Contact: Ejner Knudsen, ext 7403

1 Introduction

1.1 At its meeting on 17 December the Cabinet set provisional budget guidelines which would result in an overall budget increase of 5.5% and an estimated council tax rise of 6.1%. The provisional guidelines are at the level of the base budget together with passporting of additional sums for Education and Social Services.

1.2 Other identified central pressures were not allowed for in the provisional guidelines because of a number of uncertainties affecting the budget. The Cabinet will take account of these pressures at their meeting on 11 February 2002 when considering the final budget to be recommended to the County Council. Taking these considerations into account a budget increase of between 6.2% and 6.6% might be the likely outcome. This would result in a council tax rise of between 8% and 9%.

1.3 The Cabinet resolved that when making budget recommendations to the County Council they will include:

· agreement of the base budget

· confirming the passporting of SSA percentage increases to Education and Social Services

· considering executive members' responses to the budget guidelines

· considering the results of budget consultation with partners (headteachers, governors, parent teachers' organisations, the voluntary sector, trades unions); business interests; residents' associations and council tax payers

· considering the outcome from any further public opinion polling and any comments received from other organisations such as Police, Fire and health authorities

· determining spending and council tax decisions within the flexibility available within the provisional projections and subject to the final revenue support grant settlement and the update of budget and council tax figures.

1.4 For this service, the provisional budget guideline is £73.5m.

1.5 This report sets out the Executive member for the Environment's responses to the guidelines. The report:

· reviews the base budget which totals £73.5m

· identifies efficiency improvements which include £0.8m of pressures and costs absorbed in the budget

· reviews the charges made by this service

· recommends to the Cabinet proposed growth of £0.9m to be met from savings brought forward from 2001/02 together with redeployment of resources within the budget guidelines.

1.6 Prior to the Executive member considering the budget, 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.

2 Revised budget

2.1 A separate report on this agenda provides a monitoring update for the Environment Services revenue budget for the 2001/02 financial year. It summarises all of the changes to the cash limit since the revenue budget was originally approved during February of last year and considers the outcome of the most recent monitoring review which has been carried out by budget holders within the County Surveyor's and County Planning departments.

2.2 Proposals are made to offset higher forecast expenditure of £81,000 on the waste management budget for the disposal of abandoned vehicles by utilising savings available within the overall Environment Services revised budget. It also recommends that further savings of £642,000 on the highways and transportation services and on the planning services be carried forward to assist in the preparation of the 2002/03 budget. The planned use of these underspendings is discussed more fully in paragraphs 6 and 7 of this report.

2.3 Detailed figures relating to the revised budget for 2001/02 are shown in Appendix 5 (the green pages).

3 Base budget 2002/03

3.1 A base budget has been prepared which contains the current financial policies of the Council, in order to provide a starting point from which decisions can be made. The 2002/03 base budget for the Environment Services is £73.5 million, including an allocation to cover future inflation during next year.

3.2 Appendix 1 shows the make up of the base budget. Significant issues affecting the individual services are discussed below.

Highways and Transportation Services

3.3 The recommended 2002/03 base budget for the highways and transportation services totals £39.601 million, which is equal to the control total for these services. The following paragraphs highlight the main features of the base budget for each of the major budget headings. A number of budget pressures, which cannot be included within the definition of the base budget, are considered in paragraph 6.

Highways maintenance

3.4 The 2002/03 base budget includes provision of £18.703 million for revenue budget funded highways maintenance, which is an increase of £694,000 compared to the 2001/02 budget. It includes a sum of £453,000 to cover future inflation during 2002/03. Other variations include an additional sum of £42,000 arising from the growth in road lengths following the adoption of new highways and an increase of £184,000 for the revenue effect of new capital schemes although, of this latter sum, expenditure of £78,000 relating to the maintenance of anti-skid and coloured surfaces has been transferred to the capital maintenance programme.

3.5 The revenue budget also includes increased funding of £93,000 for winter maintenance salting and snow clearance, met by adjusting the capital programme provision for structural maintenance. This adjustment is in line with the special budgeting arrangements that apply to winter maintenance whereby the base budget provision is set at a level equivalent to the average level of expenditure on this activity during the past four years, with a corresponding variation to offset any increase or reduction in winter maintenance provision being made to the structural special maintenance budget.

3.6 It is intended that a further report be prepared for the Executive member's meeting in March on the subject of the 2002/03 highways maintenance programme, which will consider spending priorities for the forthcoming year. This report will also review the detailed allocation of the revenue highways maintenance budget covering the routine maintenance activities, together with the capital maintenance programme which covers structural maintenance works on roads and bridges.

