Meeting documents

To consider the attached report.

 

Contact Officer:  Nuala Donnelly (01296) 585164

Cabinet had considered its initial budget proposals on 20 December 2017.  Due to the timing of scrutiny meetings, it had not been possible for these proposals to be reported to this scrutiny meeting.  Following the Government’s announcements in late December regarding the draft Grant Settlement 2018/19 for Councils and on other significant issues such as the future of New Homes Bonus, Cabinet had further honed its proposals and an updated set of budget proposals would be reported to the Cabinet meeting to be held on 9 January, 2018.  That report together with the updated Medium Term Financial Plan was also included as an appendix to the agenda.

 

The scrutiny committee was requested to indicate any comments that it had on the draft budget proposals for 2018/19, that it wished Cabinet to take into account (at the Cabinet meeting on 9/1/2018) in making final recommendations to full Council on the final budget proposals for 2018/19.

 

The key budget proposals that Cabinet was being asked to recommend to Council were:-

 

·                    to increase Council Tax by £5.00 for a Band D property, equivalent to a 3.48% increase from 1 April 2018.  This was the maximum allowable for lower tier councils.  The Government had assumed that each council would make maximum allowable increases and had reduced the amount of Grant awarded to Councils by an equivalent amount.

 

·                    subject to any amendments Members wished to make, recommend to Council the budget for 2018/19 and the Medium Term Financial Plan as detailed at Appendix A.

 

·                    to approve the use of £1.53m of New Homes Bonus to meet the costs of the Connected Knowledge programme in 2018/19.

 

·                    to agree the proposed fees and charges as detailed at Appendix E.

 

·                    to approve the level of the Band D Special Expenses charge for 2018/19, as detailed at Appendix F.  The precept charge of £45 was unchanged from the initial budget proposals.

 

The budget report also included information on:-

 

Government Grant Update

 

The draft Grant settlement for 2018/19 had been announced on 19 December, 2017, in which the Government had largely honoured the commitments within the 4 year settlement and left the pre-announced Grant numbers mostly unchanged. Importantly, the Revenue Support Grant and Baselined Business Rates settlements were virtually the same as those announced for 2018/19 (which was Year 3 of the four year settlement).

 

However, there had been a 1% increase in the Council Tax referendum thresholds across all Councils.

 

The Secretary of State for Communities and Local Government had also announced a formal consultation on a review of relative needs and resources which would feed into a new funding system that would be introduced in 2020 to 2021.  Alongside the new methodology, a new phase for business rates retention programme would also be introduced.  The aim was for local authorities to retain 75% of business rates growth from 2020 to 2021, and was intended to be a lever and incentive for local authorities to grow their local economies.

 

The mechanism for this would be through incorporating existing grants into business rate retention including the revenue support grant, and the public health grant.  Local authorities would be able to keep that same share of growth on their baseline levels from 2020 to 2021, when the system was reset.

 

In 2016/17, the government had introduced the concept of negative revenue support grant and this remained an issue for some councils.  The Secretary of State had announced that he would be relooking at this element during the forthcoming year, but had warned that any solution would need to be found from within the existing local government funding system.

 

The announcements heralded the most fundamental change to the settlement formula since business rates retention was introduced.  However, with no more funding in the system it was likely that the historic downwards trend would continue.  As such, the Council’s strategy around commercialism and efficiency was considered the right strategy to deal with the financial challenges facing the council.  The additional freedom around council tax increases would soften the challenges marginally, although new pressures, such as those associated with inflation, were likely to absorb any respite offered by them.

 

New Homes Bonus

 

The Government had announced that there would be no new changes to the way New Homes Bonus operated.  The baseline growth would remain fixed at 0.4%, with NHB only paid on growth above this.  AVDC would receive £6.3m in 2018/19 which included previous year’s delivery.  Nationally, NHB payments of £946m would be made in 2018/19.

 

Actual numbers for future years would still depend upon actual housing growth.  However, the decision not to make changes provided sufficient certainty to validate the revenue contribution assumption included within the Medium Term Financial Plan.

