Contact: Bevis Ingram, (01962) 84 7508; [email protected]

1 Introduction

1.1 This report presents the latest update on the 2006/07 budget that has been presented to Cabinet. This was presented as the revised budget 2006/07 as part of the major budget paper for 2007/08 presented to Cabinet on 9 February. It has previously been agreed that all such reports should then be brought to this Committee. The remainder of this report is the relevant extract from the paper presented to Cabinet.

2 Revised budget 2006/07

2.1 There is no formal review of the revised budget as budgets are monitored regularly during the year and changes, with required action, reported as they occur. All services, with the exception of Adult Services given its two year recovery plan, and Children's Services are controlling estimates to their cash limits for 2006/07.

Adult Services

2.2 The extra commitments on Adult Services of £11.1m in 2005/06 were written off to reserves and balances. The Cabinet reviewed the 2006/07 budget position in the light of the projected full year effect of these commitments, in July 2006. The 2006/07 cost was about £19m but the projection in July was for an overspend of around £17.5m

2.3 Cabinet agreed to find cash savings of £14.5m to reinstate balances. £3.5m was required to restore balances to the minimum position from the 2005/06 overspend and £11m was set aside against the minimum risk of an overspend on Adult Services in 2006/07.

2.4 A two year recovery plan was set for Adult Services targeting £4.5m additional savings in 2006/07 and £8.4m in 2007/08 (now revised to £9.3m). The projected overspend at that time, if the savings were achieved, was between £11.5m and £15.5m, against which Adult Services also retained a contingency of £2.5m within its budget.

2.5 The latest projection is for an overspend of £10.9m, without the full use of the £2.5m contingency retained by Adult Services. The Executive Member has requested that any remaining balance of the 2006/07 contingency at the year end (currently £1m) be carried forward to 2007/08 to offset pressures in that year (provided that the overall impact on balances does not exceed £10.9m).

2.6 It is also recommended that the overspending of £10.9m be written off to balances, set aside for that purpose, subject to confirmation of the final outturn. This is just within the £11m minimum risk position set aside in July, with £13.3m provided in total.

Children's Services

2.7 There is a projected net pressure of £3m, mainly from the costs of children looked after. Action has been taken to prepare a recovery plan reducing the projected overspend to £1.5m. Following a review of the children's centres revenue funding it has been possible to identify £1m of general sure start grant that can be used to offset other early years expenditure. This leaves a remaining revenue budget pressure of £561,000. It is recommended that this be carried forward to 2007/08 and absorbed within the Children's Services budget, partly by applying the one-off use of £233,000 of local public service agreement reward grant. The balance of £328,000 will be carried forward against the schools budget as agreed by the Schools Forum.

Environment

2.8 Slippage of projects within highways maintenance, totalling £390,000 has been identified. These include the initial consultancy and other costs of the street lighting private finance initiative (£250,000), tree management (£100,000), and an IT system for traffic management (£40,000). There has also been slippage in the transport asset management plan of £100,000. It is recommended that the total amount of the projected underspend, £490,000, is carried forward to allow the projects to continue in 2007/08.

Policy and Resources

2.9 Pressures totalling £359,000 mainly within property services will be managed within the overall approved revenue and capital budgets.

Recreation and Heritage

2.10 Pressures of £0.5m for the library restructuring and reduced levels of income are being managed by a recovery plan and will be contained within the overall cash limit.

Summary of service revised budgets

2.11 The proposed carry-forwards to 2007/08 are therefore:

Table 4: Proposed service carry forwards to 2007/08

South Hampshire Rapid Transport (SHRT)

2.12 The Department for Transport has recently agreed to repay 75% of the SHRT abortive costs incurred by the County Council and Portsmouth City Council. This is further split between the two promoters in the agreed 70:30 ratio, and includes an interest element.

2.13 The County Council's share is £3.1m. Part of this reimbursement, £499,000, was anticipated in 2005/06, and used to finance the continuing costs of the project team in that year, pending final decisions. This leaves £2.6m to be brought into account for 2006/07. It is proposed to add the reimbursement to balances.

Revenue contributions to capital, capital financing and interest on balances

2.14 The capital programme report shows that capital expenditure in 2006/07 is forecast to exceed resources by £4.9m. It is proposed that this shortfall is met by temporary borrowing which will be repaid in 2007/08 if anticipated capital receipts are realised.

2.15 Part of the package agreed by Cabinet in July 2006 to increase balances was to delete the provision of £5m in the 2008/09 capital programme (by adjusting revenue contributions to capital) for the acquisition of an interest in the land at Manydown. This cannot now be achieved in 2006/07 because of increased prudential (temporary) borrowing and the full use of budgeted revenue contributions to finance capital expenditure in that year. This will reduce balances by £5m, but it may be possible to reverse the position by 2008/09 when the anticipated capital receipts do become available and this has been assumed in the capital financing estimates and in the medium term financial plan.

2.16 However there is a saving of £0.4m on capital financing costs in 2006/07 from the final outturn for 2005/06, compared with the estimated position at the time the budget was prepared, after taking account of higher interest rates.

2.17 Additional balances and increasing interest rates will result in more interest on revenue balances of around £2m, which will be added to balances.

Balances

2.18 A budgeted contribution to balances of £2.3m was provided in the 2006/07 original budget in anticipation of a risk of an overspend on adult services. This will not be required based on the latest projection of the outturn. This amount, together with a slightly smaller amount which was withdrawn from balances set aside in July, can now be retained in balances to cover continuing risks of an overspend on adult services in 2007/08.

2.19 Taking account of minor adjustments between reserves, and an adjustment required for the projected overspending on the schools budget results in a total addition to balances of £2.4m in 2006/07 as compared with the strategy agreed in July, summarised in the next table:

Table 5: Further additions to balances in 2006/07

2.20 All the changes in service and other budgets are set out in Appendix 2.

Section 100 D - :Local Government Act 1972 - background documents

The following documents discuss 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:

1. Published works

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

None

Appendix 2

Revised budget 2006/07