Contact: Jon Pittam, ext 7400

1. Summary

1.1 The following decisions are sought:

· to note latest budget monitoring position, but no immediate action is necessary

· to receive the report back on the implications of potential grant losses of up to £80m, but no further action is required at this stage pending the provisional formula grant settlement in December

· to consider the latest update on the budget outlook for 2003/04

· That a further report on the provisional formula grant settlement and budget guidelines be considered by Cabinet on 23 December.

2. Reason

2.1 The Cabinet needs to

· regularly review budgets during the current financial year

· prepare for its 2003/04 budget in the light of latest developments and projections.

3. Other options considered and rejected

3.1 Not applicable.

4. Conflicts of interest declared by the decision maker or a member or officer consulted

4.1 Not applicable.

5. Dispensation granted by the Standards Committee

5.1 Not applicable.

6. Reason for the matter being dealt with if urgent

6.1 Not applicable.

Approved by: Date:

Councillor T K Thornber

Contact: Jon Pittam, ext 7400

1. Summary

1.1 This report:

· sets out the latest position on budget monitoring for 2002/03

· reports back on the impact on services, if all the potential grant losses were met by service reductions, instead of compensating council tax rises, and on the implications for performance indicators

· provides a further update on the budget outlook for 2003/04 in the light of the latest developments since the last report to the Cabinet on 23 September 2002.

2. Budget monitoring 2002/03

2.1 Budget monitoring reports have been submitted to Environment, Policy and Resources, Recreation and Heritage and Social Services executive members, while a report on the Education service is due to be submitted to the Policy Review Committee on 19 November. Allocations to services from the pay and recruitment contingency provision and to Social Services for social care market pressures were agreed by the Leader at the last Policy and Resources executive decision day.

Education

2.2 The Education budget contained a general contingency (£380,000) together with a specific contingency (£450,000) for home to school transport costs. No calls on either contingency have been identified so far. An underspending of £150,000 on the youth service is anticipated as a result of the recruitment of youth workers by the new Connexions service and delays in filling the resulting vacancies. Further savings on schools' centrally held budgets, home to school transport and standards fund, offset by inclusion costs, result in a forecast underspending of £680,000 in addition to the uncommitted contingencies.

Environment

2.3 The main pressures affecting the Environment budget relate to public transport support and waste management services. When the budget was approved by the County Council in February, allowance was made in setting the level of balances for a possible requirement to find additional resources for public transport support during the course of the year to underwrite higher tender prices and additional costs arising from service deregistration. The projected overspending in 2002/03 is estimated at £300,000, subject to further unplanned changes in the commercial network between now and the year end.

2.4 Costs of disposing of abandoned vehicles have risen substantially in the last few years as lower scrap metal prices have increased the incentive to vehicle owners to abandon vehicles which are no longer roadworthy. Despite a recent upturn in scrap metal prices, spending on the disposal of abandoned vehicles is expected to be approximately £120,000 in excess of the budget, at a similar level to 2001/02.

2.5 Though the Government indicated during the summer that an additional grant of £40m would be allocated to local authorities to cover extra costs associated with the storage and disposal of refrigerators, the basis of distribution has still to be confirmed. However on the assumption that the County Council will receive about £800,000 in extra grant, in addition to the £120,000 already allocated in respect of costs incurred in 2001/02, a shortfall of around £380,000 is forecast, based on anticipated storage and disposal costs of £1.3m. This could also be a potential call against the additional balances set aside in the 2002/03 budget.

2.6 The overall contingency of £3m for costs related to the waste management contract seems likely to be adequate to cover increased costs in 2002/03. Allocations from the contingency in the first half year total only £1.0m, with growth in waste volumes in the first five months of the year being lower than predicted. In addition, the Chineham energy recovery incinerator is now expected to open later in this financial year than originally forecast, which will also delay the impact of higher costs.

2.7 It is suggested that the use of balances to assist these pressures be determined later in the year when the Leader and Cabinet makes the final decision on its recommended 2003/04 budget to Council.

