Contact: Ejner Knudsen, ext 7403

1 Introduction

1.1 This report provides an update on the budget monitoring position for the Environment Services for the 2001/02 financial year, covering the revenue budgets for highways and transportation, planning and waste management.

1.2 Changes to the Environment Services cash limit since the last report to the Executive Member in November are explained, together with the main issues that have arisen from the latest detailed monitoring exercise which has recently been carried out by the budget holders within the County Surveyor's and County Planning departments.

1.3 Prior to the Executive member considering the budget monitoring position for 2001/02, this report is being presented to the Environment Policy Review Committee to provide the Committee with the opportunity to comment to the Executive member on the proposals.

1 Changes to the 2001/02 revenue budget cash limit

1.1 The most recent budget monitoring report, which was presented to the Executive Member for the Environment at the meeting on 13 November 2001, set out in detail all of the changes that had been made to the cash limit for the Environment Services since the original budget had been approved during February 2001. These changes included additional allocations for inflation, approved virements from the former revenue budget provision for South Hampshire Rapid Transit Phase 1 (SHRT 1) to meet other budget pressures and increased Government support for Rural Bus Subsidy Grant funded services. In addition, an allocation had been made from the central waste management contingency sum of £2.840 million to cover estimated cost increases on the waste management contract related services during the first quarter of the year. The overall adjusted revenue budget cash limit for the Environment Services reported in November was £71.137 million.

1.2 A number of further changes have now been made to the Environment Services cash limit:

· An additional allocation of £902,000 from the central waste management contingency sum to cover estimated cost increases during the second quarter of the year on the waste management contract related services.

· An increase of £7,000 to cover business rates increases on waste management properties.

· A transfer of £19,000 to the planning services capital programme budget for Environmental Improvements to enable the aims of the Hampshire Landscape Strategy to be implemented through practical works and grants.

· Other adjustments, amounting to a reduction of £10,000, in respect of additional legal support from the Chief Executive's department in connection with the implementation of traffic regulation orders, and for changes to the cost of services being provided under service level agreements by the County Treasurer.

1.3 The above variations increase the revenue budget cash limit by £880,000 to £72.017 million. Annex 1 to Appendix 1 provides a summary of all of the changes that have been made since the original budget was approved during February 2001, which build up to the cash limit for the revised budget 2001/02.

2 Budget monitoring review

2.1 Another detailed budget monitoring review has recently been completed by staff with budget responsibilities within the County Surveyor's and County Planning departments. Trends in expenditure and income have been examined, likely further commitments during the remainder of the year have been considered and variations from approved budget allocations have been identified. Appendix 1 provides a summary of the adjusted cash limits and the latest forecast outturn for each division of service, which will now become the revised budget for the year for future monitoring purposes.

2.2 The more significant issues that have emerged from the budget monitoring review are discussed in the following paragraphs.

3 Highways and Transportation services

Highways maintenance

3.1 The 2001/02 cash limit for revenue budget funded highways maintenance is £18.149 million. In addition, the Environment Services capital programme includes provision of £23.630 million for the structural maintenance of highways and bridges and a special two-year programme of flood damage work, totalling £5.051 million, being funded by the Government through supplementary credit approvals (SCA).

3.2 Appendix 2 provides a detailed analysis of how these highways maintenance programmes have been allocated this year. This summary covers both the revenue funded highways maintenance budget, covering routine maintenance activities such as grass cutting, sign cleaning and street lighting, and the capital highways maintenance programmes which cover various categories of structural repairs. Appendix 3 goes on to provide details of volumes of work to be carried out during 2001/02 on the more significant highways maintenance headings, together with information showing progress to date on the implementation of works.

3.3 On the highways maintenance revenue budget a number of changes have been made to the allocated programme since the previous budget monitoring report to the Executive Member in November, as shown in Appendix 2. Additional funds totalling £386,000 have now been released from general reserves and have been mainly allocated to the Area Surveyors for routine maintenance purposes, including kerbing, routine drainage and renewal of road markings. This has reduced the level of general highways maintenance reserves to £190,000. Further allocations will be made to budget holders in the forthcoming weeks to fully allocate the cash limit before the end of the financial year.

3.4 Part of the highways maintenance revenue budget is set aside each year to provide a source of funding for the development or modification of highways maintenance related management information systems and their subsequent implementation. During 2001/02, this allocation included a sum of £100,000 for the acquisition and installation of a new computer system to manage the new highways maintenance term contract, which is planned to commence during May 2002. The actual phasing of expenditure in connection with this development is expected to result in an underspending of £80,000 on this heading during 2001/02, although this expenditure will still be required during the next financial year.