 

The draft budget settlement had also confirmed that local authorities could increase planning fees by 20% where they committed to investing the additional income in planning services.

 

Business Rates Pooling

 

The membership of the pool in 2016/17 which was formed around the retention of the Disproportionate Growth Levy had been AVDC, Bucks County Council, Bucks Fire and Rescue, Chiltern District Council and South Bucks District Council.  As part of the finance settlement the government has confirmed that this pool would continue into 2018/19, unless any of the pooling members notified that they wished to withdraw within 28 days of the provisional finance settlement being announced.

 

It had been recommended that AVDC continue with the pooling arrangement in 2018/19, as it was believed there would again be a gain from it.  No account had been taken of any anticipated gain in the 2018/19 budget proposals so any gain achieved would be placed in the Business Rates Equalisation Reserve.

 

Nationally, a number of local authorities were participating in 100% retention pilots in relation to business rates.  The government had announced a number of further county pilot areas as part of the finance settlement and had said that it might invite further pilots in 2019/20.  The relationship between the 100% retention pilots and the government’s intention to deliver a 75% system by 2020 were still unclear.

 

Fees and Charges

 

Fees and charges are reviewed as part of the annual budget setting review process.  The proposed fees and charges for 2018/19 were detailed at Appendix E.

 

A significant review was planned during the forthcoming financial year of car parking charges and, in particular, season ticket prices.   Any proposed changes to income levels might potentially be implemented in year.  This additional income had not been factored into the financial plan.

 

The fees and charges in relation to Taxi Licensing were subject to the review of the Licensing Committee and were excluded from the proposed list of charges.

 

Council Tax

 

The initial budget proposals recommended increasing Council Tax from 1 April 2018 by the assumed maximum expected amount of £5.00 (3.48%) for a Band D property.  This was the maximum allowable for lower tier councils and would represent an increase equivalent to 10 pence per week and will increase the Band D Council Tax for Aylesbury Vale District Council to £149.06..  The Government had assumed that each council would make maximum allowable increases and had reduced the amount of Grant awarded to Councils by an equivalent amount.

 

Increasing Council Tax by this amount would generate £362,400 and help to protect services valued by residents and businesses in the Vale.

 

In the finance settlement announcement, government had also confirmed they intended to defer the setting of referendum principles for Town and Parish Councils for 3 years.

 

Impact on the Budget Proposals

 

The numbers announced in the draft Finance Settlement in December had been as expected and only very marginally different to those assumed in the Cabinet’s initial budget proposals.

 

Consequently, the Revenue Support Grant for 2018/19 had provisionally been set at £3,826,500 for 2018/19 which was £12,700 less than was previously assumed.  The MTFP had been amended to reflect this by adjusting the proposed contribution to balances in 2018/19.

 

Reserves and Balances

 

Members were informed that earmarked reserves represented the prudent saving of sums against the recognition of future financial events which, if not prepared for, would be difficult to deal with at the point they occur.  In short, earmarked reserves were an essential part of sound financial planning.  The reserves were held for legitimate reasons and the balances were reasonable given a fair assessment of the budgetary pressures that they are held against.

 

It is expected that the total balance held in reserves would dip significantly over the next 2 years as the pressures against which they are held materialised and the infrastructure schemes, for which the New Homes Bonus was held, were delivered.

 

The Council also held general working balances as insurance against unexpected financial events.  This includes failure to generate expected income as well as financial claims against the Council.  The current minimum assessed level of balances was £2.0 million which had been arrived at based upon a risk and probability assessment of potential budgetary factors during 2018/19.

 

Medium Term Financial Plan (2018/19 and After)

 

The report to Cabinet in November 2017 set out the rationale for the core assumptions used in the Medium Term Financial Plan.  Whilst some of the uncertainty surrounding the Government Settlement and the future of News Homes Bonus had now diminished following the publication of the draft Settlement in December, there were still multiple uncertainties and risk factors which needed to be managed beyond 2020.

 

The single biggest issue that was likely to remain was the ongoing and severe impact of the reductions in Government Grant and how public sector austerity continued to impact upon local government, as a whole, and the demands of the communities it serves and the services it provided.