Policy and Resources

2.8 A potential net overspending of about £300,000 on Policy and Resources services is currently predicted as a result of a variety of pressures on the budget. Continued management action will be required during the remainder of the year to contain expenditure within the cash limit.

Recreation and Heritage

2.9 The Recreation and Heritage budget has been reviewed in order to focus resources on the strategic objective of the new department, involving the establishment of a `policy fund' by virement from libraries and countryside budgets. A recovery plan for Milestones museum is being drawn up, but there is likely to be a further deficit in 2002/03, forecast at £156,000, in addition to the 2001/02 deficit of £324,000 which was carried forward to be recovered in 2002/03. It is assumed that the overall deficit will be met within Milestones and the overall Recreation and Heritage cash limit.

Social Services

2.10 Despite an increase in the Social Services budget in 2002/03 in excess of the addition to the County Council's Social Services SSA, service demand pressures continue to increase across all client groups. The budgetary position in 2002/03 has also been exacerbated by the introduction of new guidance on charging for non residential services, which is expected to result in income from non residential charges being £0.7m lower than budgeted. Nonetheless some progress has been achieved with corrective actions to review commitments designed to ensure that a balanced budget is achieved by the year end.

2.11 As a result pressures of £3.6m identified at 31 July have been brought down to £3.1m at 30 September 2002. With continued management action it should be possible to contain spending within the cash limit this year.

2.12 It is understood that there will be no additional winter pressures support from Government this year which could increase pressures on meeting the "bed blocking" targets and build-up a backlog which would be subject to the "fines" mechanism to be introduced in April 2003. The initial prognosis is that a one-off sum of £2m might be necessary to purchase additional care and meet the bed blocking target set for 31 March 2003. Discussions will be held with the health authorities to help deal with this problem and the position may need to be reviewed again in December and January.

Fire

2.13 Hampshire Fire and Rescue Authority's spending in 2002/03 is expected to be contained within the approved budget, before allowing for the effect of the fire pay dispute. The Government has agreed to meet the costs associated with emergency cover provided by the army in the event of strike action, in return for receiving the benefit of any deductions from firefighters pay. However it is not clear whether the Authority will be able to offset other costs incurred directly as a result of the strike against pay deductions.

3. Impact on services of potential grant changes in 2003/04

3.1 When the Cabinet reviewed the implications of the Government's formula grant options on 23 September, a further report was requested on the impact on services and performance indicators if all the potential grant losses were met by service reductions instead of compensating council tax rises.

3.2 The mid case options result in a grant loss of £35m or 3.5% of the budget. The worst case grant loss of £80m is equivalent to a 8% budget cut on the current forecast for 2003/04. The forecast of course does not allow for any new pressures or demands which have to be met by redeployment within the existing base. The exception would be Education and Social Services, based on the current assumption on passporting cash increases above the base budget.

3.3 To achieve savings of this order of magnitude would have a major impact on the County Council's corporate strategy and would inevitably affect all or most front line services. Appendix 1 analyses the 2002/03 budget (net of specific grants) identifying services which have been given high priority in the County Council's budget strategy or where statutory or contractual liabilities limit the scope for achieving service reductions.

3.4 The analysis in Appendix 1 is illustrative rather than exhaustive but covers £754m (82%) of the County Council's budget. The remainder of the budget, which includes some front-line services particularly in Environment, Recreation and Heritage, and Policy and Resources together with support services in Education and Social Services (including assessment and care management), totals £167m. To achieve savings of £80m or £35m across this narrow base would not be feasible without destroying the County Council's ability to support front-line services in Education and Social Services and all or most other front-line services. The only conceivable approach therefore to seeking to make reductions of this magnitude would be to seek to make savings across all major services.

