Contact: Anne Hibbert, tel: 01962 847533, e-mail: [email protected]

1. Introduction

1.1 This report is the first monitoring report for 2006/07 and provides an overview of the position on:

· Policy and Resources own revenue cash limited budgets including an update on the implementation of growth proposals

· Policy and Resources business units

· Policy and Resources capital programme

· the County Council's capital payments and sources of finance

1.2 At the end of July 2006 the main pressures to be managed in order to meet savings targets and keep within cash limit relate to Human Resources and Property and Regulatory Services, and continuing management action will be required to manage budget pressures across all services.

1.3 Capital payments for the County Council during the first four months of the financial year have been substantially higher than would be expected on the basis of a normal profile. Payment profiles on individual projects are being reviewed during September/October which will provide a better indication of likely payments levels and of any possible compensating changes in the availability of grants and external funding sources.

1.4 The Policy and Resources revenue budget and capital programme includes financial resources for those central services that support all other County Council services and as such contribute to all the corporate strategy aims.

2. Policy and Resources cash limited revenue budget 2006/07

2.1 The latest cash limit for 2006/07 is £52.5m as set out in Appendix 1. This includes an additional £14,694 from the Local Area Agreement Single Funding Stream for the Crime and Disorder Data Information Exchange (CADDIE). Based on monitoring of expenditure up to the end of July 2006 some pressures in keeping within the cash limit are forecast. These are outlined below.

Chief Executive's Department (including Human Resources)

2.2 Overall, expenditure on Chief Executive's during 2006/07 is anticipated to be at budget.

2.3 The main area of concern remains the achievement of the SAP savings targets by Human Resources. Having previously achieved savings amounting to £250,000 in 2004/05 and 2005/06, forecasts for the current year show that the 2006/07 SAP realisation benefit savings target of a further £310,000 will also be achieved. The 2006/07 target has been increased by £60,000 in respect of the Payroll Service Centre which previously was included in the Treasurer's target and is reflected in the adjusted cash limit in Appendix 1. Overall, this is a significant achievement, bringing total cumulative savings harvested over the three year period to £710,000.

2.4 Further savings of £410,000 are required of the department in 2007/08 and plans to achieve these savings are already being considered. The overall impact of savings over the four years between 2004/05 to 2007/08 will be to reduce the costs of the department by £870,000 per year. It needs to be stressed however that these savings will not be easy to achieve and come at a time when the organisation is going through significant change which requires high levels of HR input. Whether the level of HR support needed by departments can be sustained given the level of savings required remains questionable.

2.5 Further pressure on the 2006/07 budget relates to the implementation of the Pay and Benefits project. A report identifying the costs of implementation together with the requirements for a permanent Remuneration and Benefits team in the longer term and how these can be funded is currently being compiled and will need to be considered at a corporate level.

2.6 Additionally, the number of staff using Hampshire Learning Centre courses in the first quarter has been less then planned for. This is attributed to budget pressures elsewhere in the County Council, large scale organisational change and the inability of units to backfill staff attending courses. This position is being closely monitored.

2.7 The number of recruitment assignments managed by the Resourcing Centre is at higher levels to the 2004/05 volumes upon which the structure of the centre was based. However, these volumes are at similar levels to those delivered last year, when prudent stewardship of the budget and higher efficiency and effectiveness contained pressures. It is therefore anticipated that the pressure from the continuing higher level of assignments will again be contained within budget.

County Treasurer's Department

2.8 County Treasurer's Department is expecting to manage on-going pressures in order to achieve the £100,000 SAP benefit savings budgeted in 2006/07 and keep net expenditure at the cash limit. These are in addition to SAP benefit savings of £500,000 achieved in 2004/05 and 2005/06.

Property Business and Regulatory Services

2.9 Property Services

Pressures on the fee charged to capital mainly resulting from the cost of increased feasibility work, the management of consultants and the development of Ashburton Court were reported to Cabinet at its meeting on 24 July 2006 and are expected to total between £500,000 to £900,000 in the current year. The inability to recruit directly employed management staff for Ashburton Court has meant that a considerable amount of the in-house management of the project has fallen to senior staff and a greater dependence on consultants for key activities during the briefing, planning and project development stages to keep the project on time. A number of other projects such as the development of the new school for Whiteley and the Strategic Property Review continue to produce financial pressures and increase the dependence on external consultants, which is difficult to contain in the current year. Proposed changes to funding arrangements were agreed at the Cabinet for these activities on 24 July 2006, but will not take effect until 2007/08 leaving this pressure in 2006/07.

2.10 Corporately held land

Security costs continue to cause significant pressure on this budget. Recent delays from factors outside our direct control to the disposal of two properties with significant security costs mean the overspend from 2005/06 of £103,000 is expected to persist for the whole of 2006/07.

