Contact: Ejner Knudsen, ext 7403 email: [email protected]

1 Introduction

1.1 This report presents an update of the revenue budget monitoring position previously presented in September.

1.2 It provides details of recent changes to the revenue budget cash limit for year and reports on the outcome of the latest budget monitoring review, which was carried out in consultation with Environment department budget holders during September and early October. Details of assessed expenditure to date and a forecast outturn for the year are provided for each major budget heading.

1.3 A detailed summary showing the planned allocation of the highways maintenance budget is provided and the report also reviews the achievement of planned staff turnover and other housekeeping savings on the management and support services. The latest budget monitoring positions on public transport and waste management are also discussed.

1.4 The overall budget monitoring position appears satisfactory for this stage of the financial year. However, a number of significant issues have been identified which will need to be considered further in constructing the 2004/05 revised budget, which will be reported to members in January.

1 Corporate strategy

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

i) Maximising life opportunities

ii) Stewardship of the environment

iii) Achieving economic prosperity

iv) Building strong and safe communities

v) Improving services

vi) Developing councillors and staff

2 2004/05 cash limit changes

2.1 The previous budget monitoring report in September made reference to a number of adjustments to the revenue budget cash limit since the original 2004/05 budget had been approved during February. These adjustments had increased the Environment services' revenue budget cash limit to £89.430 million. The following additional changes to the cash limit have also recently been made:

· An increase of £77,000 reflecting the approved transfer of expenditure on a number of community transport schemes from Social Services to Environment

· An allocation of £188,000 from the central inflation contingency to fund the cost of approved staff pay awards in excess of the allowance of 2.5% included in the 2004/05 original budget

2.2 The adjusted cash limit is therefore £89.695 million, taking into account the above variations. Appendix 1 provides an analysis of the budget over the main service headings, together with details of assessed expenditure to 30 September 2004.

3 Budget monitoring review

3.1 As in previous reviews, the budget monitoring process has involved meetings between finance section staff and those departmental offices with budget management responsibilities to consider trends in expenditure and income in order to arrive at an updated forecast outturn for each service heading. The outcome of this process was reported to departmental management during October.

3.2 Details of the main issues arising from the budget monitoring review are discussed in the following paragraphs.

Highways maintenance

3.3 The 2004/05 revenue budget cash limit for routine highways maintenance is £21.284 million.

3.4 Appendix 2 sets out in detail the 2004/05 highways maintenance programme, showing variations between the programme previously reported in September and the latest plan. For completeness, this statement also includes details of highways structural maintenance works being funded from the capital programme.

3.5 Overall revenue budget highways maintenance works allocations to date total £20.484 million, leaving reserves of £800,000 available to meet demands later in the year. A detailed review of pressures on the current year's routine maintenance budget, including the impact of an estimated increase of approximately £350,000 for street lighting energy and price variations on other budget headings, is ongoing and it is planned that the revised highways maintenance programme be reported as part of the 2004/05 revised budget in January. Revisions to the programme, both revenue and capital funded, will need to be considered at that stage, in order to absorb any excess inflation arising from annual contract re-pricings and to accommodate other budget pressures that have emerged.

Management and support services

3.6 The overall budget for the management and support services is £22.221 million, which mainly represents the running costs of the Environment department together with the remaining agency arrangements with the district councils. For presentational purposes, the management and support services cash limited budget is allocated between highways and transportation and planning services in the appendices, in line with the requirements of the relevant accounting codes of practice. However, in effect, this expenditure is being managed and controlled as one combined departmental budget.

3.7 As mentioned in the September budget monitoring report, the 2004/05 management and support services cash limit assumes that turnover savings from staff vacancies, together with other housekeeping efficiencies, will be achieved during the year in order that overall departmental expenditure may be contained within the budget. The 2004/05 general savings requirement was set at £634,000, equivalent to 2.9% of the budget. In addition, the department's Design and Implementation branch are required to find additional specific savings of £50,000 from administration, to help fund various redeployment proposals agreed in the construction of the 2004/05 budget. Total required savings are therefore £684,000.

3.8 The previous budget monitoring report, covering the first quarter of the financial year, identified actual savings from staff vacancies of £142,000. The latest savings figure for the year to date, based on the most recent budget monitoring review completed during September, has increased to £386,000, reflecting further savings from staff vacancies and other efficiencies. Although the achievement of the full savings will need to be monitored carefully during the remainder of the year it does, at this stage, appear likely that the overall target will be met in full.

3.9 Other variations identified during the budget monitoring review include the need for excess expenditure of £67,000, reflecting higher than anticipated costs arising from the employment of temporary staff and consultants within the highways units, to help implement the higher structural maintenance programme. This additional expenditure is in excess of the usual allowance for design and supervision fees and will need to be accommodated by making offsetting adjustments to the highways structural maintenance programme.

3.10 A further potential pressure on the management and support services budget has been identified relating to lower than estimated capital recharges for scheme design. The reasons for this possible shortfall in income are currently being investigated and corrective management action will be taken as appropriate.

Public transport

3.11 The 2004/05 budget for public transport support is £6.068 million, including an additional sum of £77,000 recently transferred from the Social Services revenue budget. This transfer, which has been approved by Executive Members of both services, reflects the recommendations that arose from a past review of community transport provision in the County, designed to achieve best value by channelling all community transport support through a single source. The transfer covers the funding of three community transport schemes in Basingstoke, Eastleigh and East Hampshire.

