Hampshire County Council
	20 January 2006
	Executive Member for Adult Services	Item 3
	Revenue Budget 2006/07 and 2007/08
	Report of the County Treasurer and Director of Adult Services

Contact: Paul Carey-Kent, Deputy County Treasurer ext 7525, email:
[email protected]
David Ward, Assistant Director ext 7529, e-,mail: [email protected] and
Annal Nayyar, Head of Finance ext 7526, e-mail: [email protected]

1 Summary

1.1 This report sets out the proposed Adult Service revenue budget for 2006/07, a provisional budget for 2007/08 and recommends a revised budget for 2005/06.

1.2 The following decisions are sought:

· To approve for submission to the Leader and Cabinet:

i) The revised budget for 2005/06 (as set out in appendices 1 and 2)

ii) The base budget for 2006/07 (as set out in Appendix 3)

iii) The proposals for growth and redeployment of resources (as set out in Appendix 4)

iv) The proposals for efficiency improvements (as set out in Appendix 5)

v) The annual review of income and charges (as set out in Appendix 6)

vi) The workforce implications of the proposed budget for 2006/07 (as set out in Appendix 7)

vii) The detailed budget for 2006/07 (as set out in Appendix 8)

viii) The provisional budget for 2007/08 (as set out in Appendix 9)

In addition , the Executive member recommends that the option set out for an Adult Services budget of £256.4m in 2006/07 and £260.0m in 2007/08 be agreed for submission to the Cabinet, whilst noting that these are preliminary considerations in a developing picture and that:

· this meets the 2007/08 Cabinet guideline but exceeds the 2006/07 guideline by £2.7m;

· there are clear risks associated with delivery even at that level of budget; and consequently:

· it is not considered feasible at this stage to identify a further £2.7m of reductions to take effect in 2006/07.

2 Reason(s)

2.1 Cabinet has requested that:

· Service budgets be prepared for approval by Executive members within the provisional budget guidelines set by Cabinet in December 2005 and submitted to the Leader and Cabinet for consideration in February 2006

· Executive members identify annual efficiency improvements of least 2.5%, of which at least 1.25% are cashable in the Government's terms. Cash savings in budget terms are required to meet new pressures, service developments or legislative requirements which cannot otherwise be met within the budget guidelines

· Executive members report back on their annual review of charges and maximisation of income

· Executive members report back on the workforce implications of their proposed budgets as part of the process of linking workforce and financial planning.

2.2 The Adult Service revenue budget for 2006/07 and 2007/08 supports: the County Council's corporate aims and its priorities by focusing financial resources on areas such as improving the quality of life for vulnerable adults and older people

3 Other options considered and rejected: None

4 Conflicts of interest declared by the decision maker or other Executive member consulted: None

5 Dispensation granted by the Standards Committee: None

6 Reason(s) for the matter being dealt with if urgent

6.1 Proposals need to be submitted to the Cabinet on 10 February 2006 in order to influence decisions on the 2006/07 budget and council tax.

Approved by: Date:

Councillor Patricia Banks

Executive Member for Adult Services

	Hampshire County Council
	Adult Social Care Policy Review Committee	Item 9
	20 January 2006
	Executive Member - Adult Social Care	Item 3
	20 January 2006
	Revenue Budget 2006/07 and 2007/08
	Report of the County Treasurer and Director of Adult Services

Contact: Paul Carey-Kent, Deputy County Treasurer ext 7525, e-mail:
[email protected]
David Ward, Assistant Director ext 7529, e-,mail: [email protected] and
Annal Nayyar, Head of Finance ext 7526, e-mail: [email protected]

1 Introduction

6.2 This report sets out the proposed Adult Services revenue budget for 2006/07 and a provisional budget for 2007/08 and reviews the revised budget for 2005/06. This report has been prepared in consultation with the Executive Member for review by the Adult Services Policy and Review Committee, 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.

6.3 The new department is faced with exceptional pressures which impact on both 2005/06 and the forward position. The background behind these is set out fully in the accompanying paper on this agenda.

6.4 Given the very substantial difficulties faced in setting the budget, this report must be regarded as an initial approach which lays out the issues for decision. More work is needed to confirm the achievability of efficiency savings and further consideration will need to be given to the balance between efficiency savings and service reductions in the context of the level of support available. A firm savings plan will be required before the start of the financial year.

6.5 The Adult Services revenue budget for 2006/07 and 2007/08 supports the County Council's corporate aims and its priorities by focusing financial resources on areas such as improving the quality of life for vulnerable adults and older people.

7 Budget strategy

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

For 2006/07:

· Dedicated Schools Grant for schools

· 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 price increases and 1.5% for the increase in employer's contributions to the Local Government Pension Scheme

· an extra £0.9m for Adult Services above the base budget level to recognise extra demographic and other pressures in line with the increase in 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 £2.7m for Adult Services above the base budget level

7.2 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.

7.3 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.

8 Budget guidelines

8.1 The budget guidelines were considered by the Cabinet on 19 December 2005. For Adult Services' expenditure , the provisional budget guidelines are:

For 2006/07	£253.7m
For 2007/08	£260.0m

8.2 This report sets out the Adult Service Executive Member's 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 £252.8m (as set out in Appendix 3). After the allowed growth of £0.9m this equates to the budgeted guideline of £253.7m

· For Adult Services identifies growth and unavoidable service pressures of £10.0m as set out in Appendix 4

· Proposes savings and redeployment of £6.4m (as set out in Appendix 4)

· Identifies efficiency improvements of £4.7m being 1.9% of the base budget (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)

· Proposes a provisional budget for 2007/08 (as set out in Appendix 9).

