Contact: Ejner Knudsen, ext 7403, e-mail: [email protected]

1 Introduction

1.1 This report sets out the proposed Environment revenue budget for 2004/05 and reports on the revised budget for 2003/04. This report has been prepared in consultation with the Executive Member for review by the Policy and Review Committee, before the budget is considered formally by the Executive Member. It will be reported to the Leader and Cabinet on 12 February 2004 to make final recommendations to County Council on 25 February 2004.

1.2 The Environment revenue budget supports all of the aims of the corporate strategy by focusing financial resources in these areas:

1	Maximising life opportunities
2	Stewardship of the environment
3	Achieving economic prosperity
4	Building strong and safe communities
5	Improving services
6	Developing councillors and staff

2 Budget strategy

2.1 The Cabinet has confirmed its budget strategy that:

· Schools budget increase will be fully passported, matched by Government grant, as constrained by the Secretary of State's reserve power to require this outcome.

· Social Services will have a cash increase in line with the rise in Social Services Formula Spending Share (FSS).

· Schools and Social Services will be required to meet all cost pressures, demands, contingency, new pressures and priorities within these cash limited resources.

· Extra contingency provision will be made to match the commitments on waste management from new infrastructure costs, increases in volumes and effect of landfill tax on the private sector contract.

· All other services have a base budget increase only and have to meet all costs and other pressures within this limit, including the redeployment of existing resources to higher priorities as necessary.

2.2 In arriving at the base budget it is assumed that:

· Income will be maximised in line with inflation.

· Efficiency savings will be achieved to absorb costs not budgeted for (increments etc).

3 Budget guidelines

3.1 These are based on an overall budget increase of 5.4% against a grant increase of 5.9% resulting in a projected council tax rise of 4.7%. This is in line with public preference put forward during the budget consultation process, adjusted for the additional Government grant announced on 11 December 2003 designed to reduce council tax increases in 2004/05.

3.2 The budget guidelines were set by the Cabinet on 15 December 2003. For this service, the provisional budget guideline for 2004/05 is £85.9m.

3.3 This report sets out the Environment Executive Member's responses to the guidelines. The report:

· Reviews the revised budget for 2003/04 (as set out in Appendices 1 and 2).

· Reviews the 2004/05 base budget which totals £85.9m (as set out in Appendix 4).

· Proposes the redeployment of £2.6m of resources (as set out in Appendix 5).

· Identifies £456,000 of pressures and costs absorbed (as set out in Appendix 5).

· Reviews the charges made by this service (as set out in Appendix 6).

4 Revised budget 2003/04

4.1 The most recent 2003/04 budget monitoring report, which was presented to the Executive Member - Environment on 11 November 2003 and the Environment Policy Review Committee on 3 December 2003, provided an update on the current year's budget, including changes to the 2003/04 cash limit and a review of the latest budget monitoring position.

4.2 Although the overall budget monitoring position appeared satisfactory, the report indicated that further savings would need to be achieved on the budget for management and support services, to restrict expenditure to the cash limit. It also drew attention to the position on public transport support where very little scope remained available within the budget to meet any further pressure from bus subsidy contract changes during the remainder of the year.

4.3 The report went on to review the position on the highways maintenance budget, where net savings of £1.090 million, arising mainly from lower than anticipated tender prices on major highways maintenance schemes within the capital structural maintenance budget, were available for redistribution. Furthermore, there were also indications that the position on the waste management budget for the disposal of abandoned vehicles had eased, as the financial impact arising from the planned introduction of the End of Life Vehicles (ELV) directive had yet to be experienced.

4.4 A further budget monitoring exercise has now been completed within the Environment department, taking account of progress in implementing spending plans and recent information on expenditure and income trends, to arrive at a revised budget for the year based on the end of November 2003 position. The main issues arising from the budget monitoring review are discussed in the following paragraphs.

Cash limit changes

4.5 The previous budget monitoring report made reference to a number of previous changes to the cash limit that had been made since the 2003/04 original budget was approved in February 2003. These adjustments has increased the Environment revenue budget cash limit to £83.083 million. The following further changes to the cash limit have now been made:

· A transfer of £119,000 from Recreation and Heritage in respect of the Chichester Harbour Conservancy precept, responsibility for which has now transferred to Environment.

· An increase of £24,000 reflecting an additional inflation allocation to cover the higher costs of business rates.

· Other minor adjustments resulting in an increase of £1,000.

4.6 The adjusted 2003/04 cash limit is £83.227 million, taking into account the above variations.

Highways maintenance

4.7 As mentioned above, the previous budget monitoring report drew attention to net savings of £1.090 million that were available for redistribution from variations within the capital maintenance programme, arising from lower than anticipated tender prices on two major maintenance schemes. A revised highways maintenance programme has now been prepared reflecting the re-allocation of this saving together with a number of other changes. The revised programme includes, within capital maintenance, additional provision for structural patching works and other special maintenance schemes. In addition, a sum of £350,000 has been allocated to the highways maintenance revenue budget to meet a number of pressures including higher expenditure on IT systems replacements, additional volumes of routine and reactive maintenance work being carried out under the highways term maintenance contract and the need for further works allocations to cover demands in the west of the county.

