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

1 Summary

1.1 This report sets out the proposed Environment revenue budget for 2008/09, a provisional budget for 2009/10 and 2010/11 and recommends a revised budget for 2007/08. This report has been prepared in consultation with the Executive Member and will be reviewed by the Environment and Transportation Select Committee. It will be reported to the Leader and Cabinet on 8 February 2008 to make final recommendations to County Council on 21 February 2008.

1.2 The budget proposals contained in this report are derived from the departmental service plans which have been developed to support the priorities of the Corporate Strategy.

Recommendations

To approve for submission to the Leader and Cabinet:

1 The revised budget for 2007/08 totalling £109.0m (as set out in Appendices 1 and 2), including proposals for the carry forward of resources totalling £980,000 to the 2008/09 budget.

2 The base budget for 2008/09 totalling £110.6m (as set out in Appendix 3).

3 The proposals for additional expenditure arising from service pressures totalling £2.5m in 2008/09, together with offsetting proposals for redeployment of resources and other savings (as set out in Appendix 4).

4 The proposals for efficiency improvements totalling £1.8m (1.7 % of the base budget) in 2008/09 (as set out in Appendix 5).

5 The annual review of income and charges (as set out in Appendix 6).

6 The detailed budget for 2008/09 totalling £111.8m (as set out in Appendices 7 and 8).

7 The workforce implications of the proposed budget for 2008/09 (as set out in Appendix 9).

8 The provisional budget for 2009/10 of £112.4m and for 2010/11 of £114.8m (as set out in Appendix 10).

2 Budget Strategy

2.1 A provisional budget for 2008/09 and 2009/10 was agreed by the Cabinet in February 2007 alongside the 2007/08 budget. The budget strategy was incorporated in the Medium Term Financial Strategy approved by Cabinet in May. The budget strategy was reviewed by Cabinet in October following the publication of the Comprehensive Spending Review and in December to update inflation assumptions. The strategy is based on the following principles:

· Increases for all services in accordance with the County Council's base budget rules

· Above inflation increases for Adult Services and Children's Services

· Redeployment within each service of cashable efficiency improvements identified in 2008/09 towards new priorities and pressures

· No other provision for any new service developments unless funded by cashable efficiency savings

· Pay inflation of 2.5% together with a 0.4% increase in employer's pension contributions

· 2.5% for non-pay

· Income to be maximised by reviewing charges in line with the average inflation on the related gross expenditure.

2.2 The same assumptions have been used to set a provisional budget guideline for 2010/11.

2.3 For this service, the adjusted budget guidelines are:

	£m	% cash increase on year before
2008/09 guideline	110.6	3.6
2009/10 provisional guideline	112.4	1.7
2010/11 provisional guideline	114.8	2.1

2.4 This report sets out the Environment Executive Member's responses to the guidelines. The report:

· Reviews the revised budget for 2007/08 totalling £109.0m (as set out in Appendices 1 and 2), including proposals for the carry forward of resources totalling £980,000 to the 2008/09 budget.

· Reviews the 2008/09 base budget which totals £110.6m (as set out in Appendix 3).

· Identifies £2.5m of services pressures and costs to be absorbed (as set out in Appendix 4).

· Proposes the redeployment of resources and other savings of £2.5m (as set out in Appendix 4).

· Identifies efficiency improvements of £1.8m, being 1.7% of the base budget (as set out in Appendix 5).

· Reviews the charges made by this service (as set out in Appendix 6).

· Proposes a detailed budget for 2008/09 (as set out in Appendices 7 and 8).

· Identifies the workforce implications of the budget proposals (as set out in Appendix 9).

· Proposes a provisional budget for 2009/10 and 2010/11 (as set out in Appendix 10).

3 REVISED BUDGET 2007/08

3.1 The most recent monitoring report to the Executive Member in November presented the outcome of the second quarter's review of the Environment services' revenue budget 2007/08, including the actions that were being taken to manage the cash limit before the budget was revised later in the year.

3.2 The report presented a satisfactory position for the halfway stage of the financial year, with anticipated expenditure being managed in line with the approved 2007/08 cash limit for most of the individual Environment service headings. However, the report drew attention to potential underspendings in two parts of the budget, relating to the development of the street lighting PFI project and departmental staffing and support costs. The report indicated that expenditure trends in these areas would need to be considered more fully in preparing the 2007/08 revised budget, including whether there were opportunities for the carry-forward of resources to assist in the preparation of the 2008/09 budget.

