Contact: Ejner Knudsen, (01962) 847403; [email protected]

1 Summary

1.1 This report presents the outcome of the first monitoring review for the 2007/08 financial year, covering the Environment services' revenue budget, which was carried out in consultation with departmental budget holders during the summer.

1.2 The report provides an update of the 2007/08 revenue budget cash limit, taking into account recent budget changes, and gives an assessment of actual expenditure against each of the main service headings. The report then goes on to highlight significant issues that will affect the management of the budget during the course of the year.

1.3 In summary, the overall revenue budget monitoring position shown in this report is satisfactory for this stage in the financial year and the expected outturn is currently shown to be in line with the approved cash limit. However, this forecast assumes that action will be taken as required to fully attain the various savings assumptions built into the 2007/08 budget and that any further pressures on service budgets are also absorbed.

1 Recommendation

1.1 That the actions being taken to manage expenditure before the budget is revised later in the year be approved.

2 2007/08 cash limit changes

2.1 The original 2007/08 cash limited revenue budget for the Environment services, which was agreed by the County Council at its meeting in February, was £106.704 million. A number of changes have subsequently been made to the cash limit:

· An increase of £1,500,000 for the County Council's contribution to the Hampshire and Isle of Wight Safer Roads Partnership, to reflect the new funding arrangement for this activity following the integration of safety cameras into the LTP system via the new Road Safety Grant from 2007/08.

· Increases of £35,000 relating to Rural Bus Subsidy Grant and £11,000 for A339 de-trunking grant, following confirmation by the Government of the actual grant sums due for 2007/08.

· Increases totalling £261,000 arising from variations in expenditure during 2006/07 on those projects being funded from allocations of LPSA Reward Grant and LPSA2 Pump Priming Grant.

· A provisional allocation of £94,000 from the Government of the second tranche of the planning delivery grant for 2007/08. This is in addition to the first tranche allocation of £17,000 already included in the 2007/08 original budget.

· A transfer of £25,000 to the capital highways maintenance budget, relating to footway improvement works to be funded from the 2007/08 allocation of LPSA Pump Priming Grant for Target 15 - improving the condition of footways.

· A transfer of £20,000 to the capital highways maintenance budget from the £400,000 LPSA Reward Grant funding set aside for highways initiatives and innovations, to enable a pilot scheme for road edge treatments to be implemented in the New Forest.

· An increase of £15,000 arising from this service's 50% share of the unplanned underspending that arose from the closure of the 2006/07 accounts. It is suggested that this sum be added to the budget for highways and transport management and support services, to help manage any additional expenditure arising from organisational change during 2007/08.

· An additional £13,000 towards the second stage of a project to improve the digital information available on highway land ownership, which is due to be carried out over the next two years. The Cabinet approved additional total funding of £26,000 on 25 June 2007, to be phased over 2007/08 and 2008/09, when determining services' share of 2006/07 capital receipts, on the basis that this project is expected to provide a rapid payback from the identification of surplus highway land for future disposal.

· The assessed call of £827,000 on the central waste management contingency, reflecting additional expenditure arising from the operation of the waste management contract during the first quarter of the financial year.

· A number of cost neutral transfers between divisions of service, to reflect technical adjustments relating to the distribution and control of centrally managed departmental overheads.

2.2 The adjusted cash limit, taking into account the above variations, is £109.415 million. Appendix 1 provides an analysis of the adjusted budget over the main service headings, together with details of assessed expenditure to 30 June 2007.

2.3 Further adjustments to the cash limit will need to be made throughout the year to cover additional quarterly allocations from the waste management contingency, together with any subsequent budget transfers and adjustments that may be required.

3 Outcome of budget monitoring review

3.1 The Environment department's budget monitoring process reflects a comprehensive approach involving a series of review meetings between finance section staff and those departmental service officers with budget management responsibilities. During this process plans for service spending during the year, together with trends in expenditure and income, are systematically reviewed in comparison to the approved budget plan, in order to arrive at a provisional forecast outturn for each of the main service headings. The outcome of this process is initially reported to the department's management so that any necessary actions can be considered.

3.2 Details of the main issues arising from the first quarter's budget monitoring review are discussed in the following paragraphs.