9 Revised Budget

9.1 The cash limit for the revised budget is £249.2m. The calculation is shown in Appendix 1.

9.2 A summary comparing the revised budget with the cash limit is set out in Appendix 2. The principal reason for the variations across all client groups arises from technical adjustments to the methodology of apportionment of the cost of management and support services. The actual reduction in budget of £0.7m is due to procurement savings across all client groups (£0.4m) and the deduction of the 2004/05 overspend (£0.3m). There are a number of other adjustments that are highlighted in Appendix 1 which have an overall neutral budgetary impact. The accompanying report deals with likely spending compared with the revised budget.

10 Base Budget 2006/07

10.1 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 Adult Services is £252.8m at outturn prices and the fully passported budget after the allowed growth of £0.9m is £253.7m

10.2 Appendix 3 shows the make up of the base budget.

10.3 Overall, the base budget includes a net decrease in expenditure at constant prices (based on corporate inflation levels) of £1.8m, due to changes in grant funding levels. This is comprised of £1.3m loss of Adult Social Care grants as reflected in paragraph 6.22 and £0.5m loss of Supporting People grant as described in paragraph 6.25.

11 Growth and Cost pressure proposals for Adult Services for 2006/07 and 2007/08 and budget strategy.

11.1 The proposed guidelines are based on the budget strategy agreed in July by Cabinet and endorsed in December 2005. These guidelines are based on the following assumptions:

· Dedicated Schools Grant for schools

· base budgets for other services, adjusted for inflation on the same assumptions made in previous forecasts of 2.95% for pay increases, to reflect the national settlement, 2.5% for prices and a 1.5% increase in the employers' contribution to the Local Government Pension Scheme (the next phase from stepping-in increases from the last actuarial valuation). For 2007/08 the assumptions are 2.5% for pay (following the Chancellor's recent announcement to bear down on national pay awards - in line with the teachers pay settlement of 2.5%, which is 2.8% with incremental drift), 2.5% for prices and 1.2% rise in employers' pension contributions.

11.2 However, it has been recognised that Adult Services and Social Care in general have extra demographic and legislative as well as other pressures. Consequently an extra £0.9m above base budget levels in 2006/07 and £2.7m in 2007/08 has been made available.

11.3 The Adult Services Department is faced by an unusually challenging budget position through a combination of increased demand pressures, restricted increases in Government support (even before the effect of any formula changes take effect from 2008/09) compounded by grant losses, and a strong likelihood that overspending pressures will be brought forward from 2005/06. The budget guideline adopted by Cabinet recognises this and allows for increases under the Government's former FSS allocations to be passed to Children's and Adults Services. However, those increases are distributed unevenly across the two years 2006/07 and 2007/08 as follows:

	2006/07 addition	2007/08 addition	Cumulative addition
	£m	£m	£m
Children's	2.5	1.2	3.7
Adults	0.9	2.7	3.6
	3.4	3.9	7.3

11.4 This, combined with the lead-in time required to make significant changes, makes the Adult Services position particularly difficult in 2006/07. Realistically, a two year approach is necessary.

	2005/06	2006/07	2007/08
Total net budget	184.7	194.9	202.9
Specific grants	64.5	58.8	57.1
Total available to spend - cash limit	249.2	253.7	260.0
Projected actual spend (including new pressures, growth and savings)	251.2	254.4	260.0
Assumed 05/06 overspend carried forward		2.0*	0.0
Total budget requirement before savings		256.4	260.0
Further savings required to balance budget		2.7	0
* Target position against projection of up to £4m.

11.5 Appendices 3 and 4 shows the make up of the budget and details the cost pressures. The position may be summarised in the following table:

11.6 The result is that savings of £9.1m are required in order to balance the 2006/07 budget of which savings of £6.4m have been identified, with £2.7m still required. Additional savings of some £2.3m are likely to be needed in 2007/08 - and this before the likely "cliff edge" in 2008/09. Given the difficulty encountered in 2005/06 in the face of demand pressures combined with ambitious efficiency saving targets, it is not judged feasible to achieve all the savings required through efficiency measures, nor to achieve all of the savings required in 2006/07 in isolation. Rather, it will be necessary to rely on significant service reductions and generation of additional income, both of which will take time to implement in full. Consequently, even assuming that those service reductions and increases in charges are initiated as soon as possible, it will be necessary to plan over a two-year period. This paper is therefore based on the following:

· maximum use of efficiency savings

· maximum increases in charges subject to consultation

· significant service reductions

· aiming to achieving the 2007/08 budget position, which assumes an additional passporting of FSS worth £2.7m, in 2006/07 as well as 2007/08. This, in effect, buys time to implement the changes required but the consequence is that this report falls £2.7m short of identifying the full savings required in 2006/07.

11.7 It is essential that consultation on and rapid implementation of service reductions proceeds as quickly as possible in order to reach a relatively stable position in 2007/08. It will be necessary to restructure the department to build in flexibility to achieve the changes likely to be required in the longer-term, ahead of the likelihood of further reductions in 2008/09 onwards, and work on this must also start in short order.

11.8 Accordingly, this paper proposes:

· Very ambitious targets for service remodelling and other efficiency measures (£4.7m in 2006/07, of which £3.4m is cashable for use in balancing the budget) in order to minimise service reductions. These usable budget savings can be summarised as:

- more cost effective placements and keener price negotiation: £1.6m

- more efficient administration and saving in management costs: £0.6m

- more effective use of vacancy management: £0.8m

- more efficient procurement across supplies and services and a reduction in transport costs: £0.4m

11.9 The scale of the challenge may be illustrated by comparison with 2005/06 budget for Social Services, in which £3.1m of cashable efficiency savings were required across a broader base - and that budget is proving exceptionally difficult to deliver. Actions are identified intended to achieve this level of savings, but some slippage or non-delivery is likely in practice, meaning that additional efficiency measures will have to be identified either as a post-budget process or as the year develops in order to meet this target. Scope for measures which do not reduce service is exhausted, if not exceeded, by this level of requirements:

· £0.5m for additional income from increases in charges beyond inflation. The 2007/08 effect of these changes is hard to predict accurately but is expected to be around £1.1m

· Plans for £2.4m of service reductions, as outlined in both Appendix 4 and 5.