3.3 A further review of the 2007/08 budget position has recently been carried out within the Environment department during November and December. The review has taken into account progress in implementing spending plans, together with recent information on trends in expenditure and income, and a recommended revised budget for 2007/08 has now been prepared. The main issues arising from the preparation of the revised budget are set out in the following paragraphs.

Changes to 2007/08 cash limit

3.4 The most recent reported figure for the 2007/08 cash limit was £109.930 million set out in the budget monitoring report in November 2007. This reflected a number of changes to the cash limit agreed earlier in the year, including the first two quarter's allocations from the waste management contingency.

3.5 Subsequent adjustments, including transfers to other County Council services, adjustments between revenue and capital and higher provision for business rates, have now increased the cash limit slightly to £109.984 million. Full details of all of the changes to the cash limit since the beginning of the financial year are set out in Appendix 1.

Highways maintenance

3.6 The recommended 2007/08 revised budget for highways maintenance is £25.636 million, which is £260,000 below the cash limit. This variation reflects anticipated lower expenditure this year of £260,000 in connection with the proposed street lighting Private Finance Initiative (PFI), following approval delays by the Government, details of which were previously reported in the November budget monitoring review.

3.7 As a consequence of the PFI 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 to 2008/09, and overall expenditure on the project is expected to be approximately £260,000 lower than the current year's budget of £710,000. It is recommended that the Cabinet be requested to approve the carry forward of the sum of £260,000 to the 2008/09 budget for expenditure next year in support of the PFI project.

Waste management - contract related services

3.8 The approved original budget for the waste management contract related services was based on an estimate of expenditure commitments a 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 2006/07 levels, together with an allowance for future price increases, changes in landfill tax rates and other contract pressures. Periodic allocation are made from this central contingency throughout the year, based on quarterly assessments of cost increases on this part of the budget.

3.9 Allocations from the central waste contingency during the first half of the year have amounted to £1.371 million, which are included in the calculation of the 2007/08 revised budget of £45.632 million for the waste management contract related services. Calls on the central waste contingency have so far been lower than anticipated when the budget was prepared, 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 (WEEE) 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.

3.10 Waste disposal volume levels during the first eight months of the year were also lower than expected, increasing by only 0.8% compared to the same period of 2006/07, which is well within the 2.1% allowance for growth included in the central contingency. On the assumption that these trends continue for the remainder on the year, it is currently expected that the overall call on the central waste contingency will be at least £1 million lower than the total sum provided. Further increases to the waste management cash limit will be made later in the year to reflect subsequent quarterly allocations from the central waste contingency, once these have been assessed.

Staffing and support costs

3.11 The recommended revised budget for staffing and support costs is £24.986 million, being £720,000 below the adjusted 2007/08 cash limit for this service heading. This budget covers the overall running costs of the Environment department, after taking into account cost recharges to the capital programme and other income, together with the remaining agency arrangements with the district councils.

3.12 The construction of the 2007/08 original budget for staffing 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. As reported in the previous budget monitoring report, staff vacancy levels have continued at a relatively high level during the first half of 2007/08. However this has resulted in a corresponding reduction in service delivery within the department.

3.13 Revised estimates for expenditure this year on the budgets for staffing and support costs have now been prepared as part of the November monitoring review and full year excess savings of £720,000 on the budgets for staffing and support costs are now forecast. This reflects an assumption that current staff vacancy levels will continue throughout the remainder of the year, together with a number of other anticipated cost savings on non-pay support budgets.

3.14 It is recommended that the approval of the Cabinet be sought to the carry forward of the anticipated underspending of £720,000 to the 2008/09 budget. Within this sum, it is proposed that £470,000 be allocated to provide funding in support of the development of transport evidence in South Hampshire and for the County Council's contribution to the Partnership for Urban South Hampshire (PUSH) (see paragraph 5). It is recommended that the £250,000 balance of the savings from staffing and support costs be added to the 2008/09 budget. This sum would be allocated for one-off purposes, either for high priority highways maintenance works, following an assessment of highways maintenance priorities when the detailed programme is prepared, or for public transport support.

Other services

3.15 The recent budget monitoring review has confirmed previous spending projections for the other Environment services, including public transport support, road safety and the non-contract related waste management services. This has enabled recommended 2007/08 revised budgets to be set in line with the approved cash limits for these service headings.

Summary of 2007/08 revised budget position

3.16 Detailed figures relating to the 2007/08 revised budget are shown in Appendix 8 (the green pages), whilst Appendix 2 provides a summary comparing the recommended revised budget to the cash limit, by division of service.