Public Transport Support

3.7 A base budget of £4.595 million has been set for public transport support which is in line with the control total for this heading. The 2002/03 base budget includes additional income of £95,000, being the contribution from Basingstoke and Deane Borough Council towards the cost of subsidised bus services in their area, agreed during the current financial year.

3.8 The base budget provision for expenditure to be funded from Rural Bus Subsidy Grant is £1.307 million based on the indicative allocation for 2002/03 announced by the Government during February 2001. This is a further increase of £165,000 on top of the increase of £248,000 made in 2001/02. In accordance with the revised rules governing the use of the grant, which now allow local authorities to redirect up to 20% of their overall grant to support existing bus subsidy contracts which serve rural locations, it is intended that £262,000 of the grant be used in this way during 2002/03.

3.9 The cost of supporting subsidised bus services has risen during the past year by £757,000, over and above the 2001/02 inflation provision of £101,000, representing a further 18.2% increase in costs. Despite the increases in funding for subsidised bus services mentioned in the above two paragraphs, it has still not been possible to fully accommodate the higher costs of supporting existing contractual commitments which currently exceed the base budget provision for bus subsidies by £400,000. It is expected that future contract re-tendering exercises to be carried out during 2002/03 (eg in the New Forest contract area) will further add to the pressures on this budget. Proposals to address the current funding shortfall are discussed in paragraph 6.

Management and Support Services

3.10 This budget mainly covers the running cost of the County Surveyor's department together with payments to district councils to cover their administration costs under the highways agency arrangements. The 2002/03 base budget is £14.471 million.

3.11 The 2001/02 budget for management and support services included additional provision of £300,000 for information technology, for systems development and the implementation of the IT2000 strategy. In 2001/02, this additional expenditure was met by carrying forward an equivalent sum from the 2000/01 budget which was originally earmarked for the construction of a salt storage facility at the Totton depot but which was not, in the event, required for this purpose. The 2002/03 base budget for management and support services is therefore £300,000 lower than the 2001/02 budget, reflecting the non-recurring nature of this item.

3.12 Other changes in the make-up of the management and support services base budget include funding within the salaries budget for an additional 31 employees compared to the original budget for 2001/02. This increase includes a number of additional posts which are required to assist in the implementation of the local transport capital programme, which will be fully offset by additional fee recharges to capital, together with other posts to be funded externally by the Government or covered by reimbursements under service level agreements with other County Council departments. The overall increase of 31 posts also assumes that 11 vacant posts within the Engineering Consultancy are to be filled by permanent staff, which would reduce the department's reliance on external consultants and agency staff. However, this may be difficult to achieve in the current staff recruitment climate. Again, the cost of these additional posts will be fully covered by income from scheme design and supervision fees.

South Hampshire Rapid Transit Phase 1 (SHRT1)

3.13 The 2001/02 revenue budget originally included a sum of £412,000 for the employment of consultants and other support to make progress with this project during the current financial year. However, when the County Council budget was approved in March it was agreed that, in anticipation of the Transport Works Order and funding approval for SHRT, preparation costs could be charged to the capital programme and funded from supplementary credit approval (SCA). The decision to capitalise SHRT 1 preparation costs, released the revenue budget provision of £412,000 for SHRT 1, which the former Policy and Resources Committee agreed could be used to meet other budget pressures. They agreed that:

· £200,000 be added to the public transport budget, to help meet above inflation increases in the cost of bus contracts following service re-tendering and to provide match funding towards rural bus partnerships.

· £50,000 be added to the planning services to enhance the capital programme for Country Towns Initiatives.

· The balance of £162,000, which was available in 2001/02 only, be used to meet other transportation pressures.

3.14 The 2002/03 base budget continues to reflect the continuing sum of £250,000 which is available to meet pressures on the 2002/03 budget. It is proposed that the sum be used in 2002/03 to meet some of the proposals for additional expenditure set out in paragraphs 6 and 7 and summarised in Appendix 4.

Wider SHRT

3.15 The 2002/03 base budget also assumes that the cost of the in-house project support for SHRT 1, which was formerly funded within the management and support services revenue budget, will also be met from capital, enabling this funding of £230,000 to be re-allocated to provide support for the development of future phases of SHRT or other integrated transport projects.

Planning Services

3.16 The 2002/03 base budget for the planning services is £4.219 million. Details of variations from the current year's budget are shown in Annex 3 to Appendix 1, including planned savings of £32,000 which will need to be achieved to absorb the cost of staff salary increments and higher inflation costs during 2001/02.

3.17 The 2002/03 base budget reflects the removal of a number of one-off items, totalling £252,000, included in the current years budget, mainly planned underspendings carried forward from 2000/01. However, against this, a sum of £73,000 has been added to the budget to fund the statutory elements of the proposed County Structure Plan review and the Minerals and Waste Local Plan work programmes.

