Contact: Sheila Little (01962) 847545 Contact Ext.; [email protected]

1 Introduction

1.1 This report sets out, for the first time, the proposed combined Children's Services revenue budget for 2006/07, a provisional budget for 2007/08 and recommends a revised budget for 2005/06. It combines the `old' Education Service and the Children's Social Care Services following the creation of the new Children's Services Department during 2005/06. This report has been prepared in consultation with the Executive Members for review by the Policy Review Committee (PRC), before the budget is considered formally by the Executive Member. It will be reported to the Leader and Cabinet on 10 February 2006 to make final recommendations to County Council on 22 February 2006.

1.2 The Children's Services revenue budget for 2006/07 and 2007/08 supports the corporate strategy aims, specifically maximising life opportunities, achieving economic prosperity and improving services by focusing financial resources in these areas.

1.3 Also, Children's Services contribute to the five outcomes of the Children Act and the revenue budget uses the six priorities established in the Annual Performance Assessment (APA) to set the key performance indicators underpinning the financial strategy.

1.4 The report is structured:

· Executive summary (Section 2, pages 2 to 5)

· County Council budget strategy and guidelines (Sections 3 and 4, pages 5 to 7)

· Revised Budget 2005/06 (Sections 5 and 6, pages 7 to 10

· Budget 2006/07 (Section 7, pages 10 to11)

· Change for Children (Section 8 pages 11 to 12)

· School funding and Schools Forum proposals (Sections 9 and 10, pages 12 to 20)

· LEA and Children's Social Care Budget pressures 2006/07 and 2007/08 (Sections 11 to 13, pages 21 to 26)

· Efficiency Improvements (Section 14 page 27)

· Review of Charges (Section 15, pages 27 to 28)

· Other expenditure and mandatory awards (Sections 16 and 17, page 28)

· Workforce levels (Section 18, page 28)

· Business Unit up-date (Section 19, pages 28 to 29)

· Provisional budget 2007/08 (Section 20, page 29)

· Impact Assessment (Section 21, page 29)

1 Executive Summary

1.1 The report starts by addressing the requirements from Cabinet of the Executive Member, demonstrating Children's Services achievement of the budget guidelines set by Cabinet at its meeting on 19 December 2005.

1.2 The revised budget position is then set out, building on the regular monitoring reports during this year to the Children's Services PRC and Executive Members. There is some variation since the December monitoring report, with further spending pressures in the key areas of Home to School Transport and Non County Placements (NCP)/ Independent Fostering Agencies (IFAs) and some offsetting savings including Support Services. As such both the Education and Children's Services budgets are forecasting overspends totalling £2,462,000 against which the flexibility of £2,547,000 from redirecting Early Years and Child Care expenditure (explained later in the report) to take up the full General Sure Start Grant entitlement for 2004/06 can be applied. Overall the forecast under spend for the whole service is £85,000 and approval is sought for 100% carry forward to help address the significant service development aspirations of the Change for Children programme.

1.3 The Change for Children agenda is in its early stages and it is clear that the service aspirations and change challenges for the coming two year budget period are

· Change for Children and restructuring the service to focus on integrated outcomes for children, in particular the development of early intervention teams

· developing Information Sharing across the service to facilitate new ways of working together

· managing future budget pressures on placement costs in particular by extending the Foster Care pilot to improve outcomes for children looked after

· increasing front line social work staffing.

1.4 These four priorities will form the basis of service development. At this early stage, detailed budget implications are not clear - service plans and business cases will be developed and brought to Members over the coming months.

1.5 As such the service is aiming to develop a Change for Children investment fund for the coming two years. The proposals are that this will comprise a number of elements, explained further, later in the report

· one off carry forward from 2005/06 of £85,000

· use of any Local Public Service Agreements (LPSA1) reward grant for the service which may be achieved

· the development of a "Combined Budget" with the Schools Budget, agreed in principle with Schools Forum at its December meeting. With £500,000 in 2006/07 and £1,000,000 in 2007/08 from Dedicated Schools Grant (DSG) headroom to develop the Change for Children agenda in partnership with schools and other agencies to deliver improved educational outcomes for children including some further focus on those geographical areas of high deprivation

· containing service pressures in the forward budget to maximise the availability of passported increases for Children's Social Care. This is planned to deliver £84,000 in 2006/07 and £1,068,000 in 2007/08.

1.6 Overall the budget settlement is better than expected for the service, with very significant increases in the Schools Budget, through the new Dedicated Schools Grant, of 6.7% per pupil in 2006/07 and 6.3% in 2007/08. The passporting of increases for Social Care through the County Council's budget strategy results in budget growth above base budget even when allowing for some loss of Children's specific grants. The pressures across the service remain and the report sets out how the pressures will be managed to develop the opportunities in this budget.

1.7 The separate elements of the Children's Services budget are then explored in some detail. For the Schools Budget, the significant issues are the availability of additional funding within Dedicated Schools Grant, above the 5% per pupil minimum increase, as a result of the implementation of the modified DSG distribution. The funding has been earmarked by the Secretary of State for specific service priorities, which had already been highlighted by Hampshire Schools Forum as its priorities.

1.8 For 2006/08 the LEA Budget pressures have been, and will continue to be, tightly managed. Whilst a number of issues have been absorbed within the service management, an overspend is forecast of £205,000 in 2006/07 and £338,000 in 2007/08. This arises mainly from the full year effects of of changes in the Home to School Transport budget.

1.9 For the Children's Social Care budget, the passported increase gives some significant growth above base budget with an additional £2.514m in 2006/07 and £1.2m in 2007/08. Unfortunately the loss of specific grants (particularly the two year Safeguarding Children grant), whilst anticipated, has not led to baseline adjustments in the national settlement and results in a first call on these increases as illustrated in para 12.2. The demand led service pressures remain and are currently forecast to be manageable within the passported increase. This has allowed for the wider pressures in Children's Social Care and LEA Budgets to be met with growth of £1,068,000 then available for service development and Change for Children, in 2007/08.