3.17 Overall the recommended revised budget is £109.004 million, being £980,000 below the 2007/08 cash limit of £109.984 million. This position reflects the request that is being made to the Cabinet to approve the carry forward to the 2008/09 budget of underspendings of £260,000 on the street lighting FPI project and £720,000 on the budget for staffing and support costs.

4 BASE BUDGET 2008/09

4.1 A base budget for 2008/09 has been prepared which contains the current financial policies of the Council, in order to provide a starting point from which decisions can be made. The base budget for this service is £110.561 million at outturn prices.

4.2 Appendix 3 shows the make up of the base budget. Overall, the base budget shows a net reduction of £189,000 at constant (November 2007) prices, together with an allocation of £1.614 million to cover future inflation during 2008/09. The main variations affecting the individual services are discussed below.

Highways maintenance

4.3 The 2008/09 base revenue budget provision for routine highways maintenance is £26.596 million. This represents an overall increase of £380,000 (1.5%) compared to the re-priced 2007/08 original budget, reflecting reductions totalling £247,000 (-0.9%) at constant prices, together with a sum of £627,000 (2.4%) to cover the cost of inflation next year. In addition, the proposed 2008/09 capital programme contains an allocation of £29.0 million to cover the structural maintenance of roads and bridges.

4.4 The base budget includes additional sums of £93,000 to cover routine maintenance of recently adopted highways and £447,000 for additional revenue expenditure resulting from the implementation of capital improvement schemes, both of which have been added in accordance with the base budget preparation rules.

4.5 The base budget also includes increased funding of £49,000 for highways winter maintenance salting and snow clearance. This increase has been met by making a corresponding reduction to the locally resourced capital programme for highways structural maintenance. This adjustment is in accord with the special budgeting arrangements that apply to winter maintenance, whereby the base budget provision is set at a level equivalent to the average

expenditure on these activities during the past four years. A corresponding adjustment is then made to the allocation for highways structural maintenance, to offset any increases or reductions in the calculated winter maintenance provision.

4.6 Other variations within the highways maintenance base budget show an overall reduction in expenditure of £836,000. These relate to:

· Non-recurring items of expenditure - a reduction of £640,000, relative to the 2007/08 original budget, reflecting a number of underspendings carried forward from the 2006/07 budget, including support for the street lighting PFI and implementation of pro-active tree maintenance policies, which were only available on a non-recurring basis.

· Excess inflation - a net reduction of £106,000 required to absorb higher highways maintenance inflation during 2007/08.

· Emergency standby cover - a transfer of £68,000 to the budget for staffing and support costs to implement arrangements for standby cover in the south Hampshire which are consistent with other parts of the county. This activity was formerly undertaken by the highways contractor and funded from the highways maintenance operational budget.

· LPSA2 pump priming grant - deletion of non-recurring grant of £45,000 included in the 2007/08 original budget for improved pavement conditions.

· Government grant - increase of £23,000 to cover expenditure arising from de-trunking of A339. The provision for next year is in line the sum included in the allocation of Government's area based grant (ABG) for 2008/09, which incorporates support for a number of services currently paid as service specific grant.

Road safety education

4.7 The 2008/09 base budget for road safety education is £245,000. This is £65,000 lower relative to the 2007/08 budget, reflecting the deletion of non-recurring support for this activity from LPSA pump-priming and reward grants.

Safer Roads Partnership

4.8 A sum of £1,537,000 has been included in the 2008/09 base budget for the anticipated County Council's contribution to the Hampshire and Isle of Wight Safer Roads Partnership, although this figure is provisional at this stage pending approval of the partnership's budget for next year. This provision is in line with the revised funding arrangements for this activity following the integration of safety cameras into the LTP system via the new Road Safety Grant from 2007/08 onwards.

Public transport

4.9 The base budget for public transport support and co-ordination has been set at £7.957 million, in line with the control total for this service. The calculation of the base budget includes higher inflation costs of £34,000, compared with the allowance of 2.5% for inflation included in the 2007/08 original budget, reflecting higher costs arising from bus service contract re-tendering and re-pricing during 2007/08. The base budget also makes allowance for the implementation of the various changes to bus service provision which were agreed during the current year to implement the savings included in the 2007/08 budget guideline and to absorb other cost pressures as part of the contract re-tendering in the Blackwater Valley and Eastleigh areas.

4.10 Within the overall total, the 2008/09 base budget provision for expenditure on bus subsidies is £6.398 million, including support from district councils and other external contributions. The sum is currently sufficient to fully cover expenditure on existing bus service contractual commitments, but leaves only limited scope for the accommodation of further cost increases from contract re-tendering, re-pricing or commercial services de-registrations during 2008/09. It will therefore be necessary to continue to apply existing policies, including the rolling programme of area reviews, for the containment of expenditure within available budget limits where appropriate.

