Contact: Ejner Knudsen, ext 7403

1 Introduction

1.1 This report sets out the proposed Environment revenue budget for 2003/04 and reports on the revised budget for 2002/03. The Environment executive member is recommended to approve for submission to the Cabinet:

· the base budget for 2003/04 (as set out in Appendix 1 and Annexes 1 to 4 and Appendix 5)

· the proposals for efficiency improvements and for savings (as set out in Appendix 2)

· the proposals for redeployment of resources (as set out in Appendix 3)

· the annual review of income and charges (as set out in Appendix 4)

· the revised budget for 2002/03 (Appendix 5)

· the summarised trading accounts for business units (as set out in Appendix 6)

1.2 For this service, the provisional budget guideline is £81.2m.

1.3 This report sets out the Environment executive member's responses to the guidelines. The report:

· reviews the base budget which totals £81.2m

· identifies savings, including efficiency savings, of 1% (£469,000) and a further 0.5% (£235,000)

· identifies £493,000 of pressures and costs absorbed

· proposes the redeployment of £410,000 of resources

· reviews the charges made by this service.

2 Revised budget 2002/03 (£77.2 million)

2.1 The most recent budget monitoring report, which was presented to the Executive Member for the Environment on 12 November 2002, provided an update of the position on the current year's budget, including changes to the 2002/03 cash limit and the latest budget monitoring position. This showed that expenditure was expected to be contained within the budget for all divisions of service, other than on public transport support and co-ordination and waste management, where excess expenditure of £300,000 on bus subsidies and £120,000 on the disposal of abandoned vehicles was being projected. In addition, on the waste management contract related budget, expenditure during 2002/03 on the storage and disposal of fridges was likely to exceed the funding available to the County Council by some £500,000.

2.2 A further budget monitoring exercise has now been completed within the Environment department. In general terms, the position reported in the previous budget monitoring report has been largely confirmed, although the extent of the excess expenditure on waste management, mainly relating to the disposal of abandoned vehicles, is now lower than previously forecast at £90,000. Pressure from incurring expenditure on the storage and disposal of fridges has also reduced. The latest projection for the year, indicates that expenditure may be approximately £400,000 above the available funding. These and other main issues are discussed further in the following paragraphs.

Highways maintenance

2.3 Expenditure on the highways maintenance budget is being progressed in accordance with the operational plan for the year. The highways maintenance reserve, which is available to meet any unforeseen demands, currently stands at £255,000 and is expected to be fully committed before the end of the year. Appendix 8 sets out in detail the latest highways maintenance programme, showing variations between the programme previously reported to the Executive Member in November and the latest plan. The summary also includes details of works being funded from the 2002/03 capital budget for structural maintenance.

2.4 It will be necessary to incur additional expenditure in dealing with the recent floods in parts of Hampshire resulting from the very heavy rainfall over the Christmas and New Year period. Resources will be redeployed from within the budget as required to meet this need, although some excess expenditure may result if the bad weather continues. The position will need to be monitored carefully during the remainder of the year.

Management and support services

2.5 The previous report in November made reference to the additional savings of £153,000 that would need to be identified during the remainder of the year on the departmental budget for management and support services, to offset known cost pressures and to avoid an overspending on this division of service. The recent monitoring review, carried out in consultation with departmental budget holders, has confirmed the achievement of further savings of £111,000, mainly from staff vacancies and reduced departmental running costs. It is anticipated that the remaining savings target of £42,000 will be achieved before the end of the year, enabling expenditure on this division of service to be contained within the cash limit.

Public transport

2.6 The latest financial estimates for public transport bus subsidies have confirmed the position previously reported in September and November. The projected overspending on this service is still estimated at £300,000 at the present time, although this figure could of course still vary depending upon the extent of any unplanned changes in the level of support between now and the end of the financial year.

2.7 It is intended that the Cabinet be informed of the latest position on the bus subsidies budget in order that they may consider the extent of the additional support to bus services that may be provided this year from central balances.

Waste management

Waste contract related budgets

2.8 Notwithstanding the additional cost of dealing with redundant fridges (see paragraph 2.10 below), it is still expected, at this stage in the year, that the overall County Council budget provision for the waste management contract related budgets, including the £3.0 million central contingency sum, should be sufficient to cover expenditure during 2002/03.

