Contact: Anne Hibbert, (01962) 84 7533; [email protected]

1 Summary

1.1 This report is the second monitoring report for 2007/08 and provides an overview of the position on:

· Policy and Resources own revenue cash limited budgets

· Policy and Resources business units

· Policy and Resources capital programme

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

1.2 At the end of August 2007, on-going budget pressures within corporately held land, sites for gypsies and travellers and the Coroner Service mean net expenditure for 2007/08 is likely to exceed the budget for these areas. Actions have been identified to manage the budget and the budgetary position will continue to be monitored closely throughout the year. H3CS are benefiting from a sustained increase in demand, but will face higher pay costs once the new pay framework is implemented. IT Services have financial plans in place to eliminate a projected deficit over the next two years. Other budgets are anticipated to be within cash limit.

1.3 Capital expenditure for the County Council for 2007/08 is forecast to be a little above the estimate of £187.5m reported to Cabinet on 9 February 2007, but this is not unexpected in view of the slippage against planned expenditure in 2006/07. Actual capital receipts to 31 August 2007 were £33.8m, increasing to £43.5m as further stage payments due in 2007/08 are received.

1.4 The Policy and Resources revenue budget and capital programme includes financial resources for a range of direct services and for central services that support all other County Council services and as such contribute to all three priorities of the corporate strategy.

Recommendations

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

1 Policy and Resources cash limited revenue budget 2007/08

1.1 The latest cash limit for 2007/08 is £56.3m as set out in Appendix 1. This includes the carry forward from 2006/07 of the net underspending for Policy and Resources of £87,000 and an additional £8,500 funded by grant from the Government's capacity building fund. This is the first instalment from a total of £20,500 allocated to enable more Hampshire authorities to participate in the Hampshire Marketplace procurement consortium. This is just one element of the Hampshire and Isle of Wight improvement programme designed to achieve efficiency savings from shared service provision and other collaborative working.

1.2 Comments on budget issues for 2007/08 based on monitoring of expenditure up to the end of August 2007 are given below.

Chief Executive's Department (including Human Resources)

1.3 There are a number of budget pressures, particularly within the HR Service Centre but these are offset by efficiencies in other areas including recruitment and advertising. Therefore, at this stage in the financial year, it is anticipated the Department will keep within its cash limit.

County Treasurer's Department

1.4 For 2007/08 the department's outturn forecast is in line with its cash limit. The County Treasurer's department is delivering the additional work loads required in areas including the Pensions tri-annual valuation and implementing pay and benefits and achieving the savings targets for pay and benefits, reinstatement of balances and the on-going realisation of SAP savings. The balanced position will be achieved through a careful management of budgets along with service reviews.

Property Business and Regulatory Services

Property Services

1.5 The impact of management action previously reported (recruitment freeze, reduction in the use of consultants and agency staff) together with additional measures implemented in 2007/08 including a number of early retirements means the outturn will be in line with cash limit after allowing for the carried forward overspend from 2006/07 and the savings targets already built into the cash limit relating to Pay and Benefits and the redistribution of guidelines to provide further support for Adult Services.

Repairs and maintenance

1.6 The unusually wet summer weather has resulted in higher than normal spending on items such as roof leaks and drainage problems. At this stage in the year it is anticipated that spending can still be contained within cash limit however this will depend in part on winter weather conditions.

1.7 The new engineering term maintenance contracts for all areas other than the Winchester headquarters buildings commenced on 1 August. The financial impact will be monitored as the year progresses but early evidence suggests there is likely to be an efficiency gain resulting from the new arrangements. The current arrangements for the headquarters buildings run until autumn 2008 and their replacement is currently being considered as part of the Facilities Management Modernisation review.

Corporately held land and Sites for Gypsies and Travellers

1.8 Pressures relating to the Corporate Estate, Development Account and Sites for Gypsies and Travellers budgets totalling £320,000 were reported to the July meeting. The position remains difficult with the costs of unavoidable repairs, security costs and maintenance work on the Corporate Estate continuing to be extensive leading to anticipated overspend of £200,000. Of this £90,000 is accounted for by security costs.

1.9 The shortfall in income on the Development Account resulting from maintenance liability and vacancies continues to be in the region of £70,000 and work is underway to review all aspects of costs and charging on this budget.