3.5 Table 1 below contains an apportionment of the potential grant losses by:

· "passporting" grant losses attributable to Education, Fire and Social Services to the relevant service

· splitting the grant loss relating to resource equalisation and to a reduction in the capital financing standard spending assessment (SSA) across all services in proportion to current budgets

· apportioning the balance of grant loss by a flat rate percentage across Environment, Policy and Resources, Recreation and Heritage and the locally resourced capital programme:

Table 1 - Impact of grant loss on services
	Mid case	%	Worst case	%
	£m		£m
Education	23.0	4.5	48.5	9.5
Social Services	1.3	0.8	9.0	5.4
Environment	4.4	6.0	8.9	12.1
Fire	1.6	4.0	2.7	6.8
Policy and Resources	2.2	6.0	4.9	12.1
Recreation and Heritage	1.5	6.0	3.1	12.1
Revenue contributions to capital	1.4	6.0	2.8	12.1
	35.4	4.1	79.9	9.3

3.6 The implications of the Government's grant options are clearly set out in Table 1. Over a period of years Environment, Protective and Cultural Services (the EPCS SSA) would be most hard hit. Substantial reductions would then also be made in Education, including schools' budgets. Social Services is the least badly affected, especially at the mid case. Services cannot be cut to this extent.

3.7 The budget forecast on which these savings would be applied includes passported amounts for Education and Social Services, but for all other services the reductions would apply to the current base budget provision.

3.8 The general impact of these reductions would be to lower the standard of services provided or to reduce significantly their accessibility to the Hampshire community. The majority of best value performance indicators could be expected to deteriorate rather than improve and the local public service agreement would cease to have any relevance. The star rating of County Council services under the comprehensive performance assessment regime would also decline.

3.9 The Cabinet has already decided that

· any service pressures or proposals beyond the base budget level would be offset by an equivalent redeployment of resources. These are being reviewed at the service budget briefing meetings between the Leader and Executive members. Demand and other external pressures, as well as political priorities, could require significant savings if these are to be met (or would otherwise fall on the council tax in addition to the projections made in this report)

· contingency plans are being prepared of 1% and 1.5% for efficiency savings, cost reductions and other savings, protecting as far as possible frontline services. These savings have to be achieved after absorbing all new spending above the base budget. The contingency plans will be reported to the Cabinet in December to assist in setting budget guidelines.

3.10 It is likely that reductions to meet new pressures and to provide savings targets for contingency planning, will require decisions on priorities and service levels, as well as efficiency measures. It would be sensible to avoid re-structuring costs and plan any savings over a three year period to maximum effect to match the cash flow of any grant loss which is not offset by an equivalent council tax rise.

Budget outlook 2003/04

4. Timetable for 2003/04

4.1 There has been some slippage in the Government's plans:

· Spending Review 2002 (SR2002) outcome for local government, including details of the level of both revenue and capital "ring-fencing" (specific grants), has been delayed from October into November

· the provisional formula grant settlement for 2003/04 has been delayed from late November into December (possibly 5 or 12 December). Details will be reported to Cabinet at its rearranged meeting on 23 December

· consultation on whether to continue to support capital investment by revenue grant or solely by capital grant, deferred to January 2003 and implementation to 2004/05.

5. Hands off Hampshire

5.1 The media campaign was launched on 11 October 2002, together with a meeting with Hampshire MPs. Representations have been made by Hampshire MPs in the debating time that has been available.

5.2 Hampshire County Council and its MPs, in partnership with Surrey and Kent County Councils and their MPs, is calling a press conference at the House of Commons on 14 November 2002.

5.3 There has been no specific response to the Council's representations on the proposed formula grant changes.

5.4 The Government has however published its response to the Select Committee's report on the draft Local Government Bill. It has decided not to merge revenue support grant and national non-domestic rates into a single formula grant. It has also decided not to include the redistribution of capital receipts, except for housing. The County Council opposed these proposals in its consultation response, so there has been some measure of success. However the Government still appears to wish to proceed with most of the other prescriptive requirements which both the Select Committee and the County Council also opposed.

