Agenda No 8

AGENDA MANAGEMENT SHEET

Name of Committee Cabinet

Date of Committee 17 June 2010
Report Title 2011/12 Budget and Medium Term Business
and Financial Planning Process
Summary The report outlines the resources available to the
authority for funding the Council’s priorities. It then goes
on to outline the process to be followed in reaching the
planning decisions contained in the 2011/12 Budget and
the 2011-13 Corporate Business Plan and Medium Term
Financial Plan.

For further information Virginia Rennie Gereint Stoneman

please contact: Group Accountant Corporate Planning
Tel: 01926 412239 Manager
vrennie@warwickshire.gov.uk Tel. 01926 412378
gereintstoneman@warwickshire.
gov.uk
Would the recommended No.
decision be contrary to
the Budget and Policy
Framework?

Background papers None

CONSULTATION ALREADY UNDERTAKEN:- Details to be specified

Other Committees ..................................................

Local Member(s) ……………………………………

Other Elected Members X Cllr Tandy, Cllr Roodhouse, Cllr Appleton, Cllr
Gittus, Cllr Davis, Cllr Moss - for information

Cabinet Member X Cllr Farnell, Cllr Heatley, Cllr Hayfield

Chief Executive ……………………………….

Legal X Sarah Duxbury – for comment

Finance X Dave Clarke - reporting officer

Other Chief Officers X Monica Fogarty – reporting officer

District Councils ..................................................

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Health Authority ..................................................

Police ..................................................

Other Bodies/Individuals ..................................................

FINAL DECISION NO

SUGGESTED NEXT STEPS: Details to be specified

Further consideration by ..................................................

this Committee

To Council X Council will consider the draft Corporate Business

Plan in December 2010. It will agree the 2011/12
budget and Corporate Business Plan at its
meeting on 15 February 2011 and the 2011-13
Medium Term Financial Plan at its meeting on 29
March 2010.

To Cabinet X Cabinet will receive further reports on the

development of the 2011/12 Budget prior to the
Council meeting in February 2011.

To an O & S Committee ..................................................

To an Area Committee ..................................................

Further Consultation ..................................................

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 Agenda No 8

Cabinet – 17 June 2010

2011/12 Budget and Medium Term Business and Financial

Planning Process

Joint Report of the Strategic Director, Resources and

Assistant Chief Executive

Recommendation
Cabinet are requested to approve the process and timetable for preparing the 2011/12
Budget, Corporate Business Plan and Medium Term Financial Plan outlined in the
report and shown in Appendix A.

1 Background and Context

1.1 The Corporate Business Plan, Budget and Medium Term Financial Plan are
the key documents in outlining the direction of travel of the organisation.
Together they provide a focus to the delivery of sustainable but improving
services for the citizens of Warwickshire within a medium term resource
framework, reflecting the financial environment within which we operate. We
continue to be committed to the integration of our financial and service
planning, and delivering a business-led budget.

1.2 With all of the work that took place as part of agreeing the 2010/11 Budget and
the 2010-13 Corporate Business Plan, the 2011/12 financial and business
planning process is starting from a much stronger base than has been the
case in recent years. Already in place or under development are:

• A vision for 2013 in the Corporate Business Plan that will provide a more
stable basis for decision-making.

• A Transformation programme and a partial savings plan for the next two
years, and

• Service statements and the cross cutting reports covering all aspects of
service delivery, alongside directorate service plans, providing greater
detail on the service changes expected over the life of the Administration.

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1.3 But, this does not mean all the issues are resolved:

• The existing 3% savings plans need to be revisited to firm up the detail in

respect of future years. These plans will remain insufficient to close the
budget gap, by £28 million, over the next three years.

• The emerging Transformation plans do not, as yet, provide detail on the

quantification of either service benefits or any potential savings that could
be used as a basis for setting the 2011/12 budget.

