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Budget & Medium Term Financial Plan 2012/13 – 2015/16 Budget & Finance Overview & Scrutiny Committee 8 th November 2011 Clive Heaphy / Mick Bowden Finance.

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Presentation on theme: "Budget & Medium Term Financial Plan 2012/13 – 2015/16 Budget & Finance Overview & Scrutiny Committee 8 th November 2011 Clive Heaphy / Mick Bowden Finance."— Presentation transcript:

1 Budget & Medium Term Financial Plan 2012/13 – 2015/16 Budget & Finance Overview & Scrutiny Committee 8 th November 2011 Clive Heaphy / Mick Bowden Finance and Corporate Services

2 Economic Update Economic predictions are gloomy and universally negative Recovery has ground to a halt – GDP predicted 0% in 2012 Inflation remains high at 5% but predicted to fall Interest rates remain low at 0.5% and not predicted to rise Households reluctant to spend – fear of jobs; falling real income; high inflation on basic goods and services Uncertain times ahead – requires tough longer-term decisions

3 Downturn deeper than previous recessions Recovery slower to get started End is a long way off Policy impact of projections : employment, interest rates and consumer confidence 2015/16 marks the end – Political implications GDP Recovery: A long, slow haul

4 Severe gap opening up between Wages and Inflation Even if inflation falls (as predicted), gap only likely to narrow rather than reverse Impacts on consumer confidence and spending behaviour Public sector worse hit than private sector Inflation vs. Wages : A widening gap

5 SR10 – 20 th October 2010 COMPOSITION OF THE TIGHTENING IN © Institute for Fiscal Studies £ billionOctober 2010 Spending Review Tax 29.8 Spending 80.5 Investment spending 17.0 Current spending 63.5 Of which: Debt interest 10 Benefits 17.7 Public services 35.7 Total tightening % Spending 73 % Tax 27

6 General Coalition Objectives Elimination of structural deficit over 5 years Reduction in local government funding from £29.7bn to £24.2bn over 4 years – a reduction of 26% in real terms Introduction of Universal Credit and Housing Benefit Reforms – “it pays to work” Priorities – NHS, Schools, Infrastructure (Crossrail, London underground, HS2) Dependency on strong continuing economic growth Public sector pensions - commit to a form of defined benefits and increased employee contributions Banking Levy £2.5bn annually

7 Local Government Policy impact Headline 7.1% pa real terms reduction in formula grant in ; Less ringfencing of LG revenue grants (except simplified schools grants, public health grant) Council Tax Benefit: reduce by 10% - localise CTB from Household benefit caps £500/£350 p/w from 2013 Borrowing from PWLB 1% more expensive – although rates have now fallen by 1% Schools budget up 0.1% per annum (including pupil premium) - numbers up 0.7% Additional £2bn by to support social care Community budgets pilots in 16 areas New homes bonus / Tax increment financing / Business Rate reform Funding to freeze council tax in – support for 4 years - now extended

8 Themes /13 to 2015/16 Continuously reducing budgets On-going demand pressures in key areas Unable to make small efficiency savings – looking increasingly to transformation changes or to stop providing services Need to have absolute clarity about what Brent in 2015/16 will look like Smaller in spend terms and headcount Targeted rather than universal spending / Controlled demand Clear priorities – do what we do well; stop doing things that are not a priority or affordable More commissioning than provider?

9 Efficiency or Transforma tion

10 Funding Gap – 2011/12 – 2015/16 Revised Financial Forecast 2012/ / /122012/132013/142014/152015/16 £'000 Gross spend requirement291,388294,336302,810319,100335,704 Gross resources(294,894)(282,816)(281,241)(269,871)(267,556) Gross Cumulative Funding Gap / (Surplus)(3,506)11,52021,56949,22968,148 Contribution to/(from) Balances2,5002, Deficit / (Surplus) on Collection Fund1, Net Cumulative Funding Gap / (Surplus)013,75921,56949,22968,148 Net Annual Deficit / (Surplus)-13,7597,81027,66018,919

11 Central Items – Reasons for the increase £4.1m provided over four years for additional capital financing charges £3.8m provided over four years for increases in levies predominantly the fixed element of the West London Waste levy £3.9m provided over four years for increases in Concessionary Fares. The Concessionary Fares budget for 2011/12 is £13.8m and there is provision for a 9% increase in 2012/13 and 5.5% in subsequent years. £1.7m provided over four years for increases in a number of areas including South Kilburn Development (£0.6m), Premature Retirement Compensation (£0.5m)and Carbon Tax (£0.6m)

12 Demand and inflation – Reasons for the increase £5.0m provided annually to meet demand and loss of income pressures e.g. transfer of social care clients to Adults, additional temporary accommodation charges following the benefit changes, children’s social care legal costs and the loss of Council Tax and HB grant £12.3m provided over four years for non pay inflation £5.6m provided over four years for additional contributions to the Pension Fund £7.8m provided for pay awards of 2% annually from 2013/14 £1.3m provided over four years for national insurance and other changes

