Archived decisions

HAMPSHIRE COUNTY COUNCIL

Decision Report

EXECUTIVE SUMMARY

1) Summary of Decision Area

1.1. This report concerns the management of the Environment revenue budget for 2008/09. It provides a further update on the monitoring position, including latest information on trends in expenditure and income, together with recent changes to the cash limit, compared to the 2008/09 revised budget which was approved in January.

2) Issues Covered in Report

2.1. The report presents the outcome of the third quarter's budget monitoring review for the 2008/09 financial year, which has been carried out in consultation with the various holders of delegated budgets within the Environment Department.

2.2. A number of adjustments have been made to the 2008/09 cash limit since the revised budget was approved in January, mainly relating to the operation of the waste management contract during the third quarter and the decision to use prudential borrowing to finance the cost of architectural enhancement pass through costs at the energy recovery facilities. This has reduced the cash limit by £4.241 million to £111.756 million.

2.3. The outcome of the third quarter's budget monitoring review shows the financial position to be satisfactory for that stage in the financial year, with the anticipated outturn expected to be close to the approved budget.

2.4. Expenditure on highways winter maintenance, which is outside of the cash limit for the purposes of reporting the final outturn position at year end, is expected to be some £300,000 in excess of the approved budget allowance.

3) Recommendation

It is recommended that:

3.1. The actions being taken to manage expenditure be approved.

MAIN REPORT

1) Contextual Information

1.1. This report presents the outcome of the third quarter's monitoring review for the 2008/09 financial year, covering the Environment revenue budget. The review was carried out in consultation with departmental budget holders during January.

1.2. The Environment Department's budget monitoring process reflects a comprehensive approach including a series of review meetings between finance staff and those departmental officers with delegated budget responsibilities. During this process, plans for service spending during the year, together with trends in expenditure and income, are reviewed in comparison with the approved budget plan, in order to update the forecast outturn projection for each of the main service headings. The outcome of this process is initially reported to the department's management so that any necessary actions can be considered.

1.3. An update of the 2008/09 revenue budget cash limit is also provided, taking into account recent budget changes.

2) Key Issues

2.1. In summary, the overall revenue budget monitoring position is satisfactory for this stage in the financial year and the year-end outturn on the cash limited services is expected to be close to the approved budget.

2.2. Expenditure on highways winter maintenance, which is outside of the cash limit for the purposes of reporting the final outturn position at year-end, is expected to be some £300,000 in excess of the approved budget allowance.

3) 2008/09 Cash Limit

3.1. A number of amendments to the 2008/09 cash limit were included in the 2008/09 revised budget which was approved by the Executive Member for Environment in January for submission to the Cabinet. In total the 2008/09 revised budget was set at £115.997 million, which was £314,000 below the available cash limit, enabling resources to be carried forward to the 2009/10 budget to provide support for:

(i) road safety initiatives or other highways and transportation priorities (£254,000);

(ii) public transport support, to help manage anticipated pressures on this service next year (£60,000).

3.2. Further changes have now been made to the 2008/09 cash limit since the preparation of the revised budget, as set out below:

(i) an additional allocation of £16,000 towards higher electricity costs during 2008/09, approved by the Cabinet on 6 February 2009;

(ii) an adjustment between the central waste management contingency and the waste management cash limit, relating to the operation of the waste management contract during the third quarter of the year, which has resulted in an estimated reduction in costs of £1,102,000. This has reduced the overall call on the central waste management contingency so far this year to just £129,000;

(iii) a reduction of £3,155,000 relating to the decision to use prudential borrowing to finance the cost of architectural enhancement pass through costs at the Chineham, Marchwood and Portsmouth Energy Recovery Facilities, reflecting savings against sums for pass through costs included in the 2008/09 budget, together with the previous year's creditor provisions for these costs that will not now be required.

3.3. The Environment budget has been amended to take account of the above change, giving an adjusted 2008/09 cash limit of £111.756 million. Further changes to the cash limit will be made at the end of the year to reflect the final cost of the waste management contract services, together with any other adjustments that may be required, such as variations in expenditure funded by specific Government grants and any adjustments between capital and revenue.

4) Budget Monitoring Update

4.1. Appendix 1 provides a summary of the adjusted 2008/09 cash limit over the standard divisions of service, together with assessed expenditure to 31 January 2009. Appendix 2 provides a statement of key volume and activity indicators.