Waste Management

3.18 A base budget of £29.671 million has been set for the waste management service for 2002/03. In considering the key elements of the base budget, it is possible to divide this service into two distinct elements:

· the waste contract related budgets, comprising the main waste disposal contract together with related budgets covering trade waste income and recycling credits. The base budget for this element totals £27.700 million, equivalent to 93% of the waste management budget

· the other waste management budgets, including facility maintenance, administration, promotions and developments, abandoned vehicles and household waste recycling centres (HWRC) management costs. This area accounts for £1.971 million, or 7% of the budget.

Waste Contract Related Budgets

3.19 The contract and related budgets are principally demand led and are subject to long term contractual obligations, thus providing very little scope within the overall management of the contract to vary expenditure.

3.20 The base budget for the waste contract has been prepared in accordance with the guidelines set by the Cabinet and therefore accords with the control total for this element of the budget. This allows for the cost of current commitments including known and estimated tonnages for the current year at January 2001 prices. The contract is re-priced on the 1 January each year in line with changes in the Retail Prices Index (RPI).

3.21 No allowance has been made in the base budget for any future growth in volumes beyond 2001/02 levels, future price increases, the forthcoming additional £1 per tonne increase in the rate of landfill tax, or other future cost pressures such as the planned introduction of energy recovery incineration in the north of the county from January 2003. These additional costs are provided for within the specific central contingency sum held by the Cabinet, as set out in paragraph 8.

Other Waste Management Budgets

3.22 Budgets for the other waste management services, totalling £1.971 million, have been mainly set in accordance with the sums provided within the base budget control total. However, the exception is the budget for the disposal of abandoned vehicles, where expenditure during 2002/03 is currently estimated to exceed the control total by £128,000.

3.23 A separate report on this agenda, dealing with the budget monitoring position for the 2001/02 financial year, refers to the pressures impacting upon the budget for the disposal of abandoned vehicles. It also highlights the outcomes of a recent audit investigation reviewing the operation of the existing district council agency arrangements for the provision of this service.

3.24 In summary, the audit has concluded that the agency arrangements are being applied inconsistently, and that certain costs are being incorrectly claimed against the County Council. Given that the management response to the audit has yet to be formulated, it is not currently possible to be certain by how much the level of expenditure on this service might decrease.

3.25 Although it seems clear that certain district council estimates might be reduced, it is equally possible that trends showing increasing numbers of vehicles being abandoned, and the re-classification of abandoned cars as hazardous waste from April 2002, could mean that any lower costs are offset by these other factors.

Natural Resource Management

3.26 The Natural Resource Management initiative was considered by the Cabinet during October. If external resources become available enabling this project to commence during 2002/03, some additional internal support would be required which would be met from within existing staff resources.

Other Services

3.27 The 2002/03 base budget for the Environment Services contains a sum of £23,000 to enable the County Council to carry out its responsibilities under the Reservoirs Act, 1975.

4 Efficiency improvements

4.1 The Cabinet has requested that services identify efficiency improvements achieved in absorbing costs within the budget guidelines. It is suggested that the efficiency improvements be categorised as follows:

· Cost increases absorbed

· Same outcome but at a lower cost.

4.2 Details of efficiency savings, totalling £776,000 are set out in Appendix 2. Although no cash backed efficiency savings have been identified, the 2002/03 budget does reflect a number of cost increases which are being absorbed, including excess inflation, increments and other cost pressures offset in preparing the budget.

Government Grants

4.3 As mentioned above in paragraph 3.8, dealing with the construction of the base budget, the Government has already announced indicative allocations of Rural Bus Subsidy Grant for 2002/03. The allocation for Hampshire County Council is £1.307 million which is an increase of £165,000 (14.4%) over the grant to be paid in 2001/02. This sum has been added to the Environment Services' revenue budget cash limit.

5 Review of Charges

5.1 The revenue budget for the Environment Services includes income of £5.4 million. Details of the main sources of income, including charges and review arrangements are set out in Appendix 3. Most charges to users of the Environment Services are designed to ensure full recovery of cost including an appropriate contribution towards departmental overheads. As levels of charges are reviewed regularly in accordance with financial regulations, or rise automatically in line with increases in cost, no further increases are recommended at the present time.

5.2 Charges for the two main waste management sources of income, being disposal site rentals and trade waste, are increased from the beginning of January each year in accordance with price increases applied to the long term contract. This is based on a formula contained within the contract which effectively provides for an increase based on the change in the RPI to the previous October. The charge for trade waste is currently subject to a further flat rate increase in April, to reflect increases in the cost of disposal arising from variations in the rate of landfill tax.

