Agenda item

That the following be noted:-

i)          the Medium Term Financial Plan as at 30 September 2013 

ii)         The Organisational Change and Re-Design Plan & Budget Strategy

iii)        The approach to sharing the budget strategy and proposals with Members over the coming three months. 

The Leader of the Council introduced the report to provide Members with an update on the Medium Term Financial Plan (MTFP) 2014/15 – 2018/19.  He explained that the report had been submitted to Cabinet in October 2013 and included an updated MTFP as at 30 September 2013.  Member workshops on the 2014/15 budget were due to be held on 16 and 18 December 2013 with the scrutiny budget meetings taking place in January 2014.  The MTFP covered a five year period but the focus was on the budget for 2014/15 and the financial challenges that lay ahead.  This was an opportunity for Members to have a clear understanding of the principles that underpinned the MTFP and the workshops would allow Members to see how the principles had been applied. 

The Head of Finance detailed the background to the report and explained that the budget gap as projected at 30^th September was £16.5m for 2014/15 and £47m over the five year period of the MTFP.  This had been affected by the level of funding available to the Council, which was 80% from Welsh Government with the remaining 20% being from Council Tax.  The final settlement figure had been received the previous day which indicated that the budget gap was now £15.1m. 

The Corporate Finance Manager explained that prior to the settlement being received the funding forecasts had been revised to assume a cash reduction of 4% in both 2014/15 and 2015/16 and an assumed ‘cash flat’ position for the following years.  However the MTFP had subsequently been updated to reflect the settlement figures and also a change to the collection rate for Council Tax to 99% in line with the recent decision of Cabinet.  It was reported that the MTFP currently assumed grant levels remain the same as 2013/14 (£34.761m) as no details of any significant changes had been received at this stage.

Within the grants figure was £1.4m which was linked to the achievement of outcomes under the Outcome Agreement which the Council had with Welsh Government.  The Corporate Finance Manager advised that the MTFP assumed that all outcomes would be achieved and that the Council would receive the full grant settlement.  Each year an assessment is needed to be made on the inflationary increase required for service areas.  A detailed exercise had been carried out since May to target price inflationary increases to where there was a business need only, rather than a flat increase across all service areas.  The effect of this was to reduce the inflation provision requirement for 2014/15 from that previously assumed to £2.909m, a reduction of £1.118m.  The Corporate Finance Manager advised that no adjustment had been made at this stage for future years and the table in the report detailed the assumptions currently made. 

The full year effect of previous year budget decisions was required to be adjusted to the base budget in order to ‘follow through’ the decisions made in budgetary terms.  For 2014/15 the impact for all Service Areas was an increase in the budget requirement of £2.808m rising by a further £2.743m in 2015/16.  Costs within service areas were also reported which included an initial assessment of additional costs of £0.300m which was included in the MTFP as at May for the Council Tax Reduction Scheme to take account of caseload and the increased cost of support linked to the assumed Council Tax rise.  Details of pressures for Leisure Services and Child Protection were also reported and the projected shortfall in 2014/15 taking into account all of the adjustments reported was now £15.1m. 

The Chief Executive spoke about the budget Member workshops which were to be held.  He said that the £15.1m budget gap was a significant challenge and that the MTFP document included information on the required Organisational Change Strategy for 2013-17 to meet the efficiency and savings targets required.  He commented on efficiencies which had overall been successful in previous years with the rate of efficiencies being 85% which had delivered over £20m of savings over the last five years.  The organisation needed to adapt its current work into a single and coherent strategy for modernisation, change and prioritisation.  The four parts of the strategy were:-

·                                             Corporate Efficiency

·                    Functional Efficiency

·                    Organisational Design – Structure and Operating Models

·                    Organisational Design – Workforce 

The Chief Executive said that the approach was different to previous years but added that the Council did not have an option due to the challenging budget gap and he spoke of considerations to protect local services as a first priority.  The reductions in staff levels would therefore reduce workforce costs but he added that it was important to balance service need with requests for voluntary redundancies.  Work was advanced on proposals to lower costs which would be shared with Members when it was available in the new year.     

