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

1 Summary

1.1 This report sets out the proposed Children's Services revenue budget for 2007/08, a provisional budget for 2008/09 and 2009/10 and recommends a revised budget for 2006/07. This report has been prepared in consultation with the Executive Members and will be reviewed by the Policy and Resources Policy Review Committee. It will be reported to the Leader and Cabinet on 9 February 2007 to make final recommendations to County Council on 21 February 2007.

1.2 The budget proposals contained in this report are derived from the departmental service plan which has been developed to support the priorities of the Corporate Strategy and the five outcomes of the Children Act.

1.3 The report is structured:

· Executive summary

· County Council budget strategy and guidelines

· Revised Budget 2006/07

· Base Budget 2007/08

· Change for Children

· School funding changes and Schools Forum proposals

· LEA and Children's Social Care Budget pressures 2007/08

· Efficiency Improvements

· Review of charges

· Other expenditure

· Business Unit up-date

· Workforce levels

· Provisional Budget 2008/09 and 2009/10

· Impact Assessment

1 Executive Summary

1.1 This report starts by addressing the requirements from Cabinet of the Executive Members, demonstrating Children's Services' achievement of the budget guidelines set by Cabinet at its meeting in September 2006.

1.2 The revised budget position is then set out, building on the regular monitoring reports during this year to the Executive Members. There is some variation since the October 2006 position reported on 15 December 2006, with further spending pressures in the key area of Children Looked After. The forecast outturn position for the department is now £3.044m offset by a departmental recovery plan to the value of £1.483m, leaving a net projected pressure of £1.561m. However, it is expected that this can be further offset by maximising the use of General Sure Start Grant (GSSG) to fund allowable early years expenditure to the value of £500,000. This leaves a budget pressure of £1.061m. Options for charging up to a further £500,000 to GSSG are being explored and, if identified, would reduce the overall revenue budget pressure to £561,000. This overspend will be carried forward and funded in 2007/08.

1.3 Significant progress on the Change for Children agenda has been made during 2006/07:

· the new department structure was agreed in September 2006. This is designed to support integration and the concept of multi-discipline working and full implementation is planned from March 2007

· the Children and Young People's Plan (CYPP) was agreed in the summer 2006 setting the priorities for the department and these have been reflected in the redeployment proposals supported in the forward budget are aligned with the department's service plan

· the local intervention teams have been planned and roll out begins in January 2007 supported by Dedicated Schools Grant (DSG) money allocated by Schools Forum

· use of the one off Local Public Service Agreement (LPSA) reward grant has been planned to maximise the focus on departmental priorities, including the Change for Children agenda and maximising the wellbeing for Children Looked After through investment in the fostering service in particular.

1.4 The overall budget settlement for 2007/08 is then considered. For the Schools Budget this is the second of a two year settlement following the change to the Dedicated Schools Grant (DSG) in 2006/07. In summary, the Schools Budget, through the DSG grant has an increase of 5% per pupil, and for the LA and Children's Social Care budgets the impacts of the redirections are set against the County Councils plans to passport Government spending plan increases to Children's Social Care.

1.5 The separate elements of the Children's Services budget are then explored in some detail. For the Schools Budget, this meant revisiting the provisional allocations proposed in December 2005 by the Schools Forum in light of the impact of a number of DfES announcements since then. The overall effect of these has been to increase the Headroom flexibility by £1.965m and the Schools Forum agreed its priorities for use of these funds at its December 2006 meeting. At this stage Schools Forum have accepted that the proposal may vary when firm January 2007 pupil numbers are known and as the outturn position for Schools Budget items becomes clearer. The Schools Forum in February 2007 will review the position and agree final allocation proposals.

1.6 For 2007/08 for the LEA Budget there is additional growth above base budget to reflect an additional specific grant change (£387,000) and corporate adjustments for Pay and Benefits and the corporate redistribution. The net effect increases the base budget available by £27,000. Although the main pressures will continue to be tightly managed in 2007/08, there is a pressure on the Home To School Transport budget of £354,000. The proposals are to redeploy resources to the value of £1.160m.

1.7 For the Children's Social Care budget, the passported increase (including a net increase in specific grants of £652,000), gives additional growth above base budget of £1.909m. However, corporate adjustments for Pay and Benefits, Hantsdirect and the re-direction to Adult Services reduces this by £1.160m, to a net increase of £749,000. There are service pressures of £3.117m and re-deployment proposals of £1.903m.

1.8 The overall effect of the pressures and the re-deployment proposals, together with use of some of the one-off Local Public Service Agreement (LPSA) reward grant, allows the department to propose a balanced budget for 2007/08.

1.9 The efficiency agenda is then addressed with the service identifying a number of initiatives and reviews aimed at enabling it to meet its targets in 2007/08 and subsequent years. The annual review of charges is set out followed by the position for the Business Units.

1.10 Finally, the high level forward position for 2008/09 and 2009/10 is set out, which indicates that the department will have to undergo significant service and process review in order to sustain the current levels of service in future years.

1.11 The Director of Children's Services particularly wished to highlight the following key aspects to this report.

1.12 Firstly, 2006/07 is the first full financial year of the newly formed Children's Services Department which brings together the Schools Budget (funded through the new ring fenced Dedicated Schools Grant), the LEA and the Children's Social Care budgets. Given the highly pressurised demands on these budgets, it is to the credit of the County Council and the officers involved that this process has progressed so smoothly and effectively.

1.13 As this paper sets out, based upon the forecast outturn for 2006/07, as at the end of November 2006, there remains a projected pressure of £561,000 for the current year's budget. This pressure has been reduced by the department's recovery plan and currently represents less than 0.4% of budget outside of the DSG, following substantive and effective management action to control spending and deliver a balanced position for the year. Managers remain confident that any pressure to be carried forward will be kept to an absolute minimum by year end, as described within the report. That represents a significant achievement especially given the circumstances, but the achievement should not mask the substantial and continuing demands placed upon the three key areas of pressure: Home To School Transport, Special Educational Needs and Children Looked After. These largely "demand led" areas of service will continue to represent a challenge to the County Council's service planning and require determined control and management.

1.14 The Dedicated Schools Grant has altered the financial relationship between the local authority and schools. The role of the Schools Forum is now more critical both in supporting the distribution of that grant but also as a focus of dialogue between the County Council and schools. This relationship remains constructive and effective in Hampshire. Last year the Schools Forum agreed to the establishment of a Combined Budget to help establish Locality Teams. That project is progressing and should now realise benefits for children and schools. This year again the Schools Forum has taken a strategic lead in its flexible support of the development of the budget. In return the quality of professional and business support provided through the County Council remains of an exceptional standard. This is especially evidenced in the rapid and effective introduction of School Improvement Partners across the county. The positive partnership between the Schools Forum and the County Council deserves recognition.

