Contact: Nick Gibbins, (01962) 84 7544; [email protected]

1 Introduction

1.1 Executive members have received further budget monitoring reports during the autumn, reviewing progress on the achievement of budgeted savings and in dealing with budget pressures. This report also reviews the position at the end of the second quarter on high risk/demand led budgets, overall employee budgets, savings plans and financial health indicators to provide an overall corporate context to budget monitoring.

1 Recommendation

1.1 That the action being taken by all services to contain spending within cash limits be supported.

2 Service cash-limited budgets

2.1 Since the previous budget monitoring report to the Cabinet in September, good progress has been made in planning and implementing management action to accommodate budget pressures.

Adult Services

2.2 Adult Services predicted overspending of £3.6m based on spending to the end of June has reduced to approximately £1m at the end of September as a result of management action. The reduction is largely the result of vacancy management, additional income and price negotiation with care providers. In addition, due to effective gate-keeping and the managing of demand pressures the Department has also been able to release some of the contingencies set aside to deal with increased demand. Further management action to reduce the overspend will focus on reducing the pressure from hospital discharge clients and helping more residential clients live in the community through direct payments.

Children's Services

2.3 A full assessment of projected spending on Children's Services budgets to the end of August 2007 was reported to the Executive member in October. The report indicated a small projected overspend of £356,000, on the non-schools budget, which it is anticipated should be eliminated over the remainder of the year, by management action, such as reviewing grant-related expenditure, the impact of work targeted at reducing high cost children's placements and close scrutiny of all commitments.

Environment

2.4 The Environment budget has been able to accommodate additional allocations for remedial highway maintenance works resulting from the exceptional rainfall in early summer. The trend in waste volumes over the first six months of the year has continued to be more favourable than budgeted and savings in staff and support costs are also running ahead of the assumptions made in the budget.

2.5 The delay in the Treasury's consideration of the outline business case for the street lighting PFI project is likely to lead to lower spending on the project than forecast in 2007/08. Approval will be sought to carry forward any planned underspending to 2008/09 to cover the costs deferred between financial years.

Policy and Resources

2.6 Action continues to manage pressures within the Policy and Resources budget. Higher spending on corporate land holdings, sites for gypsies and travellers and the Coroner's service require close monitoring during the remainder of the financial year.

Recreation and Heritage

2.7 The restructuring of the library service is expected to yield the targeted savings of £1m in a full year. However the decline in library income particularly from the hire of electronic media is projected to result in a further loss of income of around £200,000 in 2007/08. This is in addition to the reduction of £300,000 compared with the 2006/07 budget, which was built in to the 2007/08 budget. This is the major additional budget pressure affecting the Recreation and Heritage budget and an action plan has been drawn up by the Director of Recreation and Heritage to ensure that spending is contained within the cash limit.

3 Corporate budget monitoring

3.1 In addition to service based budget monitoring, a corporate review is carried out on a quarterly basis focussing on high risk/demand led budgets, overall employment trends, the achievement of budget savings and the monitoring of financial health indicators.

High risk/demand led budgets

3.2 Spending on these budgets was projected to be £5m higher than the budget at the end of the first quarter, £3.4m on Adult Services and £1.6m on Children's Services. The position has improved at the end of the second quarter as spending on the demand led budgets for Adults and Children's Services is now projected to be only £3.5m higher than budgeted (Adult Services £2.7m, Children's Services £0.9m) and more favourable trends on other budgets have reduced the overall projected overspending on cash limited budgets to £1.4m as reported in paragraphs 3.2 and 3.3 above. Management action is continuing to be taken and the position will be kept under review. Activity and spending trends on the relevant budgets are summarised graphically in Appendix 1.

Employee budgets

3.3 Overall spending on employee budgets was projected to be £1.1m (0.4%) higher than budgeted at the end of the first quarter, mainly because of higher spending on demand led budgets within Adult Services. At the end of the second quarter, the overall projection is very close to the budget, at £0.3m (0.1%) above budget. Average employee full-time equivalent (fte) numbers (excluding schools and business units) for the first two quarters total 8,949, 0.2% less than at the end of the first quarter. Appendix 2 summarises the changes in overall employee numbers, and the variations at departmental level between actual and budgeted staff numbers, and between employee budgets and projected spending on employees in 2007/08.

