Contact: Anne Hibbert, ext 7533, email: [email protected],

1. Introduction

1.1 This report is the second monitoring report for 2004/05 and provides an overview of the position on:

· Policy and Resources own revenue cash limited budgets including a commentary on the implementation of growth proposals

· Policy and Resources business units

· Policy and Resources capital programme

· County Council's capital payments and sources of finance.

1.2 The review indicates a few areas in which revenue spending is likely to differ from the assumptions in the budget and where management action is required but no major issues that require immediate corrective action.

2. Policy and Resources cash limited revenue budget 2004/05

2.1 The latest cash limit for 2004/05 is £42.2m as set out in Appendix 1. Based on monitoring of expenditure up to the end of October 2004, there are a number of emerging budgetary issues on which action is planned. These are outlined below.

Chief Executive's Department

2.2 Overall the budgets for which the Chief Executive's Department is responsible are broadly on target. However, funding needs to be identified for the two new posts created as part of the restructuring of support services to Members. The part year cost of these in 2004/05 is £25,000.

2.3 Additional expenditure is also being incurred in respect of consultation and communication relating to Every Child Matters. The Cabinet agreed at its 27 September 2004 meeting that the Executive Member for Policy and Resources determines the allocation from the £200,000 contingency set aside for this purpose. It is recommended that £100,000 is allocated in 2004/05 to cover corporate start up costs including consultancy (£60,000)and production of website and newsletter communication channels (£40,000),subject to the approval of the Children's Services Board..

2.4 In addition, expenditure will be incurred delivering an older persons communications campaign. Research among Hampshire's older residents identified the need for an information and awareness raising campaign. The purpose of the campaign will be to bring together all relevant information and available services for older people from the County Council and other organisations, which will address their concerns and help them to live more independently. This would clearly support the corporate aim of maximising life opportunities and building strong and safe communities. It is anticipated the campaign would run for a period of around 6 months at a cost of £130,000. This will be spread over two financial years and approval for the campaign was given at the last meeting of the Executive Member for Policy and Resources in November 2004, on the basis that funding of £80,000 in 2004/05 and £50,000 in 2005/06 would need to be identified.

Human Resources (HR) Department

2.5 The transfer of budgets from departments to reflect the new corporate management of HR services and recruitment activity has been finalised, with the exception of one department. Discussions to agree that transfer are continuing. Subject to the outcome of those discussions, HR is confident that costs of the reorganised services will be controlled within the transferred funds.

2.6 Under the new management arrangements, the SAP realisation savings of £100,000 required for 2004/05 in respect of recruitment advertising have been built into the cash limit. HR is responsible for the management of this budget for only half the financial year.

2.7 Two unexpected pressures have been identified on the HR budget. Costs in respect of services delivered by the Occupational Health Unit have increased by £70,000 above available funding. Increased work volumes and higher standards of insurance cover required by the County Council have led to a £40,000 (83%) increase in the cost of tendered doctors services provided by Consultant Medical Advisers. In addition, charges estimated at £30,000 are to be levied for the unit's new accommodation at Eastleigh House. These pressures were unforeseen at the time that approval was sought for growth in the service in the 2004/05 budget.

2.8 In addition, pressures contained within the cash limit in 2003/04 in respect of backfilling key senior posts for sickness cover have continued in 2004/05. These total £40,000 and are currently unfunded.

2.9 Every effort will be made to restrict spending during the rest of 2004/05 in order to absorb these pressures and enable a planned underspending to be carried forward to 2005/06 to cover commitments relating to the reorganisation of HR, Pay and Benefits project and the Leadership and equalities training programmes which are subject to non-recurring funding and which will now extend into 2005/06. These commitments are detailed in paragraphs 3.4 to 3.6. However, it is likely that the overall underspending achieved at the end of 2004/05 will be insufficient to cover these commitments in full in 2005/06.

County Treasurer's Department

2.10 The County Treasurer's budget, which incorporates the first tranche of savings of £0.25m related to the implementation of new systems, is currently projected to be at cash limit. However, every effort will be made to achieve an underspend in the remainder of the year in order to place the department as well as possible for 2005/06, when the systems savings requirement will rise to £0.5m.

Property Business and Regulatory Services

2.11 Forecast net expenditure for the department in 2004/05 is expected to be in line with the cash limit subject to the following assumptions.

2.12 Security costs relating to properties awaiting disposal are borne by the Corporate Estate budget. Two schools recently declared surplus to requirements have added to the pressures on this budget and the overspend this year is anticipated to be £80,000. It has been assumed that, as in previous years, any additional costs arising from securing properties awaiting disposal will be covered by the capital receipts accruing.

2.13 At its meeting on 26 July 2004 Cabinet agreed that any underspend within the Accredited Community Safety Officers scheme in 2004/05 will be carried forward to cover commitments in 2005/06 and 2006/07.