1.15 Together with responsibility for its own highly sensitive and volatile areas of service, Children's Services share some of the longer term pressures that are faced corporately. These include the implementation of Pay and Benefits, the transfer of services and budgets required for the establishment of Hantsdirect and supporting Adult Services to tackle demographic pressures. This report sets out and seeks approval for a balanced budget for 2007/08. Again that is a significant achievement given the demands faced. As will be seen, the reconciliation of this position has already required some difficult decisions, especially with regard to non-statutory areas of service. Brought together with what we understand are likely to be the restrictions of future local government settlements, it is evident that in order to maintain a balanced position in years to follow the department will have to address a more fundamental approach to the re-design of services.

1.16 It should be noted that alongside the financial re-alignment, the department is reaching the conclusion of its restructuring in order to deliver the Change for Children Programme further to the Children Act 2004. This restructuring has been cost-neutral. Indeed some senior management capacity has been cut from the new structure to support the budget position. Nevertheless we now have in place a structure both fit to deliver on the Children Act and also flexible enough to evolve in future as service integration progresses. A key element of the new structure will be the Locality Teams which are designed to work more efficiently as well as more effectively than previously separated specialist services. Again, these teams will develop further over time. It is worth repeating that as well as generally improving outcomes for all children, which is the heart of the County Council's responsibility for these services, a core theme of the Children Act 2004 is one of efficiency, through the prevention of children needing higher cost services by the better provision of earlier intervention. That remains the focus of the restructuring.

1.17 Finally, Members should also be reminded that the forthcoming year will see a Joint Area Review (JAR) of all children's services in the county. The most recent annual performance assessment scored our children's services as good with outstanding capacity to improve. That assessment acknowledged that our achievements are with limited financial resources based on our financial settlement. Officers remain committed and confident that the budget set out in this paper, while challenging, will offer a sound basis for the preparation for the JAR.

2 County Council Budget strategy

2.1 A provisional budget for 2007/08 was agreed by the Cabinet in February 2006. This was based on the following principles:

· Increases for all services in accordance with the County Council's base budget rules

· Additional increases for Adults' and Children's Social Care to reflect the Government's spending plans for those services in 2007/08 in the Spending Review 2004

· Redeployment within each service of any further cashable efficiency improvements identified in 2007/08 towards new priorities and pressures

· No other provision for any new service developments unless funded 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 priorities of the Corporate Strategy.

The inflation assumptions used to construct the provisional base budget for 2007/08 were:

· 2.5% for pay together with the planned increase in the employers' contribution to the Local Government Pension Scheme from 275% to 295% of employee's 6% contributions

· 2.5% for non-pay

· Income to be maximised by reviewing charges in line with the average inflation on the related gross expenditure and introducing new income wherever possible, taking account of the powers to charge for discretionary services in the Local Government Act 2003.

2.2 Services are also required 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.

2.3 The principles and assumptions outlined in paragraphs 2.1 and 2.2 were reviewed by Cabinet in September 2006 and revised guidelines for the 2007/08 budget set to reflect changed circumstances, new priorities and additional information emerging since February. The revised guideline reflects:

· Pay inflation reduced to 2.25% in line with the Government's expectation of a downward movement in the level of public sector pay increases in 2007/08

· Budget transfers in respect of the phased introduction of the contact centre Hantsdirect

· The need to make reductions in the workforce plan in order to contribute to meeting the anticipated cost of the new pay framework

· An additional £6m for Adult Services reflecting the continuing impact of demographic factors.

2.4 For Children's Services (excluding the Schools Budget), the original guideline for the 2007/08 budget is £136.2m.

	LEA	Social Care	Total
	£m	£m	£m
Original provisional budget for 2007/08	67.5	70.2	137.7
Base budget adjustments including inter-service transfers			0
Hants Direct		-0.5	-0.5
Pay and Benefits benefit realisation	-0.2	-0.3	-0.5
Guideline redistribution	-0.3	-0.2	-0.5
2007/08 Original provisional guideline	67.0	69.2	136.2

2.5 Indicative budget guidelines for 2008/09 and 2009/10 have been set based on the following assumptions:

· Increases for all services in accordance with the County Council's base budget rules

· Additional increase of 4.3% for Adult Services and an increase for children's social care based upon 2007/08 passporting assumptions

· Redeployment within each service of any further cashable efficiency improvements identified in 2007/08 towards new priorities and pressures

· No other provision for any new service developments unless funded by cashable efficiency savings

· Pay inflation restricted to an average of 2% with no increase in the employers' contribution to the Local Government Pension Scheme

· 2.5% for non-pay

· Income to be maximised by reviewing charges in line with the average inflation on the related gross expenditure.

3 County Council Budget guidelines

3.1 The budget guidelines for this service are:

For 2007/08	£858.305m
For 2008/09	£873.991m
For 2009/10	£890.523m

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

· Reviews the revised budget for 2006/07 ( as set out in Appendices 1 and 2)

· Reviews the 2007/08 base budget which totals £858.305m (as set out in Appendix 3)

· Identifies allowable growth of £387,000 on LEA Budget and £117,000 for Children's Social care (as set out in Appendix 4)

· Identifies £3.530m of pressures and costs absorbed (as set out in Appendix 4)

· Proposes the redeployment of £3.063m of resources (as set out in Appendix 4)

· Identifies efficiency improvements of £1.129m (as set out in Appendix 5)

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

· Reviews the trading accounts of business units (as set out in Appendix 7)

· Proposes a detailed budget for 2007/08 (as set out in Appendices 8 and 9)

· Identifies the workforce implications of the budget proposals including plans for workforce reductions to contribute to the increased cost of the new pay framework (as set out in Appendix 10)

· Proposes a provisional budget for 2008/09 and 2009/10 (as set out in Appendix 11).

4 Revised budget 2006/07

4.1 The cash limit for the revised budget is £826.445m (split £690.644 m for Schools Budget, £69.797m for LEA Budget and £66.004m for Children's Social Care Budget. The calculation is shown in Appendix 1(a), 1(b) and 1(c).

4.2 A summary comparing the revised budget with the cash limit is set out in Appendix 2 and in the table below. This shows an overall overspend of £3.044m for the total services as at period 8 (end of November 2006). A separate budget monitoring report to the Executive Member for Children's Services on 18 January 2006 considers the the main areas where the projected outturn is significantly different from the cash limit.

4.3 There is a projected net pressure on the Children's Services Budget of £1.061m as at the end of November 2006, made up as follows:

	Schools	LEA (Non-schools)	Children's Social Care	Total
	£'000	£'000	£'000	£'000
Period 8	+513	+311	+2,220	+3,044
Less: recovery plan (services)	-25	-784	-374	-1,183
Less: recovery plan (Business Unit contributions)		-300		-300
Sub-total	+488	-773	+1,846	+1,561
General Sure Start Grant (allowable Early Years expenditure)	-160	-340		-500
Total	+328	-1,113	+1,846	+1,061

4.4 The 2006/07 budget position as at period 7 (October) was presented to the Executive Lead Member for Children's Services on 15 December 2006. The report gave details of an underlying pressure of £2.784m, offset by a recovery plan showing £1.483m savings (including £1.183m relating to services and the use of £300,000 of Business Unit balances).