1.10 The efficiency agenda is then addressed with the service delivering to its targets in 2006/07 and forecasting meeting the targets in subsequent years with the development of the efficiencies from Change for Children. The annual review of charges is set out with a number of new areas covered for the first time. Finally the report sets out the position on Business Units.

1.11 The Director of Children's Services particularly wished to highlight the following critical elements to this report. Firstly, the report sets out a projection for an overall balancing budget for the year 2005/06. Notwithstanding the inevitable variations that have contributed to that balancing position this represents a considerable achievement on behalf of the County Council by staff and managers across operational and financial services. It is well understood that these budgets relate to some of the most volatile, sensitive and demand led areas of service which in many authorities place the council as a whole under considerable pressure. For this to be achieved in the year when the total Children's Services budgets are in the process of being combined and made subject to this first joint report is further credit to those concerned.

1.12 Secondly, a significant contribution to this balancing position has been the virement of Early Years spending to Sure Start grant releasing funding into other areas of Children's Services, thus particularly offsetting pressures in out of county (residential and foster care) placements for the most vulnerable children. This is a legitimate use of funds and indeed is a step which helps ensure the funds are directed to the most needy children of this community rather than potentially lost to the local authority. This will not be an option for future years which emphasises the need for still stronger controls in future and the development of the early intervention initiatives referred to in the strategy.

1.13 Thirdly, the report articulates the continuing commitment of the County Council to giving priority to investment in Children's Services. The strength of the new Dedicated Schools Grant is a direct reflection of the Authority's historical investment levels and the clear approach to passporting has protected social care services from some of the more severe effects of the changing grant regimes at a critical time for Children's Services.

1.14 Finally, this report expresses a financial strategy to support the development of the County's Change For Children programme in line with the Children Act 2004 and further to the establishment of the Children's Services Department. This programme, which is far more challenging than the structural reform currently taking place, will require the support of schools and related agencies, especially in health, police, district councils and the voluntary sector. The Schools Forum has made an in principle commitment to support that programme financially as the members recognise the impact it will have on the most disadvantaged children but also on the whole education community.

2 County Council Budget strategy

2.1 The Cabinet has set a provisional budget strategy based on the following guidelines:

For 2006/07:

· Dedicated Schools Grant for schools (DSG)

· base budget for all other services adjusted for inflation on the same assumptions made in previous budget forecasts: 2.95% for pay increases to reflect national agreements, 2.5% for teachers' pay, 2.5% for price increases and 1.5% for the increase in employer's contributions to the Local Government Pension Scheme

· an extra £3.4m for social care (Adults and Children), above the base budget level to recognise extra demographic and other pressures in line with the increase to national spending plans.

For 2007/08:

· Dedicated Schools Grant for schools

· base budget for all other services, adjusted by 2.5% for pay increases (following the Chancellor's recent announcement to bear down on national pay awards - in line with the teachers' pay settlement of 2.5%), 2.5% for price increases and 1.2% rise in employer's pension contributions

· an extra £3.9m for social care (Adults and Children) above the base budget level.

2.2 In arriving at the base budget Executive Members are required to ensure that:

· Income will be maximised by reviewing charges and introducing new income wherever possible in excess of the 2.5% price inflation assumption, taking account of the powers to charge for discretionary services in the Local Government Act 2003

· Any proposals for spending above the budget guideline are matched by cashable efficiency savings

· All proposals for additional spending, however financed, are accompanied by a summary business case containing clear financial and performance data setting out how performance will be improved and value for money achieved, and how it links to the key aims of the Corporate Strategy

· Staffing implications of proposed budgets are identified for inclusion within the service's workforce plan.

2.3 There is also a requirement to identify annual efficiency improvements of at least 2.5% for the annual efficiency statement. These need to be integrated into budget planning and categorised into cashable and non-cashable. Cash savings in budget terms will be required to meet new pressures and service development proposals.

3 County Council Budget guidelines

3.1 The Cabinet considered the budget guidelines on 19 December 2005.

3.2 This report sets out the Executive Member for Children's Services responses to the guidelines. The report:

· Reviews the revised budget for 2005/06 (as set out in Appendices 1 and 2)

· Reviews the 2006/07 base budget which totals £777.493m (as set out in Appendix 3)

· Identifies growth of £19.411m (net of savings) (as set out in Appendix 4)

· Identifies £708,000 of pressures and costs absorbed (as set out in Appendix 4)

· Identifies efficiency improvements of £4.0m (as set out in Appendix 5)

· Reviews the charges made by this service (as set out in Appendix 6)

· Identifies the workforce implications of the budget proposals (as set out in Appendix 7)

· Proposes a detailed budget for 2006/07 (as set out in Appendix 8)

· Reviews the trading accounts of business units (as set out in Appendix 9)

· Proposes a provisional budget for 2007/08 (as set out in Appendix 10)

4 Revised Budget 2005/06

4.1 The cash limit for the revised budget 2005/06 is £782.975m (split £652.996m for Schools Budget, £64.944m for LEA Budget and £65.035m for Children's Social Care Budget). The calculation is shown in Appendices 1(a), 1(b) and 1(c).

4.2 A summary comparing the revised budget with the cash limit is set out in Appendices 2. This shows an overall under spend position of £85,000 for the combined services. The following paragraphs consider the main areas where the projected outturn is significantly different from the cash limit. A positive figure denotes an over spend pressure, a negative figures denotes an under spend or additional income.

Inclusion and Behaviour (Special Education Needs) +£340,000

4.3 This includes out-county placements (cash limit £7.231m), statements (cash limit £6.753m), Education Otherwise Than At School (EOTAS) (cash limit £6.608m) and inter-authority recoupment (cash limit £618,000). Work continues to minimise the pressure on the EOTAS budget and the development of Basingstoke School Plus. Current indications are that these pressures will result in an overspend of £340,000.

Interest on School Balances -£204,000

(Non-delegated schools - miscellaneous)

4.4 Extra interest on school balances is projected as a result of increased primary and special school balances. This will equate to additional income to the LEA Budget of £204,000 in 2005/06. The existing budget for interest is £673,000.

