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

1 Summary

1.1 This report presents a further update on the revenue budget monitoring position previously reported during September. It reflects the outcome of the second quarter's monitoring review for the 2007/08 financial year, covering the Environment services' revenue budget, which was carried out in consultation with departmental budget holders earlier in the autumn.

1.2 The report provides an update of the 2007/08 revenue budget cash limit, taking into account a recent budget change, and gives an assessment of actual expenditure against each of the main service headings. Significant issues affecting the management of the budget are also discussed.

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 within the approved 2007/08 cash limit. Potential underspendings totalling £374,000 have been identified on the budgets for the street lighting PFI project and departmental staffing and support costs. Options for the re-allocation of these savings, including the possible carry forward of resources to assist in the preparation of the 2008/09 budget, will need to be considered when the revised budget is prepared in January.

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 previous monitoring report in September made reference to a number of adjustments that had been made to the revenue budget cash limit since the approval of the 2007/08 original budget during February. These adjustments had increased the Environment services cash limit to £109.415 million. The following additional changes to the cash limit also now need to be taken into account:

· A transfer of £29,000 to Policy and Resources to cover Hantsdirect set-up costs arising from the introduction of the Household Recycling Centre Permit Exemption Scheme, which is an additional service to be included within the contact centre roll-out. Operation of this scheme is in line with the contact centre operating model and the inclusion of this new service is in accord with the overall Hantsdirect programme principles.

· A transfer of £50,000 from the budget for highways and transportation staffing and support costs to highways maintenance to cover anticipated one-off costs surrounding the planned implementation of the street lighting PFI.

· An increase of £544,000 being the assessed call on the central waste management contingency reflecting additional expenditure arising from the operation of the waste management contract during the second quarter of the year.

2.2 The adjusted cash limit, taking into account the above variations, is £109.930 million. The attached appendix provides an analysis of the adjusted budget over the main service headings, together with details of assessed expenditure to 30 September 2007.

2.3 Any further changes to the cash limit, including additional budget transfers and adjustments, will be reported in the 2007/08 revised budget in January.

3 Outcome of Budget Monitoring Review

3.1 As mentioned above, the year's second quarter budget monitoring review, covering all of the department's activities, has recently been completed. Plans for service expenditure for the second half of the year, together with trends in actual expenditure and income from the first six months, were considered in order to arrive at an updated forecast outturn for each budget heading.

3.2 Details of the main issues arising from the 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 £25.910 million. Total expenditure and commitments to the end of September amounted to £12.084 million, being broadly in line with the expected profile for the first half of the financial year.

3.4 A number of minor changes to the highways maintenance programme have been made since the last budget monitoring review. These include allocations of £345,000 for remedial works following the exceptional rainfall during the first half of the summer, including £260,000 from the capital programme provision for structural maintenance, and an increase to cover the annual re-pricing of the traffic signal maintenance contract. However, these increases have been offset by adjustments to the provisions for technical surveys and arboriculture works, reflecting reduced estimates of anticipated expenditure. As a result, the current level of highways maintenance revenue reserves remains broadly unchanged at £414,000. Plans are currently being developed for the phased allocation of this sum to priority highways maintenance works this year.

3.5 The 2007/08 budget contains an overall allowance of £710,000 for expenditure in connection with the proposed street lighting PFI initiative, including the sum of £250,000 brought forward from the 2006/07 budget. Work on developing the project has continued following the submission of the outline business case earlier in the year, which was originally expected to be approved by HM Treasury Project Review Group (PRG) on 18 July 2007. However, due to the workload at the Department for Transport caused by the Government's Comprehensive Spending Review, delays have been experienced and the project is now expected to be passed to the PRG for approval in January 2008.

3.6 As a consequence of this delay, a significant proportion of planned expenditure on legal, financial and technical advisors for the post-approval procurement phase of the project has slipped from 2007/08 into 2008/09, and overall expenditure on the PFI project is expected to be approximately £260,000 lower than the current year's budget. It is therefore proposed that the Cabinet be asked to approve a carry forward to the 2008/09 budget for expenditure next year on the PFI project, when the revised budget is prepared in January.

Public Transport

3.7 The 2007/08 revenue budget for public transport support and coordination 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 Overall expenditure on public transport is expected to be within the service cash limit. However, this assumes that the savings of £244,000 included in the make up of the 2007/08 original budget are fully achieved as planned, following the adjustments to bus services which were approved during the summer, and that any subsequent service pressures are also absorbed. The forecast outturn on public transport makes allowance for expenditure of approximately £60,000 this year in connection with the introduction of Hampshire rural transport pilots, the cost of which is being met from savings arising from the Area reviews carried out earlier in the year.

Staff and Support Costs

3.9 The total 2007/08 budget for this service heading is £25.648 million, covering overall staffing and support costs relating to the highways and transportation, planning and development, and waste management services. This mainly represents the running costs of the Environment department, together with the remaining agency arrangements with the district councils. Actual expenditure to 30 September 2007 at £11.471 million was below the budget profile for the first half of the year.