4.8 Appendix 3 sets out details of the revised 2003/04 highways maintenance programme, showing variations against the earlier forecast reported in the previous budget monitoring report.

Management and support services

4.9 The 2003/04 budget for management and support services assumed that savings from staff turnover and other housekeeping efficiencies would be achieved during the year in order that overall departmental expenditure could be contained within the budget. The 2003/04 savings requirement was set at £603,000 which was equivalent to 3.0% of the departmental budget.

4.10 The previous budget monitoring report, covering the first six months of the financial year, identified expected savings of £317,000. The latest review, covering the period to the end of November has identified further savings from staff turnover and higher income, although this has been more than offset by additional provision to meet forecast expenditure on legal costs of planning appeals, in particular the Farwell appeal, and for senior staff advertising. These pressures have reduced the total of identified savings to date to £283,000, meaning that further savings of £320,000 still need to be identified.

4.11 However, there are also significant funding pressures facing the department next year for IT developments due to mainframe systems replacements, SAP implementation and continuing e-Government developments. An unfunded pressure of £233,000 has been identified for the 2004/05 IT budget, in addition to the base budget provision, which would need to be covered by redeploying resources within the budget. It is therefore proposed that further efficiency savings of £100,000 be sought this year from within management and support services so that this sum may be carried forward to the 2004/05 budget for this purpose.

4.12 Clearly the revised budget position, which requires further savings of £420,000 to be achieved during the remainder of the year, will need to be very carefully managed. Although further incidental savings are likely to emerge during the next few months, opportunities will also need to be taken to restrict departmental expenditure by carefully managing the appointment of replacement staff and a small delay in commissioning some work from external consultants until the new year.

Public transport

4.13 A 2003/04 revised budget of £5.406 million has been set for public transport which is equal to the cash limit for this service. Recent contract variations and a number of other adjustments have been made to the forecast outturn on the budget for bus subsides which has slightly reduced the overall level of committed expenditure, in comparison with the previous budget monitoring review. At the time of writing, an uncommitted sum of £30,000 is available within the bus subsidies budget and it is expected that this sum will be sufficient to meet the part-year cost of any further contract increases during the remaining months of the year.

Waste management

4.14 An increase of £394,000 was made during the preparation of the 2003/04 original budget for the disposal of abandoned vehicles, in line with the additional support provided by the Government, to cover anticipated higher costs associated with the planned introduction during 2003 of the End of Life Vehicles (ELV) directive. The previous budget monitoring report made reference to recent expenditure trends that suggested pressure on this budget had eased following the previous year's audit investigations, together with more favourable market conditions for the sale of scrap metals. The impact of the planned introduction of the ELV directive had also not yet been experienced.

4.15 Formal implementation of the ELV directive has now been delayed by the Government due to concerns raised by local authorities and the private sector about their ability to meet the directive's obligations. Although this European Union directive came into force in October 2000, consultation by DEFRA/DTI was not issued until March 2003. A formal implementation date has still not been stated, but is expected to be imminent. As a result of these factors, expenditure has been lower than originally anticipated, and it is forecast that the budget for the disposal of abandoned vehicles will be underspent by some £311,000 during 2003/04.

4.16 When the directive is finally implemented there will be an obligation to dismantle, de-manufacture and recycle a greater proportion of each end of life vehicle or abandoned car. The recycling target for 2006 is 85% by weight and this will increase to 95% by weight by 2015. Processing costs are going to increase, regulation will be tighter and there is a real concern that the number of vehicles abandoned, which has already been increasing over the past five to six years, will increase significantly. DEFRA has estimated that the initial increase in the number of abandoned cars could be close to 150,000 per annum nationally.

4.17 At this stage it is impossible to predict whether the 2004/05 base budget of £554,000 for the disposal of abandoned vehicles, including the ongoing Government support of £394,000, will be sufficient to cover the County Council's future costs, once the ELV directive is fully implemented. The County Council did receive additional Government support to meet a previous legislative pressure arising from the disposal and storage of refrigeration equipment. However, this proved to be inadequate. A prudent course of action would be to seek approval for the carry forward of this year's projected underspending of £311,000, to supplement the 2004/05 abandoned vehicles budget. To the extent that this sum was not fully required to meet higher expenditure on the disposal of abandoned vehicles next year, it would be available to help meet any other unforeseen pressures that may arise.

Overall position of 2003/04 revised budget against cash limit

4.18 Detailed figures relating to the 2003/04 revised budget are shown in Appendix 7 (the green pages). The calculation of the cash limit is set out in Appendix 1, whilst Appendix 2 sets out the recommended 2003/04 revised budget, summarised by division of service.