Home to School Transport +£403,000

4.5 Higher than anticipated contract prices due to above-inflation fuel and transport wage increases between February and December 2005 have resulted in a projected outturn over spend of around £403,000 (net of the specific contingency of £210,000) on a cash limit of £20.82m. This is an increase in the over spend pressure of £119,000 since the December PRC monitoring report. Further spend to save initiatives are being developed to ensure that past success in containing cost pressures above inflation is maintained.

Early Years - Education Payments +£155,000

4.6 A combination of more 4 year olds taking the full five sessions a week and those on fewer weekly sessions attending for more weeks has increased the full time equivalent number of 4 year olds in private, voluntary and independent settings by 194 (to 3,979 from 3,785) above the budgeted level. This additional take-up is the main reason for the projected outturn over spend of £155,000 against a cash limit budget of £19.393m.

Early Years - Sure Start Grant -£2,547,000

4.7 In addition the County Council has had £15m Sure Start Grant to spend between 1 April 2004 and 31 March 2006. The grant conditions initially set were highly prescriptive and presented challenges for the County Council in spending against those national priorities in the given timescale. This led to a carry forward for 2005/06 when the grant conditions were relaxed. The service is forecasting spending its full allocation for 2005/06 but the accumulated carry forward will remain. As such further eligible early years expenditure is to be transferred to grant funding, which will release County Council funding. Despite this under spend the service has been able to provide sufficient childcare and early years places to meet need and has delivered more places than any other local authority in the Country.

Support Services Recharge and Change for Children Agenda -£85,000

4.8 This shows the net effect of a number of salary savings, including: £110,000 in Early Years; £87,000 in Resources and Planning; £46,000 in Education Welfare Service, off set by a number of service pressures including: various salary increases (£40,000); and the 2005/06 costs of the Change for Children agenda (£118,000).

Other minor variations +£38,000

4.9 The largest are a combination of over spend variations for a Standards Fund adjustment (+£45,000) and on Bramley Frith study centre (+£36,000), off-set against under spends on FE awards (-£12,000) and the charges from the Connexions Service (-£18,000).

Proposed Strategy for Education Services

4.10 The table below summarises the variations which show that, excluding the significant under spend on the Early Years Sure Start grant, there is an overall over spend projected of £462,000 (net of general contingency). The strategy will be to continue to manage the budgets to reduce this overspend by the year end.

Budget Description	January 2006 Variation from cash limit
	£'000
Education Otherwise than at School	+340
Interest on School Balances	-204
Home to School Transport	+403
New Early Years Placements	+155
Support Services Recharge	-85
Other minor variations	+38
Total pressure	+647
Less : General contingency	-185
Net pressure	+462
Less: Sure Start Grant flexibility	-2,547
Net under spend	-2,085

Non-County Placements (NCP) / Independent Fostering Agency (IFA) +£1,882,000

4.11 There are several major elements which have impacted on the budget which shows an increase on the last reported figure of £1,535,000 and is due to revised packages of care and changes to the mix of clients:

· The average number of NCPs has increased (from 69 as at 1 April 2005 to 72 currently), with a high proportion of the increase being Children With Disabilities (CWD). At the same time the average number of Independent Fostering Agency (IFA) placements has reduced (from 125 to 118). These are less expensive than the NCP placements. The change in mix is estimated to add £450,000 to the total cost

· As well as the above, six very expensive placements during the year, equate to total additional costs (above an average cost) of £610,000

· Inflation pressure on block contracts for respite / special care adds a further £120,000 to the 2005/06 overspend projection

· Existing commitments at the start of the year exceeded the budget cash limit by approx £500,000, a continuation of the pressure from 200506.

Additional Legal Expenses +£246,000

4.12 The projected overspend reflects the continued increasing requirement for external professional advice at the levels experienced in 2004/05, together with increased need for in-house support from the Chief Executive's Legal Practice, by way of a service level agreement. This growth arises now partly as a result of the findings of the Climbie inquiry and partly reflects the increasing complexity of public law family proceedings, with an increased workload in the Chief Executive's Department and increased need to use outside experts to support in house solicitors. The service cash limit is £634,000.

Family Support Services +£316,000

4.13 Family Support Services aim to provide early intervention support in order to minimise the need for placement of children outside of the family. This is especially relevant in the area of increasing complexity for children with disabilities, where the majority of this additional expenditure is being incurred. Recent management action has reduced the projected outturn over spend from £388,000 in December's PRC monitoring report to £316,000.

Delivery against Management Targets -£465,000

4.14 The overall management action plan, which has been developed to minimise outturn over spend without impacting on service delivery, has been amended to reflect the latest end of year projections which reduces the projected saving by £100,000 to £465,000.

Proposed Strategy for Children's Social Care Services

4.15 The table below summarises the overall position, which represents a projected outturn over spend (net of management initiatives to reduce the pressures) of £2m (an increase of £440,000 from the December reported position) and sets out the developing strategy that is in place to manage the budgets to reduce this overspend by the end of the year.

Budget Description	January 2006 Variation from cash limit
	£'000
Non County Placements (NCP) / Independent Fostering Agency (IFA)	+1,882
Legal expenses	+246
Family support services	+316
Change for Children	+117
Other minor variations	-96
Total pressure	+2,465
To be funded by:
Staff savings from specific posts	-50
CAMHS planned savings	-75
Relocation of NCP to Linden Avenue	-100
Sale of additional beds at Swanwick lodge	-100
Target savings - for Care Leavers	-75
Target savings - for Children with Disability support	-65
Net pressure	+2,000

5 Revised budget - Summary

6.1 The table below summarises the overall projected outturn position across the entire Children's Services Department. In accordance with the County Council policy of allowing the carry forward of 100% of planned under spends, this would allow £85,000 to be added, as a one-off, to the Children's Services cash limit for 2006/07 to be used according to the budget strategy for the Change for Children programme.

