Contact: Jon Pittam, (01962) 847400; [email protected]

1 Summary

1.1 This report proposes the recommendations to the County Council on the 2008/09 budget and council tax, based on the budget guidelines approved on 17 December 2007. The proposals take account of the consideration of the guidelines by the relevant Executive Members, and the scrutiny arrangements through the Select Committees.

1.2 The budget guidelines assumed no cash increase in Government grant, but the floor cash increase has now been confirmed as £2.8m, or 2% over the adjusted grant base for 2007/08. Grant increases in 2009/10 and 2010/11 are 1.75% and 1.5% respectively. There is now certainty in the grant figures and the 2008/09 budget and the provisional budgets for 2009/10 and 2010/11 have been set in this context. Area based grants and specific grants (with the exception of funding for Connexions) have also been announced and built into budgets. These all support existing budgeted spending at the relevant cash amounts. However the area based grant is no longer ring-fenced and spending can be varied.

1.3 This report compares the variations in the proposed 2008/09 budget from the budget guidelines initially set in February 2007 and confirmed in December 2007.

1.4 The proposed budget requirement, before grant, for 2008/09 is £642.7m. The precept, met by council tax payers is £497.1m, 5.5% more, which results in a Band D council tax of £999. The increase in council tax is £43, or 4.5%, and will be within the Government's capping limit of 5%. The council tax rise is slightly lower than the predicted 4.9% within the guidelines because the cash increase in Government grant was more than expected.

1.5 All services have prepared budgets within the cash limits set in the budget guidelines which gave priority to Adult Services to meet the demographic costs and pressures from more elderly and adults with disabilities (5.6%), Children's Services (3.8%) and the committed costs of the waste management contract and increased landfill tax (4.1%). All other services have been provided with base budget increases to match the continuing cost of services. All other pressures and priorities have been offset by efficiency savings and other changes.

1.6 Total efficiency savings identified in the 2008/09 budget are £14.6m (2.2%).

1.7 Increases in grant, tax base, surplus on collection funds and the release of contingencies built into the budget guidelines provide additional resources which have been used either for one-off investment, or to reduce the council tax rise predicted in future years.

1.8 In 2007/08 the County Council had floor grant and personal social services damping of £38m. The damping has been removed and the County Council now just receives floor grant of £29m for 2008/09 which will reduce to £21m by 2010/11. The grant equalisation reserve is budgeted at £26m at 31 March 2008. It is therefore planned to run this reserve down over the next six year period to reflect the unwinding of the grant floor.

1.9 Without changing the budget guidelines for service related spending it is now possible to set provisional council tax rises of 3.5% in 2009/10 and 2010/11, instead of the previous projection just under the 5% capping limit.

1.10 Additional one-off resources have been used to:

· make an invest to save contribution of £1.4m towards fostering rates to improve the stability of placements, improve the life chances of children in care and save some of the more expensive costs of independent foster care placements, (as set out in the detailed business case considered by the Executive Member for Children's Services).

· increase the capital reserve to help smooth the cash flow and capital receipts from prudential (unsupported) borrowing and to provide flexibility for future investment in managing and acquiring development land.

· meet additional part year unfunded costs in 2008/09 only for Hampshire Action Teams and scrutiny arrangements, for one-off costs of an extra Coroner's inquest, Basingstoke Canal, the Commission on Personalisation, the development of the Hampshire Senate and pump priming further initiatives on apprenticeships.

1.11 Additional recurring resources will be used to:

· help reduce future council tax rises to 3.5%.

· support the capital financing costs on £10m of so called "supported borrowing" (not matched by Government grant) over the next three years for Environment (£5.6m) and Schools (£4.4m).

· supplement the invest to save and modernisation reserve to provide resources which can be released against business cases within the corporate strategy to improve services, complete any service transformation changes and to enable additional capital receipts. The enhanced reserve will also provide resources to follow priorities against the targets set within the Comprehensive Area Assessment to improve both performance and services where and when needed.

· provide a contingency to meet other pressures, against business cases within the corporate strategy including £250,000 for Recreation and Heritage.

1.12 Adult Services is expected to complete its two year recovery and modernisation plan by 31 March 2008, and together with all other services remain within the cash limits set for 2008/09 - 2010/11. As a result balances are now expected to be more than anticipated at 31 March 2008. The overall level of balances now proposed of £15m (2.3% of net expenditure) is based on a revised, lower risk assessment. This has allowed additional resources of £10m to be released from balances and added to the pay and benefits reserve to cover the potential cost of equal pay claims and any interest backdated on awards.

1.13 This summary sets out the main features of the budget. The rest of the report provides more analysis of the changes since the guidelines were set. The Appendices to the report provide all the detail of the budget.

1.14 The recommendations are contained in the preceding summary decision sheet and include:

· carry forward to 2008/09 of projected underspends

· budget proposal for 2007/08 of £642.7m and precept of £497.1m (5.5% increase)

· recommended Band D council tax of £999.00 (4.5% increase)

· provisional budgets 2009/10 - 2010/11

· approvals required for growth and savings, increased income from charges, reserves and balances, and the integrated workforce plan

· various statutory requirements on risk analysis and management, treasury and investment management and the prudential code on borrowing

1.15 The remainder of the report consists of the following paragraphs:

· revised budget 2007/08 (paragraph 2)

· 2008/09 formula grant settlement (paragraph 3)

· 2008/09 service budget pressures met within growth in the budget guidelines, or from further savings and redeployments (paragraph 4)

· efficiency savings (paragraph 5)

· annual review of charges and maximisation of income (paragraph 6)

· workforce plan (paragraph 7)

· additional resources and budget proposals (paragraph 8)

· performance and risk management (paragraph 9)

· earmarked reserves (paragraph 10)

· balances (paragraph 11)

· 2008/09 overall budget proposals (paragraph 12)

· 2009/10 to 2010/11 provisional budgets (paragraph 13)

· treasury management strategy and annual investment strategy for 2008/09 (paragraph 14)

· prudential and financial health indicators (paragraph 15)

1 Revised budget 2007/08

1.1 There is no formal review of the revised budget as budgets are monitored regularly during the year and changes, with required action, reported as they occur. Cabinet reviews the high risk budgets which are largely demand-led and monitors employee budgets during the year.

Adult Services

1.2 The service has worked very hard to complete the two year financial recovery plan whilst modernising the service. The reductions (£19m over two years) have been achieved through implementing the plan as well as making efficiency savings. In addition, budgets were set for client groups to meet demand, taking into account eligibility.

