Appendix 3

1 Expenditure Outside Service Cash Limits

1.1 Table 1 below provides a detailed schedule of the variations on budget outside service cash limits, which is summarized in Table 4 of the report.

Table 1

	Revised Budget £000	Actual £000	Variation £000
Hampshire Fire & Rescue Authority (HFRA levy)	41,525	41,200	-325
Contingency provision:
Waste Management contract	788	-	-788
HFRA	161	-	-161
Members Pensions	48	-	-48
Capital financing charges	31,242	31,215	-27
Interest on balances	-2,600	-4,946	-2,346
Revenue contributions to capital	27,384	27,384	-
Insurance provision	-	-347	-347
Contribution to insurance reserve	-	1,072	1,072
Business rates	1,277	-	-1,277
Magistrates' Courts	10,577	10,632	55
Transfer from Magistrates' Courts reserve	2	-6	-8
Highways winter maintenance	1,852	3,113	1,261
Flood Protection levies	5,728	5,728	-
Mandatory Awards to Students	1,920	850	-1,070
Doubtful debt provision	-	-22	-22
Provision for part-time pensions	-	250	250
Specific grants	-156,766	-155,758	1,008
	-36,862	-39,635	-2,773

Details of the variations are as follows:

HFRA levy (-£325,000 and -£161,000 saving within contingency)

1.2 The original HFRA levy on the County Council for 2003/04 was £40.900m and it was increased during the course of the year to £41.525m, mainly because the cost of the Firefighters' pay award was higher than the 4% assumption made in the original budget. The HFRA has yet to consider its final accounts for 2003/04 but the outturn is expected to be £41.200m, £325,000 lower than the revised levy or £300,000 above the original levy. At the time the revised budget was prepared further increased costs were forecast as a result of the impact of higher levels of operational activity. This additional provision was not required producing a further saving of £161,000.

Waste Management Contract (£-£788,000)

1.3 The revised budget incorporated allocations of £1,208,000 to the Environment Service in respect of cost increases on the Waste Management contract during the first six months of the financial year. Subsequent allocations totalled £1,704,000 so that the overall allocation for the year amounted to £2,912,000, £788,000 lower than the sum of £3,700,000 included in the original budget. The main reason for the saving is that there has been a welcome reversal in the upward trend of household waste volumes during 2003/04. Inclusive of non-recyclable waste collected via household waste recycling centres, overall volumes have declined by 1.4% as compared with assumed growth of approximately 4% in the budget. The effect on the cost of the waste management contract of lower waste volumes in 2003/04 was partly offset by an increase in the provision for claims arising from the risk-sharing arrangements in the contract.

Members pensions (-£48,000)

1.4 The County Council in September 2003 agreed the recommendation of the Independent Review Panel to allow members below the age of 70 to become members of the Local Government Pension Scheme. £104,000 was earmarked for the cost of additional employers' contributions. As only approximately half of the members eligible to join have initially chosen to do so, £49,000 of the sum earmarked has not been required in 2003/04.

Capital Financing charges (£-27,000)

1.5 The saving of £27,000 against the revised budget is summarised in Table 2 below:

Table 2

	Revised Budget £000	Actual £000	Variation £000
Asset management account and provision for debt repayment
Loan repayment and
- principal	14,291	14,282	-9
- interest	17,053	17,053	-
Capital charges to trading accounts	-295	-309	-14
Earmarking of trading account capital charges	193	189	-4
Capital financing charges	31,242	31,215	-27

1.6 Short term interest rates in the latter part of the financial year were very close to the budgeted assumptions, with base rate increasing by 0.25% to 4% in February 2004. The average rate of interest payable for the year at 5.01% was within 0.01% of the estimate in the revised budget.

Interest on revenue balances (-£2,346,000)

1.7 Interest on revenue balances is difficult to forecast with accuracy as relatively small changes associated with the large cashflows associated with payments and receipts can have a significant impact on the internal resources available to earn interest from day to day. An underspending had been anticipated in the most recent budget monitoring report, but in the event cashflow movements were even more favourable than assumed, resulting in a larger saving. Interest received on business rate refunds was also higher than forecast.