3.5 Expenditure trends on the budget for energy supply to street lights, illuminated signs and bollards and traffic signals, suggest that actual expenditure on this heading may be below the current budget allocation of £1,717,000. If this trend is confirmed during the next budget monitoring review, it would be possible to re-allocate any savings for additional high priority highways maintenance works this year.

Public Transport

3.6 In the previous Executive Member budget monitoring report, an overspending of £126,000 on public transport bus subsidies was projected, after allowing for an agreed contribution of £65,000 from Basingstoke and Deane Borough Council towards the cost of subsidised bus services in their area and the achievement of savings of £30,000 from other parts of the public transport budget.

3.7 It was subsequently agreed that this projected overspending be covered by allocating an equivalent sum from the residual budget provision for SHRT 1, which was available as a one-off sum to meet any budget pressures this year. The cash limit for public transport was subsequently increased by £126,000 to reflect this decision. The latest budget monitoring position on public transport indicates that expenditure during 2001/02 is expected to be contained within the adjusted budget total.

South Hampshire Rapid Transit Phase 1 (SHRT 1)

3.8 A sum of £36,000 remains unallocated within the former revenue budget provision for SHRT, which is still available to meet any additional one-off budget pressures this year.

Parking services

3.9 Additional rental income of £24,000 is expected to be received from land and premises at Test Lane, Nursling, which is leased to P&O Containers for use as a lorry park. Rental levels have now been increased to compensate for a previous reduction in income, arising from a decision by the VAT inspector that the County Council should have been accounting for VAT on the rental that it receives from this site.

Management and Support services

3.10 This budget heading mainly covers the running costs of the County Surveyor's department, together with payments to district councils to cover their administration costs under the highways agency arrangements. The current cash limit for this division of service is £14.182 million and represents the net revenue budget, after accounting for recharges to the capital programme and other forms of income.

3.11 The most recent budget monitoring exercise has identified a number of variations on this division of service, contributing to a projected underspending of £305,000. The main variations that have been identified are:

· Office Accommodation - provision was included in the 2001/02 budget for the provision of additional office accommodation space to help relieve the pressure on the offices in Ashburton Court. A time delay in finding suitable new accommodation will lead to an estimated underspending of £80,000 during this financial year, although a similar level of additional expenditure beyond the existing base budget provision for office accommodation will be required during 2002/03.

· SHRT Project Team - changes to this budget have been made to reflect variations in the staffing establishment, recent appointments and office accommodation in Portsmouth. In addition, an assessment has been made of the cost of work to be carried out by this team during 2001/02 in developing the Fareham - Portsmouth LRT scheme. It is now possible to reduce the revenue budget provision for the SHRT project team by some £243,000 as the majority of expenditure incurred this year can be re-allocated to capital.

· Other Variations - there are a number of other largely offsetting variations which show an overall increase in net expenditure of £18,000. Increases include provision for expenditure on sustainable development initiatives and for the higher cost of employing consultants to carry out development control work, where it has not been possible to recruit permanent staff. These increases have been partially offset by additional fee recharges to capital, arising from additional staff time incurred in the preparation of integrated transport schemes.

4 Planning services

4.1 In the budget monitoring report submitted to the Executive Member's meeting on 13 November 2001, a provisional revised budget of £4.370 million was set for the planning services, which was equal to the cash limit. The budget limit has subsequently been reduced to £4.351 million to reflect the capitalisation of revenue provision for landscape strategy, as referred to in paragraph 2.2.

4.2 It was mentioned in the previous report that budget monitoring has pointed to the likelihood of savings being identified in the current year and that a further detailed budget monitoring review would be undertaken during November. This would enable any savings to be properly quantified and considered in conjunction with the preparation of the budget for the 2002/03 financial year, which is likely to be very difficult given the numerous budget pressures which need to be accommodated.

4.3 Budget holders within the County Planning department have now completed this subsequent budget monitoring review and savings of £278,000 have been identified, which may be considered for carry forward as planned underspendings to the 2002/03 budget. The projected savings reflect the assumption that the ring-fenced provision of £100,000 for expenditure in connection with the Dibden Bay inquiry is fully spent this year. The savings which have been identified are categorised below:

· Projects - expenditure totalling £49,000 on a number of planning services initiatives, including the Minerals and Waste Local Plan review, legal costs associated with the "Triangle" development near Romsey, and various economic studies, are expected to be delayed until 2002/03 because of general uncertainties, together with delays in progressing spending as originally planned.