6 Service pressures - Highways and Transportation Services (comments of the County Surveyor)

Deferred Items of Expenditure from 2001/02

6.1 The separate report on this agenda, discussing the budget monitoring position for the currrent financial year, identifies two areas where additional expenditure will be required in 2002/03 as a result of planned expenditure being deferred from 2001/02:

· An additional sum of £80,000 will be required on the highways maintenance revenue budget for expenditure on the acquisition and development of a new computer system to help manage the new term maintenance contract.

· On the management and support services budget, a sum of £80,000 needs to be allocated for expenditure in connection with the provision of additional office accommodation space, to help relieve the pressure on the offices in Ashburton Court.

6.2 The revenue budget monitoring report recommends that approval be sought to carry forward the above underspendings, as earmarked sums, to meet these items of deferred expenditure in 2002/03.

Public Transport

6.3 Revenue support for public transport, and particularly the provision of contracted bus services, continues to be an area of pressure. Recent re-tendering exercises have led to further increases in costs, driven in part by the shortage of bus drivers. The collapse of the Tillingbourne Bus Company has also had a major impact in 2001/02. This trend seems set to continue and the County Council will be faced with some hard decisions if it is to get this area on to a firm footing for 2002/03 and beyond. Even without any further cost pressures which may arise during the next financial year, the 2002/03 base budget is already short, by some £400,000, of the sum which is required if all existing bus subsidy commitments are to be supported.

6.4 The Best Value Review for Passenger Transport was completed and audited this year. Overall the inspection highlighted that it was a good service which was likely to improve. As part of the process, a major action plan was produced which needs to be progressed this year. This would include a strategic review and needs assessment of the subsidised bus network, taking into account the impact of recent public transport initiatives on existing services. In part, this review should help to address the funding issue identified above, although the allocation of existing resources would need to be reprioritised as part of this process, including a reduction in some services where necessary. However, discussions are also taking place with district councils to establish local strategic partnerships, which would include possible funding contributions towards local bus services.

6.5 As in previous years, there are strong aspirations to make progress with community transport projects as well as being in a position to take advantage of the various "Challenge" bid opportunities presented by the Government. It is proposed to allocate an additional £100,000 for this purpose in 2002/03.

6.6 It is suggested that the provision of assistance to public transport remains a very high priority area for the County Council and that opportunities should be taken to implement new types of services which would provide innovative solutions in meeting the needs of the travelling public.

Local Transport Plan issues

6.7 The Local Transport Plan (LTP) submitted to the Government in July 2000 resulted in a significant increase in capital expenditure for the County Council for 2001/02 and beyond. The plan also received much praise, with the County Council awarded "Centre of Excellence" status by the Government.

6.8 The need for additional resources to help deliver this increased programme was recognised and provision was made in the 2001/02 budget for a number of additional staff in the Transport Policy, Implementation, Road Safety and Traffic Management sections. In addition, the County Council has also entered into a partnership arrangement with consultants W S Atkins in order to help meet this need. This partnership commenced during April 2001 and benefits are already starting to be realised. Nevertheless, the scale of the task ahead in delivering the increased programme, will mean the need for more effective ways of engaging with the public to gain agreement on the schemes to be implemented, as well as innovative forms of design and procurement.

6.9 The increased resources necessary to design and procure schemes is being funded, in the main, from capitalised fees. However not all work can be capitalised and there will be a need for more feasibility work and other studies in order to maintain progress with the development of the Area Transportation Strategies, putting together bids for funding from the Government, and ensuring that the County Council's strategic policies set out in the LTP and the Structure Plan are properly incorporated into the local plan framework. In addition, the pursuit of the County Council's objections to the development at Dibden Bay will incur costs in securing transport advice and preparing evidence.

6.10 The implementation of the existing Structure Plan and its review are crucial to the sustainable development agenda and the need for transport to be properly integrated. There is also a need to ensure properly resourced input into the Regional agenda, covering the Regional Transport Strategy and Multi Modal Studies in particular. Furthermore, there is a growing demand to provide advice and support to schools and businesses for the production of travel plans designed to minimise the use of the private car and to maximise the use of public transport, walking and cycling.

6.11 A consequence of the sharp rise in investment in transport in the UK is the shortage of skilled staff. The County Council is having increasing difficulty in recruiting and retaining experienced qualified civil engineers and other transport professionals. This is leading to significantly increased costs in some areas and there is a likelihood of contractors' prices also hardening as a result of increased demand.

6.12 As in previous years, it will be necessary to accommodate much of the additional workload associated with the above transport policy and related pressures, by reviewing the allocation of staff resources and by seeking efficiencies wherever possible.

