Contact: Jon Pittam, (01962) 84 7400; [email protected]

1 Introduction

1.1 This report reviews the budgetary position for 2005/06 following consideration by executive members of initial service budget monitoring reports.

1.2 With the creation of new Children's and Adult Services departments in August, 2005/06 represents a transitional year in the County Council's implementation of the Children Act 2004. The provision of common support services to adult and children's social care and the existence of unallocated contingencies within the Social Services budget are barriers to achieving an immediate clean break between Children's and Adult Services budgets in 2005/06. Nonetheless it is proposed to establish separate cash limits for the Social Care budgets relating to children and adults and to exercise accountability via the relevant executive members for Education, Children's Social Care and Adult Services throughout the remainder of 2005/06. No transfers between cash limits will be made without the agreement of the relevant executive members. The 2006/07 budget will be set on the basis of the new departmental responsibilities. Further details are set out in
Appendix 1

1.3 Initial monitoring reports have been considered by executive members for each of the County Council's services, focussing on plans for achieving the savings targets in the budget and where appropriate for the redeployment of those savings, as well as highlighting any other issues affecting the management of the 2005/06 budget. This report reviews the conclusions from these monitoring reports and provides an update on the position relating to non cash limited budgets and contingency items.

2 Services cash limited expenditure

Education

2.1 The Executive member with special responsibility for Education, approved in July an approach to achieving the savings yet to be identified of £496,000 included in the budget and for meeting additional spending pressures of £102,000. This strategy is dependent upon other budget pressures being accommodated within cash limits and the report reviewed the current position on high risk demand led budgets, in particular home to school transport, special education needs and early years budgets. Some potential pressures are already evident in relation to cost increases in home to school transport services and take up of early years places, which will require close monitoring.

2.2 The Executive member also agreed for submission to the Cabinet a business case for the use of the additional £250,000 earmarked at the County Council budget meeting within the contingency for the Youth Service. The business case is attached as Appendix 2 and the Cabinet is recommended to approve the allocation of £250,000 to the Youth Service.

Adult and Children's Social Care

2.3 An initial monitoring report submitted to the Executive member for Adult Social Care in July indicated that significant management action will be required to manage spending pressures affecting services to both adults and children. These potential pressures have initially been assessed at £4.4m, principally from the full year affect of additional service demand and higher costs in 2004/05, which have not been fully accommodated in the 2005/06 budget. These pressures are split between client groups as follows:

2.4 Though it is not unusual for Social Services budget monitoring reports in the early part of the financial year to forecast unbudgeted spending pressures on a significant scale, the overall budget framework contains less flexibility this year than in recent years. In particular, efficiency savings of £3.1m have to be achieved to comply with the cash limit, they are not available to fund unbudgeted spending. The Government's spending plans for 2006/07 and 2007/08 also envisage a slowing down in the rate of increase in public spending on Social care beyond this year, so that short term or one-off measures which merely cover the position in 2005/06 will not be sufficient. The necessary action is being taken and a greater emphasis being placed on recovery plans and projections over rolling three-year periods to reflect the medium-term financial projections.

Environment

2.5 The Executive member has reviewed the saving and redeployment proposals within the 2005/06 Environment budget. Additional savings of approximately £253,000 will also need to be identified to cover non-recurring costs in 2005/06 associated with the South Hampshire Rapid Transit (SHRT) resubmission bid and with the timing of the withdrawal of support for bus services which no longer meet value for money criteria. Options for achieving these savings will be considered in future monitoring reports.

Policy and Resources

2.6 Plans to achieve budgeted efficiency savings of £1m have been reviewed by the Executive member. This includes a target saving of £100,000 from fewer member meetings, which seems unlikely to be achieved in 2005/06 given the proposed timescale for implementing changes arising from the review of democratic processes. While prompt management action will be required from all chief officers to ensure that spending is contained within the cash limit, there are particular pressures on the Human Resources Department budget to cover the later than anticipated implementation of the Pay and Benefits project and additional temporary contracts required to cover absences through ill health and high levels of maternity leave.

Recreation and Heritage

2.7 The 2005/06 budget includes some significant redeployment proposals. Savings are being targeted to fund higher running costs associated with: making internet access available in libraries; reduced income in libraries undergoing refurbishment; higher IT investment; and additional costs of restructuring the Arts and Museum services. Close monitoring will be required to ensure that the assumptions made in the budget are being achieved and if not to implement other action to keep within the cash limit.