4.19 Overall, the recommended revised budget is £83.166 million, being £61,000 below the 2003/04 cash limit of £83.227 million. This variation reflects the reallocation of £350,000 to the highways maintenance revenue budget from savings on the capital structural maintenance programme (paragraph 4.7) which is partially offset by the proposed carry forward to the 2004/05 budget of planned savings of £100,000 on management and support services (paragraph 4.11) and the anticipated underspending of £311,000 on the waste management budget for the disposal of abandoned vehicles (paragraph 4.15).

5 Base budget 2004/05

5.1 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 £85.9 million.

5.2 Appendix 4 shows the make up of the base budget. Overall, the base budget includes a net increase in expenditure of £1.7 million, at constant prices, together with an allocation of £1.3 million to cover inflation during 2004/05. The main variations affecting the individual services are discussed below.

Highways maintenance

5.3 The 2004/05 base budget for routine highways maintenance is £19.946 million at November 2003 prices. The budget represents an increase of £678,000 (3.5%) compared to the 2003/04 original budget, at constant prices, including an additional £30,000 to cover routine maintenance of recently adopted highways, and £182,000 for additional revenue expenditure resulting from the implementation of capital improvement schemes.

5.4 The budget also includes increased funding of £185,000 for winter maintenance salting and snow clearance which has been met by adjusting the capital provision for structural maintenance schemes. This adjustment is in accord with the special budgeting arrangements that apply to winter maintenance whereby the base budget provision is set at a level equivalent to the average 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 budget for structural special maintenance.

5.5 During 2003/04 the County Council took over responsibility for part of the A339, from its junction with the A30 to the west Berkshire boundary, following the formal de-trunking of this highway. In 2004/05 the County Council will receive special grant of £408,000 to cover routine expenditure on this highway, which has been included in the 2004/05 base budget.

5.6 An assessment of inflation during the past year has been included in the calculation of the 2004/05 base budget. Actual inflation on the routine highways maintenance operations has been assessed as being £594,000 (3.1%), which is £127,000 higher than the corporate allowance of 2.5% included in the 2003/04 original budget. It will be necessary to seek efficiencies to absorb this excess inflation during 2004/05.

5.7 Although the specific variations and technical adjustments outlined above have increased the base budget provision for routine highways maintenance, this service area remains under significant pressure. Proposals to address this situation by re-prioritising the overall provision for both revenue and capital highways maintenance, are discussed later in the report.

Public transport

5.8 The 2004/05 base budget for public transport support and co-ordination has been set at £5.406 million, in line with the control total for this service. The base budget figure assumes that savings of £117,000 are made to absorb the full year costs of higher expenditure on bus subsidies, arising from higher inflation and other contract variations during the current financial year. However, further pressures are also expected to arise during 2004/05 which would require additional offsetting savings to be made unless extra resources for this service are made available. This issue is also discussed more fully later in the report.

Management and support services

5.9 This budget mainly represents the running costs of the Environment Department. For presentational purposes, the management and support services budget has been allocated between highways and transportation and planning services in the appendices, in order to comply with the requirements of the CIPFA Best Value Accounting Code of Practice. However, in effect, this budget is being managed and controlled as one combined departmental budget.

5.10 It is normal practice, in setting the budget for management and support services, to assume that turnover savings from staff vacancies, together with other housekeeping efficiencies, will be achieved in order that overall departmental expenditure can be contained within the cash limit. As mentioned in paragraph 4.9, the original 2003/04 savings target for the Environment Department was £603,000, equivalent to 3.0% of the management and support services budget. The 2003/04 savings target was set at a higher level than in previous years, reflecting the need to redeploy resources to fund specific studies within the department, the higher than usual cost of increments and three additional posts.

5.11 The 2004/05 cash limit for management and support services is £20.203 million, being largely a roll-forward of the 2003/04 budget. A 2004/05 base budget equivalent to this sum has been set. However it will be necessary to absorb additional departmental running costs of £307,000 in 2004/05, mainly relating to the estimated net cost of salary increments together with increased expenditure arising from continuing growth in demand for information technology. The overall shortfall in the management and support services base budget is therefore £910,000, equivalent to 4.5% of this budget.

5.12 Although it is considered to be a perfectly reasonable approach to include a challenging target for efficiency savings from staff turnover and other housekeeping economies in the base budget, it is considered that the projected 2004/05 base budget shortfall of £910,000 is too high. Certainly, at this level, key areas of the department's work could not be resourced adequately which would lead to a corresponding loss of service to members and the public. Also there is no provision within the budget for any additional legal and other costs that might arise from decisions of the Regulatory Committee. It is therefore suggested that the departmental savings target be set at a similar level to the current year and that the necessary additional funding of £307,000 for management and support services be a first call against the sum of £1.343 million that has been allocated to Environment to cover inflation during 2004/05.

5.13 The Executive Member, Environment, has requested that the Director of Environment carry out a follow-up review of the Environment department, following the implementation of the reorganisation of the former County Surveyor's and County Planning departments during 2003/04. This would include a review of the third tier management level. Such a review is required as part of day-to-day housekeeping to ensure that the new combined department is working efficiently and that all opportunities for savings from the re-organisation have been fully realised.