1.3 The unused money available for winter pressures in 2007/08 (£3.5m) is requested to be carried forward into 2008/09 subject to pressures on it before the end of the financial year. The first £2m will be allocated to capital in order to invest in the social care building stock, particularly extra care. The remainder will be transferred to winter pressures in order to bolster this, ideally to the £3m which is considered necessary to manage a demand-led service in the context of the pressures applying in 2008/09.

1.4 It is also recommended that a planned underspend of £0.8m be carried forward in order to fund a shortfall in resources in 2008/09 required to meet growth pressures which can otherwise be covered in future years within the proposed cash limits.

Children's Services

1.5 There is a forecast underspend on the Schools' budget of £1.2m, which may be carried forward to 2008/09, subject to the final outturn and consideration by the Schools Forum.

1.6 On the non-schools budget there is a forecast balanced budget for 2007/08, after applying one-off funding totalling £624,000. The key elements of the underlying overspend are home to school transport and children looked after. The forward budget implications of these pressures have been met within the three year budget guidelines.

Environment

1.7 There is an anticipated underspend of £260,000 on the proposed street lighting private finance initiative (PFI) project, following approval delays by the Government, which is recommended for carry forward to support the project in 2008/09.

1.8 Staffing vacancy savings, together with a number of other anticipated cost savings on non-pay support budgets, of £720,000 are projected. If Cabinet approves this carry forward, Environment would allocate £470,000 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). The remaining £250,000 would be used for one-off purposes, either for priority highways maintenance work or public transport support.

Policy and Resources

1.9 The revised budget is at the cash limit but includes savings of £211,000 to be found within Property, Business and Regulatory Services to meet continuing cost pressures on the corporate estate, development account and sites for gypsies and travellers. A further £80,000 of savings are to be identified on other budgets outside the service departments. Any unspent balance however on the £780,000 budget devolved to members will be carried forward for one year in accordance with the agreed scheme.

1.10 Planned underspendings are recommended for approval of:

· £400,000 on the Chief Executive's budget which would be carried forward to assist with transitional costs associated with the review of corporate and central services.

· £50,000 on a computer health system in the occupational health unit.

· £100,000 on County Treasurer's to manage pressures on the run-down of student support in 2008/09.

· £80,000 on grants to voluntary organisations to be earmarked towards the Winchester Cathedral Development Appeal.

Recreation and Heritage

1.11 The service expects to contain spending within its cash limit, but current projections indicate a potential overspend of £215,000, of which £175,000 results from lower income and the transitional effects of restructuring the library service.

1.12 Cabinet's attention has been drawn to the additional £90,000 cost of the works required to repair the breach to the Basingstoke Canal that occurred in June 2007 and the knock on effect of deferral of countryside capital schemes. This is dealt with in proposals for the allocation of additional one-off resources in 2008/09 (paragraph 8.14)

Summary of revised budgets 2007/08 on services

1.13 All services will therefore stay within cash limits and Cabinet is asked to approve the carry forward proposals for planned underspends in Table 1.

Table 1: Proposed service carry-forwards to 2008/09

Capital financing charges (-£1.8m)

1.14 As indicated in the capital programme report there has been slippage in the anticipated capital payments for 2006/07. This has resulted in an underspend of £1.8m in the budgeted capital financing charges, partly accounted for also by the use of capital grant and capital receipts to finance schemes when available in priority over borrowing.

Interest on balances (-£2.4m)

1.15 Balances and reserves have remained at a much higher level during 2007/08 and cash flow has been more positive than expected because of:

· slippage on capital payments and good progress in achieving capital receipts.

· delay in implementing pay and benefits (from April 2007 to February 2008).

· no equal pay claims paid out.

· achievement of the Adults' recovery plan and no withdrawal from balances.

· higher short-term interest rates during the year.

1.16 An additional £5m of interest on balances is therefore projected, but against this must be set the new anticipated cost of interest on any back dated equal pay claims. It is therefore proposed to add the interest accruing on the pay and benefits reserve, leaving a net additional increase of £2.4m from interest on other reserves, balances and cash flow to add to general balances.

Local Authority Business Growth Incentive (LABGI) (-£0.6m)

1.17 An extra £620,000 grant from LABGI was announced during the year and the Executive Member for Policy and Resources has agreed that £210,000 will be allocated for economic development activities in 2008/09 and 2009/10.

Other budget variations

1.18 There is an anticipated £89,000 overspend on flood protection levies and £8,000 on business rates. It is also proposed to carry forward the unused contingency of £120,000 for Hantsdirect implementation to 2008/09.

Balances at 31 March 2008

1.19 Budgeted balances at 31 March 2008 were £14.3m. When the final accounts were closed, Cabinet agreed a net addition of £5.2m to balances.

1.20 Further net additions of £4.8m are now proposed from the variations in the revised budget set out in paragraphs 2.14 to 2.18 above. Based on the overall risk assessment for balances it is proposed to target balances of around £15m at the end of 2008/09, and this could be achieved after transferring £10m from balances in 2007/08 to the pay and benefits reserve.

1.21 The next table therefore summarises the changes in balances for 2007/08 compared with the budgeted position.

Table 2: Movement in balances 2007/08

2 2008/09 formula grant settlement

2.1 There has been no change in the distribution of formula grant for 2008/09, as expected, despite the County Council's response to the provisional settlement. No attempt has been made by Communities and Local Government to answer any of the points raised in the County Council's letter which was just acknowledged, or to reply to the Leader's open letter to the Minister.

2.2 The only change announced in the final settlement was a further adjustment to the baseline before the calculation of the grant floor. The adjustment is for public law family fees to reflect the policy change by the Court Service to full cost recovery for proceedings under the Children's Act. This results in an increase of £563,000 in grant, but is matched by an equivalent increase in the cash limit for Children's Services, as the new costs arising had not been included in its budget.

2.3 After the revised grant floor adjustment, formula grant for 2008/09 is £142.7m, a £2.8m (2%) floor grant increase over 2007/08. The increase for 2009/10 is £2.5m (1.75%) and for 2010/11, £2.2m (1.5%), all well below inflation let alone meeting the other demographic and other pressures facing Hampshire on social care and waste management costs.

2.4 In announcing the final settlement the Local Government Minister said that he had considered the representations made but had decided broadly to confirm his proposals, also saying "this a tight settlement but it is fair and affordable for local government".

2.5 Other comments made were:

· "we expect local authorities to free up a further 3% a year through efficiency gains ..... to help local authorities manage service and council tax pressures".