3 Non cash-limited budgets

3.1 The main areas of spending outside service cash limits are capital financing costs, including interest on balances, revenue contributions to capital, items included in the contingency which have yet to be allocated to services, and the contribution to the modernisation, restructuring and efficiency plan reserve.

Capital Financing

3.2 The budget for 2005/06 was set at a time when the base rate stood at 4.75%, having increased during 2004/05 from 4%. Further upward movement in short term rates was expected at least in the short term and provision was made in the budget for rates to increase to an average of 5.25% in 2005/06, adding £600,000 to capital financing costs. Subsequently, following some weakening of key UK economic data, the base rate was reduced to 4.5% in August. The direction of the next movement in short term rates remains uncertain, but it seems likely that there will be a saving against the interest rate assumption in the budget.

3.3 Higher interest on balances was received in 2004/05 than budgeted and providing spending is contained within cash limits, and there are no large and unforeseen adverse movements in cash flow some continued higher income can be anticipated in 2005/06. A small adverse impact will arise from the ending of an estimating procedure for the recovery of Value Added Tax (VAT) which had benefited the County Council but can no longer be justified. The overall impact of cash flow movements on interest earned on balances will be reviewed during the autumn prior to the reporting of the revised budget.

Revenue contributions to capital

3.4 With capital expenditure projected to be broadly in line with the budget forecast of £192m in 2005/06 and the level of the capital reserve reducing to £3.6m at 31 March 2005, budgeted revenue contributions of £30.9m are likely to be required to support the approved capital programme.

Contingency

3.5 The main item within the contingency which has yet to be allocated to services is the provision for cost increases within the waste management contract of £4.7m in 2005/06. The call on the contingency in the first quarter amounted to £931,000, accompanied by a favourable trend in waste volumes, but it remains to be seen whether the trend will continue.

3.6 The contingency also includes the unallocated savings target of £1m to be achieved by savings in procurement. This is in addition to the SAP benefit realisation saving of £0.5m arising from the agency staffing contract, and specific procurement savings identified in the Environment and Social Services budgets. Savings of £675,000 against the target of £1m have already been identified from corporate contracts and the basis for achieving the remaining savings is currently under review with a view to the target saving being allocated to services by the end of September.

3.7 A further unallocated saving of £250,000 is included within the budget providing the funding for the additional spending on the Youth Service. Savings against the contingency items for the outstanding 2004/05 pay awards and to cover increased flood protection levies of £240,000 are forecast which will largely meet the unallocated saving required.

3.8 Provision of £60,000 was included in the 2004/05 budget as part of the sum allocated for Cabinet priorities for youth initiatives in Andover, on a twelve month pilot basis. This sum has been retained within the contingency in 2005/06. The majority of the £60,000 allocation has been applied to the Moving On project designed by the County Youth Service in Test Valley to help disadvantaged young people in Andover who are at risk of exclusion. Recruitment difficulties delayed the start of the project to March 2005 so only a limited number of young people have signed up to the project. With dedicated Youth Service professionals using a blend of mentoring and outdoor challenge activities this project is evolving as a key tool as part of a wide range of interventions set up in Andover as a result of the Cabinet Key Priority work. The balance of the additional funding was used to support an evening transport initiative in partnership with the Borough Council to encourage young people to use the Depot - the new youth complex on the edge of the Portway Industrial Estate. Despite extensive consultation in the design of the package, take up has been poor. The Community Safety Partnership is keen to re-launch the initiative using school transport rather than scheduled bus services. The Cabinet is requested to agree the continued funding of these initiatives.

Modernisation, Restructuring and Efficiency Plan Reserve

3.9 An initial allocation of £0.3m from the reserve has been agreed for transitional costs associated with the implementation of the Children Act but the main call on the reserves will be to fund the implementation of the pay and benefits review subject to further risk analysis of pressures identified in the 2005/06 budget and a potential requirement to provide further resources towards the loss of further Government grant support in 2006/07. Decisions on the implementation of the review are still the subject of consultation with the trade unions.