	£'000
Education related services	-2,085
Children's Social Care	+2,000
Net Children's Services Department under spend	-85

6 Base Budget 2006/07

6.1 The Children's Services Department was created in August 2005 as a direct result of the Children Act 2004 which required the appointment of a Director of Children's Services, to be accountable for local authority education and children's social care services, and appointment of a lead council member for children. The funding requirements for the combined services means that the new Children's Services budget will bring together three components, as summarised below:

· Schools Budget - funded through the new Dedicated Schools Grant

· LEA Budget - there is currently still a statutory requirement to report on this separately through Section 52 statements, so a separate budget will be retained for reporting purposes at this stage

· Children's Social Care Budget - subject to passporting.

6.2 A base budget for 2006/07 has been prepared which contains the current financial policies of the Council, in order to provide a starting point from which decisions can be made. The base budget for this service in total is £800.535m at outturn prices.

6.3 Appendix 3 shows the make up of the base budget across the three components.

6.4 Later sections in the report consider the budget pressures for each component in turn and review the implications for specific grant changes within each area.

7 Change for Children

7.1 The most significant budget issue for the new Children's Services Department is the aspiration to progress the Change for Children agenda to deliver real service improvements for children and families against the five outcomes for children.

7.2 The service is in the planning stages for these changes which involve significant change and development across the whole spectrum of services for children. The Children and Young People's Plan is currently under development with partners and will help set outcome priorities.

7.3 At this stage it is clear that for the two years of this budget period there are four change challenges to be progressed

· Change for Children and particularly the development of Early Intervention teams including training and development issues.

· Developing Information Sharing across Children's Services and with partners.

· Extending the Foster Care pilot to improve outcomes for children looked after on a "spend to save" basis

· Increasing front line social work staffing through a clear business case funded on a "spend to save" basis.

7.4 These priorities are all in the planning stages with resource implications and business cases to be developed. The budget strategy for the service overall is to manage its existing pressures and priorities within existing budget guidelines. This means containing the difficult challenges of needs led services including home to school transport, non-county placements for social care and SEN placements. At the same time it is essential the service has an investment fund to allocate to the four priorities above as business cases are developed and approved. The expectation is that the areas above can be pump primed from a mix of one off funding, the outcomes of efficiencies and through ensuring ongoing service delivery can be managed within budgets. Such an investment fund can be achieved through the carry forward of the under spend in 2005/06 arising from the use of Sure Start Grant flexibility and from any LPSA reward grant the service may receive once the outcomes of LPSA1 are known.

7.5 Change for Children has been a theme of the budget development, with every opportunity for funding to be made available for this new direction. Schools Forum have made this a priority for their budget with funding being highlighted within DSG for home to school link workers, increased funding for pooled budgets with Social Care and Health, and with agreement in principle for a Combined Budget with DSG being pooled with other Children's Services funding to develop the early intervention teams to deliver services to support schools and their pupils. Linked to this, the development of the community services budget will be focused so as to support the extended schools priority for the department.

7.6 In summary, the Change for Children investment fund will comprise a number of elements:

· The use of any one-off carry forward from 2005/06 which may be achieved (projected to be £85,000)

· The combined budget with DSG potentially contributing £500,000 in 2006/07 and then £1m in 2007/08 to develop Change for Children in partnership with schools to deliver improved educational outcomes for children

· Use of any LPSA1 Reward grant money if successful in securing

· The strategy in the forward budget of containing service pressures within existing base budgets wherever possible (in accordance with corporate budget guidelines) will allow passporting increases for further developments. This is discussed in more detail in sections 11 to 13 and will contribute £84,000 in 2006/07 and £1,068,000 in 2007/08 to the investment fund

· In developing the interagency working for Change for Children, all parties will be looking to realise improved efficiency through combining existing resources.

8 School Funding Changes 2006/07

8.1 The school funding arrangements have been under review and development nationally since the perceived "funding crisis" of 2003/04. Following two years with the operation of the minimum funding guarantee (MFG) for schools and the passporting of the Schools FSS increase there was a consultation in February 2005 about a move to a ring fenced grant for all schools funding. This resulted in ministerial announcements in July 2005 bringing in

· the Dedicated Schools Grant for 2006/07, a grant covering all the activities of the Schools Budget

· a minimum per pupil funding increase for 2006/07 of 5% for all local authorities above the baseline of their 2005/06 Schools Budget

· a further consultation on a modified distribution methodology for the additional DSG that would be available above the 5% per pupil up to the national DSG increase of at least 6%

· multi year budgets for schools and Schools Budgets, linked to Spending review periods - so for 2006/07 there would be a two year settlement and two year budgets would be required for Schools Budgets

· a new pupil number count basis for local fair funding formula using "lagged" pupil number data, with for example the January 2006 count being used to distribute per pupil funding for the 2006/07 budget

· flexibility for combining the DSG with other budgets to deliver the Change for Children agenda provided there was proportional educational benefit and subject to the agreement of the Schools Forum

· further new executive powers for the Schools Forum to agree variations to the Central Expenditure Limit, formula changes and variations to the operation of MFG and the formula where these bring about spurious or anomalous results for individual schools.

8.2 As well as DSG it was announced that schools would continue to receive further specific grants with the Schools Development Grant (SDG) replacing the Standards Fund and the Schools Standards Grant (SSG) remaining. The introduction of DSG as a ring fenced grant meant that match funding of many Schools Budget Standards Funds was no longer required. The SSG has always had an unusual distribution formula with "big steps" and "cliff edges" for entitlement and amount. It was therefore announced that the distribution would be changed to a fairer approach which would be largely pupil led, and that the grant would be available to be used for extended school activities.

8.3 On 17 October, in advance of the settlement and linked with the publication of the Education White Paper, the DfES announced a further £335m in 2006/07 and 2007/08 for personalised learning at KS3. The funding to be distributed according to prior attainment at KS2, deprivation and pupil numbers. Three priorities were given for the use of the money

· additional support for pupils who have fallen behind

· support for gifted and talented pupils

· to help children from deprived families to access after school and year round activities through development of extended schools.

8.4 An announcement was expected in the autumn of the Teachers Pay Award, a multi year settlement, after which it was expected the MFG, SDG and SSG would also be announced, with DSG being announced close to the overall settlement. This left a challenging timescale for the Schools Forum to consider budget pressures and priorities and the impact of technical changes with the pupil number count basis.