4.5 The underlying position at the end of period 8 (November) shows a pressure of £3.044m, an increase of £260,000, the majority of which relates to Children Looked After. Savings from the recovery plan are being achieved (£1.483m), leaving a projected pressure of £1.561m.

4.6 Following a review of the children's centres revenue funding, a report on which was submitted to Schools Forum on 12 December 2006, it has been possible to identify £500,000 of General Sure Start Grant (GSSG) that can be used to offset 2006/07 budget pressures. This can be done by charging two elements of expenditure to the grant, as follows:

· Charge allowable early years expenditure from the LEA Budget of £340,000 in 2006/07 giving an under spend on early years strategic management that can then support the pressures elsewhere on Children's Services for 2006/07

· To apply £160,000 of the allowable early years expenditure from within the Schools Budget for 2006/07 to GSSG.

4.7 This leaves a budget pressure of £1.061m. Options for charging up to a further £500,000 to GSSG are being explored and, if identified, would reduce the overall revenue budget pressure to £561,000.

5 Base budget 2007/08

5.1 The Children's Services department was created in August 2005 as a direct result of the Children Act 2004. The funding requirements for the combined service means that the Children's Services budget will bring together three components, as summarised below:

· Schools Budget - funded through the ring fenced Dedicated Schools Grant

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

· Children's Social Care Budget.

5.2 A base budget for 2007/08 has been prepared that 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 is £858.305m at outturn prices.

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

5.4 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.

6 Change for Children

6.1 Significant progress on Change for Children has been made in 2006/07.

6.2 The new structures for the Children's Services department, designed to support the integrated and multi-disciplinary working that the Change for Children agenda demands, were finalised in September 2006. The process of slotting in and where necessary recruiting to the vast majority of posts in the new structure has now been completed, with a few posts and team issues to be finalised early in the new year before full implementation of the structure in March 2007.

6.3 The Children and Young People's Plan (CYPP) was finalised in summer 2006 and is now published. The priorities in the plan will determine priorities for all partners in taking forward the Change for Children agenda. The Children and Young People's Partnership Management Board now has the responsibility to monitor progress, refresh, and evaluate the outcomes of the CYPP. This is on behalf of the Strategic Partnership (which acts as the Children's Trust), which is led by the Executive Lead Cabinet Member for Children's Services.

6.4 The department is now implementing a new service planning framework to support its new structures and the demands of the Change for Children agenda. Priorities have been agreed through the work to develop the new Corporate strategy, the CYPP, and the Annual Performance Assessment. Those priorities are reflected in the proposals in this budget paper. The service planning framework will fully integrate the departmental priorities with budget and workforce development.

6.5 The implementation of a key plank of the Change for Children strategy - the locality (early intervention) teams - is now underway, with the expectation that all the teams will be well established by September 2007. These teams have been funded in part from the contribution from Schools Forum through the Combined Budget within the Dedicated Schools Grant (DSG) of £500,000 in 2006/07, rising to £1,500,000 in 2007/08. The role of the locality teams is intended to bridge the gap that currently exists between universal services, such as schools, and services with high thresholds for access, such as social work. Pathfinders are being rolled out from January 2007 in:

· Fort Hill Secondary School's Cluster, Basingstoke and Deane

· Oak Farm Community School's Cluster, Rushmoor

· Brune Park Community College's Cluster, Gosport

· Leigh Park Schools' Excellence Cluster, Havant

· Targeted Youth Support Pilot in Alamein Ward in Andover.

6.6 The training and development of these teams is being combined with multi-agency training on the Common Assessment Framework and the development of information sharing.

6.7 As the pressures on the 2006/07 and 2007/08 budgets show, the management of demand in Children's Social Care is difficult. It is clear that to deliver the Change for Children programme effectively, services are going to have to be realigned and reconfigured to manage within existing resources. The preventative work of the locality teams will be a key focus for this. The main pressures for the social care services centre around the provision of services for Children Looked After, whether through in-house fostering, Independent Fostering Agencies (IFAs) or Non County Placements (NCPs). Around £500,000 of one-off Local Public Service Agreement (LPSA1) funding was agreed by Cabinet in November 2006 as a spend to save project to increase in-house fostering provision. Other work is progressing to manage down the costs of the contracts for IFAs and NCPs.

6.8 In the process of setting the base budget for 2006/07 and identifying an outline position for 2007/08, a change for children reserve of £84,000 in 2006/07 and £1.068m in 2007/08 was identified. As the difficult budget position for the department became apparent with pressures early in the year, it became clear that much of the reserve needed to be used prudently to offset those pressures. A small amount of the reserve has funded essential staff briefings around the new structures. The £1.068m originally set aside for 2007/08 has now been incorporated into the passported budget increase (as set out in paragraph 11.2) to meet the pressures now identified.

7 School funding changes 2007/08

7.1 In preparing the two year budget in 2006/07, the County Council reflected the school funding arrangements introduced in the Summer 2005. As a reminder, these included:

· the Dedicated Schools Grant (DSG) for 2006/07 and 2007/08, a grant covering all the activities of the Schools Budget

· a minimum per pupil funding increase for 2007/08 of 5% for all local authorities above the baseline of their 2006/07 Schools Budget

· allocation of earmarked funds to the value of £8.108m in 2007/08 for

· Personalised Learning KS3 £4.074m,

· Personalised Learning Primary £2.334m,

· Practical Learning 14-16 £1.7m

in addition to £10.036m allocated in 2006/07.

· multi year budgets for schools and Schools Budgets, linked to spending review periods. For 2006/07 there was a two year settlement. 2007/08 is the second year but 2008/09 will be a three year settlement period following the Comprehensive Spending Review 2007

· 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 (CEL), formula changes and variations to the operation of Minimum Funding Guarantee (MFG) and the formula where these bring about spurious or anomalous results for individual schools.

7.2 These changes meant a provisional budget for 2007/08 was proposed by Schools Forum and agreed by the Executive Member for Children's Services in January 2006. A number of announcements since then have been reflected in Schools Forum discussions for 2007/08 and the table below summarises the net increase to the Headroom flexibility available within DSG to the Schools Budget in 2007/08:

	£m	£m
Reduction in DSG		-2.480
Pupil number changes:
· Mainstream	+0.222
· SEN	-0.130
· 3 and 4 year olds	+1.252	+1.344
Pension contribution		+3.950
Increased cost of MFG		-0.849
Increased Headroom flexibility		+1.965

Dedicated Schools Grant (DSG)

7.3 The County Council's notified figure for Dedicated Schools Grant (DSG) for 2007/08 was £647.397m in December 2005 based on January 2005 pupil number forecasts. A report considered by Forum in July 2006 indicated that this estimated DSG for 2007/08 was overstated by about £1.66m as a result of the knock on effect of the lower forecast pupil numbers in January 2006. The figures have been further revised in the light of more up to date information on pupil number trends. This now suggests that the estimated 2007/08 DSG will be £644.917m, a reduction of £2.480m on the original estimate incorporated in the 2007/08 provisional budget. The final 2007/08 DSG will be based on actual January 2007 pupil numbers and will be known in April or May 2007 although a better calculation can be done in early February 2007.