6. Budget and council tax projections for 2003/04

6.1 There is no new information on the formula grant proposals to add to the September report, except for the analysis of the impact of the grant loss on services (see table 1, paragraph 3.5).

6.2 The budget outlook and spending levels can be summarised as follows, based on the figures reported in September:

Table 2 -2003/04 budget at different levels of spending
	£m	% increase
Base budget	966.9	5.0
Council tax increase at base budget level		2.5
Base budget, plus passporting (Education/Social Services)	986.1	7.1
Council tax increase at this level		8.0
National SSA increase		7.0
Council tax increase nationally		6.2

6.3 The base budget increase of 5% is the cost of rolling forward the 2002/03 budget. As this increase is lower than the increase proposed nationally of 7%, the council tax rise would be relatively low at 2.5%, if the County Council chose to spend at this level before passporting `growth' to Education and Social Services.

6.4 If an estimate is made of the effect of passporting the national cash increase for Education and Social Services, the budget would increase by 7.1%, very much in line with the national SSA increase of 7%.

6.5 As previously explained, this would be a similar position to the 2002/03 budget, but this is before the impact of formula grant changes.

6.6 Cabinet will recall that after the formula grant proposals, taking the mid and worst cases, a council tax rise of 15% for 2003/04 was likely under either option as shown below:

Table 3 - projected council tax 2003/04
	Mid case £m	Worst case £m
Budget	986.1	986.1
Precept falling on council taxpayer	413.8	461.5
Increase in council tax	18.8%	32.6%
Increase in council tax after floor	15.0%	15.0%
	£2 per week	£2 per week

7. Floors

7.1 These projections assume a floor of 2.5% - so that Government grant increases in line with its (understated) inflation assumption based on the gross domestic product (GDP) deflator. This is about half of the increase necessary, before passporting.

7.2 A possible grant loss of £35m (mid case) to £80m (worst case) has been projected from the Government's exemplifications of its options. £80m is 9% of the Council's budget, 14% of its current Government grant support and equivalent to 23% on the council tax. It will not all be lost in one year because of the floor to dampen the grant loss over a number of years. Council tax rises of over 10% over the following three to four years are very likely just to stand still by uplifting each year's budget for inflation only and to make good the potential grant losses.

7.3 The Government has indicated that such projections are scare mongering and that no Council will lose Government grant compared with 2002/03. That however does not provide for the increased costs of service provision in 2003/04 let alone the Government's commitment to increase spending nationally by 7% in cash terms.

7.4 The Government assurance is in fact a floor of 0%, worse than the projections above. The Leader wrote to the Minister for Local Government on 18 October 2002 to explain the implications.

7.5 The Minister had said that:

· "no authority will get less grant on a like-for-like basis next year than this year"

· "it's on a purely cash basis - there will be no loss in cash terms and that's an absolute pledge"

· "there is no question of a loss next year. In future years there will continue to be a floors and ceilings system".

7.6 There were four points made in reply:

· the comparison with last year's grant is not a measure of the impact of the formula grant change. A true measure is next year's grant compared with what it would have been next year with no change in formula. It would also be valid to compare actual grant this year with what it would have been with the new formula. The latter are the figures that were calculated in the consultation paper, so it is strange that the Government should now seek to deny the relevance of this comparison

· an increase of around £40m in Government grant would be expected next year to support increased spending in SR2002. So no "loss" of grant represents £40m less than the Council could have expected with no change in formula. If the Council were to increase spending in line with the Government's spending plans (around 7%) with no loss of grant, it means that the full impact of increased spending falls on the council tax. This would result in an increase of around 20% next year, compared with the current projection of around 15%, assuming a floor of at least 2.5%

· this bears no relation to the pledge that schools' funding will not be reduced in real terms

· the floor mechanism means the Council will eventually lose any grant changes but over a period of years.