8.5 In fact there were no late autumn announcements. The Teachers' Pay award was announced with the Chancellor's pre budget speech on 5 December. The other announcements all came out on 7 and 8 December, after the local government settlement. This announcement gave the MFG and confirmed that the modified DSG distribution would be used. The funding above the 5% per pupil minimum was earmarked by Ministers for specific national priorities

· personalised learning at KS3

· personalised learning in primary schools

· practical learning for 14-16 year olds

· work force reform in primary schools

· early years with free sessions for 3 and 4 years olds extended from 33 to 38 weeks a year.

8.6 The outcomes for SSG and SDG, new Schools Forum regulations and the outcome of a joint HM Treasury and DfES review into deprivation funding for schools were also announced.

8.7 As a result of the modified DSG distribution the settlement was higher for Hampshire than would have been expected from the FSS model, albeit still lower than the average national increase.

8.8 The earmarked sums announced for Hampshire are set out below

9.9 It should be noted that the above table, and all others that follow in this report show the increase between 2006/07 and 2007/08 in the 2007/08 columns, rather than the cumulative position.

9 Schools Budget proposals 2006/07 and 2007/08

9.1 The County Council's notified figures for Dedicated Schools Grant (DSG) for 2006/07 and 2007/08 are £615.803m and £647.397m respectively. These figures reflect forecast pupil numbers and will be adjusted in the May of the financial year in question when the actual pupil numbers for the preceding January are certain (e.g. January 2006 pupil numbers will have been fully validated by May 2006 and the DSG for 2006/07 will be finalised then). These totals incorporate all the expenditure on the Schools Budget including funds managed on behalf of schools by Policy and Resources e.g. repair and maintenance of buildings and capital expenditure met from revenue. There have also been technical adjustments between the Schools Budget and the rest of the service's budget due to changes in the treatment of specific grants. These movements are shown below

9.2 The Schools Forum has had two budget meetings to discuss the 2006/07 and 2007/08 Schools Budget, in November and December 2005. The Schools Forum's role has changed for 2006/07 giving it further executive powers and a stronger role in advising the Executive Members on the Schools Budget.

9.3 Schools Forum met first on 22 November 2005 to understand the anticipated settlement outcome for the Schools Budget 2006/08 and to set out their priority areas for use of any headroom available within DSG. They discussed the October DfES announcement of funding for personalised learning, and agreed the priority in Hampshire was at KS3. They set up a working group to bring proposals back to the December meeting for use and distribution of any funding Hampshire might receive.

9.4 Secondary Headteachers listed pressures in the following areas

· unfunded costs of the Upper Pay Spine (UPS) 2 and 3

· invigilation costs arising from workforce reform

· the costs of examination entries

· vocational learning for 14-16 year olds

· ICT costs, including purchase and maintenance

· behaviour and support for vulnerable children

· workforce reform and pay restructuring issues for secondary schools.

9.5 Primary Headteachers listed pressures in the following areas

· workforce reform, in particular the remaining portion of the costs of the 10% planning, preparation and assessment (PPA) time for teachers not specifically picked up in the funding formula

· home to school link workers and support for vulnerable children

· ICT costs.

9.6 Special School Headteachers referred to

· the benefit of increasing support through combined budgets with health and Social Services for early intervention services for children with disabilities, through projects such as School Home Inclusion Projects (SHIPS), Joint Exceptional Needs Initiative (JENI) and Children With Disabilities (CWD)

· home to school link workers and support for vulnerable children

· the costs of additional places for Step 6 of the SEN audit.

9.7 Governors supported all these priorities and referred to the significantly higher than inflation costs of fuel and energy.

9.8 Teacher Unions referred to the pressures of school workforce reform and the restructuring of management allowances into teaching and learning responsibility (TLR) payments. They also strongly supported the development of early intervention teams as part of the broader Children's Services agenda.

9.9 Other Individual Schools Budgets (ISB) pressures raised and discussed included

· Pay and Benefits implementation costs for non teaching staff

· Occupational Health Unit costs with increased demand for the service by schools

· potential costs for schools with the introduction of the Financial Management Standard as obligatory in secondary schools.

9.10 They also recognised and endorsed the pressures outside of ISB in the central expenditure areas for:

· Early years - further extension of the budget priority in 2005/06 to provide free early years places for 3 and 4 year olds for 38 rather than 33 weeks

· inflation on Out County SEN placements

· inflation on building repair and maintenance

· pressures on the Education Otherwise Than At School (EOTAS) service.

9.11 Schools Forum also heard an initial presentation from the Director of Children's Services on the development of the Change for Children's agenda in Hampshire and a proposal to consider using the new Combined Budgets flexibility to build the new service for the benefit of schools and all pupils in Hampshire.

9.12 At its further budget meeting on 12 December 2005 the full settlement details were available and the Schools Forum reviewed its priorities in the light of the revised budget position. However, given that the timetable was so tight (the settlement details having only been announced three working days before Schools Forum meeting), Schools Forum were only able to confirm the priority areas set out in November, proposed allocations and agreed in principle to recommend to the Executive Member that the remaining headroom be used to cover the following priorities. A further meeting is scheduled for 31 January when these will be confirmed and, if necessary any amendments taken forward through Cabinet in February.

9.13 They considered the build up of the headroom calculation. This started with consideration of the impact of the changed pupil number count date, which gives baseline and transition issues, in the first year. They agreed in principle to cap the increase possible under the MFG for schools with growing pupil numbers and to give transitional support to schools particularly affected by the compulsory change to the method of counting pupils for budget share purposes. They asked to consider this in more detail at the January meeting before finalising any proposals. They then considered and agreed the pressures which could be met with in the MFG, including

· Pay and Benefits

· upper pay spine costs

· inflation for energy and fuel costs at 15% per annum.