11.10 Three main means are proposed to achieve these reductions:

· First, restricting access to care through a review of eligibility criteria with the expectation that a move may be made from responding to `substantial' and `critical' needs to responding to critical needs only. This change will help influence the chances of delivering the various savings proposed.

· Second, making minimum provision for reprovision where residential facilities are closed (the closures themselves are due to buildings issues). The preferred approach to achieving this will be to introduce a freeze on all new residential placements unless nursing or EMI care is provided: the only exception being where a home-based package would cost more than the alternative residential care, combined with a rigorous process to verify the unavoidability of such cases.

· Third, substantial reductions in day care provided. This will also require closure of buildings-based services with the expectation not only that this will assist in moving towards models of care more aligned to the Government's developing agenda, but also that replacement provision will cost less.

11.11 The plans in these latter two areas are based on the assumption that reprovision costs will be 75% of the previous buildings-based costs of running services, given the unavoidable statutory duty to provide assessed service requirements (though it is hoped that this percentage could be reduced in time, and every effort will be made to do that). Thus to achieve the savings target of £2.4m in 2007/08 (with a part-year effect, net of any transitional costs, of £0.8m on 2006/07) will require closure of services currently costing £10m. Those reductions may be summarised as follows:

· Older Persons Residential Care - Five residential homes with net running costs of £2.4m have been identified for closure.


· Day Care - Current in house service provision provides approximately 1,670 places (220 Older People, 1,230 People with Learning Disability and 220 other Younger Adults) in 28 sites costing £10m net (£1.2m Older People, £6.5m People with Learning Disability and £2.3m other Younger Adults) and 2,100 places in contracted out provision (1,270 Older People, 400 People with Learning Disability and 430 other Younger Adults), costing approximately £7.4m (£2.6m Older People, £2.7m People with Learning Disabilities and £2.1m other Younger Adults). Total internal and external service provision costs therefore amount to £17.4m. To achieve the balance of £7.6m gross reduction in service provision (to reach £10m gross reduction in total, with £2.5m initial net savings target) would therefore require removal of some 45% of this capacity.

11.12 Both programmes of reduction would require consultation, organisation of replacement services and consideration of contractual notice requirements where provision is external and of redeployment of staff where it is internal. That would be likely to cause some delays and transitional costs and require some phasing, hence the relatively modest savings assumed in 2006/07. The primary goal is to improve positioning in terms of both overall cost and flexibility of care options for 2007/08 onwards.

11.13 The approach set out above combines the two areas for flexibility in the department: tightening eligibility criteria where a service is statutory and reducing to a statutory service where more than that is currently provided. There are in addition three other areas in which substantial non-statutory services are provided by the Council: meals on wheels, respite care and grants to the voluntary sector. Each of these could be considered to contribute towards savings. Such reductions have not been built into figures at this stage but members may wish to consider the possibilities - either now or as part of longer term approaches - which are broadly as follows:

· Withdraw funding from meals on wheels. It would then be for District Councils, many of whom currently subsidise the costs, to fund this service and set charges as they wish. This would save £0.3m.

· Reduce funding for respite care (total spend not readily separable from other care costs - further work would be needed to assess this).

· Reduce spending on grants to the voluntary sector from the current £0.9m.

Effect on Performance

11.14 There is clearly a danger that performance and CPA ratings will fall as a result of the need to make reductions. The assumption of a 75% reprovision rate for closures and allowance of £1m in 2007/08 for new pressures arising during 2006/07 are designed to mitigate this risk, but it should be clear that retention of current CPA ratings would be the best possible outcome and is by no means guaranteed. This is an inevitable result of the Government funding Adult Services on the assumption that levels of provision should reduce but judging it on the basis that provision should increase.

11.15 The combination of budget pressures (with the programme of efficiencies and service reductions consequently required), performance expectations, restructuring of the department and the developing well being agenda will also present very considerable challenges in terms of change management capacity - so much so that management capacity should itself should be regarded as a factor to take into account in deciding what is achievable. Furthermore, there will also be substantial corporate change which will impact on the Adult Services department, notably the implementation of the pay and benefits review and the introduction of a contact centre, the business case for which will require considerable efficiency savings in and therefore remodelling of the Adult Services department.

Demography

11.16 An increase in cost estimated at £1.2m as reflected in Appendix 4 is associated with `transitional age' i.e. clients entering adults services for the first time upon reaching the age of 18. The needs of these clients tend to be more complex and, therefore, more expensive to provide for than existing clients. It is estimated that in 2006/07 there will be a transfer of 51 clients from Children Services to Adult Services with a similar number in future years.

11.17 A pressure of £0.7m will arise in both 2006/07 and 2007/08 relating to demographic changes across the domiciliary care services is also included in the pressures shown in appendix 4.

On going cost of 2005/06 placements

11.18 An extra £1.3m is required in 2006/07 and 2007/08 to cover the ongoing cost of packages of care in 2005/06 in respect of 26 clients with Learning Disability at an average cost of £50,000pa. This pressure is likely to continue into the foreseeable future as survival rates of babies with disabilities followed by an increase in their life expectancy as adults. Indeed the effects of this have been evaluated nationally: the Department of Health's Learning Disability Task Force has estimated that there will be an 8% increase in the total numbers of adults with learning disabilities between 2001 and 2011 and an 11% increase between 2011 and 2021.

Inflation

11.19 It is expected that the 2.5% general inflation provision within the base budget will not be sufficient in 2006/07 as prices for independent sector care are likely to increase beyond this, especially in areas of complex need such as learning disability and mental health. Therefore an additional £1.5m has been assumed.

