Archived decisions

HAMPSHIRE COUNTY COUNCIL

Decision Report

1. Approach to savings targets

1.1. This note considers the national context and likely future prospects of the County Council's financial position. Efficiency savings targets will be set by Cabinet when considering the medium-term financial strategy at its meeting in October. This report rehearses the likely trends for the Panel to consider in advance of firm targets being set.

2. National position

2.1. No changes are expected in the 2010/11 position as previously planned for, leading to the strategy of a 1.9% council tax increase. There is an additional 1% efficiency saving required, bringing that to 4% in 2010/11, but as this is to meet Gershon-style targets those savings can be made by improving efficiency and redeploying the resources released to improve services. There is no additional requirement to demonstrate budget reductions.

2.2. The position for 2011/12 and the next two spending review years is not yet known. No further information is likely until after a general election. Real term reductions can certainly be expected, however, on the basis of overall national public spending projections of 0.7% a year real terms growth but with cuts in capital that means a 0.1% real terms fall. Increased benefits and debt interest take that to a reduction in real terms of 2.3% (Institute of Fiscal Studies). A likely distribution of that total in favour of schools and health rather than for the locally controlled elements of County Council spend and the severe deterioration in economic prospects are likely to increase reductions further still.

3. Local position

3.1. The best current estimates would then provide the following pattern of funding, budget and council tax trends over the years based on the 2009/10 Budget assumptions:

3.2. The implied council tax increase of 3.8% in 2011/12 is unlikely to be politically acceptable.

3.3. It will require £10m to reduce the 3.8% council tax rise from 3.8% to 1.9% (some one-off assistance may be available from the underspend in 2008/09).

3.4. If a 2% grant reduction is assumed another £5m will need to be found.

3.5. An appropriate efficiency target is a minimum of £10m, or £15m if it assumed that Cabinet determines to spend the 2008/09 underspend of £5m in advance of 2011/12.

3.6. Another £2.5m would be necessary to cover likely losses on area based grant, taking an overall target to £17.5m.

3.7. That target would be on top of the current level of efficiency savings within cash limits, as retained by services (in 2009/10, £15m cashable budget savings were achieved plus another £5m which was "cashable" but with no budget savings).

3.8. There will also be political expectations that the County Council stays ahead of the game by helping the local economy and council tax payers during a recession (by finding "more for less"), concentrating its resources on front line services and setting up a corporate policy fund to enable invest-to-save type actions to be taken and perhaps targeted service improvements to be made.

4. Efficiency strategy

4.1. In that overall context, the efficiency strategy proposed is to aim:

· at this stage for £15m per annum recurring savings in 2011/12 and each year thereafter, with those savings being corporately available to complement any additional measures taken to deal with pressures arising in departments

· for additional longer-term savings to develop in parallel to improve future flexibility

4.2. That would mean retaining the existing processes to balance cash-limits.

4.3. In practice it is not possible instantly to turn on significant savings for potentially complex cost reduction exercises and a good deal of pre-planning is required. It is therefore proposed that work begins now to establish two strands of savings proposals;

· shorter term measures to be agreed in the autumn with a view to implementation during 2010/11. The aim would be to achieve some savings next year, which contribute towards building up the corporate policy fund and to achieve full savings in 2011/12 in order to ensure the required targets are met. Those potential projects are specified on this agenda

· longer term areas for investigation, for which the timescale would be to develop the approach over the remainder of 2009/10, work up full implementation in 2010/11 and achieve initial savings in 2011/12 but perhaps with full savings not impacting until subsequently. Those will be projects involving such factors as potentially difficult political decisions, possible up-front investment, dependency on factors external to the County Council or complex working across partner organisations.

4.4. The County Council is fortunate in that with no "burning bridge" in budget terms, it can plan in the medium term to take forward such projects without needing to accelerate them in a way in which could otherwise prove problematic. The trick will be to ensure that sufficient progress is made in those areas that the Council remains well placed for the medium term.

5. Measurement

5.1. The most reliable approach to ensure measurable budget savings would be for corporate agreement to be reached on the savings achievable department by department, and to adjust cash-limits to take account of these savings. That, provided it is based on a realistic and agreed view of achievability, provides appropriate incentives and a reliable means of demonstrating that budget savings have been achieved. More detailed assessment and tracking of actual savings (as opposed to budget adjustments) can then follow.

6. Recommendations

6.1. On that basis, it is recommended that the Panel:

· ensure that the programme of short term projects leading to savings available for corporate purposes is identified as part of the 2010/11 budget setting process

· ensure that those savings from short-term projects are projected to reach at least £15m recurring from 2011/12 onwards, but seek in addition to maximise the savings achievable from initial implementation during 2010/11

· at the same time, assess longer term projects to take forward with a view to full specification and planning in time to feed into the 2011/12 budget setting process.

CORPORATE OR LEGAL INFORMATION:

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