Pupil number changes

7.4 The latest estimate of the number of pupils in primary and secondary schools in January 2007 shows that they will be some 1,998 below the levels in January 2006. This is 104 below the number used in the original estimates for 2007/08 and the cash equivalent is a £222,000 saving on the estimate assumptions.

7.5 The latest trends in Special School and Special Unit places indicate an extra costs of £130,000 above the levels in the original estimates for 2007/08 due to an increase of a net 17 places.

7.6 The budget for three and four year olds in private, voluntary and independent settings is particularly variable. The rate of progress from 33 weeks of provision per year to 38 weeks is not uniform. The number of sessions that each child attends is not constant nor is the percentage of the total age group participating. Whilst the population of four year olds drops between 2006 and 2007 that of three year olds increases. After taking account of the lower actual numbers in 2006 than allowed for in the 2006/07 estimates and these trends, it is estimated that costs will be £1.252m below those originally estimated for 2007/08.

Pension contributions

7.7 The report to Schools Forum on 11 July 2006 on the distributed Schools Budget 2006/07 referred to the change in teachers' pension contributions. The 2007/08 budget assumptions which underlay the provisional 2007/08 budget shares was for an increase in costs of 2% from September 2006 whereas the definitive figure is 0.6 % from January 2007. The difference is equivalent to £2.89m in 2006/07 and some £3.95m in 2007/08. This had been identified a cost pressure rather than for specific policy developments within budget shares.

Increased cost of Minimum Funding Guarantee (MFG)

7.8 The MFG has been revised for more up to date information on the pupil numbers at each individual school and for the lower teachers pension contributions than originally estimated. The net effect is an increase in MFG of £849,000, i.e. a reduced flexibility in terms of DSG.

8 Schools Budget proposals 2007/08

8.1 The total DSG figure of £644.917m incorporates 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:

	2007/08 £'000
Dedicated Schools Grant as notified December 2005	644,917
Less: Items managed by Policy and Resources	-10,908
Technical Adjustments - transfer from outside Schools Budget (SHIPS, £105,000, Occupation Health Unit, £50,000, Eastleigh Family Centre, £53,000)	+208
Schools Budget Standards Fund	+40,482
School Standards Grant	+28,274
General Sure Start Grant	+16,074
School Meals Grant	+1,800
Milk Grant	+121
Schools Budget total managed by this service	720,968

8.2 The Schools Forum held its main budget meeting on 12 December 2006 and agreed proposals to allocate the remaining Headroom in the following areas to address various pressures. In doing so they recognised their role in all Schools Budget areas to support the integrated Children's Services agenda, not focusing only on delegated schools' budgets:

	£m	£m
Increased Headroom flexibility		+1.965
Individual Schools Budgets (ISB) Pressures:
· SLA pressures (EPS and EFS)	-0.394
· EOTAS from day 6	-0.132
· Growing schools	-0.425	-0.951
Central Spend Pressures:
· Admissions	-0.096
· EOTAS - from day 6	-0.075
· SEN - 2006/07 net overspend	-0.328
· SEN - forward pressure	-0.550	-1.049
Net headroom		-0.035

8.3 Both Education Personnel Services (EPS) and Education Financial Services (EFS) are experiencing increased cost pressures as a result of either reduced grant funding or continuing/increased system support to schools for financial system (SAP), Financial Management Standard in Schools (FMSiS) and Financial Planning Software in 2007/08. Schools Forum have been invited to accept increased charges from these business units in 2007/08 to mitigate these pressures. The proposal is to utilise £394,000 of the headroom flexibility to delegate funds equivalent to the increased charges to schools.

8.4 A new code issued by the DfES requires schools, with effect from April 2007, to provide full time education for pupils on fixed term exclusions once the total fixed term exclusions experienced by a pupil in one school year have exceeded five days. DfES have indicated that no funds were specifically earmarked within DSG, meaning authorities need to allocate funding from within the 5% per pupil increase in DSG that all authorities will receive for 2007/08 to meet the cost of provision after day 6 of an exclusion. Schools Forum agreed to allocate £207,000, which can be divided in accordance with the national guidance £75,000 from the County Council (EOTAS) and £132,000 from schools' delegated budgets. The proposed distribution basis agreed reflects the relative deprivation factor within the County Council.

8.5 In January 2006 Schools Forum agreed one year transitional funding to counter the effects of the move to a single pupil count on growing schools. This impacted on 21 schools and cost £407,000 in 2006/07. The estimated cost of continuing this transitional funding into 2007/08 is £425,000 and is expected to impact on around 19 schools (15 Secondary and 4 primary). The proposal accepted by Schools Forum is to allocate the funds on the same basis as in 2006/07 and establish a more robust definition of a planned growing school.

8.6 The final allocation relates to central spend items, in particular SEN and Admissions. Schools Forum recently considered separate papers and have proposed to fund the 2006/07 carry forward overspend on central spend items (estimated at £328,000 as at period 8) and the forward year pressure for SEN of £550,000. In addition the Forum proposed to support the request for additional admissions team funding in order to enable the team to implement the statutory changes to allocating school places taking effect in February 2007.

8.7 At this stage Schools Forum have accepted that the proposals above are effectively balanced because the figures may vary when firm January 2007 pupil numbers are known and as the outturn position for Schools Budget items becomes clearer. The Schools Forum in February 2007 will include an up-dated position and agree final allocations.

9 LEA budget 2007/08 pressures and priorities

9.1 In line with the overall budget settlement for the County Council, the LEA Budget is adjusted to reflect specific grant changes, but otherwise is at the base budget level. Within the LEA Budget there is one change in specific grant for 2007/08, an increase of £387,000 for the Information Sharing Index revenue grant from in 2007/08. Current estimated figures for specific and formula grants are shown in Appendix 8.

9.2 Further 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 2006/07 and the proposal is to continue support to the same services in 2007/08.

9.3 However, there are corporate adjustments to be met, increasing the overall cash limit over 2006/07 by £27,000, as illustrated in the table below:

	2007/08
	£'000
Passporting increase including RSG adjustment	0
Net specific grant increase	+387
Total increase over 2006/07	+387
Less corporate adjustments
· Pay and Benefits	-100
· Hantsdirect	0
· Guideline redistribution	-260
Total adjustments	-360
Net increase over 2006/07	+27