2.14 Part of the revenue repair and maintenance budget is always set aside as a winter contingency so that there is financial coverage in the event of unforeseen circumstances. This year's contingency includes the £104,000 unspent contingency brought forward from 2003/04. It is still too early to know what the call on the contingency will be but, in keeping with current practice, if there is an underspending the cash limit will be adjusted to enable any unspent contingency to be carried forward.

2.15 Spending on HM Coroner Service is largely determined by caseload and as such is not within the direct control of the Department - this has been recognised in previous years in that overspending on the service has been met by Policy and Resources as a whole. It is difficult to predict the outturn with certainty but current projections for 2004/05 indicate a probable overspend of £36,000.

Other non-departmental Policy and Resources budgets

2.16 Additional costs relating to libel and slander insurance in 2004/05 are likely to be offset by lower expenditure elsewhere, including a possible reduction in the external audit fee.

2.17 The net Audit Fee budget for 2004/05 is set at £413,700, whilst the level of actual fee is uncertain this may produce a saving of £50,000, due to lower charges for the audit of grant claims.

3. Progress in implementing 2004/05 growth proposals

Chief Executive's Department

3.1 In 2004/05 the department was allocated growth for the following projects and initiatives:

· New Forest Show - £35,000 (one off) which paid for the County Council's presence at the show in July 2004. The County Council's stand won the "Best Local Stand" award and proved to be a very effective showcase for promoting the Corporate Strategy and the services provided by all departments.

· Area Committees and Select and Scrutiny Committee - total funding of £225,000 has been agreed to enable two staff secondments to run the 12 month pilot. Some funds will also be expended on training, research and witness expenses. The allocation will also contribute to the cost of the consequential impact of the pilot arrangement on Democratic Services and Corporate Communications by way of additional meetings support including cover, publicity, accommodation etc. The pilot which supports all the corporate aims of the County Council especially building strong and safe communities will be evaluated before a decision is taken on a wider roll-out.

· Community safety audits £55,000 - £5,000 was allocated to each of the 11 local Crime & Disorder Reduction partnerships (CDRPs) and has been spent on the audits. The results will be contained in the new local strategies to be published in April 2005. This also supports the aim of building a strong and safe community.

Human Resources (HR)

3.2 Significant progress has been made in developing the new Human Resources Department. Office moves bringing together Resourcing Centre staff in Athelstan House, Winchester have been completed and office moves to bring Employment Practice Centre staff into Athelstan House will be completed in November. The new structures have been created in order to further improve efficiency and effectiveness together with enabling the more responsive, flexible and innovative service to stakeholders outlined in aim five, `improving services', of the Corporate Strategy. Business processes are being redesigned following the identification and sharing of best practice from previously devolved personnel units.

3.3 Hampshire Learning Centre has successfully relocated to Capitol House, Winchester. At the end of the year, the Occupational Health Unit and Employee Support Line will be relocated to Eastleigh. This move was necessary as it was impossible to fit these teams into the new HR accommodation. The location of Safety staff will be considered in the light of CMT's recent approval of the `Health and Safety - future management issues and route map' report.

3.4 To facilitate these changes the 2004/05 cash limit includes £300,000 transitional funding for removals, telephone, contract management and other IT set up costs and a further £200,000 for the use of short term contract staff and consultants. Expenditure on removals and IT infrastructure is anticipated to match funding, while spending on short term staffing to assist with the reorganisation will fall across this financial year and next. Consequently, a proportion of these funds - estimated at £100,000 - will need to be carried forward to 2005/06 to match the pattern of this expenditure.

3.5 In respect of the Pay and Benefits project specific growth of £300,000 for staffing and project costs was approved for 2004/05. In addition, £200,000 has been retained in the central contingency to cover the anticipated costs of SAP configuration. It is not yet possible to determine the exact timing of expenditure in excess of £200,000 linked to the configuration of SAP and other issues. Should this expenditure fall into next financial year, a carry forward of the funding required will be necessary.

3.6 As reported in the last September 2004 budget monitoring report it is anticipated that £75,000 will be required to carry forward to 2005/06 due to the volume of fourth tier managers yet to undergo the Leadership programme. Additionally, in order to support the development and roll out of a specific Equalities training programme, Hampshire Learning Centre plan to carry forward £25,000 funding from the current financial year to next.

3.7 In total, therefore, these commitments require a carry forward estimated at £200,000 plus any carry forward from the Pay and Benefits project.

Property, Business and Regulatory Services

Office accommodation (£220,000)

3.8 The growth in this budget has facilitated the provision of accommodation for up to 200 staff, enabled improved accommodation to be provided for members and reduced other existing office accommodation pressures.

3.9 These additional costs can be accommodated in the short term within the current budget provision and the measures proposed to achieve this will result in an one-off underspending in 2004/05. It is proposed that this underspending estimated at £200,000 be carried forward to assist in meeting existing and anticipated new pressures in 2005/06.