· "given the substantial investment in local government, there is no excuse for excessive council tax increases".

· "we expect the average council tax increase in England in 2008 to be substantially below 5%".

· "we will not hesitate to use our capping powers as necessary to protect council tax payers from excessive increases".

2.6 The County Council has achieved £48m of efficiency and other savings over the last three budget years. The efficiency and other savings set out in this report are required to meet the excess unfunded pressures not met by the Government's 2% grant increase. Hampshire with the second lowest grant per head in 2008/09 (£112 compared with an average of £176) might be expected to have an above average grant increase especially when the average grant increase for counties is 5.3%. The settlement adversely affects Hampshire because of the underlying grant changes made in earlier years which have redirected grant support away to other parts of the country.

2.7 Details of the provisional grant settlement were presented to Cabinet in December 2007 and are not repeated here. A summary of the settlement will be available at this meeting for the information of members who would like a copy.

3

4 2008/09 Budget - service guidelines

4.1 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 2007. The budget strategy was reviewed by Cabinet in October 2007 following the publication of the Comprehensive Spending Review 2007 and in December 2007 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% in 2008/09 (together with a further 0.25% increase in respect of the additional cost of the 2007 pay award over that budgeted) and 2.5% in 2009/10 and 2010/11

· 2.5% for non-pay costs

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

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

4.3 Total service guidelines for 2008/09 and the following two years with the cumulative percentage increase over the three years are:

Table 3: Summary of service guideline cash limits 2008/09 - 2010/11

4.4 Executive Members have submitted budgets within the cash limits set by the budget guidelines.

4.5 Full details of the proposals for additional spending, and redeployment of resources to contain these within the approved budget guidelines are set out in Appendix 2.

4.6 The increases in each service budget are shown in the next table. Area based and specific grants have been adjusted for final notifications:

Table 4: Service increases in 2008/09

4.7 These increases can also be shown in percentage terms.

Table 5: Percentage increases in service guidelines in 2008/09

4.8 Because of the impact of the Government's specific grant priorities, the biggest overall increase in spending of 6.4% benefits Children's Services. In allocating the general grant and council tax funding for which the County Council determines priorities, priority has been given to the demographic pressures and costs on Adult Services at 5.6% in County Council terms, 5.3% overall after specific and area based grant changes are taken into account. Next comes the waste contract at 4.1%, a below trend increase in 2008/09 as a result of the changes associated with the implementation of producer responsibility for electrical goods. Planned service growth has therefore been allocated to Adult Services, Children's Services and the waste management contract. These services, together with other services have found savings and other redeployments to meet additional pressures over the base budget guideline figures set.

Adult Services

4.9 The financial implications of growth and pressures for the service in 2008/09 will be £15.6m, mainly from dependency, demographic and other operational pressures (£8.8m), additional commissioning costs (£1.8m), additional investment in the modernisation programme (£3.2m) and other costs in safeguarding clients, supporting people and promoting independence (£1.8m).

4.10 These costs will be met by the additional growth allocated in the guidelines together with plans to redeploy resources, including £2m further savings from the modernisation programme, £2m from commissioning efficiencies and the balance from other efficiency savings.

4.11 A further £2.3m of reductions remain to be allocated. £1.5m is needed to balance the winter pressures budget at £3m and will be met from the carry forward if agreed and achieved in 2008/09 (paragraph 2.3). The remaining £0.8m is required to bridge the shortfall in resources required to meet the 2008/09 growth pressures, which can be funded from the carry forward of the planned underspend (paragraph 2.4).

4.12 Given all these adjustments, Adult Services will be able to deliver its budget within the guidelines without cuts to services, meeting new demands, and without risks of significant in year overspends. This represents the complete turnaround of the two year modernisation and recovery plan and Cabinet may wish to congratulate the Executive Members and the Director and her staff on the transformation.

Children's Services - schools budget

4.13 The total schools budget is £766m which consists of £671m in dedicated schools grant (DSG) and other specific grants, principally schools budget standards fund (£53.7m), schools standard grant (£33.8m) and general sure start grant (£18m).

4.14 The per pupil increase in 2008/09 in DSG is 4.5%, and there are three earmarked ministerial priorities included:

· pockets of deprivation

· provision for excluded pupils from the sixth day of the inclusion

· personalised learning

4.15 The overall headroom available above the base budget in DSG is £10.3m and has been allocated by Schools Forum for deprivation (£3.9m), individual schools budget (£3.7m including provision for exclusions, pay and benefits and ICT), early years (£1.1m) and central expenditure pressures (£1.6m) including early intervention and preventative services.

Children's Services - non schools budgets

4.16 Total growth of £4.2m is proposed, principally £1.8m for foster care as part of the business case for invest to save (allowances, skills, fees and support), £600,000 for more social work resources and £400,000 for children looked after or on the edge of care.

4.17 These are mainly offset by redeployment proposals of £1.6m including savings from the use of grant flexibility (£602,000).

4.18 This leaves £1.4m of additional savings required above the extra growth of £1.2m in the budget guidelines. It is proposed to meet this from a corporate invest to save contribution of £1.4m which will be required in 2008/09 only before projected savings are recycled from the business case in the later two budget years.

Environment

4.19 Additional pressures of £2.5m have been identified including £660,000 for the street lighting PFI, £673,000 for additional public transport support and £1.1m on highways and transportation staffing and support costs.

4.20 These will be met by the equivalent sum of redeployment and savings proposals including the planned carry forward of £260,000 from 2007/08 on the PFI project, absorbing energy and PFI costs within the existing street lighting budget (£400,000) savings and lower cost solutions within bus services (£673,000) and the planned carry forward of £380,000 from the 2007/08 staffing underspend.

Policy and Resources

4.21 Additional continuing costs in implementing pay and benefits (£568,000) including the Human Resources team (£438,000), legal costs and payroll related costs, will be met from a one-off transfer from the pay and benefits reserve. A reduction in revenue contributions to capital will provide £200,000 for an invest to save bid to provide additional estates staff to increase capital receipts.

Recreation and Heritage

4.22 Savings and redeployments across all services of £786,000 are planned to meet additional running costs from the opening of the Winchester Discovery Centre, transitional costs for the Library restructuring and to increase capacity within the countryside service to cope with growing pressures on the countryside sites and rural paths network.

Total service budget guidelines

4.23 Full details of all these growth items, and the redeployments and savings proposed to meet pressures above the budget guidelines are set out in Appendix 2, including how they are related to the Corporate Strategy. The next table summarises the position for each service.