4 Efficiency savings

4.1 The inclusion of efficiency improvements and other savings of £16.1m in the 2005/06 budget increases the risks associated with the management of the budget in 2005/06. This is both because of uncertainties about whether the targeted savings will be achieved in full and because even if the savings are achieved there is less flexibility within the budget to deal with other unforeseen budget pressures. Initial monitoring of service budgets indicates that significant management action will be required to accommodate budgetary pressures facing children's and adult social care services within the agreed cash limits.

4.2 Excellent authorities are not required to provide a half year monitoring report on the achievement of efficiency improvements in the 2005/06 Annual Efficiency Statement.

4.3 It is therefore proposed to conduct an internal review and assess to what extent the actions and savings required have progressed, as well as identify what changes may be needed in the processes. The existing budget monitoring and performance reporting processes offer a framework for capturing both financial and performance results. It is suggested a joint report of progress against the efficiency targets identified in the forward looking efficiency plan, with the latest results from the related `quality cross-check' performance measures should be presented to Cabinet in November.

5 Impact assessment

5.1 The proposals contained in this report are not considered to be discriminatory.

Section 100 D - Local Government Act 1972 - background documents

The following documents discuss facts or matters on which this report, or an important part of it, is based and have been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

None

Appendix 1

Children's Services Financial Management

1 Introduction

1.1 As work continues to determine the structure of the Children's Services department, it is necessary to set out the arrangements required to manage the budget during this transitional phase.

2 Summary

2.1 The Director of Children's Services has been appointed with effect from
15 August 2005 and will be accountable for the Children's Services budget.

2.2 Until the re-organisation of Children's Services is complete, services will continue to be provided by teams previously accountable to the Director of Education and the Director of Social Services, both of whom have separate budgets.

2.3 In order to support the Director of Children's Services during the transitional arrangements, it is necessary for joint budget monitoring arrangements to be implemented in 2005/06, with joint reporting of the current Social Services budget monitoring to both the Children's and Adult Services management teams and executive members.

2.4 Joint arrangements for defining the 2006/07 budgets for Children's Services are also necessary to ensure all pressures are identified, with separate budgets for Children's and Adult Services being reported from 1 April 2006.

2.5 There are two main issues arising from the transition to a Children's Services department: the management of budget pressures during the transition and the requirement to ensure budget managers are accountable throughout the transition phase.

3 Transitional Financial Management 2005/06 and 2006/07

3.1 Until further detail on the structure of the Children's Services department emerges, it is necessary to make a number of assumptions in order to support the department during the development and transition from the current Education and Social Services departments. This may require review and update as further progress is made.

3.2 All services currently reported within the Education department budget will be deemed to transfer to the Children's Services department. All services currently reported within the Children and Families branch of the Social Services department budget will be deemed to transfer to the Children's Services department.

3.3 A list of budgets and accountable managers has been determined.

3.4 In order to provide full financial support to the Director of Children's Services during 2005/06, the devolved finance units for each of the current departments will liaise throughout, with the current Social Services budget monitoring information being reported to both the Adult Services and Children's Services management teams and executive members during 2005/06.

3.5 Although it is anticipated that the complete Children's Services restructure will not be fully implemented until 1 April 2006, the budget setting process for 2006/07 will determine base budgets for Children's Services and Adult Social Care.

3.6 It is acknowledged that the implementation of new structures within the Children's Services department is likely to result in some mismatch of budget allocations and accountabilities and these will be resolved during 2006/07 and 2007/08 as the new departmental arrangements are bedded in.

3.7 This process will require the involvement of both devolved finance units and commenced from July 2005, working in conjunction with the Children's Services restructuring that is currently being undertaken.

3.8 Costing the revised structure will continue as details emerge and will form the basis of the budget for Children's Services for 2006/07.

4 Issues

4.1 Management of budget pressures and maintaining budget accountability is key during this transitional period. Historically, the children and families branch of Social Services has experienced budget pressures which have been managed by the Social Services department as a whole. The £768,000 balance of the Social Services contingency has been allocated pro rata to the budget pressures carried forward from 2004/05 into 2005/06. That equates to a transfer of 40% (£308,000) to Children's Services. This transfer is more generous than if the allocation was pro rata to the 2005/06 budget ie Children's Services budget as a proportion of the overall Social Services budget is about 25%, not 40%.

