1. Budget 2012/13 and Medium Term Financial Plan 2012-16 Budget & Finance Overview & Scrutiny 8 th February 2012 Councillor Muhammed Butt Deputy Leader of the Council

2. 2011-12 – Forecast outturn On target to achieve budget for 2011/12 Challenging year with considerable service and financial risks 97.5% of planned £41.7m of savings ‘One Council’ savings achieved Strong financial disciplines applied rigorously throughout the year Reserves not used to achieve target – end year reserves £10.080m

3. 2011/12 Forecast Outturn (Based on December 2011 figures) Latest Position Over/(Under) Spend £’000 Service Areas Adult Social Services292 Children and Families108 Environment and Neighbourhoods0 Regeneration and Major Projects(106) Finance and Corporate Services/ Central Services (114) 180 Central Items / Government Grants (180) Net Over/(Under) Spend 0

4. Financial Pressures 2011/12 (1) Children & Families - Social Care placements (£318k), Legal Costs (£131k net) and delay in closing Crawford Avenue (£190k) Adult Social Care – Placement costs (£800k), Transitions (£280k net), frontline agency staff (£600k) and Brent Transport (£400k) offset by operational savings Environment & Neighbourhoods - Delay in achieving Library savings (£250k) and metered parking offset other transport savings

5. Financial Pressures 2011/12 (2) Regeneration & Major Repairs – Temporary accommodation (minus £250k net) Corporate Services – Schools payroll losses (£250k), Procurement and Design Services Central costs – Debt servicing costs (minus £384k) from lower interest rates and slower drawdown on Civic Centre

6. Economic situation Europe expected to be in full recession; UK ‘on the edge’ with risk of double dip - Strong risk of Euro break-up Government borrowing up now over £1,000,000,000,000 OBR downgrade of growth forecasts for 2012/13 and 2013/14 – impact on public finances? Public sector pay restraint/pensions overhaul Rising unemployment for another 18 months Inflation peaked at 5.2% now 4.2% and falling Interest rates remain at 0.5% until end of 2014 or beyond House prices falling/flat in most of UK

7. Settlement for Brent for 2012/13 £m Adjusted Formula Grant 2011/12165.060 Floor Reduction (7.4%)(12.215) Base Formula Grant 2012/13152.845 Add 2011/12 Council Tax Freeze Grant2.575 Formula Grant 2012/13155.420 Further 7.4% reduction in grant - cumulative 19.3% cut over 2011/12 and 2012/13 Business rates collected in England in 2012/13 (£23.1bn) exceed Formula Grant payable (£22.9bn) for the first time – excess used to fund Council Tax freeze grant

8. Real terms Formula Grant Loss - 2011/12 to 2016/17 (Effective grant – Business Rate retention in force from April 2013) Post CSR

9. Council Tax Localism Act 2011 allows the government to determine levels of council tax increase above which local authorities are required to seek approval via a local referendum For 2012/13 this has been set at 3.5% for London authorities 2012/13 Council Tax Freeze grant equal to 2.5% increase in funding. Brent - £2.575m receivable in 2012/13 only – propose acceptance This funding is in addition to 4 year grant in 2011/12 – 2014/15 This is NOT an excessive rise as defined in the Localism Act and thus is not subject to a referendum

10. Real terms Council Tax Loss - 2011/12 to 2015/16 (Assumes a static Council Tax base)

11. Brent Council Tax 2012/13 3 rd year of Council Tax freeze GLA Requirement to be added on – expect £306.72 not £309.82 – Decision on 9 th February £’000 Proposed Brent budget260,392 Less Formula Grant(155,420) Less Net Surplus on Collection Fund(774) Total to be met from Council Tax for Brent Budget104,198 Taxbase (Band D equivalents)98,398 Band D Council Tax (£)£1,058.94

12. Budget process Proposals developed by the Executive, taking account of the advice of officers. The key processes for doing this are as follows: Borough Plan and updated medium term financial outlook considered by the Executive in July 2011; Away-days involving both Executive and Corporate Management Team members considered key service and budget issues likely to affect the council in future years; Development by officers, in consultation with relevant Lead Members, of budget proposals for individual service areas; A process of external consultation with residents and businesses; Consideration of matters raised by Overview & Scrutiny Approval to the detailed budget proposals in the report and publication

13. The basis of our budget Sustainable medium term plan which allow Council objectives and priorities to be met – not just a 1 year issues Realistic spending totals year-on-year (no use of reserves) Reserves maintained at agreed level Maintain real value of Council Tax where possible Investing for transformation Commitment to efficiency Control debt interest costs through judicious use of prudential borrowing

14. Budget Requirement 2012/13 Change on 2011/12£’000 Budget requirement 2011/12267,889 add inflation provision2,025 add cost pressures7,158 less change in central budgets(3,456) less service area savings(11,724) less reduction in contribution to balances(1,500) Proposed budget requirement for 2012/13260,392 Requirement£’000 Service area budgets240,634 Non-ringfenced Grants(27,213) Central items41,180 Inflation provision and cost pressures and savings held centrally4,791 Contribution to balances1,000 Proposed budget requirement for 2012/13260,392

15. Service Area Budgets 2012/13 2012/13 Revised Base Budget £’000 Cost PressuresSavings 2012/13 Draft Budget £’000 % % Adult Social Services89,9362,229 2.5 (2,613) (2.9) 89,552 Children & Families52,9281,690 3.2 (3,216) (6.1) 51,402 Environment & Neighbourhood 36,691641 1.7 (3,259) (8.9) 34,073 Regeneration & Major Projects 33,8641,194 3.5 (1,781) (5.3) 33,277 Central Units31,781 1,404 4.4 (855) (2.7) 32,330 Total Service Area Budgets 245,2007,158 2.9 (11,724) (4.8) 240,634