ENHANCE - Nursing Care

11.20 2006/07 is the final transitional year for the ENHANCE project. This will position the Council well in the nursing care market in the longer term, but in the short term there are bound to be costs as places are lost during refurbishment and staffing costs incurred ahead of opening new places as appropriate phasing in of care occurs. The overall net pressure in 2006/07 is £0.6m. However this includes one-off IT costs of £0.5m which fall out of the budget in 2007/08.

Contingency

11.21 A contingency of £2.0m has been set aside to meet the possibility of a 2005/06 overspend. Should this not be needed in full, then it could be used for new pressures and also to meet any shortfall arising from proposed efficiencies not being met in full during 2006/07. An additional £1.0m has been set aside in 2007/08 (bringing the total available to £3.0m), given the strong likelihood that new pressures will arise, the possibility that not all efficiency measures will deliver in full and the worsening of the grant position due in 2008/09.

Government Grants - Change in funding arrangements

11.22 The latest grant guidance has been received which highlights an overall £1.3m pressure (excludes the Supporting People grant) which is mainly due to a £0.7m reduction in the Access & Systems Capacity (bed blocking) grant and a fall of some £1.0m in the Preserved Rights grant. The net impact of a number of other grants is an increase of £0.4m. Included in this figure is a new grant of £0.5m for preventative technology. This grant is for two years and provides resources to pilot preventative services for older people. In particular the requirement to invest in telecare initiatives aimed at supporting individuals to live at home and thereby reduce the number of avoidable admissions to residential care. This action should potentially save the department budgetary pressures in the coming years. Finally there is no financial capacity to add inflation to the grants and therefore it is assumed that service delivery is contained within this lower grant entitlement.

11.23 Residential Allowance Grant (£3.8m): These allowances were abolished for new clients in April 2002, however those who had been in receipt of this allowance before 2002 were funded through local authorities via a specific grant. This funding is now passported to local authorities via base funding from 2006/07 instead of remaining as a specific grant.

11.24 In addition a £0.4m pressure has been included to reflect the impact on the social care budget of reduced Supporting People funded services as a result of a reduction in the Supporting People Grant for 2006/07 as well as a similar amount in 2007/08. This is as a consequential impact of it being judged statutorily necessary that some of the services withdrawn are funded from the main Adult Services budget.

Supporting People (£31.1m)

11.25 As members will be aware the Supporting People Programme funding is external to the core budget of the department. As in 2005/06, the trend continues to be one of reduction - in Hampshire's case a cash reduction of £0.5m 1.5% in 2006/07 (ie a real terms reduction of £1.5m assuming as is likely at least 3% inflation) and a further reduction of up to 5% in 2007/08. Consequently work is on going to align service delivery to the grant awarded. The Service alignment also needs to plan for future years' reducing resources.

11.26 It should also be noted that any reduction in the Supporting People Programme may in some areas become a pressure on Adult Services core budget as explained in paragraph 6.24 above.

12 Redeployment proposals and efficiency improvements - 2006/07 and 2007/08

12.1 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.

12.2 Details of cost pressures absorbed and redeployment proposals of £6.4m are included in Appendix 4 and Appendix 5.

12.3 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 needs 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 price 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.

12.4 Appendix 5 identifies efficiency improvements totalling £4.7m (1.9%) of these, £3.4m (1.3%), which form part of the overall £6.4m saving proposals, represents usable budget savings. Further work will be done to identify additional non-cashable efficiencies once the budget has been finalised.

13 Review of charges

13.1 The service's 2006/07 revenue budget includes income of approximately £63.6m (excluding government grants). Approximately £22.0m is received from health (PCTs) and other local authorities. About £41.6m relates to fees and charges. £7.7m of this relates to fees and charges set by the department and details of the material headings are included in Appendix 6.

13.2 There are some mandatory and national charges which the County Council is not able to vary. Some charges, most notably residential accommodation for adults and older people, require financial assessments based on nationally determined guidelines. The charges detailed in Appendix 6 relate to the use of County Council accommodation. However, clients placed in independent sector accommodation are subject to the same financial assessment process.

13.3 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. Examples of those charges reviewed annually are provision of meals for adults and older people. Appendix 6 assumes an increase in the hourly rate for non residential care of £1.96 to £13.32 and Members may wish to note that this is an above inflation increase to reflect the true cost of providing this service.

13.4 Charging for residential care has been governed by CRAG (Charging for Residential Accommodation Guide) since 1992, which provided a high level of consistency between local authorities. Charging for non-residential care on the other hand has been much more variable. Therefore the department has taken this opportunity to review its own charges to ensure greater consistency with other local authorities which links to the government's push to support a greater proportion of the population at home.

13.5 Consequently the budget pressures in both 2006/07 and 2007/08 are partly funded from a possible increase in income from non residential care fees and charges. The value associated with this possible increase is £0.5m in 2006/07 and almost an additional £0.6m in 2007/08. However it is important to stress that these figures have been produced before the results of the consultation exercise are available. Therefore the department will need to develop alternative funding to replace this source of income if the consultation results prove unproductive .

14 Other expenditure

14.1 The budget includes some items which are not counted against the cash limit. This includes budgets for central department support services, except where they have been given to service departments to buy services, and repair and maintenance of buildings. It also includes costs of member support within Adult Services budgets that are rechargeable to Policy and Resources for corporate and democratic core services.

15 Workforce levels and costs

15.1 The workforce implications of the proposed budget are set out in Appendix 7. The 2006/07 base budget supports a planned workforce of 3,340 full time equivalent (FTE) staff . This reflects the provisional staffing structures of the Adult and Children's Services departments but will be subject to revision once the structures are finalised.

15.2 The net effect of proposals for growth and redeployment of resources (shown in Appendix 4) on staffing levels have yet to be fully quantified due to the scale of redeployment proposals (as explained in earlier sections of the report) and due to the timing of grant announcements.