1.10 Pressures also continue on the Gypsy and Travellers budget which currently projects an overspend of £100,000. However, this should be reduced following the agreed increase in rent and service charges effective from 26 October 2007.

Scientific Service

1.11 As reported to the July meeting the pressures on the Scientific Service continue but it remains the expectation that these pressures can be managed within the overall Regulatory Services cash limit.

HM Coroner Service

1.12 Pressures from higher mortuary fees, special analyses and examinations and court attendance costs persist and an overspend of £83,000 is currently forecast after allowing for the one-off budget increase of £55,000. A service level agreement is being developed to provide a framework for mortuary charges in future years and financial and procurement arrangements for the services are currently being reviewed following the work undertaken by County Treasurer's Consultancy team. The Coroner Service budget is not specifically part of PBR's cash limited budget.

Other non-departmental Policy and Resources budgets

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

1.14 This part of the Policy and Resources budget includes the Members' grants budgets totalling £780,000. To date authorised grants of £115,000 have been processed for payment.

Summary

1.15 At the end of August 2007, on-going budget pressures within corporately held land, sites for gypsies and travellers and the Coroner Service mean net expenditure for 2007/08 is likely to exceed the budget for these areas. Actions have been identified to manage the budget and the budgetary position will continue to be monitored closely throughout the year. Other budgets are anticipated to be within cash limit.

Business Units

Property, Business and Regulatory

1.16 The trading results for the first five months of the year are encouraging with HC3S seeing a sustained increase in meal numbers and income ahead of target combined with continued tight control of costs. However, a number of other factors are likely to cancel out this improved trading position. The latest proposals for the implementation of Pay and Benefits include increases to the pay bands for grades A and B - early estimates of the impact suggest this will add a further £100,000 to the pay bill for HC3S. In addition, the 2007/08 pay award is still to be settled but is now expected to be in excess of the budgeted provision of 2.25%. There are also early signals that the wet summer weather will result in significant price rises for a number of key food costs such as bread and vegetables in the coming months which will add to pressure on the trading account.

1.17 The results for the other businesses for the first five months are good with anticipated outturn in line with or better than target.

IT Services

1.18 The business unit is involved in a number of significant corporate projects, such as the IBM technology infrastructure programme and information management project, the SAP improvement programme and the accelerated replacement of hardware associated with office moves linked to the Ashburton Court refurbishment project, which are increasing costs significantly in 2007/08. As a result the business unit is projecting a carry forward deficit of close to £2m. Plans are in place to reduce costs and identify additional sources of funding in order to achieve a break even position at the earliest opportunity and certainly within the next two years.

2 Policy and Resources capital programme

2.1 The Policy and Resources capital programme for 2007/08 amounts to £59.5m, as set out in Appendix 2.

2.2 The capital repairs programme, including New Deal for Schools, totals £44.5m and is controlled on an expenditure basis. The balance of £15.0m, is controlled on a starts basis. Of this, £5m relates to IT projects including the enterprise licence agreement for IT infrastructure and the Castle complex telephone system replacement due to be completed early next year.

2.3 As at 31 August 2007, expenditure on capital repairs totalled £18.1m, and schemes to the value of £1.9m had started, representing an overall commitment of £20m.

3 Overall capital payments and sources of finance

3.1 As at 31 August 2007, capital expenditure for the County Council for 2007/08 is forecast to be a little above the estimate of £187.5m reported to Cabinet on 9 February 2007. As actual capital expenditure in 2006/07 was £ 18.9m lower than forecast in February 2007, a compensating addition to capital expenditure in 2007/08 is not unexpected.

3.2 The target for capital receipts for 2007/08 reported to Cabinet on 9 February 2007 adjusted for slippage in 2006/07 is £64.5m. Actual capital receipts to 31 August 2007 amounted to £33.8m, but a number of completed disposals are subject to stage payments due in the remainder of 2007/08, which would increase capital receipts in respect of disposals to date to £43.5m.

4 Impact assessment

4.1 The proposals in this report are the result of budget monitoring carried out in accordance with the County Council's financial management policy. This policy applies equally to all services and ensures consistent financial management decisions across all services. The proposals in this report are not considered to be discriminatory.

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 1

Policy and Resources Revenue budget - latest 2007/08 cash limit

Appendix 2

Policy and Resources 2007/08 capital programme