Agenda item

To consider a report by the Head of Finance and Assets, which provides an update on the process to deliver the revenue budget for 2015/16. (copy enclosed).

A report, and confidential Appendix, by the Head of Finance and Assets (HFA), which provided an update on the process to deliver the revenue budget for 2015/16, had been circulated previously.

Councillor J. Thompson-Hill explained that the budget process had moved to the end of the second phase.  Appendix 1 provided an illustration of the budget process for reference, and a table of key events had been included in the report.

The Council’s budget strategy had previously identified a budget gap of up to £18m over two years. This had been driven primarily by indications that the Council’s funding settlement would be cut by 4.5%.  The Provisional Local Government Settlement indicated that the cash reduction would be 3.7%, which equated to £5.3m.  With cost pressures the Council had to fund such as pay, pensions and  energy increases, the budget gap for 2015/16 was now approximately £8.3m and estimated to be approximately £8.8m in 2016/17 - £17.1m in total.  

An analysis of the movements in assumptions between September and the end of November had been included as Appendix 2.  It outlined the impact of changes as a result of the Provisional Settlement, including the impact of grants transferring in and out of the Settlement and showed the movement in cost pressure assumptions over the period.  Assumptions would change regularly and this was illustrated by the movement over the last three months which included assumptions for pension strain costs, fire service levy and pay award costs changing.  Appendix 3 provided tables extracted from the Provisional Settlement to highlight the following:-

·                 Table 1 detailed the adjusted base with a 3.7% reduction.

·                 Table 2 indicated how the base was adjusted by transfers in and out of the Settlement.

·                 Table 3 outlined further transfers included in the Settlement but not specifically funded.

·                 Table 4 provided a list of grants between 2014/15 and 2015/16.

Table 4 highlighted the issue regarding the Intermediate Care Fund (ICF) and the Regional Collaboration Fund (RCF).  The RCF had been established in 2013/14 as a 3-year grant to fund regional collaboration projects and totalled £10m across Wales.  In 2014/15, around half had been diverted as part of a £50m fund (ICF) to promote better integration between health and social care.  The Provisional Settlement showed the ICF ending, but included approximately £5m of previous RCF money which funded a number of projects which had another year to run.

The Final Local Government Settlement for 2015/16 had been published in early December.  The second phase of the budget process would conclude with proposals being taken to Council in December.  The proposals totalled £3.6m in 2015/16 and £1.8m in 2016/17, and with the proposals approved by Council in September, resulted in proposals totalling £7.3m in 2015/16 and £2.7m in 2016/17.

Phase 3 of the budget process would consider final proposals to balance the 2015/16 budget, including options for Council Tax and any use of reserves.  These issues had been discussed at the Member Workshop on the 12^th December before the final approval of the budget in February.  Phase 3 of the process would also continue to develop savings options for 2016/17.  The report to Council on the 9^th December had highlighted the significant consultation process and full details had been summarised in the report.  The Chair referred to issues raised regarding information pertaining to the Freedoms and Flexibilities process, and the response received that Members might ask further questions which could be examined in the Budget Workshops.

Mr P. Whitham explained that it had been stated previously that finance was the most important risk facing the Council, and he felt that for the Budget Process there were three key specific sub-risks about which Corporate Governance Committee should now be seeking assurances, namely:-

·  risks of weakening or removal of controls as resources were reduced, leading possibly to increased Governance risks;

·  in the event of redundancies, the risks of a failure to realise cashable savings in 2016/17 as a result of decisions not being made now;

·  Innovation risks such as risks to out- and in-sourcing, if upfront contract terms and conditions, initial aspects of contract management were not controlled or managed properly.

It was suggested by Mr Whitham that the three specific risks, and assurances about them, could be referred to in the next Budget Process report to the Committee.  The Chair explained that the areas identified had been referred to in the Governance improvement Action Plan.  The CA referred to the overall Council risk profile and the high visibility of the process adopted with each stage being scrutinised and reviewed.  It was confirmed that it would be the intention to identify the majority of 2016/17 savings by the early part of the 2015/16 financial year.                  

The HLHRDS explained that the Chief Executive wanted the adoption of a strategic approach to monitor the overall implementation of cuts and savings.  A programme approach utilising Verto would be adopted to enable the progress of each individual proposal to be tracked.  There would be an overview of how the Council communicates with the public, with risks being actively managed, and HR were currently producing a map of proposals which involved staffing issues. 

The HIA confirmed that work on managing the Council’s relationship with outside bodies was being undertaken, and the CA explained that CET had requested that a review be undertaken following the finalisation of the budget.

In reply to concerns raised by Councillor G.M. Kensler regarding any financial impact on the Council arising from Local Government Reform (LGR) the Chair explained that at present Denbighshire had only submitted an Expression of Interest.  Councillor J. Thompson-Hill informed the Committee that until a formal decision had been taken the work of the Council would continue with a view to addressing the current budget issues, and the HLHRDS confirmed that the Council’s business would progress as usual over the next three year period with the focus being on the budget process.  The CA outlined the role of the Committee with regard to LGR, and the work which could be undertaken with Conwy in relation to the production of a Business Plan.

The Chair explained that his suggestion made at Council ‘that in the Budget Process the Equality Impact Assessments also entail the impact of budget cuts on those on low income’ had been well received by the Chief Executive.  Following further discussion, it was:-

RESOLVED – that, subject to the comments made, the Corporate Governance Committee receives and notes the latest update.

     (RW to Action)