4.11 Provision of £1.537 million has been included in the 2008/09 base budget for provision of rural bus services, in line with the allocation for this service within the Government's area based grant, which has replaced the support previously provided for this service from specific rural bus subsidy grant.

Waste management

4.12 A base budget of £47.955 million has been set for the waste management services for 2008/09. In considering the key elements included within the calculation of the base budget, the service is divided into two distinct categories:

· The waste contract related services, comprising the main waste disposal contract, together with the related budgets covering trade waste income, recycling credits and household waste recycling centre (HWRC) management. The 2008/09 base budget for this element is £45.833 million, equivalent to 96% of overall waste management expenditure.

· Other waste management services, including facility maintenance, promotions and developments, the disposal of abandoned vehicles and waste management staffing and support costs. This part of the base budget accounts for £2.122 million, or 4% of overall waste management spending.

Waste contract related budgets

4.13 As the contract related waste management budgets are principally demand led and are subject to long term contractual obligations, thus providing very little scope within the overall management of the service to vary expenditure, special guidelines have been agreed by the Cabinet relating to the construction of the annual base budget.

4.14 The base budget allows for the cost of current contractual commitments, including known and estimated waste tonnages for the current financial year, at January 2007 prices. The contract is subsequently re-priced each year, on 1 January, in line with changes to the Retail Prices Index (RPI). The 2007/08 base budget for the contract related services reflects increases of £2.005 million (4.5%) for inflation, to cover contract re-pricing in January 2007 and the increases in the rate of landfill tax in April 2007, together with a reduction of £452,000 (-1.0%) in respect of other cost variations.

4.15 No allowance has been included in the calculation of the base budget for any future growth in waste volumes, beyond anticipated 2007/08 levels, future price or landfill tax increases, or other potential service related pressures. As in previous years, a central contingency sum, under the control of the Executive Member for Policy and Resources, will be provided within the overall County Council budget to meet these estimated costs during 2008/09. Quarterly allocations will be made to the waste management budget in line with the actual cost increases incurred during the next financial year.

Other waste management services

4.16 A base budget of £2.122 million has been set for the other waste management services, based on a roll forward for the 2007/08 situation. The base budget is expected to be sufficient to match the likely level of expenditure on the various non-contract related services next year. Overall, the 2008/09 base budget shows a reduction of £936,000 (-31.2%) at constant prices, compared to the 2007/08 original budget. The main variations relate to:

· LPSA2 pump priming grant - deletion of non-recurring provision of £66,000 included in the 2007/08 original budget for measures aimed at increasing volumes of waste diverted from landfill.

· LPSA reward grant - deletion of non-recurring provision of £730,000 included in the 2007/08 original budget in relation to a number of investment proposals aimed at helping to contain future waste contract cost increases and to achieve LPSA stretch targets for waste management.

· Disposal of abandoned vehicles - anticipated savings of £150,000 per annum (-58.8%) compared to the current budget provision, following the introduction of new contractual arrangements for the management of end of life vehicles.

4.17 The 2008/09 base budget makes allowance for the transfer of HWRC management to the contract related services to reflect the closer inter-relationship between the management of the recycling centres, under the new contract which comes into effect of 1 January 2008, and the levels of residual waste needing to be disposed of through the main waste disposal contract. The higher cost of the new HWRC management contract, estimated at approximately £250,000 per annum, is expected to be offset by savings from reduced volumes of residual waste from the recycling centres, together with the inclusion in the base budget of the above savings of £150,000 per annum against the budget for the disposal of abandoned vehicles from the new end of life vehicles contract.

Staffing and support costs

4.18 A review of the Environment department budget strategy was carried out during the autumn in order to identify likely budget pressures for the three year planning period and to consider options for efficiency and other cost savings from within the revenue budget, including staffing and support costs. The aim was to enable pressures which would need to be absorbed within the construction of base budget to be quantified and also provide opportunities for the development of other proposals for additional service expenditure, together with matching options for savings and redeployment of resources. This would also allow future budget proposals to be prepared in accordance with the anticipated revenue budget guidelines and enable a number of known cost pressures to be absorbed.