16. Impact of the One Council Programme 2010/112011/122012/132013/142014/15 ActualForecastBudget £'000 Cross-cutting savings/cost avoidance 10,09929,41934,67142,03448,534 Service project savings/cost avoidance 1,59012,27922,68829,35233,148 TOTAL PROGRAMME SAVINGS11,68941,69857,35971,38681,682 Total Programme costs(4,290)(2,639)(4,017)(6,017) NET PROGRAMME SAVINGS7,39939,05953,34265,36975,665

17. Risk Assessed reserves = £12m 4½% of net budget requirement Risk Assessment for Reserves setting Potential Risk Average Likelihood Net risk £’000% Demand risks6,500 20.0% 1,300 New legislation and other statutory changes9,500 20.0% 1,900 Interest rate risks5,000 20.0% 1,000 Procurement risks 3,900 20.3% 790 Pay risks 600 20.0% 120 Grant risks 2,600 19.0% 495 Savings/income risks40,584 15.0% 6,088 Asset management risks1,000 10.0% 100 Major disaster500 30.0% 150 Total General Fund revenue risks70,184 17.0% 11,943

18. Schools Schools budget overspent by £5.7m at the end of 2010/11 and forecast £7.2m by end of 2011/12 Principle issue is SEN/Statemented spending – Schools Forum have approved a plan to recover deficit by 2014/15 but relies on no further overspending in-between School balances are £12m – 6 th highest in London based on last CIPFA statistics Flat-cash settlement for 2012/13 with £6,236 per pupil (compared with England average of £5,082) Pupil premium up from £488 to £600 per disadvantaged pupil Forum have asked for 15% reduction in centrally funded items – we do not propose to agree this.

19. HRA From April 2012, new HRA self financing system is being implemented, under which HRA Subsidy will be abolished in return for a one-off redistribution of debt. The HRA budget for 2012/13 has therefore been compiled on the basis of this new framework No cross subsidy permitted with General Fund Average 7.14% Rent increase (RPI + ½% + ¼ of the way to target rent) 2011/12 – overspend of £0.4m but HRA still £0.7m surplus balances ; Rent collection 99.6% Optimised ALMO – new management agreement needed from September 2012 – focus on collaborative savings 30 Year Business Plan being prepared for member approval in Spring.

20. Capital Programme Resources Amended 2011/12 position (third quarter) £’000 2012/13 £’000 2013/14 £’000 2014/15 £’000 2015/16 £’000 Grant and External Contrib.(66,750) (61,426)(47,103)(33,208)(17,361) Capital Receipts(15,507)(23,775)(7,315)(8,815)(22,320) S106 Funding(13,595)(14,156)(15,781)(8,523)(7,940) Unsupported Borrowing(12,545)(2,280)(6,730)(6,972) Self-funded borrowing(33,409)(80,453)(1,718)(200) Total GF Resources(141,806)(182,090)(78,647)(57,718)(54,793) Housing HRA(8,704)(13,846)(9,284) Unsupported Borrowing(5,953)0000 Self-funded borrowing(11)0000 Total Resources(156,474)(195,936)(87,931)(67,002)(64,077)

21. Capital Programme Capital is not free money – it has long term consequences, particularly when budgets are falling 2012/13 £m 2013/14 £m 2014/15 £m 2015/16 £m Budget Requirement (£m)260.4258.8254.6259.5 Capital Financing Charges (£m)25.626.628.129.7 Capital Financing as a % of budget9.82%10.28%11.04%11.43% 2012/13 £’000 2013/14 £’000 2014/15 £’000 2015/16 £’000 Cumulative unsupported borrowing costs684261,0071,599 Impact on Band D Council Tax – using 2012/13 council tax base of 98,398 of unsupported borrowing £0.69£4.33£10.23£16.25

22. Medium Term outlook Continued (increased?) pressure on public sector budgets – local government likely to bear the biggest strain Indications of grant equivalent cuts of 5-8% in 2015/16 and a further 7-9% in 2016/17 April 2013 – large number of changes implemented Abolition of Formula Grant – introduction of Business Rate retention Localisation of Council Tax Benefits with only 90% of current funding Housing Benefit reforms bite / HB fraud transfers to DWP Community Infrastructure Levy Audit Commission replacement Recruitment/Retention issues – 4 year pay freeze, increased pension costs, undervaluing of public sector workers, chaotic change

23. Medium Term Financial position Savings based on Council Tax increases of 3.5%; 2.5%; 2,5% respectively – significantly higher if lower or nil rises Allowance for pay inflation of 1% in 2013/14 and 2014/15 and 2% in 2015/16; No general allowance for non-pay inflation Levies: Forecast to grow from £2.579m in 2012/13 to £2.803m in 2013/14, £3.043m in 2014/15 and £3.293m in 2015/16 Freedom Pass/concessionary fares: £14.771m in 2012/13. Additional £1.360m (2013/14), £887k (2014/15) and £936k (2015/16) in forecast. New Homes Bonus – growth of £1.4m per annum Budget Gap2013/14 £m 2014/15 £m 2015/16 £m Net savings required: Annual9.311.65.3 Cumulative9.320.926.2

24. Summary Savings target over the spending review period (2011/12 to 2015/16) remains around £100m £41.7m savings largely on target for 2011/12 Considerable risks – cost pressures could be higher and savings make take longer to achieve than we think 2013 onwards – many changes in the funding regime, many as yet unspecified Savings on this scale are painful and energy & morale sapping Civic Centre and regeneration remain the key focal points Preserving our reserves is critical in a time of heightened risk