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

	2007/08 £'000
Budget pressures:
Home to School Transport - The 2007/08 budget for home to school transport (HTST) reflects the continued cost pressure, particularly on contracts, being experienced during the 2006/07 financial year. Cost increases in the transport industry are rising at around 8.5% per annum, well in excess of the retail price index. Higher fuel, insurance and labour costs in the transport industry have continued to drive contract costs upwards	+354
Information Sharing Index - increased spend to meet specific grant requirements and ensure delivery of the information index	+387
Total Pressures	+741
Savings proposed:
Denominational transport reflects the partial effect in 2007/08 of the new denominational transport policy being introduced from September 2007. The level of savings will increase in future years as more children enter the denominational schools without an entitlement to free transport	-25
Interest on school balances - reflect the increase in school balances and interest rates experienced in recent years	-100
Community Education - This contains two elements: removal of the community subsidies supporting the use of school facilities by voluntary community groups (£265,000) and no allowance for inflation for the community allocations for 35 schools (£34,000). Alignment of budget priorities to CYPP and Change for Children priorities shows that the continuation of these community subsidies cannot be justified when set against other budget pressures	-300
Support service review - The realignment of services into district areas, where services have previously operated as independent units, offers opportunities to rationalise support services	-100
LA Family Group conferences -Family Group conferencing (FGC) is a joint Education and Social Care service which has been developed for several years in Hampshire. The evidence that it is effective is qualitative and circumstantial at the moment. The severe budget pressures force a reduction of £100,000 across the whole FGC budget (split £30,000 for the Education elements and £70,000 for the Social Care elements). This leaves £200,000 for FGC in 2007/08, which is a viable service. Options on reconfiguring the service to maximise efficiency will be considered, and quantitative measures to enable more robust evaluation of its effectiveness as a preventative service will be established	-30
Trailblazers - Trailblazers is an outdoor education programme for schools. From 2007/08 schools will be asked to pay full costs for this service	-17
Duke of Edinburgh Awards (DoE)- The administration of the DoE awards will be reconfigured to maximise effectiveness in collaboration with the voluntary sector. This follows a pattern in DoE provision across the country	-60
Business Unit core funding reduction - Children's Services currently subsidises the field study centres of Stubbington and Minstead to a total of £240,000. This reduction will halve the contribution to Stubbington and remove 25% of the contribution to Minstead. The field study centres will need to increase their prices to users, including schools, in order to remain viable	-95
Business Unit core funding reduction (one-off) - the Hampshire Inspection and Advisory Service (HIAS) business unit has agreed a reduction in its core funding of £225,000 in 2007/08. The unit remains able to fund the Primary School Improvement Partners shortfall after this adjustment	-225
Grants to Youth Organisations - Children's Services currently provides around £200,000 of grants to the voluntary sector (a mixture of direct grants and service level agreements). This funding will be reduced by 10% overall, with a review of all funding in the new year to determine where the reductions will be made	-20
LPSA1 one-off - reflects use of one-off LPSA1 funding	-188
Total savings	-1,160
Net Pressure within year	-419

9.5 The main pressure on the LEA Budget is from the demand led service, Home To School Transport, where external cost pressures as well as fluctuations in demand contribute to the volatility of the budget. The Home to School Transport overspend for 2006/07 has been contained through vigorous application of minimum statutory duties in relation to transporting pupils to school and these will continue in 2007/08

9.6 Some savings, for example denominational transport, were planned. The remaining savings are being made to reduce down the projected overspend for 2007/08. The savings on Community Education, Trailblazers, Duke of Edinburgh and the Field Study Centres, will all require schools to either increase their payments/subsidies for the service or to pass on additional costs to the groups who use their facilities and to parents. Given the budget pressures for 2007/08, Schools Forum voted to support the reduction in community subsidies. This group of services is the final set of services to schools/pupils where Children's Services was providing a subsidy, and the reductions being made acknowledge the change in the balance of funding between the County Council and schools in recent years.

9.7 The DfES made a funding announcement in December 2006 in relation to LEA grant allocations. The resulting Standards Funds grant implications for the County Council mean no change and the proposal is to continue support to the same services in 2007/08 as in 2006/07.

10 Children's Social Care for 2007/08 pressures and priorities

10.1 In 2007/08 the base budget increases in line with additional County council growth. In addition, current estimates for specific and formula grants are shown in Appendix 8. The most significant changes are:

· Children's Services Grant - increase from £2.336m in 2006/07 to £3.064m in 2007/08, an increase of £728,000. This is £140,000 higher than expected and is a result of additional funding being made to meet new statutory responsibilities arising mainly from the Education and Inspections Act 2006

· Children's Fund. As expected, this grant is reducing from £1.944m in 2006/07 to £1.895m in 2007/08.

10.2 The net increase in social care funding which can be used to meet the department's 2007/08 pressures is summarised in the table below:

	2007/08
	£'000
County Council additional growth	+1,257
Net specific grants increase	+652
Total increase over 2006/07	+1,909
Less corporate adjustments
· Pay and Benefits	-380
· Hantsdirect	-535
· Guidance redistribution	-245
Total adjustments	-1,160
Net increase over 2006/07	+749

10.3 In compiling the base budget for Children's Social Care, a net pressure of £1.214m has been identified to sustain the current level of service in 2007/08. The budget proposals below identify the main service pressures and developments for the Children's Services Social Care Budget for 2007/08. Further details are shown in Appendix 4 (c)::