· Historic Building Grants re-credits - a sum of £100,000 is available following the completion of the annual exercise to re-credit the budget with the value of time-expired historic building grant offers that, for a variety of reasons, have not been called upon during the past three to four years.

· Staff turnover and inflation - savings of £69,000 have accrued throughout the year from recruitment delays and new appointments on lower points on pay scales. In addition, savings have been achieved on a number of non-pay budgets as the distribution of the sum available within the budget to cover higher inflation has been restricted in order to provide funding for key departmental and corporate projects.

· Other underspendings - further savings of £60,000 are projected on a number of headings including removal expenses, printing and stationery and consultants.

4.4 It is recommended that the projected underspending of £49,000 on planning projects be carried forward to 2002/03, as this earmarked expenditure will be required on these services next year. With regard to the more general underspendings, it is suggested that this also be carried forward to help meet a number of deferred and new pressures that will need to be accommodated in the 2002/03 budget. This is discussed in a separate report on this agenda.

5 Waste management

5.1 As explained in previous budget monitoring reports, it is necessary to sub-divide the overall waste management revenue budget into two separate categories for budget monitoring purposes:

· the waste contract related budgets, including income from trade waste and the payment of recycling credits

· the other non-contract related waste management services, covering facilities maintenance, administration, promotions and developments, disposal of abandoned vehicles and provision for the management of household waste recycling centres (HWRC).

5.2 The current 2001/02 cash limit for the waste contract related budgets is £27.184 million. This figure now includes total allocations of £1.527 million from the central waste contract contingency sum of £2.840 million, to cover cost variations on the waste contract related budgets during the first two quarters of the year.

5.3 The 2001/02 budget for the non-contract related waste management services, which is subject to normal budget management arrangements which require services' expenditure to be controlled within cash limits, is £1.866 million.

Waste contract related budget

5.4 The final contract related budgets outcome for 2001/02 is still somewhat unclear, at this stage, mainly because tonnage information is only currently available for the first seven months of the year. In addition, negotiations and settlements, relating to a number of six figure contract claims, are taking longer than anticipated to conclude, thus adding to the general uncertainty.

5.5 The call on the central waste management contingency, for the second quarter of the year, has now been assessed at £902,000. This estimate includes the full year cost of absorbing variations on recycling credit payments and trade waste income, based on revised estimates prepared in October. It also makes allowance for the cost consequences of higher than expected civic amenity residual waste, including associated landfill tax payments, due to green waste processing difficulties at the Down End composting facility.

5.6 Overall waste volume growth to October 2001, was within the budgeted allowance for the year. Household waste volumes have increased by 2.2%, including a 5.2% increase in collected dry recyclables. Increases in civic amenity waste growth for the same period has been close to 8.3%. This included a 32.2% increase in residual waste requiring landfill disposal, largely as a consequence of the green waste processing problems referred to above.

5.7 As reported in the budget monitoring report in November, the green waste difficulties resulted from the temporary closure of the Down End composting facility, due to odour problems, made worse by the foot and mouth outbreak, which meant that farm composting sites could not be used either. Updated figures suggest that some 15,700 tonnes of Hampshire's green garden waste has been landfilled during the first seven months of the financial year, at an additional cost of £210,000 (made up of £340,000 additional processing cost, less £130,000 lower excess compost contract claim). As previously reported, operations at Down End are now back to normal. This should ensure that all green waste for the remainder of the year is composted.

5.8 In total, the call on the central contingency for the first half of the year is £1.527 million, leaving a sum of £1.313 million to cover higher waste management costs during the final six months. Although this sum is less than 50% of the overall allowance, it is hoped that the remaining balance will be sufficient to cover activity levels and costs over the remainder of the year, especially as expected favourable claims outcomes would help to release additional resources.

5.9 The possibility that additional cost pressures might arise during the latter stages of 2001/02, from new European Union legislation relating to the disposal of fridges, was mentioned in the previous budget monitoring report to the Executive Member. The legislation is effective from January 2002 and it is initially proposed to store fridges at sites within the county, pending the development of a suitable and competitive processing market and an announcement from the Government regarding financial arrangements to support future disposal costs.