            The Leader of the Council said that it was unlikely that there would be growth in funding for some time but that the Council still had aspirations to improve services.  Options were being considered for the budget gap for future years and discussions would be undertaken with the wider membership and Committees in due course.  On the issue of considerations for protection of services, he said that there may be a need to deliver the services in a different way and added the majority of services were currently delivered in-house.  Budgets for future years would be considered once the 2014/15 budget had been finalised but he added that it was important to maintain capacity and capability. 

            Councillor Carolyn Thomas asked for clarification on what would be discussed at the Member workshops.  She referred to the change in the collection rate for Council Tax but raised concern about the impact of the Council Tax Reduction Scheme on the Council.  She also raised concern as she felt that some of the decisions in the MTFP had not been aligned to the Improvement Priorities.  Councillor Thomas also requested that Members be kept fully informed of changes being proposed. 

            In response the Leader of the Council spoke of the workshops where more details on the proposals in the MTFP such as Value for Money and service efficiencies would be shared with Members.  The Organisational Change Strategy was from the top down and he said that workforce reductions would be felt across the authority.  He added that even though the MTFP was for five years up to 2018/19, there would be a reorganisation of Local Government at the end of that period.  The Leader said that Flintshire did not have one central town and that many services were replicated across many towns and added that there would be obvious implications for North Wales and Flintshire County Council from the Williams Commission. 

            The Chief Executive said that budget meetings would be scheduled for January 2014 on ‘Value for Money’ work and would be an opportunity for Members to consider the proposals.  However, he added that details of workforce reductions would need to be reported sensitively and that the scale and approach of the proposals would be discussed at the workshops.  On the issue of Improvement Priorities referred to by Councillor Thomas, he said that they were not just about money.  He said that decision had not yet been made on phases three and four but added that County Hall was not affordable in the long term and that it was important to make the best use of the space available. 

            On the issue of Council Tax, the Head of Finance explained the background to the setting of the collection rate at 97.5% for 2013/14 due to the proposed Council Tax Reduction Scheme.  However, following a change in the scheme by Welsh Government which provided assistance at up to 100% the amount collected had been higher than expected.  Whilst support of up to 100% was available to eligible taxpayers, the funding from WG did not cover the full cost of the scheme and so there was an ongoing pressure for the Council. 

            Councillor Robin Guest spoke of the workshops and said that he hoped Members would attend the sessions.  He said that the budget setting exercise was different for this year but he felt that the term ‘Medium Term’ was a contradiction as it could only apply for the short term.  He concurred that Flintshire was a county of small towns and communities and that it was important to have an eye on the future to ensure the sustainable delivery of services.  Councillor Guest also referred to the demography of the Council and to the implications for the Revenue Support Grant from Cardiff.  He also asked what percentage the authority spent on salaries or staff pay and in referring to Capacity and Capability said that there was a need to get expert advice.  Councillor Guest also referred to the section about Child Protection and asked for clarification on the marked increase in the demand for statutory child care support. 

            In response, the Leader of the Council said that the funding formula was a cause for concern and that the biggest impact was on population.  He said that for Flintshire going forward the population was not projected to increase and that was a concern.  He added that the issue of the Local Government Review had been raised with the Minister and that there was a need to review the funding formula sooner rather than later. 

            The Head of Finance said that the current formula had been in place since 2000 and that the formula, which was updated on an annual basis, was based on a number of factors.  Flintshire was 18^th or 19^th out of the 22 Welsh Authorities. 

            In response to the issue of salary expenditure referred to by Councillor Guest, the Corporate Finance Manager said that approximately half of the budget was spent on staff salaries.  The Chief Executive said that in the past there had been some provision in the settlement figure for pay but this had not been the case for some years.  On the issue of capacity, it was important to use the help of consultants where necessary and he highlighted points three and four of the Organisational Change Strategy Programme on Workforce and Structure & Operating Models.  The issue of Contractors could be discussed at the Members workshops.  He said that there had been a significant rise in referrals to different agencies on Child Protection issues but reminded Members that not all referrals resulted in the need for statutory child care support.  In referring to County Hall, he confirmed that a decision had not yet been reached but that debate on the issue could generate good ideas. 

RESOLVED:

That the following be noted:-

i)          the Medium Term Financial Plan as at 30 September 2013 

ii)         The Organisational Change and Re-Design Plan & Budget Strategy

iii)        The approach to sharing the budget strategy and proposals with Members over the coming three months.