4.19 As part of this process, pressures totalling £543,000 were identified on the staffing and support budgets, the most significant being a sum of £369,000 to cover the estimated cost of staff salary increments payable from 1 April 2008. Equivalent efficiency and other savings have been included the construction of the base budget for 2008/09 to absorb this increase, which have been found from a number of staffing and support cost headings. These include an increase in the annual departmental staff vacancy savings target, rationalisation of office budgets, efficiency savings from district councils' agency services, additional income and a number of minor reductions in budgets for external support and projects.

4.20 A number of other largely offsetting technical variations and budget transfers are included in the make-up of the base budget for staffing and support costs, resulting in an increase in expenditure of £8,000. Full details are set out in Annex 3 to Appendix 3.

4.21 The overall 2008/09 base budget for departmental staffing and support costs is £26.295 million, taking into account the above variations and including an allowance of £763,000 (3.0%) for future inflation during 2008/09. For the purposes of presenting the detailed budget figures, the overall provision for staffing and support costs is allocated across the standard division of service headings for highways and transportation, planning and development and waste management in the various appendices to this report, in line with the requirements of the relevant accounting code of practice.

5 COST PRESSURES, REDEPLOYMENT PROPOSALS AND EFFICIENCY IMPROVEMENTS 2008/09-2010/11 [SEE ALSO APPENDIX 4 - YELLOW PAGES]

5.1 The Cabinet requires all services to consider and report on:

· cost pressures absorbed within the budget guidelines

· the redeployment of any resources required to offset any new spending priorities, or inescapable budget pressures, or legislative requirements which otherwise cannot be met within their budget guidelines

· annual efficiency improvements.

5.2 Details of additional cost pressures of £2.511 million in 2008/09, rising by a further £151,000 in 2009/10 and £830,000 in 2010/11, are set out in Appendix 4. This appendix also includes proposals for savings and redistribution of resources, including the carry forward of underspendings from the 2007/08 budget, to offset these pressures. These issues are considered in more detail in the following paragraphs.

5.3 In reviewing cost pressures and opportunities for redeployment of resources and savings, consideration has been given to the close link between the services being provided from the revenue budget and proposals for the three year capital programme 2008/09 to 2010/11, in view of the significant pressures that have emerged in that area. Proposals are included in the report on the new three-year capital programme which would enable the level of highways structural maintenance to be maintained in real terms, including the use of efficiency savings arising from the new highways contract to meet the annual financing costs of additional borrowing under the prudential borrowing code.

Highways maintenance

5.4 Pressures have been identified on the highways maintenance budget for street lighting relating to:

· Street lighting energy - the current energy supply contract for street lights, illuminated bollards and traffic signals, totalling £3.4 million per annum, is due to expire at the end of the current financial year. Future arrangements for a new supply contract next year are currently being considered but current indications are that energy price increases of approximately 8% are likely, resulting in a budget pressure of approximately £300,000 per annum.

· Street lighting PFI - the current estimate is that overall future provision of £660,000 will be required in support of the ongoing development of the street lighting PFI project, with a planned spend of £560,000 falling into 2008/09, reducing to £100,000 in the following financial year. The proposed funding arrangements for next year, taking into account the sum of £260,000 to be carried forward from the 2007/08 budget, are as set out in the following table:

5.5 The usual policy is to meet budget pressures in operational service areas by making offsetting savings within the same budget heading. The resultant pressure on the street lighting budget in 2008/09 would therefore be £400,000, taking into account the anticipated increase of £300,000 for street lighting energy and the additional sum of £100,000 for the PFI. This pressure would need to be carefully managed within the street lighting revenue budget by adjusting the existing columns replacement and maintenance programmes.

5.6 In the longer term, it will be necessary to provide for the additional costs arising under the unitary change following the introduction of the PFI, including an extension to the existing maintenance contract to cover part of 2009/10, or the cost of alternative arrangement to cover enhancements to the column replacement programme if the PFI does not proceed. Indicative costs are shown in Appendix 4 in respect of these longer term pressures which will need to be revised as better information become available.

New term highways contract

5.7 The re-tendering process for the new term highways contract has recently been completed with the new contract being awarded to Amey Plc. The basis of the decision to award the contract reflects the approach agreed by the Executive Member for Environment, which was also previously considered by the Environment and Transportation Select Committee, based on an assessment of price and improvements in quality.

5.8 The overall prices next year are estimated to be on average some 2% lower than the price assumption for 2008/09, which would realise full year savings of approximately £680,000 per annum against the combined revenue and capital highways maintenance budget. This will be used to fund additional borrowing to maintain current levels of capital structural maintenance spending in 2008/09 and 2009/10. It is envisaged that the new term highways contract will provide further opportunities for future efficiency savings both within the operation of the contract and from reviews of the departmental client function.