3.10 The construction of the 2007/08 original budget for staff and support costs included a reduction of £0.5 million, or approximately 2% of this budget, for incidental savings that were expected to arise, as a matter of routine, from staff turnover and the normal delay in filling vacant posts. Staff vacancy levels within the department have continued at a relatively high level so far this year, which has resulted in a corresponding reduction in service delivery within the department.

3.11 Excess savings of £114,000 from staff vacancies and other minor housekeeping savings, beyond the assumption built into the original budget, have already been identified during the first six months of the year. It is thought likely that this figure could rise significantly during the second half of the year if the high vacancy levels continue. Options for the re-allocation of savings would therefore need to be considered when the revised budget is prepared in January, including whether or not it would be prudent to carry forward resources to next year to assist in the preparation of the 2008/09 budget.

3.12 As previously reported in September, other planned savings of £780,000 in staffing and support costs were included in the construction of the 2007/08 budget. These savings were required in order to offset a number of budget pressures, including the top-slices required to help fund the Hantsdirect contact centre, pay and benefits savings and other locally identified pressures such as salary increments. 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 second quarter's budget monitoring review confirms that the savings are being achieved in accordance with the plan.

Waste Management

Waste Contract Related Services

3.13 The approved 2007/08 original budget for the waste management contract related services was £43.137 million, based on an estimate of expenditure commitments at the time it was prepared during November 2006. In addition, a sum of £4.241 million was included in a central contingency to cover future growth in waste volumes, beyond predicted 2006/07 levels, together with an allowance for future price increases, changes in landfill tax rates and other contract pressures.

3.14 Periodic allocations are made from this central contingency throughout the year, based on quarterly assessments of cost increases on this part of the budget. The first quarter's call for 2007/08, which was identified in the previous budget monitoring report, increased the cash limit by £827,000 which, taken together with the second quarter's call of £544,000 and the cash limit adjustment of £29,000 referred to in paragraph 3.1, results in an adjusted budget for the waste contract related services of £44.479 million.

3.15 Allocations from the central waste contingency have been lower than anticipated so far this year reflecting savings from the introduction of new arrangements for the disposal of water based paints and for the funding of the disposal costs of waste electrical and electronic equipment and fridges. In addition, the arrangements for the processing of West Sussex dry recyclables are now expected to continue into 2008/09 at least, realising additional net income to the County Council.

3.16 Waste volume levels during the first six months of the year have also been lower than expected. Household waste collection volumes are marginally down compared to the same period last year, although this needs to be offset against waste growth of 4.7% from household recycling centres during the same period. Overall, waste volumes were 0.7% higher than during the same period of 2006/07, which is well within the allowance for growth of 2.1% included in the central contingency. However, it is not possible to predict whether this trend will continue across the full year.

Other Waste Management Services

3.17 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 stage of the financial year, to predict with any certainty the outturn for this element of the waste management revenue budget. This part of the budget includes volatile services such as the disposal of abandoned vehicles where 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.

3.18 At present, it is expected that overall spending on the non-contract related waste management services will be contained within the 2007/08 cash limit. This assessment makes allowance for additional expenditure this year on the new contracts for the management of household waste recycling centres which come into effect on 1 January 2008. However, it is anticipated that the County Council's share of the additional cost for the remainder of 2007/08 can be accommodated from within the current year's budget allocation.

Other Services

3.19 Budget monitoring indicates that spending on the other Environment services 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 Adjustments have been made to the Environment services' cash limit to cover Hantsdirect's set-up costs arising from the introduction of the Household Recycling Centre Permit Exemption Scheme and for the second quarter's call from the central waste management contingency, increasing the overall budget by £515,000 to £109.930 million.

5.2 Expenditure on routine highways maintenance is being progressed in accordance with the latest approved programme. Highways maintenance revenue reserves currently stand at £414,000 which will be allocated to budget holders on a phased basis for priority highways maintenance works this year. An underspending of approximately £260,000 is currently anticipated on the project budget for the development of the street lighting PFI. Consideration will need to be given to the carry forward of this sum to 2008/09 when the revised budget is prepared in January.

5.3 Spending on public transport is expected to be contained within this service's cash limit 2007 following adjustments to bus services which were approved during the summer to achieve the savings of £244,000 included in the make up of the original budget. An allowance of approximately £60,000 has been included within the budget forecast for the introduction of Hampshire rural transport pilots.

5.4 An underspending of £114,000 is projected on the departmental budget for staffing and support costs, based on the half-year position, reflecting higher savings from staff vacancies. Options for the re-allocation of excess savings will need to be considered when the 2007/08 revised budget is prepared in January. In addition, other staffing and support savings of £780,000, which were previously included in the 2007/08 budget, are being achieved as planned.

5.5 Overall waste management volumes during the first six months of the year have been within the 2.1% allowance for growth included in the budget. Calls against the central waste management contingency have also been lower than anticipated, reflecting a number of cost savings from changes to the arrangements for waste disposal.

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: 31 October 2007 - Revenue Budget Monitoring 2007/08.

APPENDIX

ENVIRONMENT

Revenue budget 2007/08 - monitoring statement

Analysis of variations

* Note: this anticipated underspending relates purely to the budget for street lighting PFI development (see paragraphs 4.5 and 4.6).