• The resource forecasts (see Section 3) are based on assumptions about

government grants, council tax increases and levels of emerging
spending pressure. At this stage it is not possible to know if these will
prove optimistic once future government plans to close the national
budget deficit become clearer. At the time of writing there are indications
of a further £1.165 billion to be saved across local government in
2010/11.

• There is no framework, across the organisation, for making decisions

about disinvesting or withdrawing from lower priority service areas.

1.4 Also, as part of thinking about how to develop the budget alongside the
delivery plan for the 2013 Vision, Cabinet have clearly expressed two aspects
that they would wish to see incorporated into the process:

• A greater choice about savings options with room for manoeuvre.

• The development of a common understanding of the rationale behind

savings proposals i.e. why some things are on the table and others are
not, requiring the development of a broader narrative to accompany any
budget proposals.

1.5 The purpose of this report is to seek approval of the proposed approach to
closing the budget gap in future years and developing the Authority’s service
plans in a way that is consistent with the budget decisions.

2 Timescales
2.1 Working backwards, members will take the final decision on the budget and
council tax for 2011/12 at full Council on 15 February 2011. However, allowing
time for consultation and scrutiny will require draft proposals being issued
before Christmas, as in the last two years. The difficulty of the decisions that
are likely to be needed to close the budget gap also suggests a significant
amount of time for internal debate will be needed, prior to going public with
any budget proposals, resulting in a need to push the timetable as far forward
as possible.

2.2 Pushing the other way is the timeframe for the next Comprehensive Spending
Review and announcement of Government grants in the autumn. Detailed

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 figures at authority level are unlikely before mid-November, although broad
brush figures may be available before this.

2.3 Combining these would suggest a high-level timetable as follows:

June Financial and business planning process agreed

June to September Detailed work developing proposals undertaken
September to December Internal consultation on proposals by SDLT, Cabinet and the
Conservative Group
December Draft CBP and Cabinet’s draft budget proposal published
February 2011/12 Budget and CBP approved

2.4 The timetable is set out in more detail in Appendix A.

3 Resource Forecasts
3.1 The latest resource forecasts are shown in Table 1 below. These show that
there remains a significant deficit to be closed in each of the next three years,
as has been referred to above.

Table 1: Overall Predicted Council Revenue Position

2010/11 2011/12 2012/13 2013/14
£m £m £m £m
Resources Formula grant1 92.092 90.250 88.445 86.676
Council Tax (2.5% year on year increase 230.544 238.081 245.863 253.900
assumed after 2010/11) 2
Surplus on council tax collection 0.432 - - -
Total Council Resources 323.068 328.331 334.308 340.576

Spending Net spend 3 323.068 319.636 341.846 366.289

Inflation and capital financing costs - 10.866 10.289 10.268
Identified spending pressures - 2.192 1.458 1.458
Indicative spending pressures - 10.000 13.000 14.000
Total Net Spending 323.068 342.694 366.593 392.015

Cumulative deficit - (14.363) (32.285) (51.439)

Savings Savings targets and plans already approved - 7.674 7.884 8.065
Deficit addressed in previous years to - - 14.363 32.285
balance the budget

Remaining deficit in year - (6.689) (10.038) (11.089)

Notes:
Formula grant figures assume a 2% cash decrease each year after 2010/11
Council Tax figures assume a 0.75% year-on-year increase in tax base in future years.
Net spend figures are the spend in the previous year adjusted for one-off or time-limited allocations

3.2 As yet there is nothing specific to suggest these forecasts should be updated.
However, in terms of sensitivity:

• Each 1% variation in formula grant compared to the above forecasts

would increase/decrease the level of savings required by £0.9 million.

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 • Each 1% change in the level of council tax, from the 2.5% annual
increase assumed above would increase/decrease the savings required
by £2.5 million.

3.3 In stark terms these figures show the current 3% annual savings target needs
to increase to an average annual savings target of 6% for all services, just to
close the budget gap. To present members with real choices, then potential
savings of, say, £50 million, not the £28 million required to balance the budget,
would need to be identified, equivalent to an average annual target of 10%.