4.2 In order to manage this throughout the transitional period, all budget managers must be aware of the need to operate within budget limits. This required clear distinction of the Adult Social and Children's Services budgets before the new Directors took on accountability for their respective budgets from 15 August.

4.3 This has been done on the basis of:

· Allocating the available contingency (as at 4.1 above) and efficiency savings targets across the two areas

· Reporting budgets for management and support for the former Social Services department to the Director of Adult Services.

4.4 Budget management responsibilities will change as the structure is determined and robust arrangements for ensuring the appropriate transfer of such responsibilities during the transition phase will be enforced by the Director of Children's Services.

4.5 The Social Services capital programme 2005/06 will not be split, but simply reported to the Director of Adult Services.

5 Timescales

5.1 With effect from 15 August 2005, relevant Social Services budget monitoring information will be reported to both the Adult Social Care and Children's Services management teams and executive members.

5.2 Base budgets for the Adult Services and Children's Services departments will be determined during the 2006/07 budget process beginning in September 2005, with separate budget reporting arrangements commencing 1 April 2006.

5.3 Costing the new structure to inform the budget setting process will follow the project timescales for the restructuring work, commencing July 2005.

Appendix 2

Youth Service plan for the use of additional funding 2005-2006

1 Aims

1.1 The additional resources allocated to the youth service in the current financial year will be used to:

· fund an increase in detached and outreach work, reaching socially excluded young people living in rural areas and in communities with significantly high levels of social deprivation

· increase contact with young people from under represented groups

· contribute to local partnership work by addressing youth related community safety issues

· fund a one off payment to support the youth work development scheme at RAF Odiham.

2 Use of resources

2.1 £200,000 will be distributed to districts using the youth service's funding formula and will be managed by a youth service manager under 3 area groupings. The resources will be used primarily for the staffing required to carry out the additional work in the districts. Where efficient and effective to do so, staff may be deployed across 2 or more districts. The management of support functions is being reviewed by County Treasurer's Consultancy to enable closer working with other services.

£ £

Area 1 Basingstoke 22,000 East Hampshire 22,000

Hart 12,000 Rushmoor 16,000

Area Total 72,000

Area 2 Eastleigh 16,000 New Forest 22,000

Test Valley 18,000 Winchester 18,000

Area Total 74,000

Area 3 Fareham 16,000 Gosport 18,000

Havant 20,000

Area Total 54,000

2.2 A one off payment of £50,000 will be made to support the youth work development scheme at RAF Odiham.

3 Performance Indicators

3.1 The following improvements are targeted:

· increase the level of contact made by youth service staff with young people living in rural and socially deprived communities by 1,100 (an increase of 17% from 6445 to 7545).

· increase the contact made with young people in under represented groups by 110 young people (an increase of 10% from 645 to 755).

· raise the number of hours of delivery of detached and outreach work, across the county by 131 hours per week.

· increase active participants gaining a recorded outcome from 421 to 521, and those achieving an accredited award in detached and outreach settings from 24 to 74.

· contribute more to youth related elements of district community safety strategies (indicators to be agreed locally).

· better youth facilities at RAF Odiham.

4 Monitoring and evaluation

4.1 To monitor the additional funding, separate budget monitoring codes have been established for each district and monthly monitoring reports will be produced

4.2 Additional work will be monitored by the established monthly district report which logs the contacts, active participants, and recorded and accredited outcomes for young people for each youth work project. The increase in delivery hours and the contribution to community safety strategies will be reported by senior youth workers in the district half yearly and annual report.

4.3 The Hart Senior Youth Worker will monitor progress and improvements at RAF Odiham and report to the County Youth Officer.

5. Milestones

April 2005 Needs of socially excluded young people and community safety issues identified in each district. Consult with stakeholders and use any existing and valid needs assessments.

Review existing detached/outreach/mobile projects in each district and assess scope for immediate expansion to meet identified needs.

May 2005 Redirect existing staff and/or recruit additional staff as required.

June 2005 Deploy increased staffing levels and other resources to meet needs.

Oct 2005 Review and evaluate impact of work to date.

Feb 2006 Further review, evaluation and recommendations for future action.

Malcolm Rittman 06 April 2005

County Youth Officer