5.9 Adjustments between the various highways maintenance operational headings will need to be made in due course, in conjunction with the preparation of the 2008/09 highways works programme, to reflect a more detailed assessment of the impact of the revised term highways contract prices on the various activities within the overall budget.

Road safety education

5.10 During 2006 the Cabinet approved LPSA reward grant funding proposals including the use of £100,000 towards young driver safety "pass plus" courses, aimed at reducing the high casualty rate in the 17-24 year age group. The level of uptake from young drivers has been high reflecting the popularity of these courses and the 2007/08 revised budget contains a total sum of £64,000 towards these training courses, which have proven to be very popular with young drivers, after which the LPSA grant funding runs out.

5.11 To maintain this service requires an ongoing sum of £75,000 per annum, which is included in Appendix 4, for continued support towards these courses. A number of options are being considered to provide the necessary funding, including the use of sponsorship and higher user fees, which would need to be confirmed before any expenditure could be committed next year. Alternatively, the provision of financial support towards this initiative may be an issue that could be considered by the Hampshire and Isle of Wight Safer Roads Partnership.

Public transport

5.12 Continuing pressures totalling £673,000 on the public transport budget are estimated in 2008/09 from contract re-tendering, the fall out of Government funding towards community transport and the ongoing impact of other initiatives:

· Bus service re-tendering is due to be carried out in the Winchester, Romsey and Waterside contract areas next year. A budget pressure, estimated at £258,000, could arise if previous trends in recent years continue and as operators seek to offset increases in their operating costs which continue to run at a higher level than the budget allowance for inflation.

· Government funding, including Bus Challenge grant, which is currently being used in support of Cango services and other transport initiatives, is expected to be £225,000 lower than in the current year as the availability of this source of funding continues to reduce. In addition, community transport provision in rural areas, including support of Hampshire rural transport pilots, is estimated at £190,000 next year.

5.13 The policy is to contain cost pressures on the public transport budget by utilising savings from the area review process, implementing lower cost options and seeking contributions from other sources. However, in 2008/09, it may be possible to also accommodate some of the above pressures by utilising savings which have already been achieved in the current financial year from service reconfigurations, which are no longer required to meet corporate budget priorities.

5.14 There is a growing risk of bus service de-registrations following the introduction of free concessionary travel and the ongoing appeals by the bus operators. The main area of risk is rural services for which there has been a potentially significant reduction in the proportion of fare paying passengers. Whilst it is not possible to quantify this risk, the current policy is to require operators to continue to work within their total existing subsidy envelope, but their may be significant impacts on services in sustaining this policy in future.

Highways and transportation - staffing and support costs

5.15 There is an increasing need to develop major sub regional transport schemes, initially in South Hampshire, but also in the north of the county in the medium term. This represents a step change in the scale and number of major capital projects being developed. Although there is an anticipation of significant funding from associated development, some additional up-front investment is needed for the development and design of schemes ahead of successful projects receiving Government approval resulting in associated grant reimbursement and capital funding. Although in the past limited support for major project development has been found from existing allocations for advance scheme preparation, the cost of this work, which can be significant, can only be capitalised if the schemes are successful in obtaining Government support. It is therefore proposed to include a technical funding adjustment, increasing the revenue budget provision to cover any scheme preparation costs that cannot be capitalised. A sum of £1 million, spread over the next three years, is included in the revenue budget proposals, which is proposed be funded from resources to be re-deployed from the capital programme.

5.16 A sum of £380,000 in 2008/09, reducing to £200,000 by 2010/11, is proposed for the development of the transport evidence base, to support the bidding process for schemes in order to access Growth Point and other funding sources such as the Transport Innovation Fund or Community Infrastructure Fund. The expectation is that this would provide additional resources for the improvement of transport infrastructure. In 2008/09 it is proposed to fund this requirement by using part of the staffing and support cost underspendings to be carried forward from the 2007/08 budget, pending the development of longer term funding solutions.

5.17 Additional expenditure of £150,000 is required to provide essential support to the effective operation of the highways maintenance service. These comprise further ongoing work in connection with the development of an asset management approach to highways maintenance and additional legal support to respond to highways claims. It is proposed that these items be met by allocating resources from the highways maintenance operational budget, in line with normal practice. This additional expenditure could be met from the estimated efficiency savings of £680,000 arising from the new term highways contract.