Management and Support Services

6.13 The departmental budget for information technology remains under pressure because of the increasing need for investment in systems development to meet external requirements, particularly in the network management field, and in enabling the County Council to "work smarter". Irrespective of new developments, the cost of standing still with the implementation of IT2000 has been significant and further pressures associated with `e-government' requirements are also foreseen.

Highway Network Management and Maintenance

6.14 This area of work has received considerable attention over the last year, with changes in funding regimes and progress on how the service will be delivered in the future.

6.15 The revenue budget now covers the management and routine maintenance of the network, with all structural maintenance now being met from the capital maintenance programme, which is supported through the LTP process and from local County Council resources. Overall funding of highways maintenance declined from 1994/95 until 1998/99, but significant increases from 1999/00 onwards have arrested that decline. Initial indications are that the effects of this increased investment are now being seen from the relevant key performance indicators for pavement condition.

6.16 Nevertheless, the continuing negative effects on the condition of the highway resulting from the budget reductions during the 1994/95 to 1998/99 period, have still to be recovered from future years' budgets. Progress towards this objective has been exacerbated by the serious flooding problems over the last winter. Although Hampshire received a very significant level of funding of £5.051 million from the Government to deal with the effects of the flooding, a similar level of residual cost will need to be accommodated within the current year's and next year's budgets.

6.17 It is important to remember that the overall highways maintenance operation is more than just about structural repairs to the highway surface. It is also about street lights and traffic control systems, signs and white lines, grass cutting, dealing with emergencies and traffic management. Further, it is increasingly important to invest in the systems to manage the network and the tools to make effective use of the resources, thus meeting Government requirements and good practice standards. As in 2001/02, it will be necessary to allocate funding from within the 2002/03 highways maintenance budget for systems development, including those to manage the term maintenance contracts, pavement management, public utilities and to provide a seamless public interface.

6.18 Following agreement by the former Policy and Resources Committee, work is now underway to implement the Highways Network Best Value Review Blueprint for the future. This will enable the County Council to form new partnership arrangements with district councils to provide a more seamless service to the public and gain the benefits of strategic integration and procurement. This is likely to result in increased costs in the short term, of the order of £250,000 during 2002/03. However, in the longer term, it is planned that any additional costs would be more than offset by efficiencies in service delivery and partnering, together with economies of scale arising from the new county-wide term contract for highways maintenance works.

South Hampshire Rapid Transit (SHRT)

6.19 SHRT is the cornerstone of the transport strategy in southern Hampshire and is key to the County Structure Plan. After many years of work, SHRT Phase 1 covering the proposed Fareham - Gosport - Portsmouth light rapid transit (LRT) system, was finally given the go-ahead by the Government, covering the Transport and Works Act Order and the necessary funding. The funding arrangements are likely to involve a hybrid of private sector, central government, local authority as promoter funding and Private Finance Initiative (PFI). Work is now well underway to secure a concessionaire to take the scheme forward and to manage the construction process.

6.20 The SHRT Phase 1 project needs to be driven by a clear output specification with the intention of optimising the transfer of risk to the private sector. Nevertheless, the work carried out so far by the advisers to the project have highlighted that considerably more work needs to be carried out by the promoters if this risk transfer is to be optimised. The promoters are now committed to significant development costs in order to ensure the proper securing of a concessionaire, although these costs are taken into account in the overall financing of the project. As in 2001/02, it is intended that SHRT 1 development costs in 2002/03 will continue to be capitalised. In the recent local transport capital settlement for 2002/03, notification was received that the Government are making a sum of £750,000 as SCA available to the County Council to help meet SHRT 1 preparation costs next year.

6.21 It is fundamental to transport and land use policy in South Hampshire that wider SHRT is delivered. This will be very different in nature to SHRT 1 and will involve a wider range of stakeholders. Recent discussions with both Southampton and Portsmouth City Councils have proved encouraging and there is clearly a desire to see how the three strategic authorities can best work together to promote a coherent transport strategy for South Hampshire. Provision is being made within the 2002/03 budget to provide dedicated resources for future phases of SHRT as discussed in paragraph 3.15 above.

School Crossing Patrol Service

6.22 The Best Value review of the School Crossing Patrols service reported in year 2000 and its findings were considered by the then Education and Planning and Transportation Committees. The existing service was found to be deficient in a number of respects, including lack of management, supervision and proper training. The review recommended that this service be transferred to the then Planning and Transportation Committee, to be managed by the County Surveyor (in the current context, this means a transfer to the Executive Member for the Environment).

6.23 Since the end of year 2000, much work has been carried out on risk assessments of existing school crossing patrol sites and in working up an operational plan for service transfer and improvement. It is currently proposed that this service moves across to the Executive Member for the Environment at the start of 2002/03 and budgets and operational staff be also transferred at that time.