16 Provisional budget for 2007/08

16.1 The provisional budget for 2007/08 for this service is £260.0m at outturn prices as set out in Appendix 9.

16.2 The principle reasons making up the difference of £6.3m from the 2006/07 guidelines are:

· changes in government grants -£1.7m

· passport growth £2.7m

· pay and Non Pay inflation £5.3m

17 Impact assessment

17.1 In compiling this report account has been taken of the requirements of the Corporate Equalities Plan and Race Scheme.

18 Conclusion

18.1 The Executive Member for Adult Services is grateful for the support beyond base budget which is included in the budget guidelines. However, most of the benefit of this enhancement will be felt in 2007/08, and given the severe demand pressures faced by Adult Services and the strong probability of a significant overspend being carried forward for repayment, 2006/07 will be an exceptionally challenging year. The extent of pressures are such that that a two year approach needs to be taken to allow time for savings actions to be implemented.

18.2 The proposed response to the Cabinet guideline must be regarded as a preliminary view given the many difficult and substantive issues involved. It assumes repayment of up to £2m of overspend from 2005/06, which may well be optimistic; in order to cope with the pressures identified, it incorporates £6.4m of savings proposals and income increases in 2006/07, rising to £8.8m to be achieved by 2007/08. This is unquestionably a high risk position as it relies on efficiency savings at a level well beyond any previously delivered, and also requires substantial reductions in buildings-based services with as little reprovision as possible. That will require consultation and careful planning. There will, consequently, be a need to monitor the developing position very actively, including both the impact of the actual outturn for 2005/06 and the achievement in practice of efficiency and service reduction savings. The proposals drawn up in response to Cabinet guidelines are, therefore, considered to be at the limit of what can feasibly be achieved. Nonetheless, they fall £2.7m short of meeting the Cabinet guidelines for 2006/07.

19 Recommendations

19.1 The recommendations are included in the covering decision sheet.

Section 100 D - Local Government Act 1972 - background papers

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

NB the list excludes:

Published works.

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

TITLE FILE

Appendices

Appendix		Colour
1	Revised budget 2005/06 - calculation of the cash limit	yellow
2	Revised budget 2005/06 - comparison with cash limit	yellow
3	Base budget 2006/07 - summary of cash limit	pink
3 - Annex 1	Base budget 2006/07 - definition of base budget	pink
3 - Annex 2	Base budget 2006/07 - significant costs of inflation	pink
3 - Annex 3	Base budget 2006/07 - significant variations from 2005/06 repriced budget	pink
3 - Annex 4	Base budget 2006/07 - analysis of variations	blue
4	Proposals for growth and redeployment 2006/07 and 2007/08	yellow
5	Efficiency statement	yellow
6	Review of income 2006/07	yellow
7	Workforce levels and costs 2005/06 - 2007/08	blue
8	Revenue Budget 2006/07 - budget book detail	green
9	Provisional budget 2007/08	pink

Appendix 1

Adult Services

Revised budget 2005/06

Calculation of the cash limit for the revised budget 2005/06

The following table shows the progression from the original budget for 2005/06 to the cash limit for the revised budget 2005/06. Both are at estimated outturn prices 2005/06.

				£'000	£'000
Original budget 2005/06 at outturn prices				249,884
Transfers to/from other services and contingency allocations:
-	IT rebasing Procurement Savings Transfer between Adults and Childrens Services			178 (354) (559)
=	Adjusted original budget				249,149
Inflation Provision added since the original budget for:
-	Business rates			11
Other variations:
- - -		Carry forward 2004/05 overspend Second Home Council Tax Adjustment Temporary virements and adjustment of management and support apportionment between adults services and children services		(327) 9 (193)
-		Variation in expenditure financed by government grants: Aids Support grant Mental Health Grant Supporting People CSCI reimbursement		13 (38) 532 14
					21
=		Cash limit for the revised budget 2005/06			249,170

Appendix 2

Adult Services

Revised budget 2005/06

Summary comparing the revised budget with the cash limit

	Cash Limit	Revised Budget	Variation
	£'000	£'000	£'000
Service Strategy and Regulation	465	476	11
Unallocated	1,300	343	(957)
Older Persons
Assessment and Care Management	12,614	12,540	(74)
Net Cost of Services	113,739	113,230	(509)
Total	126,353	125,770	(583)
Adults with Physical or Sensory Impairment
Assessment and Care Management	6,410	5,924	(486)
Net Cost of Services	17,585	17,456	(129)
Total	23,995	23,380	(615)
Adults under 65 Years with Learning Disabilities
Assessment and Care Management	3,493	3,364	(129)
Net Cost of Services	46,931	48,086	1,155
Total	50,424	51,450	1,026
Adults under 65 Years with Mental Health
Assessment and Care Management	5,462	5,594	132
Net Cost of Services	7,162	7,062	(100)
Total	12,624	12,656	32
Other Adults Services
Assessment and Care Management	221	313	92
Net Cost of Services	1,155	1,035	(120)
Total	1,376	1,348	(28)
Supported Employment	929	899	(30)
Supported People	32,418	32,848	430
Total	249,884	249,170	(714)

Appendix 3

Adult Services

Revenue budget 2006/07

Calculation of the base budget 2006/07 - summary of cash limited expenditure

The following table shows the progression from the original budget for 2005/06 which was prepared at outturn prices 2005/06 to the base budget 2006/07 at outturn prices 2006/07.