4.2. No variations between the forecast outturn and the approved budget plan are currently anticipated on the cash limited budgets (excluding highways winter maintenance). A forecast overspending of some £300,000 is shown for winter maintenance which will be met from central balances under the special budgeting rules that relate to this activity. However, it is important to note that the figures in this final 2008/09 budget monitoring report are only projections of the likely outturn for the year based on the most up-to-date information currently available. This does not, at this stage, represent the final year-end position for the 2008/09 financial year, which will be reported in June after the accounts have been closed.

4.3. The main issues arising from the budget monitoring review are discussed in the following paragraphs.

5) Highways Maintenance

5.1. The 2008/09 revised budget for routine highways maintenance (excluding winter maintenance) is £25.631 million. Total assessed expenditure to the end of January amounted to £19.377 million, which was below the expected profile for this period of the financial year. This reflects a number of factors, the main one being the weather, with reduced capacity as contractor's resources have been diverted to winter maintenance related emergency work which has been exceptionally high this year. At the time of writing this report, it is anticipated that with careful management of the various highways maintenance elements a break-even position may be expected at year-end, although this outturn position could be affected if further weather related delays are experienced.

5.2. As mentioned above, activity on highways winter maintenance salting and snow clearance has been higher during 2008/09. Up to the end of January 2009, salting of highways had been carried out on a total of 52 days, compared with an average of 31 days during the previous four years and only 26 days during 2007/08. In total, £2.930 million of the overall winter maintenance budget of £3.300 million had either been spent or committed up to this point.

5.3. Expenditure incurred on winter emergency salting and snow clearance during the severe weather incurred during the first week of February has been assessed at £485,000. Assuming average winter weather conditions prevail for the remainder of the year and no further severe weather including additional snowfall is experienced, then an overspending against the winter maintenance budget in the order of £300,000 might be expected at year end.

5.4. Under the special budgeting arrangements that apply to winter maintenance, any overspending against this activity does not count against the Environment cash limit and will be covered by central balances at year-end. However, the higher expenditure during 2008/09 will feed through into the calculation of future years' base budgets, based on the four-yearly average of actual levels of winter maintenance expenditure.

6) Public Transport

6.1. The 2008/09 revised budget for public transport support identified an estimated underspending of £60,000, relating to the unallocated share of savings from previous service reconfigurations during 2007/08, after taking into account further allocations for expenditure in support of the Hythe ferry and other changes. This sum has been carried forward to the 2009/10 budget to help manage the anticipated pressures on the public transport support budget next year, including anticipated higher costs arising from the area bus service re-tendering process.

6.2. The current budget monitoring position suggests that overall passenger transport expenditure is expected to be contained within the service cash limit. A sum of £22,000 was retained in the 2008/09 budget as a contingency to meet any further pressures, after allowing for the sum of £60,000 being carried forward to 2009/10, of which £16,000 has now been earmarked to provide additional support to the operation of the Hayling Island ferry. This leaves £6,000 uncommitted to cover any further cost pressures that may emerge during the remainder of the year.

7) Waste Management

7.1. The 2008/09 original budget for the waste contract related services budget was £45.833 million, based on estimated commitments at the time it was prepared during November 2007. No allowance was included in the 2008/09 base budget for growth in waste volumes beyond predicted 2007/08 levels, nor for future price increases, changes to landfill tax rates or other contract cost pressures.

7.2. As in previous years, a contingency amount has been set aside within the overall County Council budget to cover these inescapable pressures, the sum for 2008/09 being £4.377 million. Periodic allocations will be made throughout the year to adjust the waste management cash limit, based on quarterly assessments of cost variations.

7.3. Overall waste disposal volumes during the first nine months of the year have been lower, by 5.8%, compared with the corresponding period of 2007/08 and the allowance for growth of 2.2% included in the make-up of the central waste contingency. Within this figure, volumes from household waste kerbside collections have reduced by 1.9% year-on-year, whilst household waste recycling centre (HWRC) volumes have reduced more significantly by 16.0%. This latter figure reflects the continuing impact of the new contract arrangements for the management of the recycling centres and the introduction of trade waste controls, which has been successful in reducing waste volumes at these facilities.

7.4. The third quarter's waste contingency adjustment shows a reduction of £1,102,000, reflecting variations in the cost of the waste contract during this period, and this sum has now been subtracted from the service's cash limit. This significant cost reduction during the third quarter reflects the lower waste volumes and increased use of incineration, together with additional income from the sale of ferrous metals, reductions to the costs of paint disposal at HWRCs and reduced charges for third party landfill tax. So far during 2008/09 only £129,000 of the central waste contingency has been utilised and it now seems likely that the call on the central contingency from the normal operation of the waste contract this year will be in the region of £3 million below the sum provided.

