15th December, approval was given to a range of savings amounting to £15.3M. This is made up as follows:-
Savings
2011/12
£000
Adults 6,230
Children’s Services 3,673
Development & Regeneration 700
Environment 2,105
Central Departments 2,609
Total 15,317
The savings required, as outlined in Section 4, amount to £41.685M in 2011/12 but at this stage only £15.317M has been identified and therefore further savings of £26.368M will need to be found.
Further savings could potentially be identified as follows:-
· During 2009/10 and 2010/11 the Council has rescheduled much of its debt, refinancing loans that were at approximately 5% interest with new short term loans at less than 1%. Under normal circumstances this would only be a temporary saving until such time as interest rates increase back to their previous levels, however with the transfer of the Council’s housing stock to Bolton at Home the Council’s debt will be written off and therefore this reduction can effectively be made permanent. This will save £5M in 2011/12
· A review of the activities currently funded by WNF has been undertaken and set out in Appendix B are the revised allocations which result in savings of £4.250M. These savings will entail significant changes to many of the programmes/projects funded through WNF. This will inevitably have an impact on the Council’s key priorities of Economic Prosperity and Narrowing the Gap. However, in the proposals set out, the highest priority has been given to the key areas of reducing crime, community safety, the Youth Offending Team and Economic Prosperity
· As outlined in the Expenditure Forecast, the Council has seen significant reductions in the Specific Grants we receive for Children’s Services. Out of overall grants of £23.2M, the Government have reduced these by £8.4M. In addition a further £2.2M of grants are uncertain and we are awaiting formal announcements from Government Departments. Potentially out of a total of £25.4M of grants, £10.6M may no longer be available.
These grants generally contributed part of the funding to a range of activities and functions within the Department. It is therefore necessary for the Department to reconfigure the services it delivers, combining and integrating functions as well as reducing levels of activity. This can only be delivered by prioritising those services to the most vulnerable and then reducing activity and merging services in other areas. These changes will impact on prevention services and some of the universal services, including those commissioned with the voluntary sector. Included in these grants are some which have been transferred into the Schools DSG relating to school improvement, extended services and school meals grant. Discussions will be held with schools to recover these amounts.
A list of all the Children’s Services Grants are in Appendix C. It is proposed that over 2011/12 and 2012/13 that £12.9M be saved by reconfiguring services and reviewing projects. Outline proposals for reductions are summarised in Appendix D. This should achieve a saving of £7.4M in 2011/12 which includes £490K saving in relation to former WNF projects, excluding the WNF gives a saving of £6.9M