		£'000	£'000
Original budget 2005/06 at outturn prices		249,884
Transfers to/from other services and contingency allocations
	IT re-basing	178
	Procurement Savings	(354)
	Transfer between Adults & Childrens	(559)
=	Adjusted original budget		249,149
Increases for inflation to reflect November 2005 prices (see Annex 2)
-	Full year cost of pay awards in 2005/06 and business rates adjustment	11
-	Excess cost of inflation over inflation allowance		11
Original budget at November 2005 prices			249,160
Other variations (see Annex 3)
-	Joint Finance Taper	21
-	Variations in expenditure funded by government grants:
	National Training Strategy	124
	Human Resources Development Strategy	(173)
	Aids Support	13
	Access and Systems Capacity Grant	(747)
	Mental health	(21)
	Supporting People Grant	(479)
	Preventative Technology	592
	Preserved Rights	(1,057)
	Carers	(75)
	Delayed discharges	13
	CSCI Reimbursement Grant	(6)

		£'000	£'000
	Sub total		(880)
			247,365
Allocation for future inflation			5,460
=	Base budget 2006/07 at outturn prices		252,825

Annex 1 to Appendix 3

Adult Services

Calculation of base budget 2006/07

Parameters used in the compilation

1	Definitions
1.1	The first stage in the construction of the budget for 2006/07 is the preparation of a base budget. The rules used this year are similar to those applied in 2005/06, which are summarised below.
1.2	The 2006/07 base budget is defined as the current year's budget adjusted for: · allocations made for inflation in 2005/06 including the full year effect of the provision made for outstanding pay awards from 2004/05 · exclusion of expenditure included in the 2005/06 budget which was financed by the carry forward of planned underspendings from 2004/05, the one-off use of reserves or balances, or which was approved on a non-recurring basis · the revenue effect of past capital programmes, subject to its inclusion in the approved capital programme unless a specific Cabinet decision to the contrary · the full year effect of council-approved policies included in the 2005/06 original budget, which have been introduced part-way through the year · changes in income volumes which are not the result of policy decisions · correction of arithmetical errors in the current year's budget · The following specific items:
		Children		Variations arising directly from changes in the number of pupils in schools, pupils eligible for free meals and numbers of days in the school year
		Environment		Routine highway and street lighting maintenance arising from variations in road length
				Variations in waste disposal volumes
		Adults		Increased cost of joint finance schemes with health due to operation of the taper

Annex 2 to Appendix 3

Adult Services

Calculation of base budget 2006/07

Significant costs of inflation

1.	Variation between the actual cost of inflation in 2005/06 (as at November 2005) and the provision for inflation included in the 2005/06 budget
							£'000
	Additional cost of inflation:
		Allocation from contingency for business rates					11
		Shortfall in the provision					(11)
2.	Significant costs of inflation between budgeted 2005/06 outturn prices and November 2005 prices
2.1	Pay awards
	Provision was originally made in 2005/06 for pay awards of 2.95% for teachers and other employee groups.
	The pay awards agreed were:
	Negotiating body: Effective date:						%
	Local Government Services Staff Hampshire Management Grades				1 April 2005 1 April 2005		2.95 2.95

2.2	Non pay inflation					£'000
	Provision was originally made in 2005/06 for a net amount of :					2,099
	This was for general price increases of 2.5% (£4,349,000) offset by increased income to match inflation in gross expenditure. An additional allocation was made to cover social care inflation above the 2.5% general inflation rate within the original cash limit of:					2,532
	The most significant variations within this additional cost are as follows: Older Persons - residential , day and domiciliary care Adults - residential, cay and domiciliary care			Outturn 2005/06 to November 2005 % 3 - 4.97 2.7 - 7.06		Cost in 2006/07 £'000 1,382 1,150
3.	Allocation for future inflation in 2006/07					£'000
	Provision for all pay awards of 2.95% in 2006/07					2,368
	Increase in local government employers' pension contributions (from 250% to 275% of employee contributions)					775
	Provision for non-pay inflation at 2.5%					2,812
	Allowance for increased income					(495)
	Total allocation for future inflation					5,460

Annex 3 to Appendix 3

Adult Services

Calculation of base budget 2006/07

Significant variations

Major variations between the repriced budget 2005/06 and the base budget for 2006/07 at November 2005 prices contributing to the decrease of £0.9m (0.4%) are set out below:

		Variations against the repriced 2005/06 budget
		£'000	%
	Variations in Government grants (Itemised in Appendix 3)	(901)
	Other miscellaneous variations - Joint Finance Taper	21
	Total	(880)	0.4

Annex 4 to Appendix 3

Adult Services

Base budget 2006/07

Analysis of variations

	Adjusted original budget 2005/06	Variation in inflation to November 2005 prices	Other variations	Inflation allocation to 2006/07 outturn	Base Budget 2006/07
	£'000	£'000	£'000	£'000	£'000
Cash limited expenditure
Service Strategy & regulation	414				414
Unallocated	1,191	0	(1328)	5,460	5,323
Unapportionable overheads	343				343
Older Persons
Assessment and care management	12,481				12,481
Net cost of services	112,722	1			112,723
Total	125,203	1		0	125,204
Adults with Physical or sensory impairment
Assessment and care management	5,975				5,975
Net cost of services	17,601	7			17,608
Total	23,576	7		0	23,583
Adults under 65 years with learning disabilities
Assessment and care management	3,400				3,400
Net cost of services	47,905				47,905
Total	51,305			0	51,305
Adults under 65 years with mental health
Assessment and care management	5,574				5,574
	Adjusted original budget 2005/06	Variation in inflation to November 2005 prices	Other variations	Inflation allocation to 2006/07 outturn	Base Budget 2006/07
	£'000	£'000	£'000	£'000	£'000
Net cost of services	7,037		(18)		7,019
Total	12,611		(18)	0	12,593
Other adult services
Assessment and care management	301		13		314
Net cost of services	984	3			987
Total	1,285	3	13	0	1,301
Supported Employment	904		17		921
Supporting People	32,317		(479)		31,838
Total net expenditure	249,149	11	(1,795)	5,460	252,825
Specific Government grants
Homeworkers	(2)		(0)		(2)
National training strategy	(1,065)		(124)		(1,189)
Human resources development grant	(724)		173		(551)
Aids support	(120)		(13)		(133)
Access and system capacity	(11,475)		747		(10,728)
Delayed discharges	(1,965)		6		(1,959)
Mental health	(2,555)		21		(2,534)
Supporting people	(32,418)		479		(31,939)
Residential allowance	(3,878)		3,878		(0)
Preserved rights	(7,535)		1,057		(6,478)
Preventative grant	(0)		(592)		(592)
Carers	(2,785)		75		(2,710)
CSCI reimbursement	(0)		(13)		(13)
Sub Total - Grants	(64,522)		5,694		(58,828)
Total	184,627	11	3,899	5,460	193,997