2.9 Waste volumes for the first seven months of the year have been below budgeted expectations and within the household waste volumes handled, there has been a near 18% increase in collected dry recyclables. Although growth in waste received at household waste recycling centres for the same period was higher than estimated, the increased costs of disposal have been partially offset by reduced contractor incentive payments.

2.10 The Chineham energy recovery incinerator is to be commissioned this month in line with the assumption made when the 2002/03 budget was set. Some 90,000 tonnes of household waste will be processed at the plant during a full year of operation. In addition, new three to five year household waste recycling centre contracts are also commencing this month. Under the terms of the new contracts, which were delivered within the budget allowance, the contractors will again be able to earn incentive payments where they can demonstrate sustained increases in recycling performance.

2.11 Since the preparation of the November budget monitoring report, a market testing exercise relating to the disposal of fridges has been undertaken. Although a full evaluation of the returns has yet to be completed, the results appear to be encouraging. New contractual arrangements should be in place by the end of January, thus ensuring some financial benefit will be secured in the current year. However, it is still estimated that the cost of dealing with redundant fridges this year will exceed, by some £400,000, the level of Government funding support available to the County Council, which has been set at £843,000 for 2002/03. The Cabinet will need to consider the implications of this funding shortfall later in the year, against the additional balances set aside in the 2002/03 budget for this and other pressures.

Other waste management budgets

2.12 The main concern, once again, within this area of the waste management budget is the likely level of expenditure on the disposal of abandoned vehicles. Revised estimates from the district councils now indicate likely excess costs against this level of activity to be some £94,000 during 2002/03. This figure is well within the forecast overspending of £120,000 reported in the previous budget monitoring report and reflects well on the audit exercise that was completed earlier this year, as well as the recent sustained upturn in the market for scrap metals.

2.13 Expenditure on the other waste management budget headings is expected to be contained within the budget provision. Indeed, minor savings of £4,000 are projected on the administration budget, which would partially offset the excess cost of abandoned vehicles disposal, resulting in a net shortfall of £90,000 for this sector of the waste management budget. Excess expenditure against the budget provision has been regularly identified this year in previous budget monitoring reports. The expectation has been that the Cabinet would decide to cover any overspending from central balances and it is therefore recommended that they be informed of the latest projected overspending of £90,000 on this part of the waste management budget.

2.14 Detailed figures relating to the revised budget for 2002/03 are shown in Appendix 5 (the green pages). The calculation of the cash limit is set out in Appendix 7. A comparison of the revised budget against the cash limit is set out in Annex 1 to Appendix 7.

3 Base budget 2003/04

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 base budget for this service is £81.2 million.

3.2 Appendix 1 shows the make up of the base budget. Overall the base budget includes a net increase in expenditure at constant prices of £3.2 million. The main variations affecting the individual services are discussed below.

Highways and transportation services

3.3 The recommended 2003/04 base budget for the highways and transportation services totals £41.445 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. Budget pressures which cannot be accommodated within the base budget are considered in paragraph 4.

Highways maintenance

3.4 The 2003/04 base budget includes provision of £18.768 million for revenue budget funded highways maintenance. The budget represents an increase of £182,000 compared to the 2002/03 budget, at constant prices. It includes an additional £33,000 to cover routine maintenance of recently adopted highways, and £188,000 to cover additional revenue expenditure resulting from the implementation of capital improvement schemes although, of this latter sum, expenditure of £67,000 relating to the maintenance of anti-skid and coloured surfaces has been transferred to the capital maintenance programme.

3.5 Other variations include increased funding of £27,000 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 The cost of inflation within the calculation of the 2003/04 highways maintenance base budget shows savings of £559,000 when compared with the allowance included in the 2002/03 original budget. This mainly relates to assessed savings of £478,000 from the re-tendering of the highways maintenance term contract, which was awarded to Raynesway Construction Southern Limited, with a start date of 1 May 2002. A significant part of this saving, £362,000, arose on the structural maintenance programme with the balance arising on the revenue funded highways maintenance budget.

3.7 Adjustments have been made within the construction of the 2003/04 base budget to allocate the savings from the term maintenance re-tendering to help to offset the full year cost of implementing the highways network management best value review blueprint for the future, now estimated at just over £700,000. This treatment is in line with the strategy agreed by the former Policy and Resources Committee whereby additional costs were envisaged in the short term, following the transfer of staff from the former agency district councils, which would need to be offset in the budget. However, in the longer term, it is clear that the new arrangements will provide opportunities for savings from more efficient service delivery, including scope for partnering arrangements with the term maintenance contractor.