6.24 The budget provision for school crossing patrols is at present £839,000, which covers direct service costs and overheads. In addition the Education budget provides for personnel support, dealing with immediate employment issues, including wages, the cost of which would also need to be transferred. However there is currently no allowance within the budget to cover the cost of implementing many of the recommendations of the Best Value review including improvements in management and supervision, training, clothing and equipment, and vacancy reductions in existing crossing patrol sites. Further cost pressures may also arise in due course through the development of school travel plans and safer routes to school initiatives, where it seems likely that there may well be requests from schools, governing bodies and community representatives for new additional crossing patrol sites where none exist at present.

6.25 It is understood that the school crossing patrol budget is consistently underspent by some £80,000 annually, due to the high level of vacancies for patrol staff. This underspending could be allocated to partially offset the cost of the Best Value service improvements outlined above. Also, in the longer term, it may well be possible to find savings by rationalising the service, leading to a reduction in the number of patrols through applying the site justification criteria more critically and, in some case, by substituting patrols with more appropriate highways infrastructure improvements, such as signal controlled crossings or traffic calming measures.

6.26 However, the service deficiencies identified in the Best Value review cannot be remedied in the short term without additional budget provision. In the absence of any additional funding, at least in the 2002/03 and 2003/04 financial years, implementation of the review findings could only be achieved by finding short term savings through immediate service reductions and rationalisation, which may prove contentious and difficult for the County Council to deliver.

Redeployment of Resources

6.27 As mentioned above in paragraph 6.1 and 6.2, approval is sought to the carry forward of earmarked sums totalling £160,000 for deferred items of expenditure from 2001/02 ie the term maintenance contract IT system and for office accommodation.

6.28 The above paragraphs also outline a number of additional pressures which will fall on the highways and transportation services budget next year. Provision of £250,000 needs to be made for the implementation of the highways agency blueprint and £100,000 is required for community transport initiatives. It is proposed that additional resources be allocated for these purposes from the underspendings to be brought forward from 2002/02 together with the redeployment of funds within the overall budget limit.

6.29 It is proposed that the projected additional expenditure on public transport bus subsidies, that cannot be contained within the 2002/03 base budget, be offset by reviewing and re-prioritising the allocation of financial resources to services within the subsidised network.

7 Service Pressures - Planning Services (comments of the County Planning Officer)

7.1 This section of the report highlights a number of pressures facing the planning services in 2002/03 and discusses ways in which they may be accommodated in the budget.

Dibden Bay

7.2 It is generally acknowledged that the Dibden Bay project is one of the most significant development proposals in Hampshire for many years. The final decision on the proposal will be taken by the Secretary of State following a Public Inquiry, which commenced at the end of November and could take up to a year to complete. Significant costs will therefore impact on the management of next year's budget. However, given the uncertainties relating to the length if the inquiry and the required attendance and preparation work of the external consultants, it is difficult, at this stage, to precisely predict what the actual cost will be.

County Structure Plan and Minerals and Waste Local Plan

7.3 Programmes for the review of the County Structure Plan, which was recently endorsed by the Cabinet, and the Minerals and Waste Local Plan (MWLP), point to a resource requirement of £151,000 in 2002/03. After allowing for sums already included in the base budget and taking into account deferred expenditure to be carried forward from 2001/02, a shortfall of £66,000 still exists. Resources will need to be re-deployed for this purpose within the planning services budget if the respective programmes are to be completed as planned.

Local Public Service Agreement

7.4 As part of the County Council's recent Public Service Agreement (PSA) submission, the County Planning department included a landscape project aimed at engaging young people to make decisions about their environment. The Government has indicated interest in the project and discussions about targets are continuing. Even after allowing for central grant support, there could still be a funding shortfall of up to £90,000 over the three year duration of the project. Clearly, if this element of the PSA bid is approved, then resources will need to be re-deployed during 2002/03 to enable the project to proceed as planned.

LIFE 3

7.5 Having successfully completed the four year LIFE 2 programme during the current year, a £4 million LIFE 3 project bid, focussing on sustainable wetland restoration in the New Forest, was submitted to the European Union in October 2001. If the bid is successful, up to £2 million of EU financial support will be attracted.

7.6 The estimate for unfunded project management costs across the life of the project is in the order of £60,000. This pressure will fall directly onto the planning services revenue budget. The likely impact during 2002/03 approximates to £12,000 given that the project is unlikely to commence before the second quarter of the financial year.

Land Management

7.7 Following the introduction of the Countryside and Rights of Way Act, there is a new obligation on local authorities with Areas of Outstanding Natural Beauty (AONB) in their administrative areas to produce, over the next three years, Management Plans for these areas. At a recent meeting of the Cabinet, it was decided that Management Plans should be prepared for the whole of the County, rather than just the protected areas.