Table 6: Summary of 2008/09 spending pressures and savings

¹ includes £0.5m pay and benefits savings and a savings requirement which would be covered by a proposed £0.8m carry forward, if approved.

² includes £1.4m unallocated savings which would be covered by an invest to save contribution if approved.

4.24 If the £0.8m carry forward for Adult Services and the £1.4m contribution to Children's Services are approved the net redeployment will be £14.5m (£16.7m - £2.2m).

5 Efficiency savings

5.1 The Government has announced (paragraph 3.5) that it expects local authorities to free up a further 3% a year through efficiency gains ..... to help local authorities manage service and council tax pressures. There are no further cash reductions to be made as this assumption is built into the Government's grant announcement.

5.2 The County Council has demonstrated its achievement of efficiency savings of £48m over the last three years. The distinction between cashable and non-cashable efficiency savings required under the 2.5% per annum Gershon targets has disappeared. 1.25% under that definition was cashable. The new target of 3% is all cashable.

5.3 The County Council will now be required to publish a performance indicator demonstrating how it has contributed to the national target (the annual efficiency plans and statements will no longer be required after the publication of the actual efficiency savings achieved in 2007/08).

5.4 Appendix 5 identifies efficiency improvements totalling £15.4m (2.3%) in 2008/09, as well as projected savings for 2009/10 and 2010/11. The efficiency improvements consist of:

· cashable efficiency improvements producing a budget saving and meeting the Government's definition of efficiency (£10.2m). These occur when inputs, or the price of inputs are reduced, but the outputs remain unchanged. An example is general procurement savings against the budget provision of a 2.5% increase in prices.

· cashable efficiency improvements producing a budget saving but not meeting the Government's definition of efficiency (£0.3m). An example includes new income charges or reductions in expenditure on taxation, eg business rates.

· cashable efficiency improvements not producing a budget saving (£5.2m). Examples include any avoided cost which is not budgeted for, including staff reductions or vacancy management to absorb the cost of salary increments

5.5 The cashable efficiency savings achieved in 2008/09 which meet the Government guidelines (ie excludes Adult Services income) are:

Table 7: Cashable efficiency savings 2008/09

5.6 The Chief Executive will bring forward a review to exploit other savings opportunities identified by recent external consultancy studies.

6 Annual review of charges and maximisation of income

6.1 Fees and charges have been raised where there is scope to do so in policy and financial terms, and the inflation allocation has been calculated on the basis that charges are increased in line with the allowance for inflation on gross expenditure, averaging 2.7%.

6.2 Details of income reviews and charges were set out in the budget reports for Executive Members and in the summary below.

Table 8: Summary of income from fees and charges

7 Workforce plan

7.1 The workforce plan will be developed in the context of the corporate strategy and the budget. Appendix 5 summarises changes in the overall workforce supported by the budget.

7.2 The overall budgeted variation in workforce costs and numbers in relation to growth, savings and redeployment proposals is shown next.

Table 9: Summary of changes in workforce costs and numbers

8 Additional resources and budget proposals

8.1 There are a number of changes since the initial guidelines were set in February 2007, and this part of the report summarises them, distinguishing between additional resources that are of a one-off nature for 2008/09 and those which are recurring and can be built into the base budget for future years.

Additional resources in 2008/09 only

8.2 The collection fund surplus notified by district councils in January 2008 is £1.5m more than budgeted, resulting in a total surplus of just under £3m.

8.3 Actual capital expenditure in 2006/07 and estimated capital expenditure to be met by borrowing in 2007/08 are lower than originally forecast, which together with a lower average interest rate due to new long-term borrowing, reduces capital financing costs by £1.6m in 2008/09. However, as the report on the capital programme shows, there will be a shortage of capital resources in 2009/10 of £4.8m (and a further £0.7m in 2010/11) to fund future capital payments.

8.4 The savings from the introduction of producer responsibility for the costs arising from the Waste Electrical and Electronic Equipment (WEEE) regulations has been more favourable than anticipated, which will release £0.7m of the contingency set aside for the waste management contract in 2008/09.

8.5 In setting the budget guidelines, unallocated contingencies were included in the 2008/09 and 2009/10 forecasts within the projected council tax rises at 4.9%. It was anticipated that these might have been required to meet continuing pressures on Adult Services and Children's Services, but the resources available within the budget guidelines and the use of redeployments mean that these contingencies do not need to be drawn upon. This releases £3.7m within the overall 2008/09 budget.

8.6 In summary therefore, the one-off resources available in 2008/09 are set out in the next table, and amount to just under £7.5m.

Table 10: Additional one-off resources in 2008/09

Proposed use of one-off resources in 2008/09

8.7 The identified one-off resources are available for investment in 2008/09 or later years, provided no continuing commitments result.

8.8 The additional resource from the collection fund surplus is about the same size as the proposal from Children's Services for an invest to save contribution towards the business case for improving foster care rates and allowances. This will produce longer term savings from avoiding higher costs in independent foster agency placements (IFPs). It is planned to repay this invest to save contribution in 2010/11.

8.9 Children's Services will invest £3.4m itself over the three year budget period from within its budget guideline cash figure. The business plan will maintain the current level of in-house placements, transfer 92 placements from existing IFPs to in-house and take on the additional children that would otherwise be placed in IFPs based on projected trends over the next five years. The aim is to develop a strong and effective service for Hampshire's vulnerable children and young people. It will assist the priority area of placement stability for children looked after.

8.10 Cabinet has agreed to set up a Commission on Personalisation. Provision of £200,000 is recommended towards the project management, administration, production of evidence, holding events and meetings and contributing to the expenses of the commissioners. This should also be regarded as an investment to develop the most effective implementation of `personalisation' in the County Council with its various partners, and also to influence the Government's future thinking on funding and implementation of Adult Social Care in its Green Paper.

8.11 Initial set-up costs for the Hampshire Senate are required to improve two-tier working, seek efficiencies, introduce shared services and to work in partnership to deliver the improvement targets set for the Comprehensive Area Assessment.

8.12 The attention of Cabinet has been drawn to the additional cost (£90,000) of the works required to repair the breach to the Basingstoke Canal that occurred in June 2007 which had a knock on effect of deferral of countryside capital schemes.

