report for: cabinet · cabinet approved the year ahead statement in october 2010, and approved ......

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REPORT FOR:

CABINET

Date:

10 February 2011

Subject:

Final Revenue Budget 2011-12 to 2015-16

Key Decision:

Yes

Responsible Officer:

Myfanwy Barrett, Corporate Director Finance

Portfolio Holder:

Councillor Bill Stephenson, Leader and Portfolio Holder for Finance and Business Transformation

Exempt:

No

Decision subject to Call-in:

Yes (Applies only to those recommendations falling within the remit of Cabinet)

Enclosures:

Appendices listed overleaf

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No Appendix Page

1 Medium Term Financial Strategy

21 2 2 (i) 2 (ii) 2 (iii) 2 (iv) 2 (v) 2 (vi) 2 (vii) 2 (viii) 2 (ix) 2 (x)

Budget proposals in detail: Technical changes Inflation Cross Cutting Transformation Adults and Housing Children’s Services Community and Environment Place Shaping Legal and Governance Finance Chief Executive

22 23 24 25 27 29 31 33 34 35

3 Commentary 36 4 Provisional Local Government

Settlement 39

5 Budget book 42 6 Levies, contributions and

subscriptions 57

7 Policy on use of contingency 58 8 Schools budget 60 9 Risk assessment 64 10 Reserves policy 78 11 Virement Rules 80 12 Report of the Chief Finance

Officer 83

13 Model Council Tax Resolution 85 14 Reserves and provisions

forecast 88

15 Stakeholder meetings and events

90

Note: the page numbers in the table above refer to the small page numbers (bottom right of page) on the report itself and not the large numbers (bottom middle of page) that run throughout the agenda pack

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Section 1 – Summary and Recommendations

This report sets out the final revenue budget for 2011-12 and medium term financial strategy (MTFS) for 2011-12 to 2015-16. RECOMMENDATIONS: 1) That Cabinet asks Council to approve the budget to enable the

Council Tax for 2011-12 to be set 2) That Cabinet approves the Medium Term Financial Strategy at

Appendix 1 3) That Cabinet notes the planned investment in services and efficiency

programme 4) That Cabinet recommends to Council the policy on the use of the

contingency (Appendix 7) 5) That, in relation to schools, Cabinet approves the proposed changes

to the formula and recommends to Council the schools budget (Appendix 8)

6) That Cabinet refers the risk assessment (Appendix 9) to the Governance, Audit and Risk Management Committee for consideration

7) That Cabinet recommends to Council the reserves policy (Appendix 10)

8) That Cabinet recommends to Council the virement rules to be added to the financial regulations (Appendix 11)

9) That Cabinet recommends to Council that Members’ allowances are frozen and therefore the current approved Members’ Allowances Scheme is adopted for 2011-12

10) That Cabinet recommends to Council the model Council Tax resolution set out in Appendix 13

REASON: To ensure that the Council sets a balanced budget for 2011-12

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Section 2 – Report Introductory paragraph 1. The Council has adopted an integrated planning framework to ensure that the

Corporate Plan and Medium Term Financial Strategy (MTFS) are developed in tandem.

2. Cabinet approved the Year Ahead Statement in October 2010, and approved

a new draft vision and priorities. Following consultation the recommended vision and priorities are as follows:

Vision Working together: our Harrow, our community

Priorities: • Keeping neighbourhoods clean, green and safe • Supporting and protecting people who are most in need • United and involved communities: a Council that listens and leads • Supporting our town centre, our local shopping centres and businesses

3. Extensive consultation has been carried out on these priorities via the

residents’ panel and a campaign entitled “Let’s Talk”. A stakeholder event was held early in 2011 to feed back on the results of the consultation on the new vision and priorities. There is a separate report on the agenda which outlines the results of the consultation and sets out the new Corporate Plan and associated priorities.

Options considered 4. The development of the Corporate Plan and MTFS is a long process which

takes place over 6-9 months every year. The remainder of this report deals with the recommended budget for 2011-12 and the proposed MTFS.

Financial Context 5. The development of the medium term financial strategy is extremely

challenging because: • Harrow is already a relatively low spending council • Large parts of the budget are outside the Council’s control • Considerable savings have been made in previous years and this

makes it increasingly difficult to identify new areas for efficiencies and reductions

• The demand for services and expectations from central government are growing all the time

• The Local Government Settlement entails significant reductions in funding

6. Harrow is still experiencing the effects of the recession – for instance the

number of benefit claimants has increased from 16,600 to 19,500 from April 2008 to date, an increase of 17%.