5.14 There is also a need to incur additional estimated expenditure of £50,000 during 2004/05 to update the highways land terrier. This will be managed within the overall base budget and is expected to generate additional income in future years through the sale of land surplus to highway requirements.

Waste management

5.15 A base budget of £36.222 million has been set for the waste management services for 2004/05. 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 £33.349 million, equivalent to 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. This area accounts for £2.873 million, or 8% of the waste management budget.

Waste contract and related budgets

5.16 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.

5.17 The base budget for the contract and related services 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. The budget allows for the cost of current commitments, which include known and estimated tonnages for the current year, at January 2003 prices. The contract is re-priced on 1 January each year in line with changes in the Retail Prices Index (RPI).

5.18 No allowance has been made within the base budget for growth in waste volumes beyond 2003/04 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 off-site highways improvements for the Marchwood energy from waste incinerator. 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 during 2004/05. Quarterly allocations will be made to the waste management budget in line with actual costs incurred during next year.

Other waste management budgets

5.19 Base budgets for the other waste management services, totalling £2.873 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 2004/05 on these services apart from the budget for the disposal of abandoned vehicles where levels of expenditure next year, although uncertain, may well be significantly above the base budget provision. As mentioned in paragraph 4.17 above, it is recommended that because of uncertainty over future levels of expenditure on this service, the projected underspending of £311,000 in 2003/04 be carried forward to supplement the 2004/05 base budget provision.

Other services

5.20 The 2004/05 base budget contains a sum of £24,000 to enable the County Council to carry out its responsibilities under the Reservoirs Act, 1975.

5.21 The base budget total also includes £119,000 for the transfer of responsibility for the Chichester Harbour Conservancy precept payment from Recreation and Heritage to Environment. The actual 2004/05 precept payment for Chichester Harbour is expected to be £129,000, which would result in a call of £10,000 on the Environment service's 2004/05 inflation allocation.

5.22 As mentioned in paragraph 5.12, the central allocation to the Environment services to cover future inflation during 2004/05 is £1.343 million, including provision of £774,000 (2.5%) for price increases on non-pay budgets. The recommended calls on this allocation, to cover higher costs on management and support services and the Chichester Harbour Conservancy precept, total £317,000. This reduces the sum available for re-pricing other budgets to £457,000 (1.5%) which would be allocated to individual services on a pro-rata basis.

6 Redeployment proposals, efficiency improvements and cost pressures

6.1 The Cabinet requires all services to consider and report on:

· the redeployment of resources required to offset any new spending priorities, inescapable budget pressures, or legislative requirements which otherwise cannot be met within the budget guidelines

· efficiency improvements achieved in absorbing pressures and costs within the budget guidelines

· the annual review of charges and the maximisation of income

6.2 In addition, a reduction in this service's cash limit for SAP benefit realisation will be considered by the Executive Member - Policy and Resources on 23 January 2004. The reduction and consequent action required will be included in the County Council's budget report to the Cabinet on 12 February 2004.

6.3 Details of redeployment of resources of £2,600,000 and cost pressures absorbed of £456,000 are included in Appendix 5.

Redeployment of resources

6.4 The following paragraphs set out a number of service pressures and proposals that cannot be included within the definition of the base budget, together with proposals for compensating savings.

6.5 The redeployment proposals are considered under the following main headings:

· public transport

· highways maintenance

· transport policy

· strategies

· pressures to be offset by additional income

· other redeployments

Public transport

6.6 Bus subsidies - additional funding is required to maintain the current tendered bus network. In addition to the existing pressure of £117,000 in the base budget, arising from higher contract prices during 2003/04, contract prices are also expected to rise significantly next year, in line with experience elsewhere in the south-east. In total, it is estimated that an additional sum of £200,000 is required in 2004/05, on top of the normal inflation allowance, to cover the existing base budget pressure and to provide for future re-tendering of bus subsidy contracts next year and any future deregistration of commercial services. It would not be possible to accommodate this cost unless other bus services are reduced, which would have a small impact on PSA and BVPI targets for increasing bus patronage.

6.7 Cango - the initial Bus Challenge funding for Cango ends during 2004/05 and a sum of £260,000 per annum is required to maintain these services in the longer term. The impact, if this is not funded, would be a reduction in Cango services at a time when these services are proving very popular with growing patronage. Again, any reduction would have a small impact on PSA and BVPI targets, but the main effect would be in terms of social exclusion and public perception of these very popular public transport services and would be contrary to the four Cabinet short-term priorities.