8.13 The workplace activities scheme was established in June 2005 and jointly funded for a three year period by Sport England and County Council budgets. A full time workplace activities officer has been employed through the scheme and has run a range of class-based activities, clubs and local opportunities for staff to undertake more physical activity during their working week. Recreation and Heritage plan to meet the extra unfunded costs of £5,300 in 2008/09 and seek a corporate contribution of £18,000 in 2009/10 as well as the continuation of existing funding within the Chief Executive's and Recreation and Heritage budgets. Longer term funding for the following three years is anticipated from the local public service agreement award for adult physical activity. Fees from activities meet a third of the budgeted costs of £74,000 in 2009/10.

8.14 £100,000 is suggested for Recreation and Heritage towards most of the costs identified in paragraph 8.12 and 8.13.

8.15 The initial funding set aside for two years for Hampshire Action Teams (HATs) and revised scrutiny arrangements will run out during 2008/09. The pilot will be reviewed and the part year costs of extending the current arrangements in 2008/09 is £62,000 for scrutiny and £115,000 for HATs, but no specific provision has been made for this at this stage.

8.16 There is expected to be a requirement in 2008/09 for additional inquests in the Portsmouth and South East Hampshire Coroner's District, and the additional costs are provisionally estimated as £100,000. The County Council is required by statute to meet the costs of any inquests in Hampshire undertaken by HM Coroners and it is proposed to hold £100,000 in contingency for this purpose.

8.17 £50,000 would be helpful to establish up to 50 apprentices and/or work opportunities for young people to improve their life chances. It is anticipated that the bulk of the cost would be met by suppliers and contractors and the Chief Executive will use this pump priming resource to achieve this target.

8.18 It is suggest that the remainder of the one-off resources available be made as a contribution to the capital reserve. This would meet the shortfall of resources to fund the capital programme of £5.5m identified in 2009/10 and 2010/11 (paragraph 8.3) without recourse to further unsupported borrowing. It also provides some additional flexibility to fund future infrastructure costs associated with new developments, to acquire future development land as opportunities arise, and assist in the achievement of higher targets for capital receipts to be established in 2010/11 and 2011/12 (see the separate capital programme report).

8.19 The proposed use of these one-off resources is summarised in Table 11.

Table 11: Potential use of one-off resources in 2008/09

Recurring budgeted changes

8.20 The final estimates in January 2007 of the tax base show an increase from 493,247 Band D equivalent dwellings to 497,560. This is a 0.9% increase compared with the budgeted 0.5% and results in £1.8m additional income for 2008/09.

8.21 The initial budget guidelines assumed no cash increase in Government grant, but the 2% floor for 2008/09 creates £2.8m extra income.

8.22 The original pay award assumption for 2007/08 was 2.25%, but the final award was 2.5%. The 2008/09 base budget has been uplifted for the extra 0.25% cost (the additional costs in 2007/08 are being absorbed by management action). The budget guidelines assumed 2% pay rises for 2008/09 and following years, but Cabinet in October agreed that given current rates of inflation (retail price index 4%, pay awards of 3.5% - 4.5% generally) a more prudent assumption for the 2008/09 pay award would be 2.5%. This increases budgeted costs by £2.4m.

8.23 Other budgeted variations include higher flood protection levies in 2007/08 etc of about £0.1m.

8.24 Cabinet also agreed in October 2007 not to seek further efficiency savings of £1.1m across all services to assist Adult Services.

8.25 The initial projections assumed the continued budgeted contribution of £1.2m to the grant equalisation reserve. Given the loss of grant incorporated in the three year grant announcement it is now planned to end that contribution and also run down the grant equalisation reserve by £1.2m per annum over the next six years. The reason for this planned reduction and the implications are described later in the report (paragraphs 10.2 to 10.5).

8.26 As well as the elimination of the one-off contingency in 2008/09, £0.5m of the 2008/09 contingency had been assumed to be available for additional continuing expenditure

8.27 Finally there is a further pick-up of £35,000 in additional income from the reduced council tax discount on second homes (included in the higher tax base in paragraph 8.20) which can be added to the council tax on second homes contingency which will increase to £155,000.

8.28 The additional income and other changes set out in paragraphs 8.20 to 8.27 result in a net increase in resources over those initially budgeted of £3.9m as set out in the next table.

Table 12: Additional recurring resources 2008/09

Potential use of additional resources

8.29 When the guidelines were confirmed in December 2007 Executive Members were asked to prepare draft capital programmes based on Government supported capital grant approvals and borrowing allocations (consistent with limiting the annual increase in the capital financing requirement to 2.5%, or the general assumption on inflation). Executive Members were also asked to highlight the implications of not taking up borrowing allocations in full.

8.30 Cabinet will recall that Government decisions on capital allocations made the position worse by increasing borrowing allocations at the expense of capital grant. That meant that a further £15.2m of capital schemes over the three year period could not be supported without increasing the revenue budget guidelines to meet the extra capital financing costs of £1.5m (in a full year).

8.31 When the Cabinet set its original revenue budget and capital programme guidelines in February 2007 it agreed that £30.7m of so called "supported" borrowing allocations over the three year period (2008/09 to 2010/11) would not be taken up (because there was no additional Government formula grant support towards the capital financing costs). Capital programmes were planned on this lower amount (see capital programme report).

8.32 This means that the reduced take up of supported borrowing allocations is now £46m in total over the three years (£15.2m + £30.7m), or about 32% of the Government's borrowing allocations.

8.33 The Executive Member for Environment proposes to meet the total unsupported shortfall on highway maintenance (£4m in 2008/09 and £3.1m in 2009/10) by achieving savings of approximately £0.4m for 2008/09 and a further £0.3m for 2009/10. These will be funded from efficiencies arising on the re-tendering of the term maintenance contract and a small reduction in the locally resourced capital programmes for the renewal of older urban areas and waste.

8.34 To mitigate the impact of the reduced take-up on the capital programme for integrated transport would cost up to a maximum of £14m (£4.8m in 2008/09, £4.7m in 2009/10 and £4.6m in 2010/11). Integrated transport includes capacity improvements, safety schemes, traffic management measures, cycle schemes, footway improvements etc. The cost of the capital financing charges would be £1.4m in a full year but are not a priority within the existing budget guidelines set for Environment. Paragraph 8.7 of the capital programme report sets out the schemes which would otherwise need to be deferred and slipped to later years in the capital programme (totalling £13.5m, including South Winchester Park and Ride at £6.1m).

8.35 The Executive Members for Children's Services and Policy and Resources have not made specific representations over the gap on Schools programmes, which has increased by £3.8m, but have drawn attention to the implications for the school estate if borrowing allocations are not used in full.