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7. The demands on Children’s and Adults services due to demographic growth, court decisions, new guidance and regulations, and increasing complexity of need are growing all the time.

8. There is considerable risk in relation to the impact of changes to benefits,

initially housing benefit, on the community. There is a concern that landlords will not accept reduced rents due to the amount of surplus demand and that the cap on housing benefit will therefore push families from Inner to Outer London, and perhaps from Outer London into the rest of the UK.

9. Inflation is still running at over 4% which is putting added pressure on

spending levels. Council Tax Strategy 10. The report recommends a zero council tax increase in 2011-12. The

government is providing support which equates to a 2.5% increase to keep council tax levels down.

11. The government support for next year’s council tax freeze is confirmed for

2011-12 and 2012-13 in the Local Government Settlement and it was implied in the Spending Review report that it would continue throughout the four year period covered by the review. However, this will not be confirmed until the settlement for 2013-14 and 2014-15 is announced.

12. The planned council tax increase from 2012-13 is 2.5% per year. Budget for 2011-12 and MTFS 13. The MTFS in summary form is attached at Appendix 1, with a detailed

analysis of the proposed changes attached at Appendix 2. 14. The budget for 2011-12 is balanced. The current funding gaps in future years

are:

2012-13 £6.8m 2013-14 £11.2m 2014-15 £13.4m 2015-16 £11.6m

15. The funding gaps in the medium term include:

• Prudent amounts for capital financing and technical issues such as grant reductions, concessionary travel and contributions to reserves

• Inflation at 2% on pay and prices • Additional investment in services to reflect priorities, demographic change,

and the additional cost of waste disposal • The efficiency savings identified so far via the transformation programme • Council tax increases of 2.5% a year

16. Future funding gaps will be addressed through:

• Ensuring that capital investment, where possible, delivers a strong return • Making the best use of land and property assets and opportunities

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• Redesigning services to contain the growth in demand for services, for example early intervention to reduce future care needs and new methods of waste disposal to divert waste away from landfill

• Transformation projects to drive out efficiencies within the Council • Joint work with partners to drive out efficiencies • Income generation

17. As part of its longer term financial strategy, the Council is seeking to review

the level of the capital programme and strengthen its balance sheet – in time this may reduce some of the pressure on the revenue budget.

Analysis of budget changes 18. The change in the budget requirement for 2011-12 can be summarised as

follows:

£m Budget Requirement 2010-11 171.7 Capital financing costs and investment income 0.3 Reduction in area based grant and specific grants 8.5 Technical changes (including concessionary fares) 2.1 Inflation 2.2 Investment in services 5.4 Transformation programme and other efficiencies (14.7) Budget Requirement 2011-12 175.5

19. The investment and efficiency programme totals for each Directorate for 2011-

12 are summarised below:

Directorate Investment in services

£m Efficiency

Programme £m

Cross-Cutting Transformation (0.2) Adults and Housing 1.5 (4.3) Children’s Services 1.3 (2.5) Community and Environment 0.3 (4.5) Place Shaping 0.4 (0.6) Legal and Governance 0.1 (0.0) Finance 1.8 (1.9) Chief Executive 0.0 (0.7) Total 5.4 (14.7)

20. Further work is required to allocate the savings from cross-cutting

transformation projects and procurement (within Finance) to individual Directorates.

Investment in Services and Transformation Programme 21. The planned investment and impact of the transformation programme over 5

years is summarised overleaf:

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2011-12

£m 2012-13

£m 2013-14

£m 2014-15

£m 2015-16

£m Planned investment

5.4 3.0 1.9 1.5 1.5 Unallocated investment

2.0 2.0 2.0 2.0 Transformation programme

(14.7) (7.8) (4.4) (0.1) 0.0 Net Total

(9.3) (2.8) (0.5) 3.4 3.5 22. The planned investment addresses demographic pressures, the impact of

landfill tax on waste disposal costs, and the need to improve the Council’s IT. 23. The MTFS reflects the Better Deal for Residents programme which includes a

wide variety of projects in all Directorates, savings from enhanced technology and business processes, property rationalisation, and better procurement.

24. It is clear from the table that much progress has been made to generate

savings over the next 3 years, but that this needs to be extended to cover a longer period given the funding outlook.