Repair and maintenance of buildings (£397,000)

3.10 This allocation recognises the continued escalation of repair and maintenance costs at well above Government and corporate inflation assumptions. Latest figures indicate this pressure will continue throughout the year and into 2005/06. Without the Passporting resource, fair funding allocations to schools for repairs would have been some 6% lower, with a consequent impact on the quality of service and the fabric of school buildings.

3.11 At the end of October 2004 spending is forecast to be £529,000 below the cash limit, as set out below, against which planned underspendings on HR, community support service officers and office accommodation total £650,000.

Table 1: Estimated variations from the 2004/05 cash limit

4. Business units' anticipated trading position

4.1 The Property, Business and Regulatory Services business units have a combined turnover of £33m and the approved business plans and budgets anticipate surpluses of £264,000. Latest forecasts indicate that this level of surplus will be achieved.

4.2 IT Services originally planned to generate a surplus of £280,000 in 2004/05 on turnover of £29.8 million. However slippage in programmed spend from 2003/04, the development of new systems associated with the termination of the mainframe by March 2005 and the uneven nature of IT investment year on year will result in a trading deficit in 2004/05 which is likely to eliminate the brought forward surplus of £380,000.

5. Policy and Resources capital programme

5.1 Two main adjustments to the Policy and Resources capital programme are proposed in this report as detailed below.

IT Services

5.2 IT Services plan to capitalise investment in IT infrastructure. This will be limited to investment in fixed assets and hardware with a projected life of at least 5 years. It is planned to capitalise investment of £1,150,000 in 2004/05, to be met from unsupported borrowing which will be funded from charges made to users.

5.3 It is proposed to capitalise the following expenditure:

Table 2: capitalisation of IT infrastructure 2004/05

	£'000
Data storage hardware	250
Core network infrastructure	200
Hantsnet web interface, infrastructure and implementation	500
IT2000 service infrastructure - application servers	200
	1,150

Capital repairs

5.4 In September 2004 the Executive Member for Policy and Resources agreed a change in the basis of control for some lump sum capital schemes. The detailed proposals for capital repairs were reported to the October Buildings, Land and Procurement Panel. In the light of a range of factors making it practical and desirable to earmark some of the total spending power on capital repairs for use in future years the Panel proposed the following expenditure based control totals for 2004/05 and 2005/06. Funding for New Deal for Schools in 2005/06 is subject to confirmation by the DFES.

Table 3: capital repairs programme control totals 2004/05 and 2005/06

5.5 The Department for Constitutional Affairs has recently allocated an additional £2,000 capital grant on top of the additional £148,000 reported at the September 2004 meeting of the Executive Member. This brings the total capital approval for building works and computer equipment in respect of the Hampshire and Isle of Wight Magistrates' Courts Committee to £546,000.

5.6 Taking account of these changes, and a minor technical adjustment, the capital programme for Policy and Resources totals £37.8m. This includes £30.0m of schemes controlled on an expenditure basis and £7.8m of schemes controlled on a starts basis. As at 31 October 2004, payments on capital repairs totalled £5.8m and, for schemes controlled on a starts basis, schemes to the value of £0.9 m had started.

5.7 Within the total programme, a sum of £185,000 had been included in respect of HMS Minerva. Revised plans to bring the vessel up to a basic standard to enable it to be used by the Royal Naval Museum as an education venue, rather than open it to the public, require expenditure of £76,500 to paint the exterior of the ship and to provide decking at one level.. It is recommended that the capital programme allocation for Minerva be reduced to £76,500 and the balance of £108,500 be added to the unallocated sum.

5.8 A transfer of £15,000 from the coastal capital programme to revenue is proposed. Of this, £5,000 is to fund a display of the County Council's coastal sites and facilities at the International Festival of the Sea in Portsmouth in July 2005 . The display will also be shown at Hampshire libraries throughout the year. A sum of £10,000 is to fund public consultation on the options to implement coastal defence policies in the West Hayling and other areas.

6. Overall capital payments and sources of finance for the County Council

6.1 The capital financing approved by the Cabinet in February was based on projected capital expenditure of £201.9m in 2004/05, adjusted to £206.3m to take account of the changes to the capital programme approved by the Cabinet in July 2004.

6.2 Capital expenditure to 30 September 2004 totalled £73.9m. It is difficult to forecast with certainty, but based on previous year's capital expenditure profiles, it seems likely that expenditure for 2004/05 will be close to the forecast in the financial plan.

6.3 Inclusive of the in-and-out schemes, capital receipts of £22.7m are allowed for in the latest financing plan. Actual 2004/05 capital receipts to 30 September 2004 totalled £1.4m. Success in achieving the forecast, or an outcome close to the estimate in 2004/05, will be dependent upon progress in completing a small number of significant disposals.

Recommendations

The recommendations from this report are included on the covering decision sheet.

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

None.

Appendix 1

Policy and Resources Revenue budget - latest 2004/05 cash limit

Appendix 2

Policy and Resources 2004/05 capital programme