£m

%

Inflation

15.3

2.7

Deletion of non-recurring spending in the 2006/07 budget (£3m) offset by use of balances made in 2006/07 (£0.7m)

-2.3

-0.4

Base budget growth

Waste management contract

1.0

0.2

Capital financing

3.7

0.7

Other changes

0.2

-

Proposed increase above inflation on social care

3.9

0.7

Contingency provision

2.5

0.4

24.3

4.3

£m

%

Adult services

5.4

2.7

Children's Services

4.4

3.7

Environment

4.0

3.8

Policy and Resources

0.9

2.0

Recreation and Heritage

0.8

2.6

15.5

3.1

Capital financing

4.3

11.3

Revenue contributions to capital

1.1

5.5

Flood protection

0.1

5.0

Inflation and contingencies

2.6

14.9

Use of balances in 2006/07

0.7

n/a

24.3

4.3

Policy

Related targets/outcomes

Overall financial planning and budget strategy

1

Budget strategy related to corporate priorities, as reflected in corporate strategy, local public service agreement and local area agreement

Linkages to corporate priorities made explicit in budget proposals and in preparation of business cases requiring approval prior to the release of increased sums in the budget, or in developing savings plans.

2

Growth and saving plans to be submitted to the appropriate executive member or to the Cabinet, identifying planned outcomes and performance improvements for budget growth and mechanisms for achieving any significant savings.

Plans to be submitted to Executive members prior to initial budget monitoring reports, so that implementation of plans can be monitored.

3

Ensure that the long-term level of revenue commitments does not exceed long-term funding likely to be available including reasonable expected levels of future grant settlement and council tax.

Revenue commitments to be assessed based on the assumption of grant increases not exceeding 2% for floor authorities and of Council tax increases not exceeding 5%.

4

Ensure integration of medium term financial and service planning.

Framework developed by Corporate Performance and Efficiency group linked to review of corporate strategy.

5

Maintain multi-year budget projections based on the Government's spending review cycle in order to set the likely context for making final resource allocation decisions on an annual basis.

A budget for 2006/07 and a provisional budget for 2007/08 to be submitted to the Cabinet and County Council in February 2006, based on two-year grant settlement for 2006/07 and 2007/08.

6

Minimise levels of non-earmarked reserves, with a target not exceeding 2% of the budget requirement, subject to risk assessment, in order to maximise use of available funds on service provision.

Risk assessment incorporated in budget proposals submitted to the Cabinet in February 2006, with a higher target of 1.9% proposed in 2006/07 as a result of the assessment.

7

Review the rationale and adequacy of earmarked reserves on at least an annual basis.

Protocol produced in approving 2005/06 to 2007/08 budget projections and on closure of 2004/05 accounts. Further review of protocol in relation to 2006/07 and 2007/08 budget included in Appendix 10.

8

Build up an earmarked reserve in recognition of the transitional costs of implementing Pay and Benefits proposals.

Further contribution of £5.7m to the reserve proposed in 2005/06 to bring the level of the reserve to £10m.

9

Seek to minimise the degree of instability in the employers' contribution to the Hampshire Pension fund, subject to objective of securing 100% funding in the long-term.

Outcome of March 2004 actuarial review involves phased increase in employers' contribution in accordance with assumptions made for budget planning purposes.

10

Continue policy of increasing budgets for Social Care in line with increases in national spending plans - providing that to do so does not have an unacceptable impact on the quality of other services or the level of the council tax.

Proposed budget for 2006/07 and provisional budget for 2007/08 based on the continuation of this policy for Adult and Children's social care.

11

Set a schools budget in consultation with the Schools Forum based on specific grants allocated by the Government.

2006/07 and 2007/08 budgets set at a level equal to estimated specific grants, plus a County Council contribution of £155,000 to reflect further delegation of functions to schools in 2006/07.

12

Manage the application of the grant equalisation reserve in order to protect services and limit the council tax impact of the loss of transitional Education funding, the loss in 2006/07 of the additional Government Grant made available on a one-off basis in both 2004/05 and 2005/06, and future grant loss from the 2006/07 revised formula.