8.36 To assist it is proposed to add £10m to the capital programme guidelines over the three year period which would require an increase in the revenue budget for higher capital financing costs of £150,000 in 2008/09, £650,000 in 2009/10 and £1m in 2010/11. It is suggested that the extra £10m is split in line with the overall reduction in borrowing allocations (£46m over 3 years) which would apportion £5.6m to Environment (to cover most of the costs of the South Winchester Park and Ride), £3m to Children's (Schools) and £1.4m to Policy and Resources (New Deal for Schools), or any other proportion Cabinet wish to determine.

8.37 It is proposed to replace the budgeted contribution of £1.2m previously made to the grant equalisation reserve, with a budgeted contribution to an Invest to Save and Modernisation Reserve. This will provide resources for invest to save, business improvement processes and service transformations to enable future efficiency savings and deliver value for money improvements in services. It will also provide a resource base to allocate resources to follow priorities in improving performance against up to 35 targets allocated within the Local Area Agreement. In all cases business cases would be necessary demonstrating how cashable efficiency savings, or improvements in performance or value for money would be achieved within the Corporate Strategy. It would be appropriate for the Leader and Cabinet to consider and sign off any business cases before the use of the reserve is commissioned. The Chief Executive will bring forward a business case for a further invest to save contribution of £300,000 towards additional estates staff to help accelerate asset disposals and to increase the overall value of capital receipts to be a target for the future. This will supplement the existing invest to save contribution of £340,000 to secure capital receipts and £160,000 for the strategic property review.

8.38 It would also be appropriate to make a substantial reduction in the proposed council tax rise, given the additional resources now available. Reducing the council tax increase to 4.5%, and keeping the amount below £1,000 for the Band D council tax payer, would require £1.9m of the additional recurring resources to be used - broadly equivalent to the increase in the tax base of £1.8m. The amount being raised from council tax payers is therefore unchanged, but the higher tax base enables this to be achieved at a lower Band D council tax level.

8.39 It is proposed to appoint a "rural affordable housing enabler" to give greater emphasis to the provision of rural affordable housing as suggested by the Hampshire Alliance for Rural Housing. This would cost about £40,000 and could be met from the contingency available from the council tax on second homes (paragraph 8.27).

8.40 The impact of these proposed changes is summarised in the following table, which creates £2m towards additional recurring spend and £1.9m to reduce the council tax rise.

Table 13: Potential use of additional recurring resources in 2008/09

8.41 This leaves in effect a contingency of £626,000 for the Leader and Cabinet to allocate to other unfunded pressures identified in 2008/09, having regard to clear business cases and the priorities within the corporate strategy, corporate business plan and corporate management plan.

8.42 These pressures are:

· the recurring Coroner's budget and an allocation of up to £100,000 from the proposed contingency could be made when the Executive Member for Policy and Resources is satisfied that other savings within Policy and Resources are not available to offset the extra costs.

· departments have opted to pay for finance systems training on a pay as you go basis. With pressures on budgets and staff time the necessary training is not being taken up and the County Treasurer's department can no longer afford to pick up the unfunded costs of the corporate financial systems team. Relevant training on induction in the competent use of financial systems is essential in risk management terms (and could otherwise result in a lower Use of Resources assessment) as well as in avoiding inefficiencies in staff time operating the system. A working group has been set up to review the position and risk assess the necessary training but up to £150,000 may need to be released from the contingency during 2008/09.

· additional staffing costs and longer opening hours of the Winchester Discovery Centre and in other libraries and discovery centres, together with other pressures identified within Recreation and Heritage (£250,000).

8.43 These pressures, if all drawn down in full, would use £500,000 - slightly less than the proposed £626,000 available. It is therefore recommended that the contingency be retained for allocation by the Executive Member for Policy and Resources after considering the business cases for each item as referred to in paragraph 8.41, with any balances carried forward to assist the additional pressures that might arise in 2009/10 as summarised in paragraph 8.44.

8.44 The further pressures which may need to be considered in 2009/10, subsequent to reviews during 2008/09 are:

· the full year effect of extending the HATs and scrutiny arrangements beyond 2008/09 would be £458,000. The HATs pilot arrangements are subject to review during the year and the Leader has also asked the Chief Executive to review the Council's central functions including democratic services and member support. It would therefore be appropriate to retain some contingency to meet future costs should the review require it.

· similarly the future funding of the Human Resources pay and benefits team will need to be reviewed and established when transitional funding from the pay and benefits reserve runs out at the end of 2008/09. The funding provided for 2008/09 is £438,000 but it is not envisaged that this will need to continue at the same level once implementation and initial appeals have been dealt with during 2008/09, and around £200,000 might be appropriate.

9 Performance and risk management

9.1 As part of the process of linking budgets with performance management, proposals for additional spending should indicate measurable improvements in performance anticipated and any significant savings proposals should include a plan showing how the proposal will be implemented.

9.2 This is a key feature of the Use of Resources assessment by the Audit Commission. It is therefore necessary for all Executive Members to review their plans and monitor achievement against them during 2008/09 for all the proposed growth and redeployment proposals set out in Appendix 2, and especially to monitor performance against specific plans for achieving all savings targets. Executive Members should also have explicit regard to the value for money of all their decisions.

9.3 The corporate strategy, corporate business plan and corporate management plan provide the framework within which the integration of service, workforce and financial planning has been developed. The budget proposals recognise the priorities in the corporate business plan set within the medium term financial strategy agreed by Cabinet in May 2007.

9.4 Section 25 of the Local Government Act 2003 requires the Chief Financial Officer (the County Treasurer) to report to the County Council when setting its council tax on:

· the robustness of the estimates included in the budget

· the adequacy of the financial reserves in the budget

9.5 The County Council is required to have regard to this report in approving the budget and council tax. It is appropriate for this report to go first to Cabinet and then to be made available to the County Council in making its final decision. The full report is set out in Appendix 9.

9.6 The main areas of risk are:

· equal pay claims - this is dealt with by the pay and benefits reserve.

· grant loss - there is now certainty for the next three budget years, with predicted grant losses as the floor is unwound. The use of the grant equalisation reserve will reduce some of these pressures on the council tax.

· risks from the budget assumptions. Pay awards are budgeted at 2.5% and despite current inflation levels pressure on public service pay awards is likely to keep awards within this level. There may be some hotspot pressures on price inflation, especially purchase of services and energy costs but these may well have peaked as the budget year proceeds. Savings targets will still need to be monitored carefully but the pressures on the demand-led social care budgets have now been met within the budget guidelines and contingencies have been included to meet future unforeseen costs. Cabinet regularly monitors the activity, costs and performance on the volatile and high risk budgets during the year.