5.18 Two further items of additional expenditure are included in the staffing and support costs proposals The first of these relates to additional staff resources of £85,000 per annum for searches, status and development control work, to cover the transfer of work from the district councils. It is anticipated that this expenditure will be fully covered by the resultant additional fee income being transferred to or to be generated by the County Council. The second item relates to additional expenditure of £98,000 on information technology, which can be managed from within the existing departmental IT budget.

Planning and development

5.19 A sum of £90,000 is provided to cover the County Council's annual contribution to the Partnership for Urban South Hampshire (PUSH). The County Council is a key partner in PUSH and the proposed funding contribution is for the share of resources needed to develop the delivery capability in South Hampshire in support of the sub regional strategy, which is expected to continue to benefit from significant Government funding through the new Growth Point programme and the potential Multi Area Agreement. The 2008/09 allocation of Growth Point funding of £7.5 million for PUSH has recently been announced by the Government, with a further £13.9 million across 2009/10 and 2010/11. This will be allocated by the Partnership to specific projects in due course, but a significant share of this new money is expected to be for transport infrastructure in South Hampshire.

5.20 It is proposed to fund County Council's contribution to PUSH next year by using the remaining part of the staffing and support cost underspendings to be carried forward from the 2007/08 budget, allowing time for longer term funding options to be developed.

5.21 European grant funded work on climate change ceases in 2008/09, but it should be possible to sustain the work from one-off resources for a period of about 18 months.

Reconciliation of overall revenue budget cash limit 2008/09

5.22 The overall recommended revenue budget for 2008/09 is £111.841 million, including base budget reduction of £0.189 million, at constant prices, together with an allocation of £1.614 million for inflation during 2008/09 and resources of £0.980 million carried forward from the 2007/08 budget. The following table summarises the main elements included in its construction:

Efficiency improvements

5.23 The CSR07 sets an annual efficiency target for local government overall of 3%, all of which has to be cashable, compared with 1.25% cashable improvements required by Gershon. The County Council will be required to publish a performance indicator demonstrating how it has contributed to the national target. Appendix 5 identifies efficiency improvements in 2008/09 totalling £1,847,000 (1.7%). Of these, £1,219,000 (1.1%) represent usable budget savings that have been taken into account in the construction of the proposed revenue budget.

6 Review of charges

6.1 The service's 2008/09 cash limited revenue budget includes income of £10.4 million from fees, charges and other reimbursements. Details of the material headings are included in Appendix 6.

6.2 There are some mandatory and national charges which the County Council is not able to vary, the main example for the Environment services being planning application fees. Most other charges to users are designed to ensure full recovery of costs, including an appropriate contribution towards departmental overheads. Wherever possible, charges are reviewed regularly in accordance with financial regulations, or rise automatically in line with increases in costs and are expected to produce additional income of £0.3 million during 2008/09, in line with the assumption included within the inflation allocation.

6.3 Charges for the two main waste management sources of income, namely disposal site rentals and trade waste, are increased from the beginning of January each year in accordance with price increases applied to the long-term waste disposal contract. This is based on a formula contained within the contract which effectively provides for an increase based on the change in the Retail Prices Index (RPI) to the previous October. The charge for trade waste is currently subject to a further flat rate increase in April, to reflect increases in the cost of disposal arising from variation in the rate of landfill tax.

7 Other expenditure

7.1 The budget includes some items which are not counted against the cash limit. At the present time, this includes the budget for capital charges of £13.5 million, which is allocated to services to show the full cost of service provision, together with £0.5 million for supplementary levies from the three divisions of the Environment Agency, in relation to the County Council's responsibilities for the funding of flood protection.

7.2 Further adjustments to the 2008/09 budget for other items of non-cash limited expenditure will be made later on in the budget preparation process, including charges for central departments' support services and for repairs and maintenance of buildings. These costs are excluded at this stage because Policy and Resources controls this expenditure and the budgets and subsequent allocation of expenditure to other services has not yet been agreed.

7.3 Included within the Environment services' cash limit are costs relating to member support, which will be recharged to the Policy and Resources budget for corporate and democratic core services, at a later stage of the budget process.

7.4 The revised 2007/08 and 2008/09 budgets include non-cash limited expenditure and income relating to the operation of the landfill allowances trading scheme (LATS). These estimates have been included in the budget in accordance with the guidance on accounting for LATS, issued by the Local Authority Accounting Panel.

8 Business units

8.1 From 2007/08 onwards, the trading accounts for the River Hamble Harbour Board are no longer included in the Environment revenue budget, following the transfer of this service to Recreation and Heritage.