3.8 The final adjustment to the 2003/04 highways maintenance base budget is a technical reduction of £80,000 relating to a sum for the development of the new highways term maintenance information system, which was carried forward from the 2001/02 budget and included in the 2002/03 original budget. As this was a one-off sum, available in 2002/03 only, the base budget for 2003/04 has been reduced by a corresponding amount.

School Crossing Patrols

3.9 The 2003/04 base budget for the school crossing patrol service, which was transferred to Environment from the Education service from the beginning of April 2002, is £895,000. This figure is £50,000 below the 2002/03 budget, which included an additional sum, allocated by the Cabinet on a one-off basis, to enable a review to be carried out into school crossing patrols to ensure a safe and consistent provision.

Public Transport

3.10 The base budget for public transport support and co-ordination has been set at £4.949 million. This is an increase of £154,000 over the 2002/03 budget, at constant prices, reflecting the allocation of part of the Public Service Agreement (PSA) pump priming grant. The award of this grant is in connection with increasing bus use from 2000 levels by 10% by the year 2010, including securing improvements in punctuality and reliability. Total pump priming grant of £308,000 is available in connection with this PSA, which is now expected to be a two year project commencing in 2003/04.

3.11 The 2003/04 base budget provision for rural public transport services to be funded from Rural Bus Subsidy Grant is £1.335 million, based on the indicative allocation for next year previously announced by the Government. This is a further increase of £28,000 on top of the previous increases in funding made available during the past two years.

3.12 The base budget for public transport bus subsidies has been set at £4.621 million, of which a maximum sum of £267,000 is planned to be recharged to Rural Bus Subsidy Grant. This is in accordance with the rules governing the use of this grant, which allow local authorities to redirect up to 20% of their overall grant to support existing services serving rural locations which were in operation prior to the introduction of the grant during 1998/99. However, the cost of supporting existing contractual commitments continues to grow, reflecting the cost of re-tendering, inflation increases and other changes to the supported network. As mentioned in paragraph 2.5, the excess expenditure on bus subsidies during 2002/03 is likely to exceed the budget sum by approximately £300,000. The full year effect of these increases, together with other anticipated variations next year, is likely to result in a shortfall of some £500,000 in the 2003/04 budget. Equivalent savings would need to be made from this service area in order to constrain expenditure to the budget limit, unless additional resources can be provided.

Management and Support Services

3.13 The base budget for departmental management and support services, totals £15,135 million. A number of budget pressures have been absorbed and other variations included within the construction of the base budget. The main items are:

· Additional departmental running costs totalling £313,000 from staff salary increments, staff retention payments, office accommodation pressures and additional information technology requirements. It is planned that efficiency and other departmental housekeeping savings will be sought during the next financial year to absorb these cost increases.

· Estimated additional costs of £701,000 arising from the implementation of the highways network management best value review blueprint for the future. As previously indicated, any additional short term costs arising from this review will be partially accommodated within the base budget by utilising savings of £478,000 from the re-tendering of the highways term maintenance contract. It is planned that the balance of the blueprint cost could be met from changes to the arrangements for delivering highways development control and additional fee income, although this latter item is subject to the outcome of an ongoing review considering the correct level of design and supervision fees chargeable to the structural maintenance programme.

· An increase of £76,000 from pump priming grant in respect of the PSA aimed at diverting waste from landfill through the development of a natural resource management approach. The grant will be used to fund additional staff and consultancy support as necessary.

· A reduction of £315,000, in comparison to the 2002/03 original budget, relating to those items of expenditure brought forward from the 2001/02 budget as planned underspendings, together with other provisions included in the 2002/03 original budget on a one-off basis.

3.14 It is likely that some additional costs will arise during 2003/04 from future restructuring within the new Environment department. Although any further restructuring proposals will aim to be cost neutral in the longer term, some additional expenditure may need to be absorbed next year. However, this is impossible to quantify at the present time.

3.15 It should be pointed out that the planned absorption within the base budget of £313,000 in respect of increments and other departmental cost pressures mentioned above, together with the need to accommodate any additional expenditure arising from the restructuring of the Environment department, will be achieved fully against the management and support services heading (i.e. by reducing departmental running costs). This will help to protect levels of expenditure on front line services as far as possible. However, it would be extremely difficult to make further significant reductions from this area to cover any service pressures and proposals not included within the base budget, or if service reductions of 1% plus an additional 0.5% are implemented.