Highways maintenance

3.3 The 2007/08 cash limited revenue budget for routine highways maintenance is £25.860 million. Works allocations to the various departmental and agency district council budget holders now total £25.454 million, including allocations for inflation and higher provision for a number of potential contractual claims. Expenditure is being progressed in accordance with the budget plan and no variations are currently anticipated.

3.4 Unallocated highways maintenance reserves amount to £406,000 at the present time. As in previous years, this sum will be allocated to budget holders on a phased basis to cover any operational pressures that may emerge together with further re-pricing of budgets, once these have been determined. This would include any adjustments to the highways maintenance programmes that may be required to accommodate additional expenditure arising from emergency and other works carried out following the exceptional rainfall during the summer, the impact of which has also delayed the full implementation of the 2007 surface dressing programme.

3.5 Almost twice as much rainfall was experienced during the May to July period than the long-term average, whilst particularly heavy rainfall on 20 July caused significant disruption in the north of the county. The cost of immediate response on that day, including the distribution of sand-bags to residents, additional signing, cleaning and sweeping of the highway and cleansing drains was approximately £60,000. The cost of other longer term remedial repairs to the highways infrastructure are estimated at £285,000, covering road edge damage due to erosion, drainage works, additional gully emptying, dig-outs and clearance, and repairs to culverts and bridges. This results in a total cost attributable to the wet summer of £345,000, of which approximately £260,000 would fall onto the capital programme provision for structural maintenance.

3.6 The wet weather during last winter and the continuing rainfall during the summer has had an impact on the highways network and this is evidenced by an increase in the number of claims. However, any costs arising from claims are met from the Council's central insurance reserve and have no immediate impact on the cash limit.

Public transport

3.7 The 2007/08 revenue budget for public transport support and co-ordination is £6.262 million, including provision of £5.976 million for expenditure on bus subsidies. In addition, a sum of £1.499 million is available for the provision of rural bus services, in line with the Rural Bus Subsidy grant allocation advised by the Government.

3.8 In preparing the revenue budget during January, it was agreed that savings of £244,000 in 2007/08, rising to £495,000 in 2008/09, would be sought by removing support for some bus services, to address the budget redistributions which were required to address continuing impact of demographic factors affecting the cost of providing Adult Services. In addition, it would also be necessary to absorb any additional cost pressures arising on the bus subsidies budget from contract re-tendering and the fall out of Government funding towards community transport and other initiatives.

3.9 Reports were considered by the Executive Member - Environment on 24 July 2007 and 22 August 2007, setting out proposals for managing the savings targets arising from the budget redistribution. These involve some reductions to bus service levels on Sundays, weekday daytime and evenings, realising annual savings of approximately £490,000. By making one reduction of this size halfway through the financial year, the budget pressures covering both the 2007/08 and 2008/09 financial years would be largely covered, although a small shortfall would still need to be managed against the overall public transport service cash limit. However, this decision would enable transport services which give access to employment, education, health, retail and leisure facilities for the widest section of the community to be maintained, whilst containing expenditure within the available budget.

3.10 Two significant service re-tenderings were originally programmed for 2007/08, covering local bus services in the Blackwater Valley and Eastleigh tendering areas, both of which have now been completed. In both cases, tender price increases were lower on average than in other areas of the county recently tendered, reflecting increased competition between operators. As a result, bus services in these tender areas have largely continued to meet value for money criteria which, taken together with housekeeping changes introduced from the area reviews, has enabled the majority of these services to be retained within existing budget allocations.

Management and support services

3.11 The total 2007/08 budget for management and support services is £25.666 million, covering overall staffing and support costs relating to the highways and transportation, planning and development, and waste management services.

3.12 Planned savings of £780,000 in staffing and support costs were identified in constructing the 2007/08 original budget to offset a number of budget pressures including the top-slices required to help fund the Hampshire Direct contact centre, pay and benefits savings and other locally identified pressures such as salary increments. Savings of £412,000 were identified from staff related budgets, including the reduction of 8.5 full time equivalent posts, together with target reductions of £368,000 from a combination of other support cost headings, including more effective use of in-house design teams resulting in less consultancy support, additional income, and efficiencies in district council agency agreement operations, service level agreements and printing budgets.