5.10 Presently, it is difficult to predict with any confidence how many fridges will need to be stored, largely because the final numbers will depend upon to what extent the current commercial take-back schemes continue. In addition, the costs of storage have yet to be confirmed. Haulage costs estimates from external organisations are being sought, whilst there are also issues of planning permissions and preparation costs associated with the sites earmarked for the storage.

5.11 Notwithstanding the above, initial indications suggest that expenditure to be incurred in the final quarter of this financial year, should be contained within the County Council's share of a £6 million fridge storage provision, earmarked by the Government for local authorities for this period. Indeed, it is possible, that the disposal costs relating to the landfilling of fridges during December, which arose because metal merchants stopped accepting fridges from amenity sites at the end of November, could be covered by the same provision. This would avoid any undue pressure on the waste management budget and the central waste contingency in the current year.

5.12 The call on the central waste contingency for the third quarter of the current financial year cannot be assessed until tonnage information for the months of November and December has been received and evaluated. The outcome of this evaluation will be reported to a future Executive Member meeting.

Other waste management budgets

5.13 The main concern within this area of the waste management budget remains the likely level of expenditure being incurred on the disposal of abandoned vehicles. As previously reported in November, estimates for expenditure being incurred on this activity by district councils on behalf of the County Council under the agency arrangements, suggest the budget for 2001/02 could be exceeded by as much as £120,000. This increase reflects increases in the number of cars being abandoned, the continued depression of the market for scrap metal and higher standards of regulation.

5.14 The general outlook for this area of activity, which has been the focus of much recent national attention, is not good, given that abandoned vehicles are to be classified as hazardous waste from April 2002. This is against a background of cost increases totalling almost 500% since 1998/99.

5.15 Given the extent of the budget pressure and the seemingly fluctuating cost returns submitted by the district councils, an audit review of this service area has recently been carried out, at the request of management, of six out of the eleven agencies. The initial outcome has confirmed fears that inconsistencies of approach, in terms of properly and fairly applying the agency arrangements, are prevalent and that these inconsistencies are another factor behind the sizeable cost increases.

5.16 The management response to the audit is currently being considered. Follow up meetings will clearly need to be held with certain of the six districts, whilst further audit time is being earmarked to enable the practices of the remaining five districts to be reviewed. It is not clear, at this stage, how quickly this process will be completed or exactly what the outcome might be. However, it is safe to assume, that the final additional cost to be borne by the County Council for this function during 2001/02, may well be lower than the overspending of £120,000 presently forecast.

5.17 It is now possible to be more certain about the achievement of a number of savings within the non-contract related services part of the waste management budget. These largely relate to the administration budget, from staff turnover and more efficient use of resources, and from the HWRC management budget, as a result of the summer contract extension negotiations. The savings help to reduce the total projected overspending on the non-contract related waste management budgets to £81,000.

5.18 As previously reported in November, it is accepted that the generation of additional savings beyond this level would be extremely difficult to achieve, especially at this late stage in the year. To seek further savings within the waste management cash limit would have a serious negative impact on service delivery. The facilities maintenance programme could be limited to essential works only, but many projects included in the current year's plan already fall into this category, or reflect works previously deferred from last year. Alternatively, spending on promotions and developments could be reduced, but again much of this budget is already committed, and reductions in expenditure on these activities would need to be weighed against the likely negative impact on waste volumes and levels of recycling.

6 Discussion

Projected overspending on Disposal of Abandoned Vehicles

6.1 As discussed in the above paragraphs, additional expenditure of £81,000 beyond the approved waste management cash limit is expected to be incurred, mainly because of costs of disposing of abandoned vehicles. It is suggested that the absorption of this overspending, within the waste management cash limit, is unacceptable as this could only be achieved by not implementing essential works programmed to be carried out this year from within the facilities management programme, or by severely cutting the budget for waste promotions and developments.

6.2 However, it is necessary to manage the overall Environment Services revenue budget prudently and to fully offset, at the present time, the estimated overspending of £81,000 before considering the carry forward of any planned underspendings to next year. It is therefore recommended that this overspending be offset in the revised budget by utilising alternative savings which are already available from other parts of the Environment Services budget.

6.3 Clearly there are a number of ways in which the £81,000 pressure could be accommodated, as significant savings are available on both the highways and transportation and planning services' budgets. One such approach would be to top-slice savings pro-rata to these other services' cash limits, which would require the use of £73,000 of the savings available on highways and transportation with an £8,000 contribution from the planning services' underspendings.

