Agenda item

(Director of Finance & ICT) To consider the attached report (FPM-012-2012/13).

The Director of Finance & ICT presented the Financial Issues paper, which would provide the framework for the Council’s budget in 2013/14 and highlighted a number of financial issues that would affect the Council in the short to medium term.

The Director reported that the greatest areas of current financial uncertainty and risk to the Council were:

·                     Local Government Resource Review – the proposal was now for Councils to retain only 50% of their Business Rates, so the system of Formula Grants would remain for the foreseeable future. The Council had seen consistent reductions in its Formula Grant over the last five years.

·                     Business Rates Retention – if the Council increased its Business Rates collection by £1million then it would only get to keep an extra £234,000.

·                     Welfare Reform – The Council would need to save £1million from the current cost of Council Tax Benefit and nearly everyone of working age would now need to pay 20% of their Council Tax bill. Other measures coming through were the Universal Credit, the weekly benefits cap to limit the maximum amount of benefit a person could receive, and the ‘Bedroom Tax’ to restrict the amount of housing benefit received if a person was deemed to be under-occupying.

·                     New Homes Bonus – the Council would receive £450,000 in 2013/14 and this would be allocated to the Continuing Services Budget. A prudent position had been adopted for future years with no New Homes Bonus included after 2013/14.

·                     Double Dip Recession – This could adversely affect the Council’s income streams, particularly from the market at North Weald Airfield.

·                     Development Opportunities – These would not be included in the Medium Term Financial Strategy until firm decisions on the different projects had been made.

·                     Community Budgets – Essex had been appointed as a pilot area, but some of the proposed schemes could be detrimental to the Council, particularly with regards to the management of property assets.

·                     Organisational Review – Any potential changes in the structure of the Council, following the appointment of a new Chief Executive, had not been included.

The Director reported that two different scenarios for the future had been presented to the Cabinet Committee. The first scenario was based upon a 1% increase in the Council Tax for 2013/14, whilst the second scenario was based upon a 0% increase in Council Tax. The Council was in a stronger financial position than had been anticipated, but there were still a number of uncertainties and challenges facing the Council. Despite all the uncertainty, the Council could look forward with a degree of confidence. At the end of 2012/13 the balance on the general fund reserve was predicted to exceed £9.3million and the balance on the District Development Fund to be just under £2million. This position of financial strength meant that whatever the outcomes were of the funding and benefit changes, a measured view could be taken on their implementation. The Cabinet Committee was requested to determine which scenario to recommend to the Cabinet, along with the guidelines to base the budget for 2013/14 on.

The Chairman welcomed the Council’s position of financial strength, and felt that this should be used to help the residents of the District during the current economic uncertainty. The Leader of the Council agreed that the Council’s financial strength precluded them from having to make ‘knee-jerk’ reactions to the forthcoming Government measures. The Council should be positive about the future and the sensible option to help out the residents of the District would be to opt for the 0% Council Tax increase scenario.

Recommended:

(1)        That the 2013/14 budget guidelines be set in accordance with the revised four year forecast as follows:

(a)           The ceiling for Continuing Services Budget net expenditure be no more than £14.91million including net growth;

(b)           The ceiling for District Development Fund expenditure be no more than £560,000;

(c)           The balances continue to be aligned to the Council’s net budget requirement and that balances be allowed to fall no lower than 25% of the net budget requirement; and

(d)           The District Council Tax not be increased, with Council Tax for a Band ‘D’ property remaining at £148.77.

(2)        That a revised Medium Term Financial Strategy for the period to 2016/17 be developed accordingly; and

(3)        That communication of the revised Medium Term Financial Strategy to staff, partners and other stakeholders be undertaken.

Reasons for Decision:

By setting out clear guidelines at this stage, the Cabinet Committee could establish a framework to work within in developing growth and savings proposals. This should help avoid late changes to the budget and ensure that all changes to services had been carefully considered.

Other Options Considered and Rejected:

To wait until later in the budget cycle to provide guidelines if it was felt that more information, or a greater degree of certainty, was necessary in relation to a particular risk. However, any delay would reduce the time available to produce strategies that complied with the guidelines.