Revenue contributions to capital (-)

1.8 The revised capital financing plan for 2003/04 required the use of revenue contributions to capital of £29.8m and of £3.3m from the capital reserve. Capital payments were £6.4 lower than forecast and after allowing changes in borrowing approvals, capital grants and external contributions, payments to be funded from local resources were £7.3m lower than estimated. As a result, rather than a withdrawal of £3.3m from the capital reserve a contribution of £4m is required to match additional capital payments in future years. Revenue contributions to capital in 2003/04 are £27.4m, as set out in Table 3 below:

Table 3 - Revenue Contributions to Capital in 2003/04

	£000
As per revised budget	29,782
Increase to reflect transfers between revenue and capital, mainly school revenue budgets being used to fund capital expenditure	1,583
Transfer to capital reserve as a result of lower capital payments in 2003/04	-3,981
	27,384

Insurance (Provision - £347,000 Reserve £1,072,000)

1.9 The assessed value of outstanding liability claims was £0.4m lower at 31 March 2004 than at the end of the previous year, while claims paid in the year broadly matched the level of premiums. There was therefore a saving of £0.4m in the insurance provision required, as set out in Table 4 below:

Table 4

	Buildings £000	Liabilities £000	Total £000
Provision at 1 April 2003	-	10,024	10,024
Premiums for 2003/04	1,950	3,971	5,921
Payments charged to provision	-3,883	-2,081	-5,964
Outstanding provision at 31 March 2004	-1,933	11,914	9,981
Outstanding liabilities at 31 March 2004	-	9,634	9,634
Variation in provision required	1,933	-2,280	-347

1.10 Though in accounting terms there are no liabilities for which a provision is required in the accounts in respect of damage to the County Council's buildings, there is nonetheless an increasing level of commitments in 2004/05 or in later years in respect of Fire Damage reinstatement in schools which has increased from around £6.7m a year ago to £8.7m. It is therefore proposed both to transfer the 2003/04 saving against the insurance reserve (£347,000) and the amount by which actual spending in 2003/04 within the schools block is lower than budgeted (£745,000) to the insurance reserve. The latter sum would be subject to a supplementary delegation to schools in 2004/05.

Business rates (-£1,277,000)

1.11 Business rate savings of £1,277,000 against the revised budget arose mainly as a result of successful appeals against school and library valuations, generating substantial refunds as a result of backdating.

Magistrates' Courts (£55,000, but matched by increased Government grant of £47,000 and a transfer from reserves of £8,000)

1.12 The Magistrates' Courts Committee set its revised budget for 2003/04 on the basis of a planned underspending of £220,000 against the cash limit set by the Department of Constitutional Affairs. In the event the underspending in 2003/04 was only £161,000, £59,000 lower than planned, or £55,000 after allowing for the contributions from Isle of Wight, Portsmouth and Southampton unitary authorities. The impact upon the County Council's position in 2003/04 is however neutral after allowing for additional Government grant of £47,000 and an adjustment to the transfer from the reserve from designated Magistrates' Courts underspendings.

Highways Winter Maintenance (£1,261,000)

1.13 The County Council's policy is to budget for winter maintenance on the basis of average spending at current prices in the previous four years, with any under/overspending at the year end being outside service cash limits. Spending in 2003/04 was £3,133,000, £1,261,000 above the revised budget. Costs of £980,000 were incurred in treating the network during two periods of snowfall in January and February 2004. County-wide salting operations were carried out on 71 days during last winter, significantly above the average of 45 days in recent winters.

Mandatory Awards to Students (-£1,070,000 but offset by reduced specific grant of £1,068,000)

1.14 The County Council is responsible for paying awards to disabled students towards their special needs, which they receive in addition to student loans. Lower spending than budgeted arose because responsibility for payment of new grants transferred to the Student Loan Company during 2003/04. The awards are 100% grant-aided, but the County Council is responsible for the cost of any unrecovered grant overpayments.

Doubtful Debt provision (-£22,000)

1.15 The County Council's policy is to make a provision against a proportion of debts which are more than one year old proving to be irrecoverable, together with any more recent debts which are also likely to have to be written off. The overall provision at 31 March 2004 is £994,000, which is £22,000 less than the equivalent provision in 2002/03.

Part-time Pensions Claims (£250,000)

1.16 A provision of £1m was made in 2000/01 to cover potential backdated employers' contributions following a European Court ruling regarding the rights of part-time workers to join pension schemes. It is anticipated that Hampshire's claims will be resolved in 2004/05, but an additional provision has been made against an updated estimate of £1.25m for backdated employers' contributions.

Specific Grants (£1,008,000)

1.17 The net reduction of £1,008,000 is largely attributable to lower Mandatory Student Award Grant of £1,068,000 (paragraph 1.14), partly offset by an increased level of Magistrates Courts' grant of £47,000 (paragraph 1.12).