Planning Services

3.16 The 2003/04 base budget for planning services is £4.229 million. Annex 3 to Appendix 1 summarises variations from the current year's budget including planned efficiency savings of £36,000 that are required to offset salary increments and comply with the base budget control total.

3.17 Other variations included in the make-up of the 2003/04 base budget include the removal of a number of one-off items, totalling £247,000, which were included in the 2002/03 budget and met from resources carried forward from the 2001/02 budget. Adjustments have also been made to the base budget to remove the one-off provisions included in the 2002/03 budget for the statutory elements of the County Structure Plan review and the Minerals and Waste Local Plan preparation.

Waste Management

3.18 A base budget of £33.882 million has been set for the waste management service for 2003/04. In considering the key elements of the calculation of the base budget, it is necessary to divide this service into two distinct categories:

· 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 £31.097 million, equivalent to nearly 92% of the overall waste management budget.

· Other waste management budgets, including facility maintenance, administration, promotions and developments, the disposal of abandoned vehicles and household waste recycling centres (HWRC) management costs. These services account for £2.785 million, or 8% of the waste management 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, which include known and estimated tonnages for the current year, at January 2002 prices. The contract is re-priced on 1 January each year in line with changes in the Retail Price Index (RPI). The full year cost of the new energy recovery incinerator at Chineham, which is due to be commissioned during January, has been included within the base budget.

3.21 No allowance has been made within the base budget for growth in waste volumes beyond 2002/03 levels, future price increases, the forthcoming £1 per tonne increase in the rate of landfill tax, or other service related pressures such as the cost of dealing with redundant fridges. As in previous years, a central contingency sum, under the control of the Cabinet, will be established within the overall County Council budget to meet these costs in 2003/04. Quarterly allocations will be made to the waste management budget in line with actual costs incurred during next year.

3.22 The allowance within the central contingency to cover anticipated cost variations during 2003/04 on the waste contract and related budgets has been provisionally set at £3.7 million. Some £1.9 million (51%) 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 to cover the cost of dealing with redundant fridges. Government support towards this activity has been subsumed within the EPCS Formula Spending Share (FSS) allowance for 2003/04, rather than the direct grant arrangements operating during 2002/03. The remaining contingency provision of £1.1 million is intended to cover legislative cost affecting the contract and any contract claims, especially in respect of planning related incinerator pass through costs and excess composting, as well as other pressures such as any reductions in trade waste income and additional recycling credit payments to district councils.

Other waste management budgets

3.23 Budgets for the other waste management services, totalling £2.785 million, have been set in accordance with the sums provided in the base budget control total. The sums included are expected to match the likely level of expenditure during 2003/04 on these services.

3.24 The underlying costs of dealing with the disposal of abandoned vehicles has stabilised during the past year, partially reflecting the positive outcome of last year's audit and the more favourable market conditions for scrap metal. However, the planned introduction of the End of Life Vehicles (ELV) directive during 2003 is destined to add further pressure to this budget. The directive classifies abandoned vehicles as hazardous waste which will require stricter dismantling and de-manufacturing of the end of life vehicles. This will almost certainly result in higher handling costs and likely increases in the number of vehicles being abandoned, significantly worsening the budget position on this heading. The exact level of excess expenditure will depend on a number of factors including the timing of the directive's implementation, cost of disposal and eventual vehicle numbers. An increase of £394,000 has been made within the base budget guidelines to cover this additional cost pressure in 2003/04, in line with additional support provided by the Government.

Other services

3.25 The 2003/04 base budget contains a sum of £23,000 to enable the County Council to carry out its responsibilities under the Reservoir Act, 1975.

4 Savings, additional services pressures and redeployment proposals

4.1 Cabinet requires all services, other than schools and social services, to identify savings, including efficiency savings, of 1% and a further 0.5%, and to identify pressures and costs absorbed. Cabinet also requires proposals for new growth to be met from savings.

4.2 Details of savings totalling £704,000 are set out in Appendix 2 (page 27), together with cost increases absorbed of £493,000. Additional service pressures and redeployment proposals are included in Appendix 3 (page 29).