3.13 These significant savings were reflected in the detailed section budget allocations to individual departmental managers at the beginning of the financial year and the outcome of the first quarter's budget monitoring review suggests that the savings are being achieved in accordance with the plan.

Waste management

3.14 The waste management revenue budget is divided into two separate categories for the purposes of budget monitoring:

· The waste contract related services, including trade waste income and recycling credits.

· The other non-contract related waste management services covering facility maintenance, administration, promotions and developments, disposal of abandoned vehicles, material resources efficiency initiatives and provision for household waste recycling centre (HWRC) management.

Waste contract related services

3.15 The approved waste management contract related original budget for 2007/08 of £43.137 million was based on estimated expenditure commitments at the time it was prepared during November 2006. In accordance with corporate budget guidelines, no allowance was included in the 2007/08 base budget for growth in waste volumes beyond expected 2006/07 levels, nor for future price increases, increases in landfill tax or other contract pressures. As these factors are principally demand led, or subject to long term contractual obligations, there is very little scope within the management of the budget to vary expenditure.

3.16 As in previous years, an amount has been set aside within the overall County Council budget to cover these inescapable pressures, the sum for 2007/08 being £4.241 million. Periodic allocations will be made throughout the year to increase the waste management cash limit, based on quarterly assessments of cost increases.

3.17 Waste volumes during the first three months of the year have been lower, by 2.83%, compared with the corresponding period of 2006/07 and the overall growth allowance of 2.06% included in the central contingency. However, it is too early to predict whether this trend will continue across the full year. The call on the central waste contingency has been assessed at £827,000 for the first quarter of the year, covering the impact of annual contract re-pricing, landfill tax and other cost increases, leaving just over £3.4 million to cover higher waste contract costs during the remainder of 2007/08.

Other waste management services

3.18 The total 2007/08 budget provision for the non-contract waste management services is £4.314 million. As with the contract related services, it is difficult, at this early stage of the financial year, to predict with any certainty the outturn for this element of the waste management revenue budget, which includes volatile services such as the disposal of abandoned vehicles. Although the abandoned vehicles budget was underspent by £49,000 during 2006/07, annual expenditure levels tend to vary year-on-year and are significantly dependent on external factors such as the buoyancy of the market for scrap metal. However, at present, it is reasonable to assume that overall expenditure on the non-contract related waste management services during 2007/08 will be contained within the cash limit.

Other services

3.19 Budget monitoring indicates that spending on the other main Environment services, including school crossing patrols, road safety education and planning and development, is being progressed in accordance with the 2007/08 budget plan.

4 Impact assessment

4.1 Monitoring of the Environment revenue budget benefits all sectors of the community equally, as it helps to ensure that the department's services are delivered in a cost effective manner within overall corporate budget guidelines. As such, proposals in this report are not considered to be discriminatory.

5 Conclusion

5.1 A number of adjustments have been made to the Environment services' cash limit, increasing the overall budget by £2.711 million to £109.415 million. Further adjustments will be made throughout the year for additional quarterly allocations from the waste management contingency.

5.2 Expenditure on routine highways maintenance is being progressed in accordance with the latest approved programme. Highways maintenance revenue reserves currently stand at £406,000 which will be allocated to budget holders on a phased basis throughout the remainder of the year to cover operational pressures as they emerge, including additional expenditure arising from the exceptional rainfall during the summer.

5.3 On public transport, proposals were approved by the Executive Member on 24 July 2007 and 22 August 2007 to enable the planned savings included in the make-up of the 2007/08 and 2008/09 budgets to be implemented. No additional pressures have emerged from recent service re-tendering in the Blackwater Valley and Eastleigh areas, the result from which have been more favourable than anticipated.

5.4 The 2007/08 budget for departmental management and support services included savings of £780,000 which are being achieved as planned.

5.5 Waste management volumes during the first quarter of the year were 2.83% lower than during the corresponding period of 2006/07 and within the overall growth allowance of 2.06% included in the make-up of the central waste contingency.

5.6 The overall revenue budget monitoring position, taking into account the above, is considered to be satisfactory for this stage of the financial year and the projected outturn is currently shown to be in line with the cash limit.

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.

i) Environment Department Management Team: 24 July 2007 - Revenue Budget Monitoring 2007/08.

Appendix 1

Environment

Revenue budget 2007/08 - monitoring statement

Analysis of variations