	2007/08
	£'000
Budget pressures:
Non County Placements and Independent Fostering Agency (NCP/IFA) - reflection of the projected level of activity for 2007/08 after adjusting for known placements that will cease and assuming the current trend of other activity data continues. This indicates that there will be a net reduction of 5 NCP placements and a net increase of 17 IFA placements as at the end of 2007/08, from the activity position reported at the end of November 2006 (as outlined within paragraphs 5.28-5.36). The overall pressure expected therefore represents a reduction in anticipated pressure on NCPs in 2006/07 to £200,000 (based on average activity during the year of 58 placements with an average unit cost of £137,200), and an increase in the pressure to meet the demand for IFA placements to £1,300,000 (based on average activity during the year of 141 placements with an average unit cost of £47,400). These placements are used for Children Looked After either where their needs cannot be met within existing resources or where there are no in-house placements available. There has been continuing pressure with an increase of children needing placements and an inability to match that with our own services	+1,500
Commissioning Social Workers - reflection of on-going pressure from previous years resulting from the payment of recruitment and retention measures and from the need to ensure child protection work is covered and can be allocated. This assumes that vacancies will continue at a rate of approximately 18% throughout 2007/08	+370
In-house fostering - reflection of on-going pressure from previous years, including the costs of supporting new carers and the payment of Level 5 Skills fees aimed at minimising the need to use more expensive Independent Fostering Agencies. The forward pressure for 2007/08 assumes that in-house fostering capacity and usage will be maintained at the same levels throughout 2007/08 as they are in 2006/07, that is an average total of 575 placements each month	+500
Direct Payments - increased costs associated with higher than expected take-up of the initiative to make payments to allow disabled young people and their families to maintain more choice and control over packages of support that can help maintain them in the community and avoid them becoming Children Looked After. The number of children being supported through direct payments in November 2006 was 136. This expected pressure is based on the assumption that this number will remain stable throughout 2007/08	+180
Home care - reflection of on-going pressure from previous years for support at home for families with disabled children and young people, that assists in maintaining them in the community	+280
Legal charges - reflection of increase in internal and external legal costs associated with child placements	+65
Residential staff allowances - additional cost of historic weekend working pay adjustments necessary as a result of the Pay and Benefits initiative	+150
Fostering Allowances Increase - the net cost of meeting nationally imposed minimum foster care rates with effect from April 2007	+72
Total pressures	+3,117
Savings Proposed
Training - a rationalisation in training and development provision, with ongoing activity to increase economies of scale by integrating training across the department	-120
Market supplement equalisation (North/South) - reflects the full year effect of equalising the market supplements paid to qualified social workers as between the North and the South of the County. Implemented with effect from 1 January 2007	-180
Restructure changes (Pay and Benefits) - adjustments to the original proposed structure reflecting the need to meet the corporate Pay and Benefits targets	-320
Teenage Pregnancy - £100,000 relates to the re-allocation of County Council funding. Of the grant funding, £325,000 in total, a sum of £25,000 (8%) has been identified as an efficiency which can be achieved without any impact on service delivery	-125
Contract Support - the on-going expected benefit of the temporary post (funded from LPSA1 reward grant) to ensure more effective placement of children in NCPs	-50
Legal 24 hour standby - cessation of 24 hour standby cover arrangements currently in place with legal services	-24
Fostering service investment - reflects the benefit expected from the one off LPSA1 investment (£500,000) in fostering services planned for 2007/08). The on-going benefit is expected to be £100,000 beyond 2007/08	-300
Fostering regional contract - the benefit expected as a result of more competitive charges from IFAs as a result of the new regional contract, due for implementation in April 2007	-100
Family group conferences - Family Group conferencing is a joint Education and Social Care service which has been developed for several years in Hampshire. The evidence that it is effective is qualitative and circumstantial at the moment. The severe budget pressures force a reduction of £100,000 across the whole FGC budget (split £30,000 for the Education elements and £70,000 for the Social Care elements). This leaves £200,000 for FGC in 2007/08, which is a viable service. Options on reconfiguring the service to maximise efficiency will be considered, and quantitative measures to enable more robust evaluation of its effectiveness as a preventative service will be established	-70
Hants direct - a business process re-engineering project in the spring of 2007 will work with the Social Care Reception and Assessment teams to identify workflow that can move to the Hants direct contact centre. Costings in the original budgeting for Hantsdirect identified £535,000 (part year effect) of potential business (telephone contact to general published numbers) that could be moved to the contact centre, and this now represents a base budget adjustment for Children's Services for 2007/08. This saving is therefore a balancing figure and every effort will be made to ensure that appropriate re-design of workflows and redeployment of staff enables this target saving to be achieved, with the associated full year effect saving for 2008/09	-535
Children's Services currently provides around £200,000 of grants to the voluntary sector (a mixture of direct grants and service level agreements). This funding will be reduced by 10% overall, with a review of all funding in the new year to determine where the reductions will be made. -	-20
Earmarked grant reduction - the net impact of changes to earmarked grants (Children's Fund -£115,000, CAMHS +£26,000, Youth Justice Board +£50,000)	-39
Local Public Service Agreement (LPSA1) one-off - reflects use of one off LPSA1 funding	-20
Total savings	-1,903
Net pressure within the year	+1,214

11 Summary of service pressures and priorities for 2007/08

11.1 The table below summarises the net position for the combined Schools, LEA and Children's Social Care Budgets for 2007/08 and shows that a balanced budget is achievable assuming use of one-off LPSA1 money to fund the shortfall of £252,000:

	Schools Budget	LEA Budget	Children's Social Care Budget	Total Budget
	£'000	£'000	£'000	£'000
Pressures	+550	+741	+3,117	+4,245
Savings	-878	-1,160	-1,903	-3,941
Net pressures and savings	-328	-419	+1,214	+304
Passported increase (net of corporate adjustments for Pay and Benefits, Hantsdirect and Adults re-direction)	0	-27	-749	-613
Sub-total	-328	-446	+465	-309
2006/07 outturn variation from cash limit	+328	-1,613	+1,846	+561
Sub total	0	-2,059	+2,311	+252
Use of one-off LPSA1 funding				-252
Net position				0

12 Cost pressures, redeployment proposals and efficiency improvements - 2007/08 to 2009/10

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 and value for money.

12.2 Details of cost pressures absorbed of £3.530m and redeployment proposals of £3.063m are included in Appendix 4.

12.3 The priorities of the Children's Services department are set by the Children and Young People's Plan (CYPP) and the annual outcomes of the Annual Performance Assessment (APA) process. Together, these priorities support the County Council's corporate priorities and the Local Area Agreement. It is against these priorities that decisions about the redeployment of resource for 2007/08 are proposed. The difficult overall County Council budget position, dictated by central government spending settlements and regulations, means that Children's Services will have to absorb very significant pressures in 2007/08 and beyond.

12.4 The main budget pressures for 2007/08 are in the area of Children's Social Care, Special Educational Needs and Home to School Transport. There could also be significant pressures on services as a result of the need to find £535,000 staff savings to transfer to Hantsdirect. Until the business process re-engineering work has been undertaken during the spring, the full implications for services will not be clear.

12.5 Special Educational Needs is within Schools Budget and the Schools Forum has agreed to meet the likely carry forward overspend pressure from 2006/07 and the anticipated pressures for 2007/08 from within DSG. The pressure in the LEA Budget is all Home To School Transport related, £354,000. The total pressures in the Children's Social Care Budget are £3.117m, and are heavily focussed on the provision for Children Looked After.

12.6 These pressures will be met for 2007/08 through a series of service reductions spread across the department. These include a clear group of services and funding provided as community education to schools/pupils where the 2006/07 budget was providing a level of subsidy for particular activities. These represent some of the few remaining non-statutory services in the budget. The pressures of 2007/08 and beyond demand that all non-statutory provision is reviewed and ceased unless it can show that its provision leads to direct reduction of costs accrued in statutory services. Some of these non-statutory services will now be forced into full-market competition, and schools, parents and community users will need to decide whether they represent value for money before continuing to purchase them at potentially higher costs. Alternatively they may be considered to form part of the extended activities a school may wish to provide, which it may then fund in part from the Schools Standards Grant increase it receives in 2007/08.

12.7 Looking forward to 2008/09, with the prospect of even greater pressures arising from government grant settlements and other external factors, it is clear that further redeployment from non-statutory service provision will not be possible. The department will now need to review and re-engineer its business process for many of its key statutory services in order to manage within the available resources.

12.8 The County Council is required to identify annual efficiency improvements of at least 2.5% for the annual efficiency statement (AES) for the period to 2007/08. 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. The basis for future efficiency targets will be determined as part of the Comprehensive Spending Review (CSR) in 2007, but the Chancellor announced in his pre-budget report that the baseline savings ambition for the 2007 CSR period will be at least 3 per cent per year across central and local government with a focus on net cashable savings.

12.9 Corporately the mid-year AES review indicated that the County Council was on target to achieve its three year target for efficiencies (covering 2005/06 to 2007/08) by the end of 2006/07, in some part due to the ability to count the backward look items identified for 2004/05. Within Children's Services the three year target was £4.8m (split equally between cashable and non-cashable savings) and the projection is that the department will have achieved £4.873m by the end of 2006/07, (£3.863m cashable and £1.010m non-cashable). Assuming these savings are sustained, as is expected, then any new efficiencies identified contribute beyond the target to the County Councils AES.