Savings plans

3.4 The 2007/08 budget includes service savings proposals of £18.9m. At the time of the previous quarterly report savings of £6.2m were identified as having been achieved. Further savings of £10.8m planned or expected to be achieved requiring alternative savings of £1.9m to be made. As plans have been further developed some savings proposals are now expected to achieve lower than targeted savings, so that alternative savings of £2.2m are now required at the end of the second quarter. However of the remaining savings proposals totalling £16.7m, £9.7m have been achieved to date in the financial year.

Financial Health indictors

3.5 A set of financial health indicators were incorporated within the Medium Term Financial Strategy approved by the Cabinet in May. These are designed to provide an early warning of when action may be required to protect the County Council's financial health. Appendix 3 contains a summary of the targets for 2007/08 and either the latest full-year projection or data for the first two quarters.

3.6 The income collection indicators are designed to highlight trends in the level of debt outstanding for periods beyond 6 and 12 months and to ensure that the majority of debt outstanding is for periods of less than two months. The age profile of outstanding debt at 30 September 2007 is outside the profile incorporated in the Medium Term Financial Strategy, but this is something of an anomaly arising from the prompt payment of debts raised during the second quarter. This has resulted in debt outstanding being about 45% lower than at the end of the first quarter, so that long-term debt represents a more significant proportion of the total. Debt outstanding for more than 12 months has increased from 10.8% in the first quarter to 19.7% at the end of the second quarter, but the actual value of the debt more than 12 months old has increased only marginally from £4.2m to £4.3m. If the quarterly fluctuations in the value of outstanding short-term debt continue to be quite significant, it may be necessary to consider framing these targets in a different form in future.

4 Non cash-limited budgets

4.1 There are no significant changes to report relating to capital financing charges/interest on balances or to flood protection levies. Base rate has remained at 5.75% since July 2007, despite the subsequent tightening of the money markets. A letter has been sent to the Thames Region of the Environment Agency seeking some better consultation on the region's Flood Protection levy proposals for next year following a 60% increase in the levy in 2007/08. The Environment Agency has explained that the 2007/08 levy was in line with that in 2005/06, but balances had been used on one-off basis in 2006/07. The Regional Flood Defence Committee will again need to consider the condition of "critical ordinary watercourses" but any increase in the levy for 2008/09 "will be limited to single figures broadly in line with the level of inflation".

Waste management contract contingency

4.2 Overall waste volumes for the first six months were 0.7% above the equivalent period in 2006/07, as compared with an allowance of 2.1% made for growth within the contingency. Savings are also anticipated from the new arrangements for the disposal of water based paints and for funding the disposal costs of waste electrical and electronic equipment and fridges. Based on these favourable trends, a saving of up to £1m in the waste contingency is currently projected.

Pay

4.3 Since the previous monitoring report, trade union ballots have approved both the County Council's new pay structure and supported the acceptance of the Local Government employers' pay offer effective from 1 April 2007, at an estimated overall cost of 2.5%.

4.4 Implementation of the new pay structure is planned for February 2008, backdated to 1 April 2007. Some technical work has still to be carried out to assess the estimated cost of the new pay structure over services, and to agree allocations from the contingency to service budgets in 2007/08 and subsequent years. As reported in September it has been assumed that management action will be taken to absorb the extra 0.25% cost of the April 2007 pay award during 2007/08 by managing staff vacancies, pending consideration of the revised budget. The estimated extra cost is about £640,000 (£207,000 on Adults, £159,000 on Children's Services and £140,000 on Policy and Resources). The additional cost of the 3.4% pay award on the lower scale point 4 is less than £50,000. This cost would otherwise have been part of the new pay framework so that overall it has no extra impact.

5 Impact assessment

5.1 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.

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

Financial Health Indicators