Savings of 1% and a further 0.5%

4.3 For the Environment services the savings target based on 1% of the base budget, excluding specific grants and the waste contract, would be £469,000, with an additional £235,000 if a further 0.5% is required to be found. In responding to this request and formulating options within the Environment department priority has been given to the identification of further efficiency savings in departmental running costs to help protect front line services as far as possible. However, given that significant additional cost pressures have already been absorbed against the management and support services in the construction of the 2003/04 base budget (see paragraph 3.15), the need to make some savings from front line services is unavoidable.

4.4 Details of the savings proposals are set out in Appendix 2. Efficiency savings of £300,000 are planned to be achieved from within the management and support services budget. These would be sought from staffing budgets, by increasing savings from vacancy management and reductions in overtime working, together with reductions in departmental running costs, including reduced staff travel, less use of external consultants for studies, and savings in office expenses. Some loss of service would almost certainly result from these proposals. As staff resources would need to remain focused on maintaining day-to-day operations, these measures may impact on the speed with which new developments and initiatives can be progressed next year.

4.5 It is proposed that, after allowing for the efficiency savings of £300,000 set out above, the balance of any savings of 1% and a further 0.5% be met by reducing expenditure on County Council subsidy support to bus services. This is in addition to the £500,000 shortfall in the base budget provision referred to in paragraph 3.12 and would be achieved by assessing the effectiveness of routes currently supported by subsidy whilst having regard to the need to achieve the relevant PSA target for increasing bus usage. This is discussed further in paragraphs 4.18 and 4.19 below.

4.6 It is necessary to note that the savings target of 1%, and a further 0.5%, are based on the overall Environment 2003/04 base budget, excluding the waste management contract related budgets. This budget heading includes provision for the main waste disposal contract, together with related budgets covering trade waste income and recycling credits. As these budgets are demand led and subject to long term contractual arrangements, there is nothing that can be done to make savings against this heading and they have therefore been excluded from the calculation of the savings targets for the Environment services.

4.7 Details of cost increases already absorbed by efficiency savings in the construction of the 2003/04 base budget are also shown in Appendix 2. These total £493,000 reflecting higher inflation, the cost of salary increments and a number of the other cost increases summarised in Annex 3 to Appendix 1.

Additional service pressures

4.8 Two significant service development pressures have been identified during the budget preparation process which will need to be included in next year's budget. These are the Hampshire Natural Resources Initiative (HNRI) and the Minerals and Waste Local Plan (MWLP).

Hampshire Natural Resources Initiative (HNRI)

4.9 A sum of £150,000 is required next year to progress the Hampshire Natural Resources Initiative. HNRI aims to achieve the more efficient use of natural resources in Hampshire, with the initial focus on materials that end up as waste. The approach being adopted aims to maximise benefits in environmental, economic and social terms by partnership working within the wider community. This work will directly benefit the County Council, in terms of reductions in the rate of future increases in the waste management contract budget, through minimising waste, maximising recycling and exploiting synergies with commercial and industrial waste. The management of natural resources is a key objective under the aim "Stewardship of the Environment" in the new Corporate Strategy and also one of the service areas under the County Council's Public Service Agreement with the Government.

4.10 Whilst PSA pump priming resources are being used this year and next to assist HNRI objectives, the focus of these resources is on the relatively narrow target objective of diverting 40,000 tonnes of waste from landfill. The focus is on commercial and industrial waste given that the County Council cannot double count achievement in household waste recycling, which is already subject to best value performance indicators. Additional resources are therefore needed if the wider objectives and benefits of HNRI are to be achieved, including the Corporate Strategy objectives and the minimisation of longer term impacts on the waste management budget.

4.11 The additional resources of £150,000 in 2003/04 are needed to prioritise and move forward the myriad of potential projects and enable preparation of an action oriented natural resources strategy. It is noted that many of these projects are unlikely to proceed without facilitation and pump priming support from the County Council.

Mineral and Waste Local Plan (MWLP)

4.12 Additional expenditure of £100,000 will be required next year in connection with the preparation of the Minerals and Waste Local Plan review which will remain a County Council responsibility even after the Government's proposed changes to statutory structure planning have been implemented. In order to be allowed to work within the Local Plan under the current framework, the Plan needs to be deposited by April 2004. Work on the minerals element of the Plan, including specialist studies and stakeholder engagement, is already underway this year and will continue into 2003/04 when there will be a need to publish the deposit plan. A review of waste policies and proposals is urgently required to address the policy vacuum which currently exists at a time when new waste facilities are urgently required to increase recycling levels. Additional resources are now required if this timetable is to be achieved and in previous years one-off sums have been provided centrally for statutory planning processes. Resources for further statutory processes will also be required during 2004/05.