12.10 Many of the efficiency improvements in Appendix 5 continue from 2006/07 into 2007/08. In addition new efficiency improvements have been identified and others will be sought across the Children's Services department during 2007/08. Some will begin to have effect in 2007/08, others will have their first impact in 2008/09. Appendix 5 identifies efficiency improvements totalling £1.129m for 2007/08. Of these, £1.129m is eligible for inclusion in the AES and £449,000 represents usable budget savings. These are summarised below:

· Impact in 2007/08

· Teenage pregnancy partnership £25,000 This will continue to deliver against targets with a reduction in Authority funding with effect from April 2007

· Support Services Review £100,000 The realignment of services into district areas, where services have previously operated as independent units, offers opportunities to rationalise support services. This means that the same levels of services will be achieved with fewer staff costs

· Management structure review £320,000 As part of the restructuring, the department has frozen recruitment to several third and fourth tier posts. These will be held vacant for 2007/08 with their responsibilities handled by other staff and no service reduction

· IFA Regional Contract Savings £100,000 More effective contract negotiations and management for Independent Fostering Agencies as a result of regional collaboration will give a cashable saving in 2007/08

· Special Educational Needs not yet known Collaboration between Applemore and Oak Lodge schools will provide services for children with SEN who would otherwise have moved to more expensive Non County Placement provision

· Reductions in Market Supplements £180,000 The equalisation of the market supplements paid to social workers in the north and south of the County, in line with changing market conditions has enabled the department to maintain the same level of staffing with reduced costs

· Family Group Conferences £100,000 This budget will be reduced by 33% for 2007/08 but without a comparable impact on the level of service provided through more effective use of resources

· Legal 24 hour standby arrangements £24,000 Cessation of this 24 hour standby cover is a cashable saving since the level of service provision will not be reduced

· Fostering service investment £300,000 A one-off investment of £500,000 in fostering services in 2007/08 is expected to realise £300,000 savings in 2007/08 through reductions in the level of external placements made and on-going savings of £100,000 (net of sustainability costs)

· NCP / IFA temporary one year posts £50,000 Funded from one-off LPSA1 reward grant, these two posts are expected to reduce the NCP / IFA budget pressures. Mechanisms for monitoring achievement of this will be established once post holders are in place so the success can be evaluated.

· Impact in 2008/09

· Home To School Transport £90,000 £30,000 of the Local Public Services Agreement reward grant is being invested in an innovative pilot procurement savings project centred on more effective procurement of taxi provision in the Hart and Rushmore Area. This may give cashable efficiency savings of £90,000 with effect from 2008/09 with no reduction in service to pupils

· Integrated Youth project - Work to specify the tender documentation for the future of youth work as an integrated service with Connexions is underway. That contract will be effective from April 2008. The department will be seeking major efficiencies in service delivery as a result of this contract. Also, during 2007/08 the Youth Service will work with Connexions to deliver the Youth Green Paper with no additional funding

12.11 The County Council has further developed its Value for Money Strategy during 2006/07 as part of its corporate review programme. One key element of this strategy has been the up-dating of a VFM self-assessment commentary on the Audit Commission based English County profiles for Children's Services.

12.12 In addition, within the Department, all reports for the departmental management team have, since April 2006, had an accompanying cover sheet setting out the financial implications of the item. Any budget growth implications are accompanied with a clear and costed business case.

13 Review of charges

13.1 The service's 2007/08 revenue budget includes income of £5.912m from fees and charges. 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, although there are none applicable to Children's Services.

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. The Executive Member for Education reviews school meal charges, and for 2007/08 this review has incorporated the implications of the nutritional standards and the three year DfES specific grant. A separate report will be presented to the Executive Lead Member for Children's Services for increases to fees and allowances in family placements in February 2007.

13.4 Although the scope for generating additional income to the County Council is limited because schools make the majority of charges, this year continues to see the benefit of the new income stream as a result of the new service level agreement started with schools in July 2005 which involves schools paying for Education Otherwise Than At School (EOTAS) provision for pupils on their school role who are emotionally vulnerable or unwell.

14 Other expenditure

14.1 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 is 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 Members control and they have not yet been agreed. In the original budget they totalled £11.527m.

15 Business Units

15.1 The trading accounts of the business units are summarised in Appendix 7.

15.2 The business units consist of two groups of services. Stubbington and Minstead Study Centres provide curriculum services to pupils and generate 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 on a charge basis. Broadly 80% of the income is secured through annual subscription from schools. The remainder is for services core-funded from the Children's Services budgets. Current service level agreements operate to end of March 2008.

15.3 The services to schools' business units operate in a volatile and challenging environment. Whilst they have traded successfully for about 16 years they are likely to face increasing competitive pressures in future 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 will be undertaken in 2007 prior to the Service Level Agreement renewal necessary from April 2008.

15.4 For the 2006/07 financial year Business Units will contribute, out of balances of £1.780m as at 31 March 2006:

· £300,000 as a one off to assist with the department's recovery plan (see paragraph 5.3 for more details)

· £359,000 as a one off corporate contribution set by Cabinet as a part of the corporate plan to reinstate the County Council's balances following the difficult end of year position for the County Council in 2005/06. (The corporate total is £1m).

15.5 For the 2007/08 financial year the Business Units will contribute a further £320,000 including:

· £225,000 one off reduction in core funding for the HIAS business unit in 2007/08 to mitigate some of the pressures elsewhere in Children's Services

· £95,000 base reduction in core funding for the Study Centre business units from 2007/08, rising to £240,000 from 2008/09 as the total core funding for these centres is removed.

15.6 The projected outturn balances for Business Units as at 31 March 2007 is approximately £1.348m (after the contributions discussed above).

15.7 In addition, Business Units will have to absorb the costs of the implementation of the Pay and Benefits review when it takes effect in 2007/08.

15.8 The extension of the School Improvement Partners programme in line with DfES policy within primary schools starts in January 2007, and is part funded through Standards Fund. However, despite discussions nationally with the DfES, 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 £640,000 in 2007/08. The forward budget proposals for 2007/08 include plans to utilise HIAS Business Unit balances to meet these costs in 2007/08. However, this is not sustainable into 2008/09 and the longer term funding implications will form part of the 2008/09 budget strategy particularly given the significance placed upon the role of SIPs in the future of the Children's Services department.

15.9 As set out in paragraph 9.3 Schools Forum agreed to allocate an additional £394,000 of their headroom flexibility to assist two of the Business Units, Education Personnel Services (EPS) and Education Financial Services (EFS), with their pressures. This will enable them to increase their charges and income for 2007/08 and is expected to ensure they can sustain their levels of service throughout 2007/08.

15.10 After accounting for the actions agreed or proposed above the end of year, projected balance for Business Units as at 31 March 2008 is approximately nil. This projected outturn position will be reflected as Business Units develop their next three year SLAs, due for renewal with schools with effect from April 2008.