Outturn for 2009-10 and budget monitoring for 2010-11 25. The Council underspent in 2009-10. The budget monitoring report for the third

quarter of 2010-11 shows that there are considerable pressures this year but all Directorates are working to come in on budget.

26. The ongoing impact of underspends and pressures identified during 2009-10

and 2010-11 to date has been factored into the draft MTFS and the situation will be kept under review. Most importantly the 2011-12 budget seeks to address the underlying issues in Children’s Services.

Technical Changes and Inflation 27. The assumptions behind the technical changes and inflation provisions are

explained in the commentary at Appendix 3 of this report. Local Government Settlement 28. Details of the Local Government Settlement for Harrow are set out in

Appendix 4. In aggregate the Council’s funding has reduced by around £7m. Budget Book 29. An analysis of the budget (objectively and subjectively) is set out in Appendix

5. This is the basis for the budget book for next year. Levies, contributions and subscriptions 30. A schedule of levies, contributions and subscriptions included in the 2011-12

budget is attached at Appendix 6.

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Impact Assessment 31. A summary of the impact of the budget proposals on the services provided by

each Directorate is set out below. This includes information on the equalities impact assessments that have been carried out with examples of action taken to mitigate the impact, and consultation on service changes where appropriate.

32. In some cases consultation is ongoing or further consultation will be carried

out. The budget for 2011-12 does include a contingency of £1m and this provides cover for savings that are subject to the outcome of consultation in the event that following consultation and equality impact assessments specific savings proposals are not pursued.

Adults and Housing 33. The Adults and Housing Revenue Budget for 2011-12 includes investment of

£1.5m to reflect anticipated growth in client numbers and care needs in the Learning Disability and Physical Disability client groups.

34. The Adults and Housing Revenue Budget for 2011-12 also contains a

substantial package of savings totalling £4.3 million. In addition a large part of the cross-council savings identified in this report will result in savings from Adults and Housing budgets.

35. The savings programme is focussed overwhelmingly on efficiency savings

driven by our new reablement model of care and better prices from our key public and private partners. The redesign of the adults care pathway for reablement has also meant that we have been able to considerably reduce agency spend across the service.

36. The savings have been designed to minimise impact on users, tenants and

employees, however some of the changes we are asking partners to make may have staffing impacts. We will be working with users and carers and tenants to ensure that they are placed in cost effective accommodation and that their care packages represent value for money. This may mean a change in care or accommodation arrangements in some cases.

37. Savings have been made in the voluntary sector in areas of duplication,

inefficiency or where the council is not the appropriate funder. Mitigation has been put in place to minimise impacts where appropriate.

38. Staff, users, tenants, leaseholders, partners and carers have been consulted

as appropriate on the revenue budget for the service. Equality Impacts have been considered in all cases and a number of adjustments made as a result.

39. There are a number of areas which are currently subject to consultation which

are shown in the budget. No decision has been made on these areas. The full consultation is scheduled to conclude at the end of April 2011 and the results will be reported back to cabinet later in the year. There are no alternative plans to achieve these savings if proposals are not implemented post consultation. Covering these savings is therefore the first call on the contingency fund established as part of the 2011-12 budget.

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40. Overall, the adult’s services budget protects quality and safeguarding of users but it exposes the Council to higher level of financial risk because there is limited provision in the budget, through the contingency, to manage the risk arising from the PCT’s financial position and changes in the health service. This position will have to be carefully monitored in year, as will our ability to manage without demographic growth in some areas.

41. There are significant funds in the health service to be allocated for social care

for the next two years. It is hoped this can be invested in community services, but this position is not yet clear and no savings can be assured because of this. A formal agreement is required, under the NHS operating framework, between the Council and the PCT, on the use of these new funds. The total for Harrow is £2.6m in 2011-12.

42. The Housing Department and residents are being exposed to substantial

change over coming years. Changes to benefits and housing grants mean high levels of financial risk to the general fund. A contingency has been established to cover their volatile position in 11-12, but the use of Temporary Accommodation and demand on housing services are growing.

43. Adults and Housing have an established system whereby all equality impact

assessments are quality checked by the chair of the Directorate Equalities Task Group before being signed off by the Corporate Equalities Officer.

44. Proposals that have resulted in a positive impact include:

• our market development strategy which has resulted in the availability of culturally specific personal assistants who are able to offer first language communication to service users.

• Development of 'Triageopoly', the Harrow Reablement model, that has been designed by service users for service users to ensure good understanding and access.