9.14 This table summarises the total headroom calculation with fuller details at Appendix A

9.15 Schools Forum considered the announcement of the earmarked amounts for Hampshire, which give significant growth above the expected minimum increase for Hampshire and were pleased to see that Ministers' priorities linked in strongly with those of Hampshire schools. As such they agreed to allocate funding in accordance with the earmarks on this occasion. Further work needed to be carried out on proposals for distributing the earmarked money between schools and reports on these will be considered at the January 2006 meeting. In the case of the early years education earmark the money is straightforwardly used on the extension from 33 to 38 weeks.

9.16 Schools Forum's proposal was to allocate the remaining headroom in the following areas to address these pressures:

· Funding of pupils from service families as agreed by Schools Forum after a study of the issues involved

· By the end of the period to fund secondary schools for 10 GCSE entries per pupil

· A part of the rising ICT requirements in all types of school

· Change for Children - funding to develop home to school link workers in all schools (with a formal proposal to go to Januarys Schools Forum meeting)

· Change for Children - combined budgets to enable early progress of benefit to schools

· Occupational Health unit and support at employment tribunals with increased demand from schools

· External assessment of the financial management standard

· Higher inflation on services to schools provided through SLAs

· Likely loss of the ability to spend General Sure Start Grant on SEN provision for the early years.

Table of headroom and earmarks	2006/07			2007/08
		£'000		£'000
Total of headroom and earmarks		13,311		10,178
Earmarks (detail breakdown available in para 9.8)		10,036		8,108
Headroom excluding earmarks		3,275		2,070
· Service Families		438		0
· Secondary Exam fees		319		197
· ICT in schools		700		0
Change for Children
· Home to School link workers		750		700
· Combined budgets (within CEL but needs separate Forum approval)		500		1,000
Other pressures identified
· Education Personnel Services (EPS) SLA (Occ Health and Tribunals)		180		0
Financial Management Standard		13		35
· Early years SEN co-ordinators		265		0
· Inflation above 2.5% for SLAs		110		138
Total		3,275		2,070

10 LEA Budget 2006/07 and 2007/08 pressures and priorities

10.1 In line with the overall budget settlement for the authority, the LEA Budget is adjusted to reflect specific grant changes, but otherwise is at base budget level. Within the LEA Budget there is an overall increase of £883,000 in specific government grants. Current estimated figures for specific and formula grants are shown in Annex 4 to Appendix 3. The most significant changes are:

· The Transforming Youth Work Performance Improvement Grant (TYWPIF) ceases, as expected, from March 2006. For Hampshire this grant totalled £200,300 and £110,000 of this supported three permanent youth worker posts

· New revenue Youth Opportunity Fund grant of £215,000 for 2006/07 and 2007/08

· New capital youth grant of £392,000 for 2006/07 and 2007/08

· Changes to the matched funding regime for Standards Fund and a desire by the DfES to streamline children related grants, means they have created a new Single Children's Services Grant which replaces a number of grants, including the Vulnerable Children grant from within Education Services

· The County Council's flexibilities over its use of some LEA Standards Fund grants, available as a result of being an excellent authority, remains similar to 2005/06 and the proposal is to continue support to the same services in 2006/07.

10.2 The new specific Youth Service related grants are in direct support of the Youth Green paper initiatives. Nationally £40m of grant has been allocated for authorities to use to progress the Green Paper issues. The Youth Capital Fund (YCF) will be available for two years to enable local authorities to develop new approaches to strategic investment in youth facilities, with particular reference to disadvantaged communities. Central to the initiative is the involvement of young people. The Youth Opportunity Fund (YOF) will support provision for increasing opportunities that support young people's personal and social development, enabling them to have a voice as well as creating possibilities for accredited outcomes. The two funds are expected to work in tandem with the YOF funding activities young people want and the YCF providing the infrastructure, facilities and equipment with both funds supporting the key components of the youth offer.

10.3 The budget proposals set out below identify the main service pressures and developments for the LEA base Budget for 2006/07 and additional pressures in 2007/08. Further details are given in Appendix 4 (b):

	2006/07	2007/08
	£'000	£'000
Budget pressures
Information System costs - this arises from the new statutory arrangements for pupil admissions, which requires a major upgrade in the software, plus significant growth in the data warehouse facility which links databases and systems and will be crucial to securing principles, such as the single point of data entry, around the emerging information sharing agenda	152	0
Home to School Transport - Despite the significant success of the spend to save strategies there are needs led and external cost pressures around bus, taxi, escort contract tenders on this £20m budget	400	300
YOT - the increase in the County Council's contribution for 2005/06 was met as a one-off but now needs base budget provision to secure the funding longer term	157	0
Child protection officer post - DfES funding ceased but work programme needs to be sustained specifically to support schools in child protection	45	0
Postal service pricing change (net of £15,000 savings)	33	0
Other minor pressures	24	0
Total pressures	811	300
Savings proposed
Home to School Transport - After School activities This implements decisions made in the previous budget	-78	0
Sale of Wessex Way lease (within Youth Service)	-85	0
Reductions in service demands - including FE Awards (-£12,000); catering (£-14,000); salary saving (-£38,000)	-65	38
Income generation - including: free school milk admin charge (£5,000); Youth Service (£10,000)	-15	0
Total savings	-243	+38
Net pressure within year	568	338

10.4 Home to School Transport is a large part of the LEA Budget (approx.33%) and remains a significant challenge in managing price and cost escalations. The service has an excellent record of cost avoidance through innovative spend to save initiatives. However, cost pressures are likely to increase further in the coming two years. As such a further review of the budget and opportunities to manage expenditure is underway. The ending of the support for After School activities is proposed in this report and is seen to be consistent with County Council priorities as well as recent developments in the White Paper. Further spend to save initiatives will be developed and brought forward in the year, including consultation on the current Denominational Transport policy. At the same time the County Council is looking at further innovations in line with the White Paper, including "yellow buses".

10.5 Discussions are continuing around the funding of Cricklade Theatre and are subject to a satisfactory business case. It may be that the Children's Service Department has to find around £40,000 towards this, recognising benefits for children and young people, which would be found within these budget proposals if necessary.