3.12 One of the key areas for managing the public transport budget is in monitoring commitments against the budget for bus subsidy contracts, where the level of committed expenditure against the budget of £5.623 million can often vary throughout the year, depending upon the extent of contractual changes within the network.

3.13 The previous budget monitoring report in September indicated that the projected 2004/05 level of commitment against the bus subsidies budget was £5.573 million, leaving a sum of £50,000 unallocated within the budget to meet any further cost increases arising from contract variations or the deregistration of commercial services. The latest monitoring position, including bus subsidy contract savings resulting from the implementation of the Alton area Cango scheme and cost increases arising from recent deregistrations of commercial services in the Basingstoke area shows overall estimated bus subsidies commitments of £5.589 million. This has reduced the unallocated sum available to meet pressures during the remainder of the year to £34,000.

Waste management

3.14 As in previous years, it is necessary to divide the waste management revenue budget into two separate categories for budget monitoring purposes:

· The waste contract related services, including trade waste income and recycling credits

· The other non-contract related waste management services covering facility maintenance, administration, promotions and developments, disposal of abandoned vehicles and provision for household waste recycling centre (HWRC) management.

Waste contract related services

3.15 The 2004/05 budget for the waste contract related services was based on expenditure commitments at the time of its preparation in November 2003. No allowance has been included for growth in waste volumes beyond predicted 2003/04 levels, future price increases, increases in landfill tax or other contract cost pressures. As these factors are principally demand led, and subject to long term contractual obligations, there is very little scope within the management of the budget to vary expenditure. These pressures are therefore covered by an annual amount set aside within the County Council's central provision for inflation and other contingencies.

3.16 The County Council's 2004/05 budget includes a sum of £3.850 million, to cover these inescapable service pressures. Periodic allocations are made from this contingency to the waste management cash limit, based on a quarterly assessment of cost increases on the contract and related budgets. The amount of the first quarter's call on the waste contingency was £640,000, leaving just over £3.2 million available to cover higher waste contract costs during the remainder of the year. The assessment of the second quarter's call on the waste management contingency is not yet available, at the time of writing this report, because contract data for September has not yet been fully evaluated. A verbal update will be provided at the meeting if this figure is available at that time.

Other waste management services

3.17 The main concern within this area of the budget over the past few years has been the increasing cost of disposing of abandoned vehicles, particularly with the introduction of the End of Life Vehicles (ELV) directive. This was expected to add further pressure to the budget as this classifies abandoned vehicles as hazardous waste, requiring stricter dismantling and de-manufacturing, culminating in higher handling costs and likely increases in the number of vehicles being abandoned.

3.18 The 2004/05 budget for the disposal of abandoned vehicles has been set at £859,000, including the sum of £311,000 which was carried forward from the 2003/04 budget as a planned underspending when the 2004/05 budget was prepared in January. The underspending of £311,000 is ring-fenced for excess costs of disposal of abandoned vehicles, refrigerators and other electrical goods in 2004/05.

3.19 There remains a great deal of uncertainty regarding the likely levels of expenditure during 2004/05 on the disposal of abandoned vehicles because of the impact of the legislative changes and the problems for the industry, DEFRA and the Environment Agency in actually working to a consistent compliant system. However, in view of the healthy scrap metal market conditions currently being experienced and the delay in fully implementing the ELV directive, it is thought unlikely that overall expenditure on this budget heading would exceed £400,000 during 2004/05. Expenditure at this level could result in an underspending of around £459,000 against the current year's abandoned vehicles budget.

4 Conclusion

4.1 Further adjustments have been made to the 2004/05 cash limit, increasing the overall revenue budget by £265,000 to £89.695 million. This includes a further allocation from the central inflation contingency to fund the cost of staff pay awards.

4.2 A revised highways maintenance programme is currently being prepared which will need to absorb a number of pressures including estimated higher expenditure of approximately £350,000 on the street lighting energy supply contract.

4.3 Savings of £386,000 on management and support services have so far been identified against the total departmental savings requirement of £684,000, so it appears that the overall target will be met in full. A further potential pressure has been identified as departmental income from capitalised scheme design fees is currently lower than the budget allowance. The reason for this variance is currently being investigated and corrective management action will be taken as appropriate.

4.4 A sum of £34,000 remains uncommitted to meet any further pressures on bus subsidies during the remainder of the year.

4.5 On the waste management services there remains uncertainty regarding the likely levels of expenditure on the disposal of abandoned vehicles, arising from the phased introduction of the ELV directive. It is currently thought unlikely that expenditure during 2004/05 on this service will exceed £400,000, against the budget allocation of £859,000. Further consideration will need to be given regarding the extent to which any underspending could be re-deployed to meet other budget pressures.

Recommendation

1 That the report be noted.

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

Environment Departmental Management Team : 29 September 2004 - Revenue Budget Monitoring 2004/05

Appendix 1

Environment
Revenue budget 2004/05 - monitoring statement
Analysis of variations

Appendix 2

Environment
Summary showing detailed allocation of highways maintenance budget
Revenue budget 2004/05

Capital maintenance programme 2004/05