6.8 Rural transport partnership/community transport - schemes have been pump-primed for three years by the Countryside Agency but as this funding ends in 2003/04 they will need to be funded from elsewhere at a cost of £50,000 per annum. The alternative would be to withdraw or reduce the schemes which would, again, be contrary to the Cabinet's short-term priorities

6.9 There is a clear need for the County Council to maintain its commitment to the funding of public transport in line with its agreed corporate strategies and priorities. Although the number of passenger journeys has fallen during the past two years, the effect of introducing bus quality partnerships on the routes with the most passengers, and the marketing programme to be undertaken this year, are all designed to reverse this trend. However unless additional resources are made available for public transport, then consideration would need to be given to the re-prioritisation of the overall public transport budget to accommodate the above pressures and to enhance value for money. It is suggested that the Cabinet consider whether they wish to allocate additional resources to public transport when they agree the final budget submission to the County Council in February.

Highways maintenance

6.10 A significant number of budget pressures have been identified, including those arising from Government legislation and the implementation of various Codes of Practice. It will be necessary to fund these items from the revenue budget for highways routine maintenance, which is already under considerable pressure.

6.11 Highways inspectors - changes to the County Council's Highways Maintenance Management Plan (HMMP) are being presented to the Executive Member in February to implement recommendations contained within the Highways Maintenance Code of Practice. This requires an increased frequency of highways inspections. A trial of the proposed new arrangements during the autumn has confirmed that present staff numbers are unable to cope with the additional workload, which would result in the required highways inspections not being carried out. This puts the County Council in a difficult position in the event of claims against the authority resulting from highways defects. In addition, health and safety requirements now mean that driven highways inspections must be carried out by two staff members instead of one. The proposal is to increase the number of highways inspectors by 3 FTEs, at an estimated additional cost of £90,000 per annum.

6.12 UK Pavement management system (UKPMS) - new inspection methods for collecting road condition data will need to be implemented from 2004/05, initially for "A" roads, followed by "B" and "C" roads the following year and then unclassified roads. To not carry out the surveys using the approved methods would jeopardise the County Council's funding allocations from the Government for highways maintenance. The estimated additional costs are £27,000 in 2004/05, rising to £130,000 in 2005/06 and £350,000 per annum thereafter. For the next two years the usual HAMP assessments (£50,000 per annum) will be continued until the new UKPMS system has been fully tested.

6.13 Tree maintenance - all districts carry out shrub maintenance on urban highway verges for the County Council on an agency basis and some districts also carry out tree maintenance. The County Council undertakes to fund work to a highways standard, but there is a concern that current levels of funding for tree maintenance is not sufficient to comply with statutory obligations. Three districts have recently given up tree maintenance and have returned the work to the County Council, putting a higher workload on the staff within the department's arboriculture section. Estimated additional works costs of up to £60,000 per annum are required to deal with the funding issues together with a need for one additional staff member to accommodate the additional work in the arboriculture section, at a cost of £21,000 per annum.

6.14 Highways maintenance IT systems - the County Council's ability to carry out its statutory requirements relating to highways maintenance and streetworks, including the public interface, is becoming increasingly dependent upon the department's specialist IT systems. Recent changes in legislation (UKPMS, streetworks, Code of Practice for highways inspections) have made it mandatory to have these systems in place. Estimated additional cost of £489,000 are required in 2004/05 to cover highways maintenance IT software and licence costs, system management and support, and systems replacements and developments.

6.15 Ragwort - impending changes to legislation will put greater emphasis on responsible local authorities to deal with Ragwort. At the moment the County Council's treatment varies from area to area, with a pro-active annual pulling programme in the New Forest, due to local circumstances, with a generally more reactive approach elsewhere. The County Council is seeking LGA support for a nationwide bid for additional Government resources to help meet the impact of this legislative charge. However, any additional expenditure in 2004/05 would need to be managed locally within existing allocations and would add further to the above pressures on the revenue budget for routine highways maintenance.

6.16 The above items, totalling £687,000, will add considerably to the pressure on the revenue base budget for routine highways maintenance. The 2004/05 base budget is already inadequate to meet anticipated needs next year as in addition to the above pressures it will also be necessary to provide for the continuing impact of the pressures identified in the current financial year (see paragraph 4.7), including higher volumes of routine and reactive maintenance work being carried out through the term maintenance contract.

6.17 An engineering assessment has been made to help determine the allocation of the locally resourced highways maintenance base budget for 2004/05. The overall sum available is £31.101 million, comprising the revenue base budget for routine maintenance together with the locally resourced capital programme allocation for structural maintenance of non-principal roads. An allocation of £21.109 million is proposed for routine highways maintenance in 2004/05, which should be sufficient to accommodate all of the expected pressures on this service area, including those outlined above. The balance of £9.992 million would be available for capital structural maintenance of non-principal roads.

6.18 The overall 2004/05 budget provision for highways maintenance includes the sum of £3.588 million, reflecting the continuation for a further year of the specific additional capital maintenance provision allocated by the Cabinet in the 2003/04 budget for an enhanced programme of repairs to local roads and footways. In the report to the Cabinet meeting on 15 December 2003, setting out the guidelines for the revenue budget 2004/05, it was suggested that £0.5m of this sum be allocated to meet the increased cost of public transport (as set out in paragraphs 6.6 to 6.8). In addition, Government support for the maintenance of roads and bridges, included within the 2004/05 Local Transport Plan settlement, totals £15.396 million, representing an increase of £2.240 million (17.0%) over the allocation for 2003/04.