2.11 Accredited Community Safety Officers

The service is being extended with the additional funding agreed for 2006/07 to provide coverage across the county with the recruitment of a team of mobile officers supported by apprentices.

2.12 Trading Standards

A recent review of the senior management structure and the co-location of staff currently working out of three office bases planned for January 2007 will mean savings of up to £100,000 to the service in the longer-term. However, the one-off costs of the move mean the budget is likely to be under some pressure in the current financial year where the savings are only part year - it is hoped that these pressures can be contained within existing resources but this will require further one-off savings to be identified.

2.13 Scientific Service

The reduction in external income experienced last year has persisted. A financial recovery plan is in place to address the budget position with staffing and other savings in place and additional external income options being actively pursued. In the event that these options do not materialise in the current year an overspend of up to £63,000 is expected.

2.14 HM Coroner Service

The cost pressures in evidence in 2005/06 are persisting with above inflationary increases again being experienced for mortuary and other charges. An overspend of £90,000 is currently forecast.

Other non-departmental Policy and Resources budgets

2.15 No significant variations on non-departmental budgets have been identified in this review.

2.16 In June 2006, the Executive Member for Policy Resources agreed revenue funding for three years for the Cricklade Theatre "The Lights". Policy and Resources share of this funding is £33,000 in 2006/07 and £40,000 in 2007/08 and also in 2008/09. It is proposed to meet this by using the contingency sum in the Policy and Resources capital programme (£30,000 per annum) and part of the unallocated sum from previous years (£23,000). The Executive Member is asked to approve this transfer from capital to revenue.

Summary

2.17 At the end of July 2006 the main pressures to be managed in order to meet savings targets and keep within cash limit relate to Human Resources and Property and Regulatory Services.

Business Units

Property, Business and Regulatory

2.18 The planned position for the businesses as a whole is to achieve a surplus of £21,000. This is considerably lower than the surpluses achieved in previous years and results principally from the difficult trading conditions facing HC3S. Current monitoring indicates that the cost reduction measures planned and implemented at HC3S will substantially offset reduced turnover and result in an overall performance in line with the business plan. The impact of the general pressure on the financial position of the County Council on customer purchasing budgets is likely to have some effect on the turnover of the other businesses, but all units are currently expected to achieve targets.

IT Services

2.19 Several emerging pressures will make it increasingly difficult for IT Services to achieve its target of eliminating the carried forward deficit this year. These include the necessity to update systems to enable wider collaboration with external agencies, the need for improved resilience and work associated with the Ashburton Court redevelopment. Progress has been made in delivering efficiencies essential in keeping annual price changes below inflation and in releasing funds for the upgrade of the central telephone system hardware.

3. Policy and Resources capital programme

3.1 The Policy and Resources capital programme for 2006/07 amounts to £81.4m, as set out in Appendix 2. This includes the carry forward of schemes totalling £9.5m from 2005/06, the addition of £60,000 capital receipts and £419,000 Local Area Agreement capital funding, of which £414,000 is received by the County Council and paid as a capital grant to partner authorities. The capital repairs programme, including New Deal for Schools, totals £35m and is controlled on an expenditure basis. The balance of £46.3m, including £40.2m for the Ashburton Court refurbishment, in controlled on a starts basis.

3.2 As at 31 July, expenditure on capital repairs totalled £8.3m, and schemes to the value of £1.1m had started, representing an overall commitment of £9.4m.

4. Overall capital payments and sources of finance

4.1 The capital financing plan approved by the Cabinet in February was based on projected capital expenditure of £175.3m in 2006/07.

4.2 Capital expenditure to 31 July 2006 totalled £38.1m. This is substantially higher than would be expected on the basis of a normal profile even after allowing for the payments relating to the ENHANCE project which are nearing completion. Payment profiles on individual projects are being reviewed during September/October which will provide a better indication of likely payments levels and of any possible compensating changes in the availability of grants and external funding sources.

4.3 Estimated capital receipts for 2006/07 (including in-and-out schemes) of £38.3m were allowed for in 2006/07's capital financing plan approved by the Cabinet in February. Actual capital receipts to 31 July 2006 amounted to £6.9m. Success in achieving the forecast, or an outcome close to the estimate in 2006/07, will be dependent upon progress in completing a number of significant disposals over the remainder of the financial year.

5. Recommendations

5.1 To note the current position on the monitoring of the revenue budget and capital programme.

5.2 To approve the transfer to revenue from the capital contingency and unallocated sum of £33,000 in 2006/07, £40,000 in 2007/08 and £40,000 in 2008/09 to finance Policy and Resources' share of the grant to `The Lights', Andover.

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

None.

Appendix 1

Policy and Resources Revenue budget - latest 2006/07 cash limit

Appendix 2

Policy and Resources 2006/07 capital programme