Agenda item

Joint report of the Treasurer and Chief Fire Officer (DSFRA/16/1) attached.

(NOTE:  this item was considered in conjunction with the item at Minute DSFRA/48(b) below – Capital Programme 2016-17 to 2018-19).

The Authority considered a joint report of the Treasurer and the Chief Fire Officer (DSFRA/16/1) on the proposed revenue budget and council tax levels for the Authority in 2016-17. 

The final local government finance settlement for 2016-17 – the Settlement Funding Assessment – had been announced by central government on 8 February 2016 together with the offer of four-year settlement (to 2019-20) to those authorities who wished to take it.  Authorities would have until 14 October 2016 to confirm whether or not to accept the four year settlement.

The individual settlement funding assessment figures for 2016-17, £26.873m, represented an 8.6% reduction on the Settlement Funding Assessment for 2015-16 (£29.413m).  The settlement figures represented a 24.9% reduction in total over the period to 2019-20.  This was the seventh worst settlement (compared to an average reduction of 20%) but was in line with figures already included in the Authority’s medium term financial plans.  As in previous years, this Authority responded to the provisional 2016-17 expressing disappointment with the settlement and the lack of recognition of rural sparsity and its impact on the Authority’s cost base.

The provisional settlement also indicated that the Authority would receive a share (£0.104m in 2016-17, rising to £0.340m in 2019-20) of the total Rural Services Grant (£20m in 2016-17 rising to £65m in 2019-20) only made available to the most sparsely populated rural areas.  The final settlement, however, indicated that the Grant total had increased from £20m to £80m in 2016-17, with this Authority’s share increasing accordingly by £0.317m to £0.421m in 2016-17.  This would, however, be paid as Section 31 grant meaning that it would count as income only and not be included in base funding.

Additionally, the Authority had been awarded a share (£0.149m in 2016-17 and £0.188m in 2017-18) of the £300m transitional grant allocated to local government for the two financial years concerned and paid only to those authorities suffering the most severe grants reductions in the first two years of the four year settlement.

At the same time as announcing the final Settlement Funding Assessment for 2016-17, the government had also confirmed, as part of the provisions introduced by the Localism Act 2011, that – for this Authority – an increase in Council Tax beyond 2% for that financial year would trigger the requirement to hold a referendum.  For this Authority (having fifteen billing authorities), the costs associated with holding a referendum – estimated in the region of £2.3m – were considered prohibitive.  For this reason, this Authority had made representations to the government to apply a cash increase limit rather than percentage increase but to date these representations had not proven successful, albeit that the flexibility to adopt a cash amount (specifically, a £5 threshold) had been afforded to some Police and Crime Commissioner areas and shire district councils.

The report set out two options in relation to the council tax and budget requirement in 2016-17:

Option A – freeze council tax at the 2015-16 level (£78.42 for a Band D property); and

Option B – increase council tax by 1.99% above 2015-16 (to £79.98 for a Band D property).

The amount of precept income was £0.859m more than anticipated as a result of a 2% increase in Council Tax base across the area of Devon and Somerset, linked to property increases e.g. the new Cranbrook development in East Devon.  Additionally, following a review of Council Tax collection rates by district councils, the amount of surplus available to the Authority had increased by £0.230m. 

Information received from billing authorities confirmed that, in net terms, the Authority would receive some £0.061m less in business rate income in 2016-17 than previously reported.  As referred to previously, the final settlement had confirmed for this Authority an increase in Section 31 grant for 2016-17 of £0.466m which, when taken with the reduction in business rate income, nonetheless reflected a net increase in funding of £0.405m since the provisional settlement. 

