Oral report of the Corporate Director of Finance
Minutes:
The Chairman welcomed the Corporate Director of Finance to the meeting in order to make an oral report on the implications of the Comprehensive Spending Review (CSR).
The Corporate Director of Finance reported that the Local Government Settlement was currently awaited and was expected in the week commencing 6 December 2010. This was close to the publication date for the December Cabinet papers and there were likely to be timing issues in terms of the information available to submit to that meeting.
In making her oral report, the Corporate Director of Finance clarified, in so far as was possible given the information available and current uncertainty, the implications for the Council and other issues as follows:
· the Department for Communities and Local Government had faired relatively badly compared to other government departments;
· there would be a 28% reduction in local government funding in a 4 year period;
· there was currently a funding gap of £16m;
· the cash position was unknown;
· it was expected that cuts would be front loaded;
· the Council would receive equivalent funding from government in order to deliver a 0% Council Tax increase in 2012;
· in terms of specific grants, the assumption had been made that a service would be scaled back in line with grants but more work was required on this area;
· there would be additional funding for Adults and Childrens’ Services and most specific grants related to these two services;
· some budget ring-fences may be removed;
· it was unknown whether some grants would be protected;
· there would continue to be reform to the Housing Revenue Account;
· there was likely to be significant changes to the benefits system, including measures to cap the total amount of housing benefit payable. The White Paper on benefits also indicated that Council Tax Benefit would become a local responsibility by 2013/14 and would be subject to a 10% cut;
· there would be big reductions in capital funding which would be of particular significance in relation to schools;
· the police and fire services would be subject to cuts but it was likely that these would be loaded in later years.
· The Council would still be required to contribute to the Carbon Reduction Scheme but would not receive any redistributed funding back.
Members asked questions, sought clarification and challenged assumptions and, in response, the Corporate Director offered clarification as follows:
· despite the best effort of officers to get a head start in the budget and associated consultation processes, this had always proved difficult. Attention tended to focus on the coming year rather than years 2 and 3. Officers had tried to do a thorough review via the Better Deal for Residents programme;
· she was not able to forecast the outcome of the consultation in relation to social care and the decision on who would receive Freedom Passes would be a political one;
· the assumption that would be fed in to the December Cabinet report was that there would be a 10% reduction in the 3 types of grant support. Compared to previous assumptions, the most difficult area would be specific grants;
· a re-calculation of the funding gap based on the new assumptions that the Council would receive assistance in maintaining a 0% Council tax increase and receive an additional £1m in relation to Adults and Children Services would be circulated to Members;
· there was, so far as she was aware, no guidance in terms of a likely capping level in relation to Council Tax;
· it was a reasonable expectation that the report submitted to Cabinet in December be detailed but, due to timings, it was likely that some clarification in relation to the tax base and settlement would be required. The draft report was being prepared and if the settlement information was not received in time for the Cabinet report publication, draft estimates would be included and then updated. The Corporate Director added that officers were planning for the worse case scenario;
· in terms of progress on the Medium Term Financial Strategy, if it were to be front loaded, the situation in years 2, 3 and 4 would be improved. The transformation programme had generated savings of £25m and the expectation was that the end of year 2 position would look quite healthy;
· in terms of the viability issue in relation to the Housing Revenue Account (HRA) raised by a Member and his comment that tenants and leaseholders appeared to be subsidising maintenance of estates, the Corporate Director advised that there was a planned reduction of the HRA and that it was not possible to draw down from balances indefinitely. Tenants and Leaseholders would be consulted on the draft budget. She added that whether or not to charge freeholders for the services they received would be a political decision;
· it was expected that less than 100 households would be affected by the £400 per week cap in terms of housing benefit but she would check the figures and advise Members accordingly;
· the additional costs arising from the IT outsourcing were factored into the current analysis of the £16m funding gap. Whilst the funding gap changed all the time, the final price for the IT contract was close to that reported to Cabinet and Council;
· in terms of the Primary Care Trust’s (PCT) £30m overspend, the transfer of additional responsibility of public health to the Council and whether any contingency had been included or liability on the Council, the Corporate Director advised there had been a meeting to discuss funding issues. The PCT’s problems were cause for concern. Responsibility for clients had been discussed, agreed and signed off in writing a couple of months previous. She did, however, remain concerned about risk. There was £125,000 contingency;
· from an officer point of view, there was considerable lobbying and also via London Councils, Local Government Association and London Treasurers. There were strong views about the ‘floor’ level as 29 London Boroughs were below this. There was a general concern across London that funding would be moved to more rural areas. She added that Harrow did not have the capacity to respond to all consultations which was why a subscription was paid to London Councils to respond;
· there was considerable joint activity with other boroughs, in particular in relation to joint procurement, for example, resourcing project, occupational health, trading standards and adults services. Officers had investigated the opportunities for a shared service. A number of boroughs were trying to amalgamate management teams;
· Members would be provided with background templates to the budget proposals in December. If Members wished to meet with Corporate Directors to discuss a particular service area that could be arranged. She undertook to discuss, with the Administration, the Member’s point that it would be helpful to Members to know what options were considered in formulating the recommendations as it would otherwise be difficult to determine whether a sensible option had been chosen. She reminded Members that officers were often somewhat constrained in terms of options;
· there was a risk that property searches may reduce;
· deliberations were required as to whether the New Homes bonus should be included in draft budget so that it was relied upon or whether to treat it as a windfall. The Corporate Director agreed that the Member’s proposal to include the social housing element was helpful.
The Chairman thanked the Corporate Director of Finance for her attendance and oral report. He also thanked Members for their questions and contributions.
RESOLVED: That the oral report of the Corporate Director of Finance be noted.