7.8 The work to produce these plans will involve extensive dialogue with a range of bodies, including landowners across the county. Despite Countryside Agency financial support, to help progress work relating to the development of a Land Management Information System, and earmarked internal resources in respect of the South Downs AONB, additional resources will be required next year to progress work associated with the North Wessex Downs and Cranbourne Chase. In addition, funding will also be required for the Test and Itchen Land Care project.

Water Project

7.9 The second phase of the county-wide water strategy commenced during 2001/02 and is set to continue into next year. Despite receiving external contributions towards the development of the strategy, it is highly likely that a further County Council contribution will be required in order to progress the project as planned.

Other projects and budgets

7.10 In addition to the above, the County Planning Department is involved in two possible bids to project manage two inter-reg funded projects (European funding where multi-European partners work in partnership). One relates to climate change and its land use implications and the other relates to assessing the benefits of environmental programmes.

7.11 Furthermore, in preparing the base budget for next year, a number of headings appear to be under pressure. For example, the staffing budget at full establishment would be £30,000 greater than the provision in the base budget. In addition, the budgets for legal expenses and consultants are lower next year than previous levels and there is also pressure on the training budget, mainly because of the Investors in People (IiP) process. Accommodating these pressures and the costs of the projects referred to above may require some difficult choices to be made next year.

Deferred projects

7.12 As mentioned in the 2001/02 revenue budget monitoring report elsewhere on this agenda, it is necessary to make provision in the 2002/03 budget for deferred expenditure of £49,000 on projects, where there have been delays in the current year. It is being recommended that the corresponding underspendings in the 2001/02 budget be carried forward and earmarked to cover this additional expenditure in the new year.

Proposed Re-deployment of Resources

7.13 The above paragraphs outline a number of pressures which are likely to arise next year from the Dibden Bay development proposal, the County Structure Plan review, the Minerals and Waste Local Plan, the local Public Service Agreement, LIFE 3, Land Management, the Water Project and other planning services initiatives. Although it is not possible to accurately estimate the cost of all of these developments at the present time, it is anticipated that additional expenditure of the order of £200,000 would be required during 2002/03, beyond the current base budget level.

7.14 The budget proposals for 2002/03 also include sums of £33,000 for an additional member of staff to support the management of Hampshire's woodlands (subject to the approval of this post in the department's workforce plan) and a further £100,000 contribution towards the capital programme provision for Hampshire Country Towns Initiatives, to increase the programme level to £150,000 in total.

8 Service Pressures - Waste Management (comments of the County Surveyor)

Waste Contract Related Budgets

8.1 As mentioned above, next year's base budget provision for the waste contract and related budgets reflects the cost of existing commitments, but excludes further cost changes that are likely to arise during 2002/03. These include any variations in waste volumes, future price increases, the forthcoming increase of £1 per tonne in the level of Landfill Tax, and the planned introduction of energy recovery incineration in the north of the county from January 2003. As in previous years, a central contingency sum will be established within the County Council's budget to meet these costs, with quarterly allocations being made to the waste management budget based on actual costs incurred.

8.2 The provision within the central contingency to cover anticipated cost variations during 2002/03 on the waste contract and related budgets has been set at £2.9 million. Some £1.6 million (57%) of this sum is intended to cover the re-pricing of the contract, higher landfill tax costs and estimated growth in waste volumes. A further £0.7 million has been included in respect of the planned introduction of energy recovery incineration in North Hampshire from the beginning of 2003. The remaining contingency provision would be available to cover contract claims, especially in respect of excess composting, and other pressures such as reductions in trade waste income and higher recycling credit payments.

Fridges

8.3 There is no provision within the contingency for the storage and safe disposal of fridges. Government support has been limited to the final quarter of the current year only whilst options for continuing funding from the beginning of 2002/03 are evaluated. Among the issues impacting upon the evaluation is the need to better understand how many fridges local authorities might ultimately be responsible for. Final numbers will clearly be influenced by the extent to which commercial take back schemes are affected. Early indications suggest that most take back schemes have already ceased.

8.4 In view of the general uncertainty, the County Council has little option but to store fridges in the short term pending decisions on future funding arrangements and the general availability of disposal routes. Given the number of fridges already entering the waste system, some 1,500 were received in the first week of the year, storage in itself will not be a cheap or easy option.

Other Waste Management Budgets

8.5 As mention in paragraph 3.22 above, it is currently estimated that expenditure on the disposal of abandoned vehicles will exceed the base budget provision by £128,000. However this estimate is still uncertain at the present time pending the management response to the recent audit of district councils' claims, which may result in savings. It is therefore suggested that the level of additional provision for the disposal of abandoned vehicles, together with the identification of offsetting savings be considered later in the year, once the position has become clearer.