Other redeployment proposals

4.13 Consideration is being given to no longer funding historic buildings grants (£160,000). This budget has been reduced over a number of years from £700,000 prior to Local Government Reorganisation in 1997, to the current level. This is not a statutory responsibility and the district councils in Hampshire have over the years, increased their support for the historic built environment.

4.14 Conversely, an increase of £160,000 is proposed for work on strategic planning and sustainability initiatives. Work is underway on two sub-regional plans and it is essential that the County has the ability to test the impact of alternative development scenarios, particularly in terms of transport impact. Match funding is also required for a number of small scale sustainability initiatives.

Discussion

4.15 The recommended proposals for the base budget set out in paragraph 3, reflect savings totalling £158,000 to offset staff salary increments, and £201,000 to absorb other increases in departmental running costs. These have been made against management and support services budgets, in order to protect front line services. In addition, the 2003/04 base budget has absorbed, as planned, the additional full year cost of £701,000 relating to the implementation of the highways network management blueprint best value review, together with excess inflation of £134,000.

4.16 Further pressures have been identified in preparing the base budget, including the potential additional cost increases during 2003/04 of up to £3.7 million on the waste contract, which would include the additional cost of the storage and disposal of fridges. As in previous years it will be necessary for the County Council to set aside a central contingency sum within the overall budget to cover this higher waste management contract related expenditure.

4.17 As in 2002/03, the 2003/04 base budget provision to cover expenditure on public transport bus subsidies is insufficient to cover the cost of supporting the existing subsidised bus network. The shortfall next year is expected to be in the order of £500,000. In addition there are the two service pressures relating to the Hampshire Natural Resources Initiative and the Minerals and Waste Local Plan which will require expenditure provision totalling £250,000.

4.18 Should it be necessary to accommodate the above items from within the existing Environment service cash limit then, in order to bring the budget into balance, it would be necessary to make further reductions of £500,000 in the level of support to public transport bus subsidies, in addition to the savings of up to £404,000 which would be necessary as part of the savings of 1% and a further 0.5% if required, set out in paragraphs 4.3 to 4.5. However, this is considered to be the only realistic option, given the extent of the reductions to management and support services already made or proposed, and the need to protect levels of investment in highways maintenance. To accommodate the other two service pressures totalling £250,000, it is planned to finance these from savings within other programmes on an opportunity basis.

4.19 Clearly savings in public transport bus subsidies would need to be targeted carefully in order to avoid conflicting with the County Council's PSA target of increasing bus usage. As a consequence therefore, the major impact of the budget reduction would most likely fall on the less well used subsidised bus services running during the evenings and on Sundays.

4.20 With regard to levels of investment in highways maintenance and the public's significant concerns about the condition of the County Council's roads and footpaths, much still needs to be accomplished to address the existing backlog of works. There continues to be a need to invest in the structure of the highways to meet the County Council's best value performance indicators and to comply with the public service agreement for highways maintenance. This requires the County Council to halt the deterioration in the condition of local roads by the year 2004 and to reduce the backlog by the end of the plan period. The standard of minor repairs and footways maintenance has been considered by the public as a major item needing attention following MORI polls over the past two years.

5 Review of charges

5.1 The service's 2003/04 revenue budget includes income of £5.7 million from fees and charges. Details of the material headings are included in Appendix 4.

5.2 There are some mandatory and national charges which the County Council is not able to vary, the main example for the Environment services being planning application fees. Most other charges to users are designed to ensure full recovery of costs, including an appropriate contribution towards organisational 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.

5.3 Charges for the two main waste management sources of income, namely disposal site rentals and trade waste, are increased from the beginning of January each year in accordance with the price increases applied to the long term waste disposal contract. This is based on a formula contained within the contract which effectively provides for an increase based on the change in the retail prices index (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 Other expenditure

6.1 The budget includes some items which are not counted against the cash limit. At the present time the only items included are levies totalling £5,429,000, made by three divisions of the Environment Agency, in relation to the County Council's responsibilities for flood protection.

6.2 Further adjustments to the 2003/04 budget in respect of non-cash limited expenditure will be made later on the budget preparation process for capital charges, central departments' support services and repairs and maintenance of buildings. These have been excluded at this stage as Policy and Resources control them and they have not yet been agreed.

6.3 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.