7.7 Some further work has now been done to model the projected council tax rise for different assumptions on floors. These include:

· no floor at all, so that the grant loss all occurs in 2003/04

· no cash reduction in Government grant, the Government's assurance, equivalent to a 0% floor

· floors at 3% and 4% compared with the Treasurer's assumption of 2.5% (in line with the Government's "inflation" assumption) used in the September report

· differential floors for Education to reflect the Government's commitment to "passporting" and no real terms loss.

7.8 The results are shown in the next table, but even an assumption of a 4% floor instead of 2.5%, only reduces the potential council tax rise from 15% to 12.6% under either the mid case or worst case assumptions for 2003/04.

Table 4 - floors set at different levels
	Council tax rises for
	mid case grant loss	worst case grant loss
	%	%
No floor	18.8	32.6
No floor, but 2.5% Education floor	18.8	27.5
No floor, but 5.0% Education floor	16.6	23.8
No reduction in grant (0% floor)	18.8	19.1
No reduction in grant, but 2.5% Education floor	18.8	19.1
No reduction in grant, but 5.0% Education floor	16.6	19.1
2.5% grant floor (current assumption)	15.0	15.0
3.0% grant floor	14.2	14.2
3.0% grant floor but 5% Education floor	14.2	14.2
4.0% floor	12.6	12.6

7.9 The table also shows that a separate Education floor does not have a significant impact, partly because Education is such a large proportion of the budget and potential grant loss, but also because of the pervasive effect of the resource equalisation proposals which accounts for £15m or £21m of the grant loss under the mid and worst cases.

8. Census data and elderly social services - some good news, some bad news

8.1 It is now possible also to model the impact of potential changes to the existing 2002/03 SSA using the revised mid-year population derived from the census results. If no formula changes were being made, the County Council would gain from the uplifted data changes in 2003/04 (and urban areas which might benefit from the formula changes are likely to lose).

8.2 The overall gain for the Council would be some £5.2m, with the most significant increase being the County's increasing share of the rise in the elderly population. The elderly residential and domiciliary sub block in Social Services would see a £3.5m uplift in SSA. This would go a long way - before formula changes - towards Government support for Hampshire's elderly and could help towards the cost of nursing care provision. It would also help avoid the cost of charges to be imposed from 1 April 2003 if Social Services cause bed blocking in the NHS.

8.3 Despite representations the Government seems intent on introducing fines for bed blocking at the rate of £120 per day for the south east compared with £100 elsewhere in the country. This is far more than the differential in area cost adjustment which the Council receives and demonstrates a lack of co-ordination and equity by the Government in grant funding. The overall cost of £840 per week is far in excess of the Hampshire nursing care rate and appears punitive, although it is based on the cost of an acute bed in the NHS. It is provisionally estimated that extra care to the value of £4m will need to be bought to avoid fines of £10m if the Council's bed blocking targets are to be met. This increase would be over and above the base budget.

8.4 The census data gain which might help achieve the bed blocking targets is likely to be more than offset by overall formula grant losses and the imposition of fines.

8.5 However the data gain, although small in the overall context, will be of some help in the Council's relative share of SSA.

9. Base budget 2003/04

9.1 A provisional projection of the base budget was reported in September. As described then, the base budget is a means of establishing a common starting point for 2003/04 based on the County Council's current financial policies. No significant changes to the `rules' are proposed in 2003/04 and in particular:

· no allowance is made for past inflation in excess of the levels allowed in the 2002/03 budget or for the net cost of salary increments. Base budgets are being prepared for services which require that the full-year cost of pay increases in 2002/03 in excess of 4% will have to be absorbed. (The implications of this policy can be reviewed when budget guidelines are set as the overall budget projection made in this report does allow for the excess costs of pay awards to be met in full in 2003/04)

· any one-off increases added to the 2002/03 budget, including those supported from past years' underspendings, do not form part of the base budget for 2003/04

· as in 2002/03 it is proposed that the budget should initially be prepared on the basis of current pay and price levels (a November 2002 price base) with assumptions about future inflation being determined when budget guidelines are set in December. This is despite the fact that this year some increases due in April 2003 are already known, such as the increase in national insurance rates, pensions costs and the local government pay offer. These amounts are included in the overall projection but not the detailed service base budget figures.