6.4 Paragraph 6.16 refers to the possibility that the projected overspending on the disposal of abandoned vehicles may be reduced following recent internal audit reviews of the basis of costs allocated to this service by district councils under the agency arrangements. However, the extent of any savings cannot be quantified at the present time. It is therefore suggested that the prudent course of action now being taken, in covering the maximum likely overspending on the disposal of abandoned vehicles by using savings available elsewhere within the revised budget, be taken into account at year end by the Cabinet in considering the proportion of any unplanned underspendings that may be returned to the Environment Services in 2002/03.

Other underspendings

6.5 A significant element of the overall Environment Services projected underspending relates to specific items of expenditure which were originally planned to be incurred during 2001/02 but which have now been delayed. Nevertheless this expenditure, for which no provision currently exists in the 2002/03 budget, will still be required next year, and it is therefore recommended that a request be made to carry forward these underspendings as earmarked sums. These comprise:

· £80,000 for the implementation of the new highways maintenance term contract management information system (paragraph 4.4)

· £80,000 to provide additional office space for the County Surveyor's department to relieve pressure on the offices in Ashburton Court (paragraph 4.11)

· £49,000 on a number of planning services initiatives where spending has been delayed until next year (paragraph 5.3).

6.6 A separate report on this agenda considers the Environment Services revenue budget for 2002/03 and identifies a number of budget pressures and service developments which fall outside of the definition of the base budget, but which will need to be accommodated during the next financial year. It is therefore recommended that a request be made to carry forward the balance of the savings identified in this report as planned underspendings for this purpose.

6.7 The amounts to be carried forward as general underspendings would be £212,000 on the highways and transportation services and £221,000 on the planning services, based on the assumed allocation of savings to cover anticipated higher expenditure on the disposal of abandoned vehicles as set out in paragraph 7.3.

7 Conclusion

7.1 The report brings the Executive Member up to date with further changes that have been made to the Environment Service cash limit since the previous budget monitoring report in November. It then summarises the outcome of the most recent budget monitoring review carried out in consultation with budget holders within the County Surveyor's and County Planning departments.

7.2 On the highways and transportation services underspendings totalling £445,000 have been identified, relating mainly to deferred items of expenditure, reduced revenue budget funding requirement for the SHRT project team and additional income from the lorry park at Nursling. Similarly, on the planning services, an underspending of £278,000 is now projected related to deferred expenditure on a number of planning services projects, a sum re-credited to the budget from time expired historic buildings grant offers, and other savings from staff turnover and lower departmental running costs.

7.3 On the waste management budget, a budget pressure of £81,000, mainly arising from the cost of disposing of abandoned vehicles, has been confirmed. It is being recommended that this higher expenditure be offset by utilising savings already available on the highways and transportation services and planning services. It is considered that the achievement of necessary offsetting reductions within the remaining waste management revenue budget would have unacceptable consequences for this service.

7.4 A recommendation is also being made to carry forward as planned underspendings the remaining savings totalling £642,000 on the highways and transportation services and the planning services, to cover items of expenditure deferred from this year and to help meet other budget pressures which will need to be accommodated in the 2002/03 budget.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

TITLE LOCATION

County Surveyor's Department - Budget Monitoring Reports

(a) Network Management Branch - 12 December 2001

(b) Transportation Branch Management Team - 12 December 2001

(c) Management Resources Branch Meeting - 19 December 2001.

County Planning Departmental Management Team - 4 January 2002

(a) Revised Budget 2001/02 update

Appendix 1

Environment Services

Revised Budget 2001/02

Summary comparing the Revised Budget with the Cash Limit

Annex 1 to Appendix 1

Environment Services

Revised Budget 2001/02

Construction of the Cash Limit for the Revised Budget

The following table shows the progression from the original budget for 2001/02 to the cash limit for the revised budget 2001/02. Both are at estimated outturn prices 2001/02.

Appendix 2

Environment Services

Summary showing detailed allocation of Highways Maintenance budget

Revenue Budget 2001/02

Capital Maintenance Programme 2001/02

Capital Expenditure on Flood Damage Work
to Highways 2001/02 and 2002/03

(Special Programme of Works funded by two year SCA)

Appendix 3

Highways Maintenance Monitoring - 2001/02

Statement of Outputs and Volumes

Revenue Budget funded - All Roads