7 Staffing statistics

7.1 The average number of staff in the base budget is 751 full time equivalents (FTEs). This compares with the original estimate for 2002/03 of 644 FTEs, and represents an increase of 107 FTEs. This large increase mainly relates to additional posts that were created in the network management highways units following the implementation of the highways network management blueprint for the future. A large number of staff have transferred from the district councils who previously carried out management of the highways activities under the former agency arrangements. Additional staff have also been appointed in the passenger transport group, transport policy and implementation, and the waste management sections, which are funded from Government grants, recharges to other departments, and other external sources of income.

7.2 It is estimated that the proposals for efficiency improvements and savings set out in Appendix 2 would reduce staffing number by an average of 2 FTEs, if implemented, arising from additional savings planned to be achieved from vacancy management.

8 Business units

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

9 Best Value Accounting Code of Practice (BVACOP)

9.1 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 heading to be identified separately from operational expenditure, is subsequently fully re-allocated over the other highways and transportation divisions of service.

9.2 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 services, a separate analysis in 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 - 23 December 2002 2003/04 budget

Executive Member : Environment - 12 Revenue Budget Monitoring 2002/03 November 2002

Appendix 1

Environment Service

Revenue Budget 2003/04

Construction of Base Budget 2003/04 - Summary of Cash Limited Expenditure

The following table shows the progression from the original budget for 2002/03 which was prepared at outturn prices 2002/03 to the base budget 2003/04 at outturn prices 2003/04.

Annex 1 to Appendix 1

Environment Service

Construction of Base Budget 2003/04

Parameters used in the compilation

Annex 2 to Appendix 1

Environmental Service

Construction of Base Budget 2003/04

Significant costs of inflation

Annex 3 to Appendix 1

Environment Service

Construction of Base Budget 2003/04

Significant variations

Major variations between the repriced budget 2002/03 and the base budget for 2003/04 at November 2002 prices contributing to the increase of £3,240,000 (4.2%) are set out below:

Annex 4 to Appendix 1

Environment Service

Base Budget 2003/04

Analysis of variations

Appendix 2

Environment Service

Revenue Budget 2003/04

Proposals for efficiency improvements and for savings

Appendix 3

Environment Service

Revenue Budget 2003/04

Proposals for redeployment of resources

Appendix 4

Environment Service

Revenue Budget 2003/04

Review of income

Appendix 5

Environment Service

Revenue Budget

Reconciliation of the original 2002/03 budget on the following pages with the 2002/03 budget in the budget book.

Appendix 6

Environment Service

Base Revenue Budget 2003/04

Business Units - Summarised Trading Accounts

The budget of the River Hamble Management Committee is outside the cash limited budgets of the Environment Service and operates on a trading basis. The following statement shows its summarised trading position and movement in its earmarked reserve accounts.

Note

The detailed budget will be considered by the Harbour Management Committee before going to the Executive member for approval when the annual charges are approved.

The above summarised accounts bring together income and expenditure and reserves for the three Hamble activities ie the statutory Harbour Authority, the Management of the Moorings, and the Visitor Partnership. They also include expenditure arising from the capital programme and the exceptional income of £100,000 each year from the sale of the river piles to the Crown Estate. These are the first two instalments of the sale proceeds of £0.5m in total to be phased over five years.

The Harbour Undertaking and Management and of Moorings operations are run on a break-even basis. Historically, the reserve exists to cover unforeseen major expenditure such as dredging of the river. The higher forecast reserve level in 2003/04 reflects the receipt of the second pile instalment of £100,000 from the Crown.

The Visitor Partnership, a new joint venture with the Crown Estate, has operated at a deficit for its first two years. It has its own reserve (in deficit) included in the above figures. Initially this deficit was covered by the reserve from the main Hamble operations. However, the first pile receipt has substantially covered this deficit. In the longer term any future surpluses on the Visitor operation will be applied to pay off this deficit.

Appendix 7

Environment Service

Revised Budget 2002/03

Calculation of the cash limit for the revised budget 2002/03

The following table shows the progression from the original budget for 2002/03 to the cash limit for the revised budget 2002/03. Both are at estimated outturn prices 2002/03.

Annex 1 to Appendix 7

Environment Service

Revised Budget 2002/03

Summary comparing the Revised Budget with the Cash Limit

Appendix 8

Environment Service

Summary showing detailed allocation of Highways Maintenance budget

Revenue Budget 2002/03

Capital maintenance programme 2002/03