Transport policy

6.19 Specific Marketing Initiatives - The County Council, in its Local Transport Plan, is committed to increasing travel choice and promoting alternatives to car use, not only to help combat congestion but also because of the social, safety, environmental and health benefits. While much progress has been made in providing new facilities through the capital programme and quality partnerships, it is clear that , in order to meet its targets on behavioural change, the County Council must become involved in actively promoting their use. In 2003/04 there have been specific promotional exercises on bus corridors and publicity (eg the opening of Chandlers Ford station) with some encouraging results in terms of increased awareness and usage. While some publicity work can be carried as part of a scheme there is a need for a sustained programme of promotional and marketing activity, skilfully focussed on areas where there is real potential for behavioural change. An additional sum of £200,000 per annum is proposed, which would enable a programme of specific marketing schemes to be introduced, possibly in conjunction with other marketing campaigns (eg waste management and sustainability) to provide greater efficiency.

6.20 Technical studies - Local Transport Plan. The County Council will produce its new Local Transport Plan in July 2005. The quality of this document will, to a large extent, determine the level of resources that will be available for transport improvements in the five year period 2006 to 2011. An increase of £200,000 is proposed to enable a programme of technical studies to be commissioned to address the development of schemes for the next Local Transport Plan bid and future capital programme. The implications of not carrying out this work would result in an inability to fully justify and validate transport policies and project priorities, leading to failure in securing funding for major schemes and other projects.

6.21 Sub regional strategies modelling - The County Council is committed to playing a significant role in the development of sub-regional strategies with the regional assembly (SEERA). It is developing new Area Transport Strategies. A sum of £250,000 is included in the proposal for redeployment to develop a model or models in order to assess the transport impact of regional and sub-regional growth options and help the Area Transport Strategy Panels and Solent Transport Partnership develop their approaches to the challenges ahead. In the south of the county, it should be possible to build on the model developed for the Government as part of the South Coast Multi-Modal Study. The County Council will seek funding in this area from its partners.

6.22 Although the above three items relate to the development of future integrated transport policies and programmes, this type of spending is revenue expenditure in nature and cannot therefore be met from the local transport capital allocations for integrated transport provided by the Government. However, it is proposed to make additional provision of £650,000 for the above items in the revenue budget by reallocating equivalent funds from the locally resourced capital programme provision for structural maintenance. However, to ensure that the total capital highways structural maintenance budget is not reduced, it is proposed that a correspondingly greater proportion of the Government's annual local transport settlement is allocated to structural highways maintenance, with a smaller element being used in support of future expenditure on integrated transport improvement schemes.

Strategies

6.23 Spatial strategy group - an operational budget of £55,000 per annum is proposed, for the spatial strategy group, to fund non-staff expenditure associated with projects and other tasks. For 2004/05 these would include design and dissemination of research findings and draft plans, to contribute to the cost of sub-regional work in the Blackwater Valley, Western Corridor (Thames Valley), and South Hampshire, although some of this would be dependent on suitable match funding from other bodies.

6.24 Materials Resources Strategy (MRS) - further expenditure is required to continue work on the development of the County's Materials Resources Strategy including, during 2004/05, the preparation of the consultation draft Minerals and Waste Local Development Framework (MWDF). Some funding towards this work is to be provided from the Natural Resources Initiative (NRI) and the waste management revenue budget, and a contribution from Project Integra is also being sought. The impact of not providing resources for this initiative would be a failure to meet corporate strategy aims in relation to the management of natural resources and to jeopardise the PSA target concerning diversion of waste from landfill. The opportunity for future strategic budget savings from waste disposal would also be lost. A continuation of the level of support of £100,000 is proposed for MRS in 2004/05.

6.25 It is proposed that provision be made against the management and support services revenue budget for the above items, to be met from a continuation of the redeployments included in the 2003/04 budget for the Minerals and Waste Local Plan and for planning studies and land management plans.

Pressures to be offset by additional income

6.26 This category includes a number of additional budget pressures provision for which will need to be included within the management and support services budget. These are to be funded from anticipated extra income:

· additional staff resource of 1 FTE in the development control section to meet SLA target for turnaround of requests for property searches (£20,000 per annum).

· additional resource for one year to develop systems for data entry and land boundary research and for the development of a minerals and waste web site (£55,000 in 2004/05 only).

· additional expenditure of £25,000 in 2004/05 to deal with statutory elements of the MWDF process following the completion of the MRS. Budget pressures will continue in subsequent years and a base budget increase would need to be considered in 2005/06 to cover the additional costs of the future statutory processes of the MWDF, including public examination and adoption.