9 Other Expenditure

9.1 The budget includes some items which are not counted against the cash limit. These include budgets for central departments' support services, except where they have been given to departments to buy services, and repair and maintenance of buildings. These have been excluded at this stage as Policy and Resources control them and they have not yet been agreed. In the original budget they totalled £2.0 million.

9.2 Also included, at present, within the Environment Services cash limited budget are costs of member support and other unapportionable overheads which are rechargeable to the Policy and Resources budget for corporate and democratic core services. This adjustment will also be made at a later stage in the budget process.

9.3 In addition, the 2002/03 budget also includes expenditure of £4,987,000 relating to the County Council's responsibilities for Flood Protection levies. These charges, which are made by three divisions of the Environment Agency, are also outside of the cash limit.

10 Capital Charges

10.1 Capital charges for 2002/03 for the use of assets amount to £17.9 million, an increase of £0.3 million. The increase cover charges for new assets and any revaluations of existing assets.

10.2 Capital charges are made to services in order to show the full cost of providing services. They impact on the charges set by services and trading units, but they do not affect the County Council's total gross expenditure as they are reversed in Policy and Resources services asset management budget and accounts.

11 Staffing Statistics

11.1 The average number of staff in the proposed 2002/03 budget is 586 FTEs (full time equivalents), which compares with 559 FTEs in the 2001/02 original budget. The figures reflect the estimated average number of posts within the approved staffing establishments of the County Surveyors and County Planning departments which will be filled during the year and for which funding has been included in the budget.

11.2 The overall increase of 27 FTEs reflect a number of variations in establishment which have been approved during the year. In the County Surveyor's department there is an increase of 31 FTEs to cost of which will be mainly covered by external reimbursements and capitalised fees, as explained in paragraph 3.12 above. This increase is partially offset by a reduction of 4 FTEs in budgeted posts within the County Planning department, reflecting reductions in posts being funded by external contributions, the additional woodlands management post and a number of other minor variations in the staffing establishment.

12 Business units

12.1 Appendix 6 shows the summarised trading account of the River Hamble.

13 Best Value Accounting Code of Practice (BVACOP)

13.1 Appendix 5 of this report (the green pages) have been prepared in accordance with the service expenditure analysis required by the BVACOP. This presentation varies from the headings which are used to present the budget in the rest of this report. This mainly affects the highways and transportation services where the total revenue budget for highways maintenance is split over three headings to differentiate between structural, routine and traffic management related expenditure. In addition, the budget for management and support services, which is retained as a separate heading during budget preparation to enable this expenditure to be identified separately from operational expenditure, is subsequently fully re-allocated over other highways and transportation divisions of service.

13.2 On the planning services the total cash limited budget is initially shown against the management and support services heading and is then re-allocated over the service analysis headings prescribed by the BVACOP. Similarly, on the waste management service, a separate analysis is included within the detailed budget pages, to meet the requirements of the BVACOP.

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 FILE

Cabinet Meeting - 17 December 2001 2002/03 Budget

Appendix 1

Environment Services

Revenue Budget 2002/03

Construction of the Base Budget 2002/03 - Summary of Cash Limited Expenditure

The following table shows the progression from the original budget for 2001/02 which was prepared at outturn prices 2001/02 to the base budget 2002/03 at outturn prices 2002/03.

Annex 1 to Appendix 1

Environment Services

Calculation of Base Budget 2002/03

Parameters used in the compilation

Annex 2 to Appendix 1

Environment Services

Calculation of Base Budget 2002/03

Significant costs of inflation

Annex 3 to Appendix 1

Environment Services

Calculation of Base Budget 2002/03

Significant variations

Major variations between the repriced budget 2001/02 and the base budget for 2002/03 at November 2001 prices contributing towards the increase of £419,000 (0.6%) are set out below:

Annex 4 to Appendix 1

Environment Services

Base Budget 2002/03

Analysis of variations

Appendix 2

Environment Services

Revenue Budget 2002/03

Proposals for efficiency improvements

Appendix 3

Environment Services

Revenue Budget 2002/03

Review of income

Appendix 4

Environment Services

Revenue Budget 2002/03

Proposals for new growth

Appendix 5

Environment Services

Revenue Budget

Reconciliation of the original 2001/02 budget on the following pages with the 2001/02 budget in the budget book.

Appendix 6

Environment Services

Base Budget 2002/03

Business Units - Summarised Trading Accounts

Note

The River Hamble's reserves include an anticipated receipt of £100,000 as a first instalment from the sale of the piles to the Crown Estate.