16 Legal implications

16.1 There are no legal implications within the proposals in this report.

17 HR Implications

17.1 The workforce implications of the proposed budget for 2007/08 are set out in Appendix 10. The 2007/08 base budget supports a planned workforce of 1,758 full time equivalent (FTE) staff. This compares with the original estimate for 2006/07 of which is an increase of 90. A number of factors contribute to this increase, including the roll out of the locality teams (36), additional staff within early years mainly linked to the development of children's centres (29), the behaviour support teams (9) (previously under schools budgets) and a small number of other variations (16).

17.2 The net effect of proposals for growth, savings and redeployment of resources (Appendix 4) on staffing levels are as follows;

2007/08	-26 FTEs
2008/09	-20 FTEs
2009/10	0 FTEs

17.3 The Children's Services Department has a Pay and Benefits realisation target of £120,000 in 2006/07 rising by a further £480,000 in 2007/08. The proposals for delivering the target for 2006/07 and 2007/08 are:

· equalising the difference between the north to south of the county for Social Worker market supplements. This has been communicated and takes effect from 1 January 2007 (£45,000 impact in 2006/07 rising to a full year effect £180,000 from 2007/08)

· review of support services to move towards the new district structure within the department (£100,000 in 2007/08)

· restructure review and reduction of posts (the remaining £320,000).

17.4 The one-off LPSA1 reward grant investment will see £469,200 being invested in staffing within the Children's Services department with a temporary increase in the number of FTE's of 12.2 during 2007/08.

18 Provisional budget for 2008/09 and 2009/10

18.1 The provisional budget at outturn prices for 2008/09 and 2009/10 for this service is set out in Appendix 11 and summarised below:

2008/09	£ 873,991 m
2009/10	£890,523 m

18.2 The department recognises the challenges faced during 2007/08 to establish a strategy for 2008/09 onwards which enables the service to meet the core service priorities as set out in the CYPP and reflected in the department's service plan, and achieve a balanced budget. The remainder of this section summarises the pressures anticipated in 2008/09 and onwards and the emerging approaches to managing these.

18.3 The restructuring of the Children's Services department in 2006/07 is the starting point for a very significant cultural change process into a fully integrated Children's service. Over a five year period the aim is to move to a position where staff are multi-skilled across the education/social care spectrum and integrated management can come into place at the most senior levels.

18.4 The business process re-engineering that will be needed during 2007/08 to meet the budget challenges for 2008/09 and beyond will be re-aligned to achieve the cultural changes outlined above. The Joint Area Review (JAR) is also well timed to inform this process. It is clear that Children's Services will need to move forward into 2008/09 having commenced the next stage of Change for Children, a model of service redevelopment and integration, with the preventative practices that are now being piloted having a real impact on overall service pressures. This will need to involve significant working with partners jointly to commission services and maximise the use of the entire children's workforce, whichever agency is the employer.

18.5 Children's Services is also participating fully in the corporate procurement strategy, and will be exploring further opportunities to streamline procurement during 2007/08. Accommodation is another significant cost base, and again, Children's Services is keen to play a full part in the corporate accommodation strategy developments, and to redesign working practices in order to achieve savings. There will be significant IT costs in changing working practices, particularly if more home based working is developed, and therefore the department will need to see the benefits of accommodation savings into its budget in order to be able to offset increasing IT costs.

18.6 The corporate priorities for budget guidelines for 2008/09 and 2009/10 have been provisionally agreed and have the following impacts on the future years' budget proposals for the Children's Services Department:

· Hantsdirect will be fully rolled out during 2008/09, meaning this department's contribution will rise to £1,312,000 (from £535,000) in 2008/09

· The guidance redistribution continues to rise by £505,000 in each of the following two years, to an overall reduction of £1,515,000 by 2009/10.

18.7 In addition, a number of key service developments within the Children's Services department can be anticipated that will impact on the future years budget proposals, as summarised below:

· Ceasing of DfES specific grants for Teenage Pregnancy and the Children's Fund is expected with effect from the end of March 2008. The Comprehensive Spending Review 2007 will indicate the extent to which these funds are to be mainstreamed into government formula funding. Work is now underway to manage the mainstreaming of some of the services currently funded by these grants, and hard decisions will have to be made about the discontinuation of a range of projects if the spending review ceases funding to these initiatives

· The provision of funding for the Primary School Improvement Partners through HIAS business unit balances in 2007/08 is not sustainable into 2008/09, representing a pressure of around £640,000 from 2008/09 onwards

· Following consultations during 2005 on the Government's proposals detailed in the Green Paper `Youth Matters', in April 2008 the DfES grant to the Connexions service will transfer to the County Council. In preparation for this funding transfer an Integrated Youth Support Service will be established which encompasses the current activities delivered via the Connexions service. This should offer opportunities for savings as a result of the rationalisation of Connexions and the Hampshire County Youth Service. The specification and tender will be drawn up by April 2007

· Longer term savings will be sought from Community Education, but will be difficult to realise quickly as a result of legal agreements, some of very significant duration. Further work to explore opportunities will be undertaken in 2007/08, but with no certainty of savings in 2008/09

· It is clear that if the upward pressures on the budgets surrounding provision for Children Looked After (CLA) continue, the department will be unable to meet spending targets. This places further emphasis on the need for development of preventative strategies on managing CLA. As mentioned throughout this paper, 2007/08 will be a year when the department will seek other ways of providing statutory services so that the provision remains affordable

· The budget strategy for 2007/08, summarised in section 12, involves a number of one-off savings totalling £1.005m which will need to be addressed in other ways for 2008/09 onwards

· An innovative pilot procurement savings project centred on more effective procurement of taxi provision in the Hart and Rushmore Area may give cashable efficiency savings of £90,000 with effect from 2008/09 with no reduction in service to pupils within the Home To School Transport budget. This savings target may increase if the pilot is rolled out further across the County.

18.8 The overall impact of the above pressures is a minimum pressure in 2008/09 of £2.7m and a further £0.5m in 2009/10 and the department will develop an approach to reducing these net pressures further during 2007/08.

19 Impact assessment

19.1 The proposals in this report are derived from the departmental service plan(s) and are in accordance with the budget strategy and the County Council's financial management policy

Recommendations


To approve for submission to the Leader and Cabinet:

1 The revised budget for 2006/07 totalling £826.445m (as set out in Appendices 1 and 2)

2 The base budget for 2007/08 totalling £858.305m (as set out in Appendix 3)

3 The proposals for allowable growth totalling £387,000 for the LEA Budget and £117,000 for the Children's Social Casre budget and pressures of £3.530m (as set out in Appendix 4)

4 The proposals for redeployment of resources totalling £3.063m in 2007/08 (as set out in Appendix 4)

5 The proposals for efficiency improvements totalling £1.129m in 2007/08 (as set out in Appendix 5)

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

7 The summarised trading accounts of business units (as set out in Appendix 7)

8 The detailed budget for 2007/08 (as set out in Appendix 8)

9 The workforce implications of the proposed budget for 2007/08 including plans for workforce reductions to contribute towards the increased cost of the new pay framework (as set out in Appendix 10)

10 The provisional budget for 2008/09 of £873,991 m and for 2009/10 of £890,523m (as set out in Appendix 11).

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 have 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.

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