Appendix 4

Adult Services

Proposals for growth and redeployment 2006/07 and 2007/08

		2006/07 £'000	2007/08 £'000	Total £'000	Staffing (FTEs)
					2006/07	2007/08
	Growth proposals and unavoidable service pressures:
	Transition - Costs of clients transferring from Children and Families to Adult Services	1,200	1,400	2,600	0	0
	Additional costs from loss of Supporting People funding	400	440	840	0	0
	Increased OT equipment demand - Integrated Community Equipment Service	50	0	50	1	0
	Purchased mental health residential care demographic / Other pressures	100	0	100	0	0
	Ongoing impact of pressures within Learning Disability in 2005/06	1,300	0	1,300	0	0
	Additional revenue costs of nursing homes opening from the enhance project	100	0	100	0	0
	IT costs - new nursing homes	500	(500)	0	0	0
	Domiciliary care - service increase from demographic growth	700	700	1,400	0	0
	Revenue costs from Swift and other IT systems	250	0	250	0	0
	Inflation on purchased care services in excess of corporately assumed rates	1,500	1,500	3,000	0	0
	Contingency for new pressures/ overspend	2,000	1,000	3,000	0	0
	Changes in grant funding	1,337	168	1,505	0	0
	Preventative technology	592	404	996	tbc	tbc
	Total increase	10,029	5,112	15,141	tbc	tbc
		2006/07 £'000	2007/08 £'000	Total £'000	Staffing (FTEs)
					2006/07	2007/08
	Redeployment and savings proposals:
	Service remodelling and re - provision	(2,199)	250	(1,949)	tbc	tbc
	Staffing Efficiencies	(1,074)	0	(1,074)	(3)	0
	Maximising income from Health for continuing care	(260)	0	(260)	0	0
	Absorption of inflation on supplies and services	(300)	0	(300)	0	0
	Reduction in travel expenditure	(80)	0	(80)	0	0
	Transition - savings from clients leaving Adults	(662)	(275)	(937)	0	0
	Savings on support services	(250)	0	(250)	0	0
	Other miscellaneous savings	(200)	(80)	(280)	0	0
	Additional income from fees and charges in excess of inflation	(570)	(595)	(1,165)	0	0
	Additional savings and service withdrawals	(819)	(1,682)	(2,501)	tbc	tbc
	Total redeployment and savings proposals	(6,414)	(2,382)	(8,796)	tbc	tbc
	Net Increase	3,615	2,730	6,345	tbc	tbc
	Total net increase allowed in the budget guidelines	915	2,730	3,645
	Balance to be identified	2,700	0	2,700

Appendix 5

Adult Services

Efficiency statement

		2005/06		2006/07		2007/08
		AES £'000	Budget £'000	AES £'000	Budget £'000	AES £'000	Budget £'000
Cashable efficiency improvements:
a	AES eligible and budget saving More cost effective placements and keen price negotiation Reprovision of uneconomic services Reduction in fines for delayed discharges More efficient administration and reductions in management costs More efficient use of agency staff More efficient financial processes Procurement Savings	669 130 200 100 380 200 400	669 130 200 100 380 200 400	179 0 0 594 0 0 0	179 0 0 594 0 0 0	0 0 0 0 0 0 0	0 0 0 0 0 0 0

		2005/06		2006/07		2007/08
		AES £'000	Budget £'000	AES £'000	Budget £'000	AES £'000	Budget £'000
	More effective purchasing on domiciliary, day and residential care:
	Older People Younger Adults More effective use of vacancy management More efficient supplies and services procurement and reduced travel costs			750 645 850 380	750 645 850 380	0 80 0 0	0 80 0 0
	Total AES eligible and budget saving	2,079	2,079	3,398	3,398	80	80
b	AES eligible but no budget saving Absorption of increments Supporting People contract review savings	662 558		570 793		672 0
	Total AES eligible but no budget saving	1,220		1,363		672

		2005/06		2006/07		2007/08
		AES £'000	Budget £'000	AES £'000	Budget £'000	AES £'000	Budget £'000
c	Budget saving but AES ineligible Reductions in placements: Nursing care Day care Residential and other Increase vigour in establishing social care responsibility: Supporting People Continuing Care Increase specialisation of support services Transition - savings from clients leaving adults Remodelling of OT equipment service funding arrangements from health		0 0 124 170 210 40 0 0		500 700 524 0 0 0 662 60		-250 275 1,407 0 0 0 275 0
		2005/06		2006/07		2007/08
		AES £'000	Budget £'000	AES £'000	Budget £'000	AES £'000	Budget £'000
	Additional income from fees and charges		0		570		595
	Total Budget saving but AES ineligible		544		3,016		2,302
Non-cashable efficiency improvements:
	Domiciliary care provision and Supporting People	2,100
	Total non cashable efficiency improvements	2,100		0		0
Totals		5,399	2,623	4,761	6,414	752	2,382
% of base budget		2.2	1.1	1.9	2.5	0.3	0.9
Total of all efficiency improvements						10,912
% of base budget						4.2

Notes

Cashable efficiency improvements are defined in the annual efficiency statement (AES) as occurring when:

- inputs (money, people, assets etc) are reduced but outputs remain unchanged

- the price of inputs (procurement, labour costs etc) are reduced but outputs remain unchanged.