3.4 In addition to a significant remaining budget deficit, there are a number of

other critical features of our financial environment that will impact. We do not
yet have details on how the Government’s deficit reduction plans of £1.165
billion for local government or the 2010 Comprehensive Spending Review will
impact on the authority. However, it is likely that these will involve (both in
2010/11 and future years), to differing degrees:
• Reductions in specific grants
• Reductions in capital grants
• The removal of ring-fencing, providing additional scope for members to
redirect resources to priority areas.
If any further information is available before the Cabinet meeting an updated
report will be provided.

3.5 It has to be recognised at the outset of the process that savings of this level
cannot be delivered by marginal efficiencies. The approval of significant cuts
and potentially the complete withdrawal from some areas of service provision
are likely to be needed.

4 Our Vision

4.1 The Corporate Business Plan 2011-13 and the 2011/12 Budget will be
produced against the Council’s current Vision, priorities and supporting
themes set out below.

Our Vision
Working in Partnership to put Customers First,
Improve Services and Lead Communities
Our priorities
• Raising educational attainment and improving the lives of children, young
people and families
• Maximising independence for older people and people with disabilities
• Developing sustainable places and communities
• Protecting the community and making Warwickshire a safer place to live
Our supporting themes
• Our Customers
• Our Partners
• Our People
• Our Resources
• Our Improvement
• Our Performance

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4.2 This Vision and the supporting document Transformation 2013 should form the
basis for service and financial planning moving forward.

5 Development of the Corporate Business Plan

5.1 The Corporate Business Plan is a 3 year plan which is refreshed annually. It
interprets and responds to national, regional and local influences and identifies
the activities and measures of performance we will adopt in response to these
influences.

5.2 Development of the Corporate Business Plan will follow the timeframe set out
in Appendix A and be finalised alongside the Budget in February 2011.

6 Development of the 2011/12 Medium Term Financial Plan and

Budget

6.1 The budget and medium term financial plan put the resources in place which
allow us to move towards the Vision. Four key principles have been central to
the development of the approach to financial planning outlined in the
remainder of this report:

• The need to ensure the process is priority-led and that the priorities on
which the budget and medium term plan are developed are agreed (i.e.
the Vision and CBP),

• The need to start the process with a realistic understanding of the

medium term financial climate and the decisions this will necessitate,

• The need for early political engagement and provision of an adequate

opportunity for political debate throughout, providing sufficient time for
sensitive issues to be discussed, and

• The need to ensure that decisions are clearly based on evidence and
that a clear understanding is developed of the implications of the
decisions and any follow-up work required prior to implementation.

6.2 Even more so than in previous years, the key issue for the medium term will
be affordability. There will be continued pressure to deliver better services and
respond to public expectations whilst delivering low tax increases against a
backdrop of increasingly tight grant settlements. The central question remains
– how do we deliver better for less – as closing the budget gap will be
central to our planning over the medium term.

6.3 Overall, the recommended process itself is little changed from last year.
Diagram 1 below outlines the main inputs and outputs from a budget and
financial planning process focussed on affordability.

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Diagram 1: Medium Term Financial Planning Process

VISION

Priorities
for
change

Efficiency Long Term

Opportunities Resource
Need
Available
Resources

CONSIDERATION Resourced Corporate

Unavoidable OF Plans
Priorities
Spending AFFORDABILITY
Commitments

Service Reductions
(in light of vision and
priorities) Cuts
Efficiency Programme Directorate
Plan Plans

Budget

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6.4 The process aims to ensure that the overall structure and make-up of the
budget reflects the Council’s priorities and presents information and options to
Members that allowed informed decisions to be made. So moving the
Authority towards the delivery of its long term vision. The role of both Members
and SDLT in the budget and planning process would then have three distinct
phases of work:

Table 2: Phased Approach to the Development of the 2011/12 Budget

Actions
Phase 1 • Agreement on the priorities
for change and service
reductions over the period of • List of potential service to stop
the current administration
Phase 2 • Scrutiny of any unavoidable
spending commitments
• Review of existing
efficiency/savings plans
Phase 3 • The consideration of
affordability, balancing the
priorities for service change
and reduction against the
outcomes of the scrutiny
exercise to determine the
draft budget proposal
Background Information Timetable
• Updated service contribution Completed by
statements the end of July
• Spending pressure forms Completed by
• Update of existing savings the end of
plans September
• Detailed new savings proposals Completed by
worked up on the basis of the the end of
prioritisation from Phase 1 November
• Spending pressures
recommended for funding from
Phase 2
• Existing savings plans
• Grant information from the
Comprehensive spending
Review

6.5 Phase 1
The output from Phase 1 is to achieve a degree of consensus on the priorities
for change and service reductions over the life of the administration. To
facilitate this, a number of pieces of work have already been commissioned:

• The updating of the service contribution statements prepared for the

budget process last year

• A list of services that could be stopped in their entirety

• The identification and quantification of any known spending pressures in

future years.

6.6 The purpose of Phase 1 is to enable early discussions on the areas to pursue,
prior to any detailed work being undertaken, to limit, as far as possible, the
extent of any abortive work.

6.7 The service contribution statements will have been updated, by mid-June, to
be consistent with the CBP and Transformation 2013 and to reflect:

• A working assumption that by 2013/14 services will only have 80% of the
resources they have this year. This is a way of identifying more potential
savings options than are needed to provide members with genuine
choice about the way forward.

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 • A narrative of the rationale used in coming to these conclusions to
generate a common understanding of why the direction of travel is being
proposed.

• The changes that would be required to the current method of service

delivery, and

• The services that would no longer be provided, consistent with the

rationale outlined above.

6.8 In this Phase, and in the subsequent Phases, it is proposed that initial scrutiny
and validation of the information is undertaken by SDLT. However, at each
Phase, Member involvement is critical if the final outcome is to reflect
Members’ priorities.

6.9 Cabinet are asked to approve the process and timetable for preparing the
2011/12 Budget, Corporate Business Plan and Medium Term Financial Plan
outlined in the report and shown in Appendix A.

DAVID CLARKE MONICA FOGARTY

Strategic Director, Resources Assistant Chief Executive

Shire Hall
Warwick
3 June 2010

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 Appendix A of Item 8

Business & Financial Planning Framework 2010/11

Business and Financial Planning Framework 2010/11
Month Budget Process Corporate Business Plan Directorate Service Plans

June Corporate Business and Financial Planning Process agreed by Cabinet

Cabinet agree budget
process and outline for
SDLT the expected
framework of any budget
proposals

July Phase 1: Prioritisation of SDLT begin consideration

areas for service change of the key corporate risks
and reduction agreed

September Phase 2: Spending Directorate contributions to Initial service planning

proposals scrutinised and the CBP developed guidance sent out to
existing savings plans Directorates
reviewed

October Phase 3: Consideration of detailed savings and service Directorate/service

reductions proposals from the Phase 1 prioritisation priorities considered and
clarified and risk
assessment completed

November Phase 3: 2011/12 draft
budget and medium term
financial planning proposals
drawn up for consideration
with the wider Group
Cabinet agree draft CBP
and key risks
Detailed Service Planning
Framework distributed to
Directorates based upon
Cabinet affirmation of the
priorities

December Cabinet formally consider Council agree draft CBP

draft budget proposals and agree key risks
Political Groups and O&S
Committee consider the
draft budget proposals

January Cabinet agrees formal O&S Committee agrees Specific targets for the
budget resolution specific targets for the Directorate Service Plans
CBP agreed

February Council agrees the Budget and CBP (incl. key risks)

March Cabinet and Council

consider and agree the
MTFP

April CBP and MTFP published on the WCC website Directorate Service Plans
published on the intranet
and copies placed in Group
Rooms

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