Contact: Ejner Knudsen, (01962) 847403; [email protected]

1 Introduction

1.1 The purpose of this report is to present an interim update on the revenue budget monitoring position previously reported during September, pending preparation of the 2005/06 revised budget in January.

1.2 It provides details of a number of additional changes to the revenue budget cash limit for the year and reports on the outcome of the most recent budget monitoring review, which was carried out in consultation with Environment department budget holders during September. Details of assessed expenditure to date and a forecast outturn for the year are provided for each major service heading, together with a detailed summary showing the planned allocation of the highways maintenance budget.

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:

1. Maximising life opportunities

2. Stewardship of the environment

3. Achieving economic prosperity

4. Building strong and safe communities

5. Improving services

6. Developing councillors and staff

2 2005/06 cash limit changes

2.1 The previous monitoring report in September made reference to a number of adjustments to the revenue cash limit since the original 2005/06 budget had been approved during February. These adjustments had increased the Environment services' revenue budget cash limit to £94.710 million. The following additional changes to the cash limit also now need to be made:

· An increase of £91,000 to reflect budget adjustments between services to accommodate the impact of revised IT charges in 2005/06, following the closure of the mainframe computer and the introduction of user charges for SAP.

· An allocation of £100,000 made from the 2004/05 corporate underspending, to provide financial support to the Hampshire Rural Pathfinder for the duration of the two year programme. A sum of £50,000 has been added to the 2005/06 budget to cover expenditure during this financial year.

· Government allocation of Planning Delivery Grant of £85,000 to the County Council for 2005/06 in respect of development control performance and for development plan preparation, enabling a corresponding increase to be made to the revenue budget.

· A budget increase to reflect the implementation of arrangements for enhanced legal support within the Chief Executive's department to undertake complex legal agreements relating to the generation of capital receipts and the negotiation of developer contributions to capital schemes. The estimated cost to the Environment department is up to £130,000 per annum. It has been agreed that this additional revenue expenditure would be met by reducing revenue contributions to capital to fund the additional costs, requiring an equivalent reduction in the locally resourced capital guideline. However, as capital receipts and developer contributions are available to enhance the capital programme, overall capital spending capacity would be restored and enhanced, providing these new arrangements prove effective.

· A budget reduction of £131,000 being this service's share of the £1 million corporate target for procurement savings on non-pay budgets, included in the 2005/06 budget. Savings of £67,000 out of the £131,000 total have already been achieved by the Corporate Procurement Team on behalf of the Corporate Procurement Network and have now been largely allocated to departments. However, further targeted savings of £31,000 for example from early payments discounts together with efficiency gains of £33,000 from greater use of the electronic catalogue in SAP still need to be generated.

2.2 The adjusted cash limit, taking into account the above variations, is £94.935 million. Appendix 1 provides an analysis of the adjusted budget over the standard division of service headings, together with details of assessed expenditure to 30 September 2005.

2.3 Further changes to the cash limit, including the second quarter's allocation from the central waste management contingency, together with any additional budget transfers and adjustments, will be reported in the 2005/06 revised budget in January.

3 Budget monitoring review

3.1 The year's second main budget review, covering all of the department's activities, was carried out during September. Plans for service expenditure during the remainder of the year, together with trends in actual expenditure and income, were considered in order to arrive at an updated forecast outturn for each budget heading.

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

Highways maintenance

3.3 Only minor changes to the bridges revenue budget programme have been made since the last budget monitoring review. Expenditure on the remaining parts of the programme is being progressed in accordance with the current maintenance plan.

3.4 Overall highways maintenance revenue budget works allocations to date total £21.275 million out of the total budget of £22.066 million, leaving reserves of £791,000, which is expected to be sufficient to meet additional demands for routine maintenance during the remainder of the year. It is planned that further revisions to the programme, taking into account price variations and other pressures on the programme, be reported as part of the revised budget in January.

Public transport

3.5 The previous budget monitoring report in September made reference to the pressure on the bus subsidies budget this year following higher costs arising from contract re-tendering in the Gosport and Fareham areas and a number of commercial de-registrations.

3.6 Following a period of consultation, action has now been taken to introduce the planned service changes that would enable the full year cost of the re-tenderings and de-registrations to be contained within the budget. However, due to the part year nature of the savings, there is a residual pressure, now estimated at £130,000, that will need to be managed within the overall Environment budget this year.

3.7 Opportunities for savings on other parts of the Environment services' budget to offset this additional expenditure are being evaluated and will be included in the 2005/06 revised budget later in the year.

Management and support services

3.8 The overall departmental budget for management and support services, including the planning services and waste management administration and also taking into account the effect of cash limit changes outlined in paragraph 3 above, is £24.399 million.

3.9 The construction of the annual budget for management and support services includes an allowance of approximately 3% for incidental savings that are expected to arise, as a matter of routine, from staff turnover and the normal delay in filling vacant posts. Monitoring of expenditure so far this year indicates that unless the forecast improves before the next monitoring report, the department may need to consider taking more stringent management action to contain expenditure on this division of service to the cash limit.

3.10 As mentioned in the previous budget monitoring report in September, there is no allowance within the management and support services budget to cover expenditure this year in connection with the South Hampshire Rapid Transit project (SHRT1), including the cost of the former project team. An assessment has now been completed to estimate the total expenditure requirement this year and this currently totals £491,000, including the cost of the project team, staff termination payments and other SHRT related expenditure.

3.11 Options for the funding of this expenditure are being considered and will depend on whether or not Government approval is given to proceed with the SHRT1 project. However, it is not necessary to make provision for this expenditure from within the Environment services' 2005/06 revenue budget cash limit as it is currently planned to meet any SHRT1 related expenditure this year either from the project budget, if the scheme continues, or, if not, from anticipated reimbursements of past County Council expenditure from the Department for Transport.

Waste management

3.12 At the time of writing this report waste disposal volume data and other information relating to the second quarter of the financial year was still being evaluated. Details of the growth in waste volumes covering the first half of the year, together with the next quarter's call on the central waste management contingency will be reported in the revised budget report in January.

4 Impact assessment

4.1 Monitoring of the Environment revenue budget benefits all sectors of the community as it helps to ensure that the department's services are delivered in a cost effective manner within overall corporate budget guidelines.

5 Conclusion

5.1 A number of adjustments have been made to the 2005/06 revenue cash limit, increasing the overall revenue budget cash limit by £225,000 to £94.935 million. This includes an allocation for additional procurement savings of £131,000, part of which will need to be to be achieved by seeking discounts for early payment and by making more use of the SAP electronic catalogue.

5.2 Following a period of consultation, action has now been taken to implement changes to bus services to offset the excess cost of contract re-tendering and commercial service de-registrations. It is proposed that the residual pressure of £130,000 on the 2005/06 budget, reflecting the part year effect of the savings, be managed within the overall Environment services' cash limit. Opportunities for savings on other service headings are being evaluated and will be included in the 2005/06 revised budget in January.

5.3 The departmental budget for management and support services is also under pressure this year and further management action may need to be taken to ensure that expenditure is contained within the available cash limit.

Recommendation

1. That the Policy Review Committee note the action being taken to manage the cash limit before the budget is revised in January.

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.

i) Detailed ledger reports.

Appendix 1

Environment
Revenue budget 2005/06 - monitoring statement
Analysis of variations

Appendix 2

Environment
Revenue budget 2005/06

Summary showing detailed allocation of highways maintenance budget