10.6 The development of School Improvement Partners in line with DfES policy started for Secondary Schools in 2005/06 and is funded by the Standards Fund. The roll out of Primary Schools starts in January 2007, and an allocation has been announced through Standards Fund. However, initial analysis suggests that the redirection of existing School Improvement activities and funding combined with this grant funding will fall short of the overall funding required by £170,000 in 2007/08. Clearly the expectations is that the new activity should be fully funded by the DfES and discussions nationally will develop. The consideration of this as a 2007/08 budget pressure will follow the outcome of those discussions.

10.7 Following the DfES funding announcements initially made in July 2005, the DfES have now confirmed the detailed LEA grant allocations. The resulting Standards Funds grant implications for the authority mean a reduction in the net matched funding requirements from the LEA Budget of £363,000 in 2006/07.

10.8 The table below summarises the overall position for the LEA Budget for 2006/07 and 2007/08. When considered together with the net position for the Children's Social Care (discussed in Section 12), the combined effect will enable the cost pressures on the LEA Budget to be contained for 2006/07 while sustaining the current level of service.

	2006/07	2007/08
	£'000	£'000
Net pressure within year	+568	+338
Standards Fund match funding adjustment	-363
	+205	+338

11 Children's Social Care for 2006/07 and 2007/08 pressures and priorities

11.1 Overall for 2006/07 there is an extra £3.4m (£3.9m in 2007/08) for social care (Adults and Children's) above the base budget level to recognise extra demographic and other pressures in line with the increase to national spending plans. Current estimated figures for specific and formula grants are shown in Annex 3 to Appendx 4. The most significant changes are:

· Loss of the Safeguarding Children grant of £1.328m the transfer of which was anticipated but has not been effected as a baseline transfer in the national settlement, thus impacting on overall grant funding for the County Council

· Reduction in the Children's Fund grant of £576,000 in 2006/07 and £180,000 in 2007/08, as expected. In anticipation, work programmes have already been agreed to reduce the spending accordingly

· Increase in the new Children's Services grant of £1.037m, which reflects the merger of a number of grants, including the current Adoption support, Choice Protects, Education Health Partnerships and Vulnerable Children grants

· A minor net overall reduction of three other specific grants (CAMHS increase of £25,000 in 2006/07 and £26,000 in 2007/08; reduction of £10,000 in 2006/07 for the Youth Justice Board: and, a reduction of £23,000 for the Teenage Pregnancy Grant), for which changes to the level of service provision are being planned to reflect these changes.

11.2 After splitting the additional Social Care funding between Adult Services and Children's Social Care Services, the net increase which can be used to meet the department's 2006/07 and 2007/08 pressures is summarised in the table below

		2006/07			2007/08
				£'000			£'000
	Passporting increase including RSG adjustment			2,514			1,200
	Net effect of budgets to be reinstated through through grant reductions			-849
	Net specific grant increase						+550
	Total increase over 2005/06			1,665			1,750

11.3 Compilation of the base budget for Children's Social Care has resulted in a net budget pressure of £1.376m on the Children's Services budget to sustain the current level of service in 2006/07. The budget proposals set out below identify the main service pressures and developments for the Children's Services budget for 2006/07 and the further pressures for 2007/08 in advance of applying the base budget increases identified in para 12.2 above. Further details are shown in Appendix 4 (c)

	2006/07	2007/08
	£'000	£'000
Budget Pressures
NCP / IFA - reflection of on-going pressure from previous years.	1,400	500
Legal charges - reflection of increase in internal and external legal costs associated with child placements	237
Relocation of Havant Children With Disabilities Team (CWD). The strategy for children with disabilities in the South East of the County, prepared in consultation with PCT, Havant Borough Council, Education and Social Services Departments, included the development of a multi agency facility meeting all needs under one roof. The building has now been constructed by the Local Implementation Finance Trust and is available for occupation	40	-6
Increased Information System running costs. Continuing growth in the use of SWIFT requires additional network connections and running costs	50
Adoption services - implementation costs of statutory changes including: appointment of independent Chairs for Adoption Panels; provision of intermediary services for ALL parties involved in adoption; provision of face to face contact, rather than `letterbox' service to facilitate and support contact between adopted people and their families/significant others, and; appoint a named adviser for the provision of such services.	114
Total pressures	1,841	494
Savings identified
Stonham contract - this will provide a new managed accommodation service to support care leavers in the South West Hampshire area and will reduce NCP provision as well as bed and breakfast spending through this direct provision	-440	-150
Family Group Conferences - efficiencies from moving the service provision to be delivered internally	-25	0
Total savings	-465	-150
Net pressure	1,376	344

11.4 In accordance with the budget guidelines, to ensure that budget pressures are contained within the base budget, the net effect for the Children's Social Care Budget is that the above agreed budget pressures can be met from within the base budget. This leaves £289,000 in 2006/07 and £1.406m in 2007/08 to be used first to balance the overall pressures in the Children's Services Budget and then to contribute to the Change for Children priorities identified in the department's budget strategy, in particular the foster care pilot and social worker investment.

12 Summary of service pressures and priorities for 2006/07 and 2007/08

12.1 The table below summarises the net position for the combined LEA and Children's Social Care Budget for 2006/07 and 2007/08 and shows that, subject to containing other service budget pressures, the service will be able to contribute to its Change for Children programme in 2006/07, £84,000 and in 2007/08 £1.068m.

	2006/07		2007/08
	£'000	£'000	£'000	£'000
LEA Budget
Net pressure within year	-568		-338
Standards Fund match funding adjustment	+363
Net LEA Budget pressure		-205		-338
Children's Social Care Budget
Base Budget increase	+1,665		+1,750
Net pressure within year	-1,376		-344
Net Children's Social Care Budget pressure		+289		+1,406
Overall funds to contribute to the Change for Children Programme		+84		+1,068

13 Cost pressures, redeployment proposals and efficiency improvements - 2006/07 and 2007/08

13.1 The Cabinet requires all services to consider and report on:

· cost pressures absorbed within the budget guidelines

· the redeployment of any resources required to offset any new spending priorities, or inescapable budget pressures, or legislative requirements which otherwise cannot be met within their budget guidelines

· annual efficiency improvements.