9.2 This provisional projection needs updating, even though the overall result is much the same. It is likely that further changes will have been made when the detailed budget preparation work has been completed. The figures will still require adjustments in December and possibly finally in January.

9.3 The base budget, plus passporting assumptions reported in September, totalled £986.1m (7.1% increase).

9.4 The main components of this projection were as shown in the table below:

Table 5 - September budget forecast for 2003/04
			£m	£m	Increase
2002/03 budget				920.5
Add inflation
·	Full year effect of 2002/03 pay awards		1.7
·	Provision for future inflation (see para 9.5)		36.6	38.3	(4.1%)
Add base budget growth
·	Waste contract		3.1
·	Fire - full year effect of 2002/03 growth		0.5
·	Capital financing - additional credit approvals		2.9
·	Flood protection		0.5
·	Other services		1.1	8.1	(0.9%)
Forecast base budget				966.9	(5.0%)
Add passporting
·	Education and Social Services			19.2	(2.1%)
Projected budget				986.1	(7.1%)

Provision for future inflation

9.5 3% was initially included for pay rises but this was revised to 3.5% when the local government pay award was agreed. 2.5% was included for non-pay inflation. Also included is £4m for the estimated cost of the national insurance increase and £1.1m for the next step in the phased actuarial rise for the local government pension scheme (LGPS). Employers' contributions will go up from 205% to 215% of the employees contributions. (215% is equivalent to 12.9% of payroll costs). Finally, the excess cost of pay inflation in 2002/03 above 4% has been added although this is a broader definition of the base budget than the actual detailed compilation requested from services. This amounts to £1.7m.

9.6 Since September there have been a number of changes.

Teachers' pensions

9.7 It is expected that the employers' contribution rate for teachers will be increased from 8.35% to around 14% of the payroll cost from 1 April 2003. Most of this increase will be met by additional resources outside the Education SSA control total reported in SR2002. However, it is contended that approximately 1% of the increase had already been allowed for in SR2002, but this was not included in the budget forecast, increasing inflation costs by £2.8m and reducing the passported amount to Education by an equivalent sum.

Social Services passporting

9.8 The Social Services forecast assumed that the SSA control total included £360m announced in the Chancellor's budget to complement increased NHS funding. Subsequently only £160m of the increase has been reflected in the SSA control total for 2003/04, and the passported amount now needs to be reduced by £2.8m. This may be a fairly technical change as there are further transfers to be agreed between specific grants and any further adjustment to the budget forecast will be matched by changes in SSA.

Interest rates and pensions costs

9.9 The original projection included provision for a 1% increase in interest rates, but this now seems unnecessary. The amount saved (£1.2m) is roughly equivalent to the cost of bringing forward the final increase of £1.1m in the employers' contribution rate to the LGPS from 215% to 225% in 2003/04 instead of in 2004/05. This may be necessary because of the adverse reduction in market values since the last valuation. No decision is required on this at this stage and the issue will be considered by the Pension Fund Panel later in November before the December Cabinet meeting. Setting the saving against the cost here provides some flexibility for final decisions in December.

Pay

9.10 The first projection in July assumed a pay award of 3% together with a further pay and recruitment contingency equivalent to 1% of non-teachers' pay. The contingency can now be deleted to bring the forecast in line with the revised 3.5% pay assumption. Most of the contingency amount was included in the passporting assumption for Education and Social Services.

Fire

9.11 The budget forecast is based on a 3% pay award from November 2002. As the employers have already offered 4% and negotiations or a strike are still pending against a 40% pay claim, it is apparent that the levy will increase by more. It is not known if the Government will support any final agreed pay award with new resources outside SR2002 but it could be argued that extra Government support should be forthcoming for any pay award over 4%. It would be sensible to increase the budget forecast by £0.4m to reflect the 4% pay offer. The Hampshire Fire and Rescue Authority is likely to include an additional levy in 2003/04 towards temporary repairs at Copnor fire station which would add a further £0.2m.