9 HR implications

9.1 The workforce implications of the proposed budget for 2008/09 are set out in Appendix 9. The 2008/09 budget supports a planned workforce of 864 full time equivalent (FTE) staff, compared with the original estimate for 2007/08 of 853 FTEs, after allowing for an adjustment for the transfer of the River Hamble Harbour Board's employees to Recreation and Heritage.

9.2 Overall, the 2008/09 budget shows an increase of 11 FTEs compared to the adjusted 2007/08 original budget, mainly relating to the inclusion in the budget of a number of fixed term posts which are being funded from Government grants together with the three additional staff for searches, status and development control work, being funded from fees transferred from district councils (as set out in Appendix 4). No additional posts requiring funding from within the services' cash limit are included in this year's budget proposals.

10 Provisional budget for 2009/10 and 2010/11

10.1 The provisional budget at outturn prices for 2009/10 and 2010/11 for this service is set out in Appendix 1 and summarised below:

2009/10	£112.4m
2010/11	£114.8m

10.2 The provisional budget makes allowance for future years' inflation together with other base budget changes in line with the approved guidelines. These include reductions in 2009/10 for items of non-recurring expenditure carried forward from previous year' underspendings and variations in the level of Government LPSA reward grant funded expenditure.

11 Impact assessment

11.1 The proposals in this report are derived from the departmental service plan and are in accordance with the budget strategy and the County Council's financial management policy. In compiling this report account has been taken of the County Council's race and equalities policies and as such the proposals in this report are not considered to be discriminatory.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

Published works.

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

TITLE FILE

Departmental Service Plan

Financial Management Policy Impact Assessment - http://www3.hants.gov.uk/impactassessments/cx-puimpact-tres.htm

1552/BA

Appendices

Appendix 1

Environment

Revised budget 2007/08

Calculation of the cash limit for the revised budget 2007/08

The following table shows the progression from the original budget for 2007/08 to the cash limit for the revised budget 2007/08. Both are at estimated outturn prices 2007/08.

Appendix 2

Environment

Revised budget 2007/08

Summary comparing the revised budget with the cash limit

Appendix 3

Environment

Revenue budget 2008/09

Calculation of the base budget 2008/09 - summary of cash limited expenditure

The following table shows the progression from the original budget for 2007/08 which was prepared at outturn prices 2007/08 to the base budget 2008/09 at outturn prices 2008/09.

Annex 1 to Appendix 3

Environment

Calculation of base budget 2008/09

Parameters used in the compilation

Annex 2 to Appendix 3

Environment

Calculation of base budget 2008/09

Significant costs of inflation

Annex 3 to Appendix 3

Environment

Calculation of base budget 2008/09

Significant variations

Major variations between the repriced budget 2007/08 and the base budget for 2008/09 at November 2007 prices, contributing towards a reduction of £189,000 (-0.2%) at constant prices, are set out below:

Appendix 4

Environment

Proposals for growth and redeployment 2008/09 to 2010/11

Proposals are shown at outturn prices for the relevant year.

Agreed proposals will be incorporated into future year's base budgets and so on-going costs are shown in the first year only. One-off costs are shown in the first year and subtracted from the following year.

Appendix 5

Environment

Cashable efficiency improvements 2007/08 to 2010/11

Notes

Cashable efficiency improvements occur when:

- inputs (money, people, assets etc) are reduced but outputs remain unchanged

- the price of inputs (procurement, labour costs etc) are reduced but outputs remain unchanged.

a) Cashable efficiency improvements producing budget savings and meeting the Government's definition of efficiency include general procurement savings against the budget provision of a 2.5% increase in prices.

b) Cashable efficiency improvements producing budget savings but not meeting the Government's definition of efficiency include introducing new charges for services and fortuitous savings.

b) Cashable efficiency improvements not producing budget savings arise because the efficiency is avoiding unbudgeted cost e.g. staff reductions made to absorb increments, procurement efficiencies where costs are still exceeding 2.5%, capital receipts or developer contributions applied to avoid unplanned additional borrowing

Appendix 6

Environment

Review of income 2008/09

Appendix 7

Appendix 8

Environment

Revenue Budget 2008/09

Reconciliation of the original 2007/08 budget on the following pages with the 2007/08 budget in the published budget book.

Appendix 9

Environment

Workforce levels and costs

Appendix 10

Environment

Provisional budget 2009/10 and 2010/11

The following table shows the progression from the 2008/09 proposed budget at outturn prices to the provisional budget for 2009/10 and 2010/11 at outturn prices.

Annex 1 to Appendix 10

Environment

Provisional budget 2009/10 and 2010/11

Analysis of variations