7.5. As mentioned above, the budget for the waste contract related services has been reduced by £3,155,000 to reflect financial adjustments relating to the decision to use prudential borrowing to finance the cost of architectural enhancement pass through costs at the Chineham, Marchwood and Portsmouth Energy Recovery Facilities. As a result of this decision, sums for pass through costs included in the 2008/09 budget, together with the previous year's creditor provisions for these costs, will not now be required.

7.6. These one-off savings are being used in the current financial year to reduce the amount of prudential borrowing that would otherwise be required to fund the lump sum capital payment to clear the remaining pass through costs debt.

7.7. The 2008/09 revised budget provision for the non-contract waste management services is £1.282 million, excluding staffing and support costs. It is currently anticipated that overall expenditure will be contained within the cash limit for this part of the waste management budget, which covers the main non-contract related activities such as facility management, promotions and development and the disposal of abandoned vehicles.

8) Staffing and Support Costs

8.1. The overall 2008/09 revised budget for departmental staffing and support services is £27.837 million, mainly covering the running costs of the Environment department, together with the remaining agency arrangements with the district councils.

8.2. In constructing the 2008/09 revised budget, provision of £417,000 was included for additional expenditure relating to the award of costs against the County Council following the outcome of recent legal appeals, together with an allowance to cover an anticipated shortfall in income from land search fees. This additional expenditure was partially offset by excess staff turnover savings of £71,000 and an underspending of £70,000 available from the waste management budget for the disposal of abandoned vehicles. This left further balancing savings of £276,000 to be achieved during the remainder of the year from within the staffing and support costs area to fully absorb the balance of the additional expenditure.

8.3. A further detailed review of all staffing and support budgets has been carried out as part of the January budget monitoring exercise and further actual or planned staff turnover and other savings of £228,000 have already been identified. However projections suggest that the already reduced estimate for land search fees is unlikely to be fully achieved and an allowance of £50,000 for further income shortfalls in this area should be provided.

8.4. An additional late pressure has also recently emerged following the arbitration panel's decision on the 2008 staff pay award which was 0.3% higher than the interim pay award of 2.45%. It is estimated that higher expenditure of £71,000 on the staffing and support services budget will result from this higher pay award which would also need to be absorbed.

8.5. The forecast outturn for the staffing and support services assumes that the residual savings of £169,000, which are now required to balance the budget, are fully achieved during the remaining weeks of the year. It is anticipated that further incidental savings would arise, as a matter of routine, from any further staff vacancies and minor underspendings against non pay budgets. However, the position is being kept under review in case management action is required to defer expenditure during the final weeks of the financial year.

9) Conclusions

9.1. The overall revenue budget monitoring position continues to be satisfactory. No significant variations are anticipated on the main cash limited operational budgets for highways maintenance, public transport or the non-contract waste management services. However, expenditure on highways winter maintenance is expected to be some £300,000 in excess of the budget, which would need to be met from central balances. Waste disposal volumes continue to be lower than assumed in the 2008/09 budget and the overall call on the central waste contingency is now expected to be significantly below the sum provided.

9.2. On the budgets for staffing and support services, good progress has already been achieved in identifying the further savings of £276,000 built into the revised budget, although additional provision of £50,000 needs to be included in the budget plan to cover further reductions in land search fees and a further £71,000 to cover the higher cost of the 2008 staff pay award. The budget forecast assumes that the residual savings of £169,000 which still need to be identified during the remaining months of the year to fully balance the budget position are fully achieved by the end of the financial year.

10) Recommendation

Please see Executive Summary for recommendation.

CORPORATE OR LEGAL INFORMATION:

COMPREHENSIVE RISK & IMPACT ASSESSMENT:

1) Equalities Impact Assessment:

a) Assessment of the Race Relations (Assessment) Act has been considered in this monitoring report. No adverse impact has been identified in terms of race, creed or gender.

2) Impact on Crime and Disorder:

a) As this is a general report covering the whole of the budget for the department, it cannot set out detailed crime and disorder implications. However, crime and disorder implications of specific issues raised in the budget would be reflected in individual service plans and project reports where appropriate.

3) Climate Change:

a) As this is a general report covering the whole of the budget for the department, it cannot set out detailed climate change implications. However, climate change implications of specific issues raised in the budget would be reflected in individual service plans and project reports where appropriate.