Contact: Paul Carey-Kent, ext 7525

1. Introduction

1.1 The Government's framework for delivering efficiency in local services was issued on 28 January 2005, a month later than expected. The framework was reported to Cabinet on 11 February 2005.

1.2 The Government requires local authorities to publish a `forward look' plan of how the 2005/06 efficiency targets will be met by 15 April 2005. This is two months earlier than suggested in the consultation paper. Significant work will be required to meet this deadline. The County Treasurer and Chief Executive will present the draft efficiency plan to Cabinet on 21 March 2005.

1.3 This report identifies the annual efficiency savings the County Council will be required to make and sets out indicative efficiency targets for County Council departments.

2. Measuring efficiency

2.1 The Office of the Deputy Prime Minister's requirement on local authorities to produce a forward-look plan in April 2005 and a backward-look Annual Efficiency Statement for 2005/06 in June 2006, applies to all non-schools services. The achievement of efficiencies in schools will be assessed by the Department for Education and Skills. Schools in this context means all education services provided for children of primary and secondary age, not just those provided from schools delegated budgets.

2.2 Between 2005/06 and 2007/08 the County Council will be required to make an efficiency saving of 2.5% per annum on 2004/05 non-schools service expenditure and 2004/05 non-education net capital spend (sum of capital spend minus capital receipts). This leads to a savings requirement of £15.2m per annum, with at least £7.6m being cashable.

2.3 The ODPM guidance indicates that `where capital spend will change significantly' between 2005/06 and 2007/08 they will be prepared to discuss with councils the calculation of the target on the basis of average net capital spend over the period. For the County Council based on the current capital programme this would have the effect of reducing the efficiency saving target to £14.3m per annum. However, until this has been agreed with the ODPM it would be prudent to assume that an annual efficiency gain of £15.2m will be required.

3. Targeting of efficiency gains 2005/06 to 2007/08

3.1 There is no requirement for the County Council to demonstrate 2.5% savings on each service proportionate to its budgeted expenditure. The Government recognises that savings in a particular service will not necessarily be proportionate to the contribution the service makes to overall spending. However setting indicative targets for services based on 2.5% of baseline expenditure provides a sensible starting point and could aid the search for efficiencies. Nor is there any requirement to make revenue or capital savings proportionate to the relevant shares of the budgets. However, it would again be a sensible starting point to set indicative targets in this way, so enabling the relative difficulty of achieving savings in revenue and capital to be assessed.

3.2 It should also be noted that recurring savings made in 2004/05 can be counted against the 2005/06 target, but to do so will require that they be incorporated in an additional backward-look assessment in June 2005.

3.3 Indicative targets based on the contribution of each department to service revenue expenditure are as follows:

Table 1 : Indicative annual efficiency targets for departments

3.4 Indicative targets for capital payments are as follows:

Table 2: Indicative annual efficiency targets for capital expenditure

3.5 As the baseline expenditure for the efficiency calculation is 2004/05 it includes £8.2m on Magistrates Courts, a service that will not be provided by the County Council from 2005/06. The inclusion of Magistrates Courts' expenditure within the efficiency target will be challenged.

3.6 The prospects for achieving these targets remain unclear, as reported in outline to Cabinet on 11 February 2005. The next step is for the County Treasurer to issue guidance to departments based on the targets set out above. Progress will be reported to the Cabinet meeting on 21 March, when the proposed Efficiency Plan will be set out - though, given the timescales and the summary nature of the plan required, this is likely to be a broad statement of intent rather than a detailed account of how savings will be achieved.

3.7 Although this apportionment forms the baseline for calculations it is likely that a full three year plan will be required with more targeting, especially on procurement, where it is anticipated that further savings can be achieved. These will be identified in the March report and April plan. The intention here is to allocate targets to revenue and capital spend and provide a benchmark against which savings should be sought over time.

3.8 It will also be necessary to identify which of the cash efficiency savings in the 2005/06 budget comply with the Government's definition and can be included within the plan submitted in April.

4. Recommendations

4.1 That the calculations of the requirements on the County Council to generate efficiency improvements and the indicative efficiency targets, both revenue and capital, be noted and departments asked to plan for efficiency gains accordingly, subject to the overall strategic efficiency plan being considered in March.

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.

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