Even allowing for the above increases, however, both Options A and B would result in a reduction of revenue funding for the Authority in 2016-17.  Option B, however, would result in a smaller reduction of £0.734m as against £1.637m for Option A, resulting in available funding for 2016-17 of £73.976m (Option B) or £73.073m (Option A).  The core revenue budget requirement for 2016-17 was, however, £77.198m and consequently the report identified several savings totalling £3.222m to be delivered during the financial year and which were necessary to facilitate the setting of a balanced budget on the basis of approving Option B.  Should Option A be approved, however, it would be necessary to reduce by £0.9m the proposed revenue contribution to capital spending contained in the core revenue budget requirement for 2016-17 to deliver a balanced budget.  A budget book had been compiled for each identifying the net revenue budget requirement in terms of employee costs, premises costs, supplies and services etc. 

The Medium Term Financial Plan modelling tool assessed the likely “base case” scenario for indicative savings likely to be required between 2017-18 and 2019-20.  This indicated that further cumulative savings of circa £6.4m would be required by 2019-20.  The previously-reported strategy to deliver these savings focussed on:

·         cost reductions against general budget lines;

·         reductions in support staff costs; and

·         reductions in operational staffing costs.

Specific proposals to deliver these savings would be subject to reports to future Authority meetings.

In accordance with Section 65 of the Local Government Finance Act 1992, non-domestic ratepayers had been consulted on the proposals for expenditure as contained in the report.  Additionally, limited public consultation (in the form of face-to-face surveys in Exeter, Taunton, Torquay and Plymouth) had been undertaken in line with the Authority decision on 14 December 2015 (Minute DSFRA/42 refers). 

The report outlined the methodology used for the consultations for which the results indicated:

·         that, of those surveyed, 61% of the business community and 85% of the public felt it reasonable to increase in council tax in 2016-17 to lessen the impact of funding cuts; and

·         that, of those agreeing that an increase would be reasonable, the majority favoured a 2% increase (72% business community;  76% public).

A statement by the Authority’s Chief Finance Officer on the robustness of the budget estimates and the adequacy of the levels of reserves and balances, as required by Section 25 of the Local Government Act 2003, was appended to the report.

The Resources Committee, at its meeting on 10 February 2016, had considered budget options and associated council tax levels for the Authority in 2016-17 and had resolved to recommend to the Authority (Minute RC/13 refers):

(a).      that the level of Council Tax in 2016-17 for a Band D property be set at £79.98, as outlined in Option B of report RC/16/3, representing a 1.99% increase over 2015-16; and

(b).      that the additional £0.405m of Section 31 grant funding be added to the amount to be transferred into the Earmarked Reserve for future capital expenditure.

Following a debate on the issue, Councillor Greenslade MOVED, with Councillor Knight seconding, that the recommendations of the Resources Committee be approved whereupon it was

RESOLVED

(i)         that, as recommended by the Resources Committee at its meeting on 10 February 2016 (Minute RC/13 refers), the level of council tax in 2016-17 for a Band D property be set at £79.98, as outlined in Option B in report DSFRA/16/1, representing a 1.99% increase over 2015-16;

(ii)        that, accordingly, a Net Revenue Budget Requirement for 2016-17 of £73,976,600 be approved;

(iii)       that, as a consequence of (i) and (ii) above:

(A)      the tax base for payment purposes and the precept required from each billing authority for payment of a total precept of £46,325,437 as detailed on page 3 of the relevant budget book (circulated separately with the agenda for the meeting) and summarised overleaf be approved:

(B)      the council tax for each property bands A to H associated with the total precept of £46,325,437, as detailed on page 3 of the relevant budget book (circulated separately with the agenda for the meeting) and summarised below be approved; and

(iv)      that the additional £0.405m Section 31 grant funding received for 2016-17 be transferred to the Earmarked Reserve for future capital expenditure thereby reducing the requirement to borrow;

(v)       that the Treasurer’s ‘Statement of the Robustness of the Budget Estimates and the Adequacy of the Authority Reserve Balances’, as set out at Appendix A to report DSFRA/16/1, be endorsed.

 (SEE ALSO MINUTE DSFRA/47(d) ABOVE AND MINUTE DSFRA/48(b)  BELOW).