· additional staff resources of 2 FTEs are required to improve the County Council's performance in connection with increasing workload and case complexity of planning applications and appeals processes. This is necessary to comply with expected service delivery (BVPIS), underpinned by good practice service standards, the Ombudsman and the Courts (£50,000 per annum).

6.27 It is planned that the above expenditure, totalling £150,000 in 2004/05, be accommodated by allocating anticipated additional departmental income arising from land searches, section 38 fees and planning application fees. It is also expected that the department will receive additional income from future allocations of Government specific grant for planning delivery, although details of this grant have not yet been received by the County Council. Decisions on whether to commit the extra expenditure would be subject to the receipt of the anticipated additional income.

Other redeployments

6.28 Environment strategy - there is a clear need to establish a separate operational revenue budget of £120,000 per annum for the environment strategy group. This budget would provide earmarked resources to enable the group to respond to a number of commitments including the County Council's involvement with strategic partnerships and the commissioning of specialist consultancy support, which would enable the County Council to respond to new initiatives and environment policy issues which are driven by the European Union and the Government. Unless this funding is provided, the credibility of the County Council, in relation to partnership working, would be threatened and opportunities to influence major components of Hampshire's environment through leading edge research would be lost.

6.29 Ecology - an increase of £40,000 to the ecology group's revenue budget is required to support the County Council's statutory development control responsibilities. This includes the funding of an existing 1 FTE post, together with additional expenditure on ecological surveys and assessments. Without this additional resources, the County Council would fail to protect vulnerable species and to meet its statutory planning obligations. This service area is being temporarily funded by withholding an equivalent level of historic buildings grant in 2003/04.

6.30 Waste management administration - additional operational support is required in the waste management section to support the control and development of the waste contract, the management of closed landfill sites and household waste recycling centres (HWRC). The relocation of the Winchester HWRC to Bar End, as part of an innovative Eco centre development, is a major corporate project over the next 12-15 months. Two existing sites have temporary planning permission which need addressing during 2004/05. Historically, one post within the waste management section has been responsible for all aspects of HWRCs. However, if the Bar End project is to be delivered on time and to budget, and other key HWRC work delivered, then additional support will be required. The cost of this additional support, representing an additional 1 FTE, is estimated at £35,000 per annum. A further post is required, but cannot be afforded in the current budget context, and a re-prioritisation of work across Project Integra and the Natural Resources Initiative will be necessary.

6.31 Areas of Outstanding Natural Beauty (AONB) Management Plans - in April 2004, the four AONB Management Plans are expected to be adopted by the County Council. The next stage would be the adoption of the Management Plans' action plans. The aim is to implement strategic initiatives and projects with AONB partners, allowing the County Council to become a full partner. A sum of £20,000 per annum is required for project funding of the four AONBs in Hampshire, which would ensure that other benefits are realised including sustained and healthy partnership arrangements, influence on key projects at a regional or sub-regional level and the potential to draw down significant future funding from national and European funds.

6.32 Information Technology - an additional allocation of £200,000 is necessary to implement unavoidable and necessary IT system changes in order that the department's targets for mainframe de-commissioning are achieved and so that progress can be maintained with other ongoing developments. It is planned that this allocation be re-directed in 2005/06 to meet costs associated with the implementation of national e-government targets. An additional staff resource of 1 FTE, at a cost of £33,000 per annum, is also required to provide adequate project management resources for the increasing number of IT systems developments.

6.33 In total, the above redeployment proposals amount to £448,000, although this may be partially offset next year by the planned carry forward of £100,000 from savings on the 2003/04 management and support services budget. The following savings have been identified to accommodate these items within the budget in the longer term:

· Historic buildings grants - elimination of this grants budget is proposed which, together with savings in administration within the department's Design and Implementation branch, would produce a saving of £210,000 per annum. This grant budget was reduced from a high point of £750,000 during the late 1980s and was also reduced in 1996 following local government re-organisation and in subsequent years. The grants are currently awarded to a maximum of 10%-20% of project costs and are targeted to reward specific projects including traditional agricultural buildings, repairs to Grade I and II* listed churches and other traditional building structures such as boundary walls.

· Traffic management - a reduction of £50,000 per annum in this operational budget, which would reduce the number of traffic management schemes that could be implemented each year.

· Consultants - a reduction of £50,000 in the base budget provision is proposed, although compensating provision for some work previously cover by this provision is being made under the transport policy redeployment proposals outlined above.

· Capitalisation - savings of up to £100,000 per annum be targeted by reviewing the extent to which current items of revenue expenditure may be accommodated within the capital programme. It is likely that this will require a re-direction of funding within the transport capital programme towards safety schemes.

· Other savings - a balancing saving of £38,000 would be required in 2005/06 which would need to be identified during the preparation of that year's base budget.

7 Review of charges

7.1 The service's 2004/05 revenue budget includes income of £6.9 million from fees and charges. Details of the material headings are included in Appendix 6.

7.2 There are some mandatory and national charges which the County Council is not able to vary, the main example for Environment 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 costs, no further increases are being recommended at the present time.