· achievement of capital receipts, pressure from prudential borrowing and variations in capital payments which affect the capital financing forecasts are in part caused by the contribution to the capital reserve.

9.7 The detailed risk assessment is set out in Appendix 9 and indicates a prudent level of balances at around £15m.

9.8 The overall level of risk in proportion to the level of the budget is slightly reduced compared with some risks identified in February 2007 which have now occurred or been removed (for example, the impact of the Comprehensive Spending Review, Lyons Inquiry, formula grant loss and the early stage of the recovery and modernisation plan for Adult Services). This means that the overall general level of balances can be minimised at around £15m, or about 0.9% of gross expenditure (2.3% of net expenditure). This proportion is relatively low compared with other local authorities. Balances at or around this level, together with the proposed level of earmarked reserves, set out in the next paragraph, will be sufficiently robust for the County Treasurer's assurance required by Section 25 of the Act.

10 Earmarked reserves - budgeted at 31 March 2009

Schools reserve (£41.4m)

10.1 The single largest budgeted reserve remains the Schools reserve which was £32.6m for 2007/08 and is now anticipated to be £41.4m. The reserve is only available to the relevant school.

Grant equalisation reserve (£24.9m)

10.2 The County Council has lost about £9m of damping grant in respect of personal social care (adults with disabilities) in the announcement of the 2008/09 grant. That reduces the total amount of damping received from £38m to £29m. A further £8m of this damping within the floor grant will be unwound over the next three years, reducing the damping to £21m at 31 March 2010. It is anticipated that the remainder of the grant damping will be lost over the subsequent three year spending period.

10.3 The reserve was set up in 2003/04 when the Government changed the funding formula and started moving grant away from Hampshire. An initial budgeted contribution of £8.7m was reduced to £1.2m in 2006/07 when most of the contribution was set aside to finance 75% of the anticipated full year costs arising from the implementation of pay and benefits. The reserve will be £26.1m at 31 March 2008.

10.4 Paragraph 8.25 indicated that the budgeted contribution of £1.2m can now be withdrawn as there is more certainty about the rate of grant loss. The proposal is to wind-down the reserve completely over a six year period at a rate of £1.2m each year. This represents about 0.3% off the council tax rise each year on a sustainable basis. The amounts withdrawn increase each year as £1.2m taken in 2008/09 has to be £2.5m in 2009/10 and so on, until £7.5m is withdrawn in 2013/14 exhausting the full £26.1m.

10.5 The balance on the reserve will be £24.9m at 31 March 2009 and £18.7m at the end of the three year budget period.

Pay and Benefits reserve (£31.1m)

10.6 The balance on this reserve was budgeted at £17m at 31 March 2008. £99,000 was approved for additional spending on equal pay claims during 2007/08, and £921,000 was added back into the reserve on the closure of the 2006/07 accounts. £2.6m has been credited to the reserve from interest on balances during 2007/08 as explained in paragraph 2.16, with a further £10m being transferred from balances (paragraph 2.20). This provides a substantial cushion against the risk of equal pay claims or compensation arising from implementation of pay and benefits job evaluation, bearing in mind claims may be payable for up to a period of six years. Interest will continue to be credited in future years. £709,000 will be withdrawn from the reserve in 2008/09 to cover equal pay and pay and benefits implementation costs as proposed in the budget report to the Executive Member for Policy and Resources.

Invest to Save/Modernisation Reserve (£2.6m)

10.7 This reserve comprises the two existing invest to save reserves, including the reserve established in the 2007/08 budget initially for improvements in Adults and Children's Services. The budgeted balance on the reserve at 31 March 2008 is £0.7m. In the event it has not been drawn on during 2007/08 by Adult Services and Children's Services, but a business case will be presented to the Executive Member for Policy and Resources at the next meeting on savings anticipated from an investment in managing health care contributions at the transition of children to younger adults with disabilities. £175,000 was withdrawn however to assist the Library Service with its transitional costs of restructuring against a business case agreed by the Cabinet and this is due to be repaid in 2010/11.

10.8 The previous budgeted contributions to the grant equalisation reserve will instead be made to this reserve in 2008/09 and its scope expanded to cover general modernisation, service transformation and other invest to save business cases as approved by the Leader and Cabinet during the year (paragraph 8.37). An extra £1.4m will be paid in 2008/09 from the additional surplus on the collection fund, but will be allocated directly to Children's Services for an invest to save contribution to foster care (paragraphs 8.8 - 8.9). The balance at 31 March 2009 will therefore be £2.6m.

Landfill allowances (£4.0m)

10.9 The reserve is available to offset future council tax rises, bearing in mind past investment in waste infrastructure, and to finance future waste infrastructure to ensure that all recycling and landfill targets are met. Though allowance sales of £1.1m are forecast in 2007/08, there have been no withdrawals in 2007/08, or currently planned for 2008/09, with the reserve amounting to £4.0m at the end of that year.

Insurance (£5.2m)

10.10 The insurance reserve has been budgeted on the basis that internal premiums will match liabilities chargeable and fire reinstatement costs incurred in 2007/08 and 2008/09. However the recent trends in liability claims suggest that public and employer liability premiums can be reduced and a reduction of £450,000 (£375,000 excluding schools) is proposed. The £375,000 released from reduced premiums can be used to cover the cost of disaster recovery insurance for the data centre over the next three year period as it relocates from the current location to Ashburton Court North.

Capital reserve (£7.0m)

10.11 This was budgeted at £1.5m. This report suggests an addition of £5.5m to the reserve for the purposes stated in paragraph 8.18.

Summary of earmarked reserves

10.12 Full details of each reserve showing movements in the budgeted amount from 31 March 2008 to 31 March 2011 are set out in Appendix 6.

10.13 The main reserves are summarised below:

Table 14: Summary of estimated earmarked reserves

Note: assumes no withdrawals - but planned withdrawals from Invest to Save, Capital Reserve and Pay and Benefits will occur - the amounts and timing are uncertain and will depend upon successful business cases or equal pay claims.

11 Balances

11.1 The estimated level of balances at 31 March 2008 is £14.4m. Budgeted contributions of £974,000 will continue to be made to balances in 2008/09 and 2009/10. The Executive Member for Policy and Resources has agreed to fund economic development initiatives of £210,000 from LABGI received in 2007/08 over the next two years which will be carried forward in balances. The unused contingency of £120,000 for Hantsdirect will be carried forward from 2007/08 and used in 2008/09.