A further contribution of £8.7m to the reserve in 2005/06, is proposed, together with contributions of £1.2m in 2006/07 and 2007/08, in view of the risk of significant further grant loss from 2008/09.

13

In order to allow services to operate within firm cash limits, allocate provision for inflation to services at the start of the financial year and require excess inflation to be absorbed.

Provisional allocations for 2006/07 and 2007/08 agreed at Cabinet in December 2005.

14

Services expected to contain spending within the approved cash limit, with no supplementary allocations being available other than in exceptional circumstances unless a specific contingency provision made within the budget.

No material adjustments made to 2005/06 cash limits during the year

15

Services expected to carry forward 100% of any overspending against the overall service cash limit, but are allowed to retain up to 100% of any planned underspendings identified prior to the approval of the following year's budget. 50% of any unplanned underspendings can automatically be carried forward.

Policy applied in dealing with under and overspendings in 2004/05's final accounts and in preparation of 2006/07 budget.

16

Require the continuing absorption of cost increases by expecting services to absorb any net cost arising from the annual cost of salary increments.

Increments of £2.0m to be absorbed in 2006/07 budget.

17

Seek to deliver efficiency gains that exceed the targets set by the Gershon review.

Summary of planned efficiencies included in Appendix 5 of the report. Improvements of £11.9m identified in the 2004/05 backward-looking AES.

18

Encourage service chief officers to submit applications for specific grants/partnership funding designed to maximise the resources available to the County Council, by allowing capital and revenue cash limits to be adjusted to reflect changes in grant levels.

Applied in 2006/07 budget and 2007/08 provisional budget.

19

Require services to review the level of fees and charges at least annually and set budget limits on the assumption that the level of charges will be increased in line with assumed inflation on gross expenditure.

Reflected in 2006/07 budget strategy. Appendix 6 summarises the review of income.

20

Seek best value in spending, bearing in mind that considerations of quality, risk, sustainability, environmental impact, local economic development and equalities may all be relevant in addition to price.

Reflected in Best Value, Local PSA programmes and CPA 3 star Use of Resources assessment for value for money.

21

Seek to retain relatively low council taxes in Hampshire, with the aim of setting a tax in the lowest quartile of County Council council taxes.

2006/07 council tax likely to be within or very close to the lower quartile of County Council's without fire funding responsibilities.

Capital programming

22

Review capital strategy on an annual basis and prepare four year capital programme in accordance with the strategy.

Revised strategy approved by the Cabinet in July 2005.

23

Seek to maintain the level of the locally-resourced capital programme by continued recycling of surplus assets to generate capital receipts.

Programme for 2006/07 to 2009/10 includes provision for refurbishment of Ashburton Court primarily funded from projected capital receipts.

24

Allow services to retain at least 25% of the value of their capital receipts and where necessary to finance investment in replacement assets, up to 100%.

Services authorised to retain £5.3m of 2004/05's capital receipts.

25

Adopt a Public Private Partnership (PPP) approach, including the use of the Private Finance Initiative (PFI), where this provides best value for the Council.

Expression of interest being submitted for potential street lighting PFI project.

26

Make full use of Government-supported borrowing, where this is financially advantageous.

2006/07 to 2009/10 capital programme based on making full use of supported borrowing. However affordability of policy to be reviewed due to impact of 2006/07 grant settlement on the mechanism for Government support.

27

Seek to maximise capital resources by developing capital schemes in conjunction with external partners where appropriate.

Funding of £57.2m by external partners, incorporated in 2005/06 and 2006/07's estimated capital payments, including NHS funding secured for nursing care investment programme.

28

Approve the use of unsupported borrowing within the framework of the County Council's prudential code

- business unit investment where the financing costs will be funded by charges made to customers

- `invest to save' projects generating savings which will enable the financing costs to be funded, capital receipts which will enable borrowing to be repaid, or alternative costs to be avoided.

Proposals have either been approved or are being submitted in the 2006/07 to 2008/09 capital programme which involve in aggregate potential unsupported borrowing of £45m by the end of 2007/08, in accordance with County Council's code. A revision to the policy is proposed to require services to absorb the revenue cost of temporary unsupported borrowing rather than recovering these costs in arrear when the capital receipt / external contribution is received.