 

The reality of continued public sector austerity through this Parliamentary term had been confirmed within the 4 Year Funding Settlement.  Further, the Chancellor had announced within his Autumn Statement that he expected the austerity agenda to continue into the next Parliamentary term, thereby potentially spanning another 6 years.

 

Special Expenses

 

The Cabinet report included a recommendation that the Special Expenses budget for Aylesbury Town remain frozen at its current level for 2018/19.

 

The draft budget and proposals under development were attached as appendices to the 9 January Cabinet report as follows:-

·                     Appendix A1 – MTFP – 2018/19 to 2022/23 – Final Proposals.

·                     Appendix A2 – Summary of Changes.

·                     Appendix B – Budget Proposals 2017/18 to 2022/23 (General Fund Revenue Balances).

·                     Appendix C – Budget Savings identified in 2018/19 budget planning.

·                     Appendix D – Budget Pressures identified in 2018/19 budget planning.

·                     Appendix E – Fees and Charges (Amendments) schedule.

·                     Appendix F – Aylesbury Special Expenses – Summary Budget 2018/19.

 

Members referred to the Cabinet reports, updated information and appendices whilst considering this matter.  They requested further information and were informed:-

 

(i)            Appendix B – it was clarified that the Council had received £2,000 from HS2 in 2017/18.  It was likely that mitigation and other work that AVDC had to do in relation to HS2 would be funded on a cost neutral basis.  It had been proposed that the £50,000 allocated to Vale Commerce would be used to explore new commercial opportunities more widely.

 

(ii)           Appendix C (Budget Savings) and Appendix D (Budget Pressures) – an explanation was provided on some of the budget savings and pressures.  Members were informed that many of these related to 2017/18 and was reporting on savings/pressures that had already been realised or dealt with.

 

(iii)          MTFP 2022/23 – that work had not yet been done to identify savings for the 2022/23 financial year, which explained the £1.006m in unidentified savings.  By contrast, savings had been identified in the MTFP that would allow balances budgets to be delivered for the next 4 years.

 

(iv)         MTFP (Appendix A1) – it was acknowledged that the MTFP assumed an annual 1% growth in the Council Tax base and that future increases could be greater due to Aylesbury Vale being a growth area.

 

(v)          Aylesbury Vale Broadband – that monies received from the sale of AVB would be used to repay the loan.

 

(vi)         Aylesbury Vale Estates – that AVDC had received a dividend of £200,000 last year.  AVE was planning to make a dividend payment of £300,000 for 2018/19, although the budget proposals were more cautious and had assume no increase.

 

(vii)        that the impact of Brexit and the retention of business rates from 2020 on the Council’s future budgets were difficult to quantify.

 

Members also commented:-

·                    Page 49 (Appendix C – Budget Savings) and Page 50 (Appendix D – Budget Pressures) – it was requested that future reporting on budget savings and pressures include some more explanatory information on the proposals to assist with Members’ understanding of the issues.

·                    Page 49 – Waste Services (UPM Contract – Recycling Credits) – that it might be helpful for the Environment and Living Scrutiny Committee to look at how recycling costs could be mitigated beyond the current contract.

·                    Page 59 – Cornwall Meadow – Cabinet were asked to check whether there should be an additional line item to pick up that the car parking charge for up to 3 hours at Cornwall Meadow was 50 pence?

 

The Committee also had a lengthy discussion on the Aylesbury Town Special Expenses.  The Chairman informed Members that he would be attending tomorrow evening’s Cabinet meeting and he would be happy, on behalf of the Committee, to report the Committee’s deliberations and to urge Cabinet to look at starting a serious ongoing dialogue with Aylesbury Town Council relating to devolving these assets/services.

 

RESOLVED –

 

(1)          That the scrutiny committee was supportive of Cabinet’s budget proposals for 2018/19 together with the Medium Term Financial Plan, as detailed in the reports to Cabinet on 9 January 2018.

 

(2)          That Cabinet be asked to take into account scrutiny’s comments in finalising the budget proposals for 2018/19 to be submitted to full Council.