13.2 Details of cost pressures absorbed of £708,000 are included in Appendix 4 and discussed in detail in sections 11 to 13.

13.3 The County Council is required to identify annual efficiency improvements of at least 2.5% for the annual efficiency statement (AES). At least 1.25% of the improvements in each year need to be `cashable' in the Government's terms. These occur when inputs (money, people, assets etc) are reduced but outputs remain unchanged or when the prices of inputs are reduced but outputs remain unchanged. However, not all cashable efficiency savings in AES terms provide usable cash in budget terms. For example, absorbing the cost of increments within the base budget counts towards the AES but does not generate new budget provision.

13.4 The AES targets set by the County Council for the Children's Services Department are £1.610m annually (Non-Schools related services £860,000 and Children's Social Care of £750,000). These targets are met for 2005/06 and 2006/07 with further contributions being made by ineligible services, such as Home To School Transport.

13.5 The cumulative of the annual efficiency improvement targets for the Children's Services Department for the period 2005/06 to 2007/08 is £14.1m. Appendix 5 identifies efficiency improvements totalling £11.6m for these services. Of these, £ 9.705m is eligible for inclusion in the annual efficiency statement and £1.893m represents usable budget savings. The shortfall is largely in 2007/08 and it is anticipated that consequences of the Change for Children programme, including the Fostering initiative and other spend to save initiatives, will generate further efficiencies over the coming two years.

14 Review of charges

14.1 The service's 2006/07 revenue budget includes income of £5.049m from fees and charges. Details of the material headings are included in Appendix 6.

14.2 Discretionary charges are reviewed annually except when they are subject to agreements, which cover longer periods when the review takes place at the end of the period of the agreement. The Executive Member for Education reviews school meal charges, and for 2006/07 and 2007/08 this review has incorporated the implications of the new nutritional standards and the three year DfES specific grant.

14.3 Although the scope for generating additional income to the County Council is limited because schools make the majority of charges, this has been a particularly innovative year and a number of new income streams are reflected in the budget for 2006/07 as listed below:

· a new service level agreement commenced with schools with effect from July 2005 which involves schools paying for EOTAS provision for pupils on their school role who are emotionally vulnerable or unwell

· the County Council has the power to issue a fixed penalty fine on the parents of children who are persistently not attending school.

14.4 During 2006/07 the opportunity to review options and report to Executive Members on the further generation of income to provide additional support for funding front line services will be taken.

15 Other expenditure

15.1 The budget includes some items, which are not counted against the cash limit. This includes budgets for central departments' support services, except where they have been given to departments to buy services, and repair and maintenance of buildings. It also includes member support within the Children's Services budget, which are rechargeable to the Policy and Resources budget for corporate and democratic services. These have been excluded at this stage as the budgets are subject to Policy and Resources Executive Member's control and they have not yet been agreed. In the original budget they totalled £5.369m.

16 Mandatory Awards

16.1 The budget for mandatory awards for 2006/07 has reduced to zero as the residual costs of awards made prior to the transfer of financial transactions to the Student Loan Company have finally ceased.

17 Workforce levels and costs

17.1 The workforce implications of the proposed budget are set out in Appendix 7. The 2006/07 base budget supports a planned workforce of 1513 full time equivalent (FTE) staff. This compares with the original estimate for 2005/06 of 1498 which is a minor increase of 15.

17.2 The net effect of proposals for growth and redeployment of resources (Appendix 4) show an increase of 330 (324 Schools Budget, 3 LEA budget and 3 Children's Social Care Budget). The increase in schools is principally due to the increase in earmarked funds and headroom available in 2006/07. However, the number of teachers posts will reduce by 20 FTE, reflecting the fall in pupil numbers.

18 Business units

18.1 The trading accounts of the business units are summarised in Appendix 9.

18.2 The business units consist of two groups of services. Stubbington and Minstead Study Centres provide curriculum services to pupils and secure income from schools to cover residential and support costs. In addition both have to secure income to cover building replacement costs and therefore operate ten-year business plans. The other business units provide services to schools and to the Children's Services department all on a charge basis. Broadly 80% of the income is secured through annual subscription from schools. Current service level agreements operate to end of March 2008. This mix enables the County Council to benefit from the economies of scale achieved by the units.

18.3 The services to schools business units operate in a volatile and challenging environment. Whilst they have traded successfully for about 15 years they are likely to face increasing competitive pressures over the next two years due to the growth in alternative suppliers. In the medium term the education White Paper is likely to affect the trading environment. A major review of the services to schools business units is likely in 2007. This review will start with adjustment to the business unit balances at 31 March 2006 to reflect the in year changes affecting business units, for example the support for the County Wardrobe, as it transfers to Recreation and Heritage, and Bramley Frith Study Centre.

18.4 During the past two years the units have assisted the County Council to implement successfully across over 500 schools the replacement of finance and procurement and the implementation of a new payroll and HR system through the rollout of SAP. Business Units have been used to manage the support functions to schools, funding the costs of around £500,000 through use of balances. In addition Business Units will have to absorb the costs of the implementation of the Pay and Benefits review in 2006/07 and will continue to fund the staffing costs incurred as service provision re-aligns to meet the needs of schools in 2006/07 and 2007/08. The issue of deficit and surplus balances at individual business unit level is the subject of ongoing discussions with business unit managers.

19 Provisional budget for 2007/08

19.1 The provisional budget for 2007/08 for this service is £853.854m at outturn prices as set out in Appendix 10.

19.2 The focus of the Children's Services budget strategy for 2007/08 is around developing the Change for Children agenda with emphasis on the development of early intervention teams as well as extending the Foster Care pilot and social work staffing levels on a "spend to save" basis. Simultaneously the strategy recognises the realistic budget pressures likely in the main budget pressure areas, such as non-county placements and Home to School Transport.

20 Impact assessment

20.1 Race and equality impact assessment has been considered in the development of this report and no adverse impact has been identified.

21 Recommendations

21.1 It is recommended that:

1 the report is noted

2 comments from the Children's Services Policy Review Committee Members are submitted to the Executive Member for Children's Services and the Executive Member for Education for further consideration.

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

Appendices