7.3 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 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.

8 Other expenditure

8.1 The budget includes some items which are not counted against the cash limit. At the present time this includes budgets for capital charges of £25.1 million, which are allocated to services in order to show the full cost of service provision, together with provision of £0.7m for supplementary levies from the three divisions of the Environment Agency, in relation to the County Council's continuing responsibilities for funding flood protection. The majority of funding for flood protection is transferring from local government to direct Government funding of the Environment Agency.

8.2 Further adjustments to the 2004/05 budget in respect of non-cash limited expenditure will be made later on in the budget process to cover 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.

8.3 Included at present within the Environment cash limited budget are costs of member support. These costs will be recharged to the Policy and Resources budget for corporate and democratic core services at a later stage of the budget process.

9 Staffing statistics

9.1 The average number of staff in the base budget is 760 FTEs. This compares with the original estimate for 2003/04 of 759 FTEs, which is an increase of one FTE, reflecting minor establishment changes during the current year. These staffing figures exclude school escorts which are included in the Education services budget.

9.2 The proposals for redeployment of resources (Appendix 5) would increase staffing numbers by seven FTEs.

10 Business units

10.1 The trading account for the River Hamble is summarised in Appendix 8.

11 Best Value Accounting Code of Practice (BVACOP)

11.1 Appendix 7 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 the report. This mainly affects the presentation of the budget for the highways and transportation services where the total revenue budget for highways maintenance is split over three different budget 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 departmental running costs to be identified separately from operational service expenditure, is subsequently fully re-allocated over other divisions of service.

11.2 For 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 is included within the detailed budget pages to meet the requirements of the BVACOP.

Recommendation

1 That the Environment Policy Review Committee consider the proposals for the revenue budget 2004/05, that have been prepared in consultation with the Executive Member - Environment, prior to formal approval of the budget proposals by the Executive Member for submission to the Cabinet.

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

Cabinet : 15 December 2003 - 2004/05 Provisional Local Government Finance Setttlement and Budget Guidelines

Executive Member - Environment : 11 November 2003 - Revenue Budget Monitoring 2003/04

Appendix 1

Environment

Revised budget 2003/04

Calculation of the cash limit for the revised budget 2003/04

The following table shows the progression from the original budget for 2003/04 to the cash limit for the revised budget 2003/04. Both are at estimated outturn prices 2003/04.

Appendix 2

Environment

Revised budget 2003/04

Summary comparing the revised budget with the cash limit

Appendix 3

Environment

Revised budget 2003/04

Summary showing detailed allocation of highways maintenance budget

Appendix 4

Environment

Revenue budget 2004/05

Construction of the base budget 2004/05 - Summary of cash limited expenditure

The following table shows the progression from the original budget for 2003/04 which was prepared at outturn prices 2003/04 to the base budget 2004/05 at outturn prices 2004/05.

Annex 1 to Appendix 4

Environment

Calculation of base budget 2004/05

Parameters used in the compilation

Annex 2 to Appendix 4

Environment

Calculation of base budget 2004/05

Significant costs of inflation

Annex 3 to Appendix 4

Environment

Calculation of base budget 2004/05

Significant variations

Major variations between the repriced budget 2003/04 and the base budget for 2004/05 at November 2003 prices contributing to the increase of £1,737,000 (2.1%) are set out below:

Annex 4 to Appendix 4

Environment

Base budget 2004/05

Analysis of variations

Appendix 5

Environment

Revenue budget 2004/05

Proposals for redeployment of resources, efficiency savings and cost pressures absorbed

Appendix 6

Environment

Revenue budget 2004/05

Review of income

ii)

Appendix 7

Environment

Revenue budget

Reconciliation of the original 2003/04 budget on the following pages with the 2003/04 budget in the published budget book.

Appendix 8

Environment

Base revenue budget 2004/05

Business units - summarised trading accounts

The budget of the River Hamble Management Committee is outside the cash limited budgets of the Environment services 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 combined statutory Harbour Authority and Management of Moorings and the Visitor Partnership. They also include the exceptional income of £100,000 each year from the sale of the river piles to the Crown Estate and expenditure within the year met from reserve (ie replacement of maintenance piles and a repayment of mooring rental to Hamble-le-Rice Parish Council in respect of previous years). These are the second and third instalments of the sale proceeds of £0.5m in total to be phased over five years.

The combined Harbour Authority and Management of Moorings operation is run on a break-even basis. Historically, the reserve exists to cover unforeseen major expenditure (such as the replacement/refurbishment of the maintenance piles in the 2003/04 revised budget). The higher forecast reserve level reflects the receipt of the pile instalments from the Crown Estate.

The Visitor Partnership, a joint venture with the Crown Estate, is still operating at a deficit. It has its own reserve (in deficit) including in the above figure. Initially this deficit was covered from the main Hamble operations. However, the pile receipts have covered this deficit. In the longer term, any future surpluses on the Visitor operation will be applied to pay off this deficit.