11.2 The overall impact on balances after reinstating the planned removal of £5m for the Manydown purchase is therefore:

Table 15: Movement in balances

11.3 This results in balances at or around the recommended level of £15m in 2008/09.

12 2008/09 overall budget proposals

12.1 Taking all these changes into account the final budget proposals for 2008/09 compared with 2007/08 are:

Table 16: Service cash limits 2008/09

12.2 Other budgets compared with 2007/08 can be summarised as follows:

Table 17: Other budgets 2008/09

12.3 Table 17 demonstrates the continuing significance of increases in specific and area based grants to the overall County Council budget as spending inclusive of reserve movement has increased by £81.9m, mostly in schools. The increase in the budget requirement funded by formula grant and council tax is only £27.3m.

12.4 The total contingency of £16.8m includes:

Table 18: 2008/09 contingency

12.5 Bringing all these budgets together results in an overall budget requirement of £642.7m which is a 4.4% increase on the adjusted budget base for 2007/08 of £615.4m.

Table 19: 2008/09 budget requirement

12.6 The budget requirement will be met as shown in the next table with 2007/08 figures unadjusted (as opposed to Table 19)

Table 20: 2008/09 precept met by council tax payers

12.7 It is anticipated that the overall council tax bill for 2008/09 will increase by about 4.4% (assuming an average district council tax rise of say 3%) as follows:

Table 21: Provisional council tax bill 2007/08

12.8 The trends in spending plans, budgets and council tax are as follows:

Table 22: Percentage increases in council tax compared with spending plans, grant and budget

12.9 The council tax rise is 4.5%, and at £999 remains just below £1,000 for the Band D council tax payer.

12.10 Provisional comparisons with other County Council's suggest that Hampshire County Council

· has the second lowest County Council formula grant per head in 2008/09 (after floor damping) and the lowest from 2009/10

· the lowest relative needs grant per head

· council tax which remains below average and within, or close to, the lowest quartile target

· council tax rise slightly above average but below the 5% capping limit

13 2009/10 to 2010/11 provisional budgets

13.1 The guidelines for 2009/10 and 2010/11 follow those provisionally set in February 2007 for 2009/10 and confirmed in December 2007. Priority has been given to Adult Services, the waste contract and Children's Services to reflect demographic and cost pressures. Other services remain at base budget level.

13.2 Full year effects of savings and growth, variations in reserves and use of balances are built into the plan.

13.3 The flexibility built into the provisional plans with unallocated amounts of £4.6m in 2008/09 and £5.2m in 2009/10 is no longer required as the issues identified in February 2007 have been dealt with (service pressures and priorities, any reinstatement of supported borrowing, higher inflation or interest rates, lower grant increase, reduction in council tax capping limit below 5%, higher unsupported borrowing from slippage in capital receipts).

13.4 The provisional budget requirements for 2009/10 and 2010/11 are estimated as follows:

Table 23: Provisional budget limits 2009/10 and 2010/11

13.5 Other budgets are provisionally estimated as set out in Table 24.

Table 24: Other budgets 2009/10 and 2010/11

13.6 The budget requirements for each year are therefore:

Table 25: 2009/10 and 2010/11 budget requirements

13.7 The budget requirement in each year will be met as set out next:

Table 26: 2009/10 and 2010/11 precepts met by council tax payers

13.8 Adjusted for changes in specific grants and in the use of earmarked reserves and past underspendings and allowing for anticipated contingency allocations for the waste contract and business rates, the following table summarises the underlying changes in spending within the budget requirement.

Table 27: Percentage cash changes in 2009/10 and 2010/11 budget

13.9 The effect of non-recurring spending included in the 2008/09 budget, the use of the grant equalisation reserve and the allocation of contingencies contribute to the reduction in spending on the budgets in 2008/09 and 2009/10.

13.10 The provisional budget for 2009/10 produces a precept of £7.4m lower than assumed in the previous 2009/10 budget projection, which can be summarised as follows.

Table 28: Summary of reduction in 2009/10 budget guidelines

13.11 Cabinet will review the provisional budgets again in May 2008 and set a firm medium-term financial plan for 2009/10 and 2010/11.

Financial planning framework

13.12 Appendix 7 sets out the County Council's current financial management policies incorporating some revisions to reflect the proposed strategy.

13.13 The fundamental challenge is to continue with sustainable and unchanged service budget guidelines, but use the flexibility from the deleted contingencies and extra income (grant slightly more than provisionally budgeted and increased tax base) to reduce the council tax increase from 4.5% to 3.5% in each year.

14 Treasury management strategy and investment strategy for 2008/09

14.1 The County Council is required to adopt a treasury management strategy and an annual investment strategy for 2008/09 and these are set out in Appendix 8 for approval. The Appendix summarises:

· the strategy for the management of the long-term debt portfolio relative to forecast trends in long and short term interest rates.

· the arrangements for the investment of surplus cash funds during the year.

· the investment strategy for submission to the County Council for approval, conforming with the prudential code for financial management.

15 Prudential and Financial Health indicators

15.1 The prudential code ensures that:

· capital programmes are affordable in revenue terms.

· external borrowing and other long-term liabilities are within prudent and sustainable levels.

· treasury management decisions are taken in line with professional good practice.

15.2 Appendix 8 also contains the prudential indicators required by the code for the County Council, together with additional Financial Health indicators The summary of the indicators in Annex 3 to Appendix 8 will be submitted for approval by the full Council in setting the budget.

16 Impact assessment

16.1 The budget is prepared within the County Council's Corporate Strategy, Business Plan and Corporate Management Plan, and draws on the County Council's financial and asset management policies. These policies apply equally to all services and ensure consistent decisions across all services.

17 Appendices

17.1 Appendices to the report are:

1. Revised budget 2007/08 (Salmon)

2. Proposals for growth and redeployment of resources in 2008/09 to 2010/11 (Yellow)

3. Efficiency improvements 2008/09 to 2010/11 (Blue)

4. Budget 2008/09 - detailed analysis (Green)

5. Workforce statement and summary of workforce budgets 2008/09 (Pink)

6. Reserves and Balances 2008/09 to 2010/11 (White)

7. Draft medium term financial management policies (Salmon)

8. Treasury Management and Investment strategies, Prudential and Financial Health indicators (Yellow)

9. Treasurer's report on risks, reserves and balances (Blue)

17.2 The analysis of the formula grant settlement and financial trends (future trends as well as past trends) will be produced as background papers to be available for the Cabinet meeting, but have not been included as detailed appendices to this report.

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.