A reduction in price of inputs is measured in general against the increase in the Gross Domestic Product deflator (likely to be around 2.5% in 2006/07). Thus if the price of inputs remains constant there is a gain of 2.5%.

a efficiency savings that count against the AES and produce budget savings - this will include general procurement savings against the budget provision of a 2.5% increase in prices

b efficiency savings that count against the AES, but do not produce a budget saving because the efficiency is avoiding unbudgeted cost e.g. staff reductions made to absorb increments, procurement efficiencies where costs are still exceeding 2.5%, capital receipts or developer contributions applied to avoid unplanned additional borrowing

c efficiency savings that do not meet the AES criteria but produce a budget saving. These will include efficiency savings that relate to LEA services to schools (that are outside the scope for AES) and fortuitous savings that are not strictly efficiencies

Non-cashable efficiency improvements are defined in the AES as occurring when:

- increased outputs or improved quality of service are obtained for the same inputs

- increased outputs or improved quality achieved at a rate that exceeds the increase in inputs.

Appendix 6

Adult Services

Review of income 2006/07

			Current charge	Total income (Budget 2005/06)	Date of last review	Proposed new Amount	Charge Effective Date	Is charge set to recover full cost? Yes/No	Is charge subject to an assessment scale determined locally? Yes/No
			£	£'000		£
1	Mandatory/National Charges
	Nursing Care for Older People - Standard Rate		420.00	1912	April 05	434.00	April 06	Yes	No
	Residential Care for Older People		382.00 .00	5928	April 05	392.00	April 06 0554	Yes	No
	Residential Care for the Elderly Mentally infirm		425.00 .00	696	April 05	434.00 .00	April 06	Yes	No
	Residential Care for people with Physical or Sensory Disability		843.00 .00	151	April 05	868.00 .00	April 06	Yes	No
	Residential Care for Adults with a Learning Disability		757.00	532	April 05	777.00	April 06	Yes	No
	Orchard Close - Standard Week		642.00 03.00 .00	110	April 05	658.00	April 06	Yes	No
2	Discretionary charges
	Residential Accommodation for Adults
	Orchard Close - Client Contribution		115.00	In above	April 05 04April 04April 04April 03	119.00 .00	April 06 April 04	No	No
	Day Care Establishments
	Day Services for Older People		151.00	214	April 05	155.00	April 06	Yes	No
	Day Services for People with Mental Health Needs		216.00	3	April 05	220.00 .00	April 06	Yes	No
	Day Services for People with Physical or Sensory Disabilities
		including transport	288.00	170	April 05	295.00	April 06	Yes	No
		excluding transport	238.00	In above	April 05	245.00	April 06	Yes	No
	Day Services for Adults with a learning Disability
		including transport	173.00	2380	April 05	180.00	April 06	Yes	No
			Current charge	Total income (Budget 2005/06)	Date of last review	Proposed new Amount	Charge Effective Date	Is charge set to recover full cost? Yes/No	Is charge subject to an assessment scale determined locally? Yes/No
			£	£'000		£
		excluding transport	144.00	In above	April 05	150.00	April 06	Yes	No
	Full Cost Annual Charges
	Day Services for Adults with a Learning Disabilities
		including transport	4748.00 .00	Included	April 05	4890.00	April 06	Yes	No
		excluding transport	3759.00 .00	Above	April 05	3870.00	April 06	Yes	No
	Banded Charges for Day Services for People with a Learning Disability
		including transport	4377.00	Included	April 05	4505.00	April 06	Yes	No
		excluding transport	3409.00	Above	April 05	3510.00	April 06	Yes	No
	Plus banded charge for each hour per week		566.00		April 05	610.00	April 06	Yes	No
	Non Residential Charges		11.36	3859	April 05	13.32	April 06	No	Yes
	Charge to external organisations		22.90	N/a	N/a	23.60	April 06	Yes	No
	Other Charges
	Meals for Adults:-
	Day Services for People with a Physical Disability, Learning Disability, Mental Health Needs or Older People, Meals on Wheels and Luncheon Clubs per meal		2.70	0	April 05	2.80	April 06	No	No
	Hostels for People with a Physical Disability:- Transport charge per week		7.55	In above	April 05	7.80	April 06	No	No
	Hire of Rooms - per hour		23.00	1	April 05	24.00	April 06 05April 04	Yes	No

Appendix 7

Adult Services

Workforce levels and costs

	2005/06		2006/07
	£'000		£'000
Cost of establishment (note 1)		83,732		84,321
FTE posts available (establishment)		3,681		3,681
Average cost per FTE		23		23
Salaries (including employer's national insurance and pension contributions)		74,867		77,638
Temporary/fixed term/casual staff		785		785
Agency staff		2,183		2,183
Additional hours		1,674		1,674
Total workforce costs		79,509		82,280
Average FTE staff actually in post		3,148		3,340
Details of unavoidable pressures, growth and savings or redeployment proposals are shown in Appendix 4.
As identified in the main body of the report, given the nature and scale of these, the full impact upon workforce levels and costs is still being quantified.

Appendix 8

Adult Services

Revenue Budget 2006/07

Reconciliation of the original 2005/06 budget on the following pages with the 2005/06 budget in the published budget book.

		£'000
Net expenditure on page B77 of the published budget book		294,884
Adjustments for items not included in the budget book: IT re-basing		178
Adjustments made to the original budget figures: Temporary virements and adjustment of management and support apportionment between adults services and childrens services		(559)
Procurement savings		(354)
Total net expenditure for 2005/06 original budget shown overleaf on page.		249,149

Appendix 9

Adult Services

Provisional budget 2007/08

The following table shows the progression from the 2006/07 proposed budget at outturn prices to the provisional budget 2007/08 at outturn prices.

				£'000
Proposed budget 2006/07 at outturn prices				253,740
Growth and redeployment proposals:
	Net effect of growth proposals and unavoidable service pressures less redeployment proposals and savings (as set out in detail in Appendix 4) Variations in specific Government grants			2,730 (1,724)
Allocation for future inflation				5,332
Provisional budget 2007/08 at outturn prices				260,078