13 Council Tax Freeze Grant Currently receiving £2.6m per year up to and including 2014/15 relating to 2011/12 freeze Announcement 3 October further £2.6m for 2012/13 only if Council Tax frozen in 2012/13 Not clear what level of Council Tax increase will be deemed “excessive” in 2012/13 Possible Option 1 – 3.5% / 2.1% / 0% Possible Option 2 – staggered – 0%, 3.5%, 2.1% Possible Option 3 – staggered with no increase in 2014/15 – 0%, 3.5%, 0% Each 1% raises £1m Unless tax base grows, resources are lost permanently

14 Council Tax and temporary grant £m

15 Formula Grant (or equivalent) £m

16 BRENT COUNCIL - Medium Term Financial Projections 2012/ / /132013/142014/152015/16 £m Council Tax Increase (Possible option 2)0.0%3.5%2.1%2.0% Funding gap after identified savings less Additional Council Tax Revenues Adjustment for 2012/13 Council Tax Freeze Grant Funding Gap after Council Tax increases New Homes Bonus-1.7 Lower growth/inflation than assumed-2.0 New Central Savings identified in budget planning0.0 Use of Redundancy Earmarked Reserve Funding Gap after agreed adjustments

17 Risks Level and complexity of savings Low reserves - £9.5m in 2011/12 – Raise to £12.0m in 2012/ outturn position Lack of clarity regarding future funding (Business Rate Retention) Lack of growth of Council Tax base Demand Growth Lack of clear prioritisation Pensions Economic stagnation Policy changes

18 Allows LA landlords to support their own stock from their own (rent) income Self financing HRA from April 2012 / Abolish HRA Subsidy (£8.5m to Brent in 2011/12) One off national debt reallocation based on assessment of debt that can be afforded over 30 years (receipt to Brent around £185m) National rent convergence policy continues Will lead to:- –HRA Business Plans guided by local priorities; –more money for Council Housing; and –more transparency for tenants Council Housing Finance Reform

19 National Rent policy for rent increase –RPI (Sept 11) = 5.6% plus –0.5% real increase plus –At least 1.1% uplift to target rent This equates to around a 7.1% average rent incease Draft forecast debt reallocation due in Nov 2011, and final due Jan 2012 Feb 2012 Executive – agree HRA budget and rent increase 28 March 2012 – Debt repayment day HRA

20 Maintain a strategic approach and use a variety of tools ‘One Council’ Programme continues to deliver 2 / 3 of the saving but at increased pace But we also need to: Identify further savings through ceasing activities or scaling back their scope Keep strict control of new commitments and match with corresponding savings Take tough decisions early to deliver full year savings over the next three years Ensure no overspends in – we must come in on budget Closing the gap Immediate Actions

21 Develop clear and detailed understanding of Political objectives and priorities Stop things that are not priority All central items to be robustly reviewed “Inescapable” Growth to be minimised Council Tax Strategy for the medium term Consider limiting Capital Programme or repaying debt Learn and join with others Closing the gap Strategic Actions

22 DateAction JulyFirst service and budget planning awayday SeptemberService planning and budget guidance issued September/ October Work on formulating draft budgets OctoberFirst stage budget meetings between F&CS and service areas 2-3 NovemberSecond service and budget planning awaydays – issues to be considered as part of the First Reading debate 8 NovemberBudget and Finance Overview & Scrutiny – 1 st Reading Debate November / December Continue to develop proposals for achieving 4 year budget targets including ‘star chamber’ meetings 21 NovemberFull Council. First reading of Policy Framework and Budget 7 DecemberSchools Forum meets to agree funding formula and budget issues 12 DecemberReport to Executive on Performance and Finance Review 2010/11 – 2 nd Quarter 15 DecemberPCG - Detailed consideration of budget issues Up to JanuaryConsultation with residents, businesses, voluntary sector, partner agencies and trade unions on budget proposals Service and Budget Planning Timetable for (1)

23 DateAction Mid-DecemberConfirmation of the following year’s funding from central government 15 DecemberRelease of the Mayor’s consultation draft GLA budget 11 JanuaryBudget and Finance Overview & Scrutiny collects evidence and discusses 1 st interim report 25 JanuaryGreater London Assembly considers draft consolidated GLA budget End of JanuaryPCG agree budget proposals to be presented to February Executive 1 FebruarySchools Forum meets to agree the recommended Schools Budget 9 FebruaryGLA ‘s final consideration of consolidated budget FebruaryBudget and Finance Overview & Scrutiny receives budget proposals prior to the Executive. Discusses 2 nd interim report 13 FebruaryExecutive considers and announces administration’s final budget proposals, agrees fees and charges for the following year and agrees savings/budget reductions for the HRA budget report as well as the overall average rent increase 16 FebruaryBudget and Finance Overview & Scrutiny receives the outcome of the Executive’s budget report and agrees a final report 27 FebruaryFull Council agrees budget Service and Budget Planning Timetable for (2)


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