Revised budget forecast 2003/04

9.12 If these changes are made, based on latest information and further analysis of SR2002, the budget and council tax forecasts for 2003/04 before formula grant charges would be:

9.13 The effect of these changes is to reduce the standard spending assessment (SSA) forecast by £2.8m (on Social Services) and the budget forecast by £3.8m, mainly reflected in the reduced passported amounts above the base budget for Education and Social Services of £4.6m. Because the budget forecast and the SSA forecast have declined by different amounts the effect on council tax is less significant. The current council tax forecast before formula grant changes is 7.7% instead of 8% reported in September. The current assumption of 15% after formula grant changes remains valid.

10. School and local education authority (LEA) funding in 2003/04

10.1 There have been further developments in clarifying the new Education funding system for 2003/04. The Department for Education and Skills (DfES) has issued guidance on:

· 3 year budgets for schools and changes for school balances

· LEA funding system for 2003/04 - control totals and specific grants

· allocation of funds to schools, including further transitional funding for former grant-maintained schools in 2003/04

· sixth form funding

· statutory guidance on schemes for financing schools

· schools' forums.

10.2 A second letter will follow in December 2002 to deal with, amongst other issues:

· Education SSAs

· LEAs to notify the Secretary of State by 31 January of their proposed school budget for 2003/04.

3 year budgets for schools

10.3 "When the allocations for the schools block and LEA block are introduced .... they will set a trend for the next 3 years and LEAs should be in a position to set a trend also for school budgets." These are expected for 2004/05 and 2005/06, but of a "very provisional nature".

Schools balances

10.4 With 3 year budgets schools should "manage their financial affairs without the protection of large uncommitted surplus balances". Proposals include

· maximum 5% uncommitted balances

· "sums held in excess of that general reserve limit would have to be held for specific earmarked projects .... normally of a capital nature " (Section 52 outturn statements have had to show balances committed to specific projects separately from 2001/02)

· any sums held by the school in excess of these would return to the LEA for general use in school budgets.

10.5 Balances cannot be taken into account in calculating budget share, and it is planned to introduce these proposals from 1 April 2004 at the earliest

Control totals for 2003/04

10.6 There will be a separate sub-block for youth and community education within the LEA block, with its own distribution formula. "The purpose of this is to highlight spending on the youth service and encourage increases where appropriate". The Government says it places great importance on the youth service and its contribution to promoting social inclusion and assisting children at risk. There will be a national 5.9% increase for 2003/04 which given the Government's intentions above would assist meeting the Council's own public service agreement targets. However this depends upon the actual cash increase possible after the formula grant changes.

10.7 Control totals are set out in the letter - an overall national 5.9% increase, with a 5.1% increase in funding per pupil (before formula grant changes).

Specific grant

10.8 There will be a £500m transfer into Education standard spending (ESS) including nursery education grant for 3 year olds and class size grant. Nursery funding will in future include top-ups for deprivation and area costs rather than existing flat rate allocations. For 2003/04 there will be real terms protection so that councils such as Hampshire with relatively low deprivation do not lose out initially.

10.9 In addition the DfES will cease certain standards fund grants and the costs are expected to be assimilated with the Government continuing "to place a high priority on school improvement, pupil inclusion and performance management" despite the end of these specific grants. Further guidance on financial arrangements for excluded pupils is to follow.

Recommendations

1. That the latest budget monitoring position is noted

2. That the implications for services of potential grant losses be received

3. That the latest update on the budget outlook for 2003/04 be considered

4. That a further report on the provisional formula grant settlement and budget guidelines be considered by Cabinet on 23 December.

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:

Published works.

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

TITLE FILE

Appendix 1

2002/03 budget analysis