45. Responsibility for Public Health is due to transfer from the Primary Care Trust

to the Council from April 2013. The recent White Paper on Health suggests that the funding will be ring fenced and that the amount will be based on the spend in 2009-10. However, it is not clear at this stage exactly how much funding will be transferred to the Council to support these new duties.

Children’s Services Overview of Investment/ Efficiencies 46. The Children’s services budget has been under considerable pressure in the

last few years. The budget for 2011-12 includes growth of £1.3m to deal with both the underlying pressure and forecast demographic growth of 7% a year. There are still risks associated with the budget as the growth is building upon a very low base line. The Children’s Directorate are clear that the strategy is to keep numbers low, quality of service high, and costs down. However, if children and young people need to come into care the Council has to be able to fulfil its statutory duties and has legal obligations to protect children in the community. There is a risk that, with the increased stress on families, and the withdrawal of Education Maintenance Allowance and other support systems for young people, the care population may increase. To recognise this risk the budget also includes a contingency.

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47. The budget includes efficiencies from Children’s Services totalling £2.5m. In response to changing national expectations and reduced grant funding the School Achievement and Inclusion service is being rationalised. Going forward school improvement initiatives will be delivered mainly through a Harrow School Improvement Partnership whose work will be driven by the schools.

48. The youth service is introducing a range of initiatives that reconfigure the

youth services provision and service level agreements to focus on key target groups generating efficiencies of £400k. In addition savings of £300k are being sought from a reduction in the contract for the universal Connexions service. The resulting youth service provision will be aligned to the proposed new operating model for Children’s Services.

Equality impact assessments 49. A preliminary equality impact assessment was undertaken for each of the

efficiencies included in the 2011/12 budget to determine whether a full assessment was required. Children’s Services Directorate strives to ensure its commitment to equalities and have targeted service efficiencies in order to ensure there are no areas of negative impact.

Consultation 50. Extensive consultation has been undertaken with key stakeholders on the

future operating model for Children’s Services and the setting up of the Harrow School Improvement Partnership including:

• Integrated Targeted Services Consultation - December 2010 • Quality Assurance, Commissioning and Schools Division Consultation -

January 2011 • Harrow School Improvement Partnership Consultation – November 2010 • Harrow Youth Parliament Consultation, as a representative body for young

people across the borough – November/ December 2010 51. Additionally, where a service is due to end, such as the open award of the

Duke of Edinburgh Scheme, consultation events have taken place with users, their parents/carers and schools, to look at the impact and potential alternative provision.

Community and Environment Overview of Investment/efficiencies 52. Community and Environment Services are responsible for a diverse range of

front-line services. A majority of the capital investment programme will ensure that the council addresses a backlog of damage following severe winters and to continue to maintain the Borough’s infrastructure. Capital funding has also been sought for the refurbishment and restoration of key cultural destinations within in the Borough, which can be leveraged to attract funding from external sources.

53. The Directorate is committed to delivering excellent public services. The

Directorate seeks to maintain standards to services that the public value whilst making services efficiencies through innovative approaches to service

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delivery, the use of technology and more effective procurement and management of contracts.

Equality impact assessments 54. Preliminary equality impact assessments have been carried out to determine

whether it is reasonable for a full assessment to be undertaken. As the directorate delivers largely universal services, the impact can be neutral when applying to environmental infrastructure programmes. Further work will be undertaken prior to specific projects being initiated. Examples of issues emerging from the assessments include: • Library Change Programme: Concerns were raised during the consultation

that the self service technologies may have an impact on Age, Disability and Race. This has been mitigated through a proven design in the implementation of the self service technology in a number of other local authorities.

55. The annual equality impact assessment programme features in the service

plan, which is regularly reviewed Consultation 56. The directorate undertakes an extensive programme of consultation regarding

its transformation programme and has statutory requirements for consultation, for example, highways. Consultations that have recently been carried out include: • Transport Implementation Plan • Climate Change Strategy • Review of Council support to voluntary and community sector

Waste Collection and Disposal 57. The Council acts as a waste collection authority and therefore collects

recycling, organic waste and residual waste from households, businesses and other bodies. Organic and residual waste are disposed of via the West London Waste Authority (WLWA), which is a joint authority for six boroughs. From next year the costs of disposal will be covered by the six boroughs through a levy to cover the fixed costs and a “Pay as you throw” system. This charging mechanism incentivises the boroughs to minimise waste and maximise recycling.

58. Generally the cost of waste disposal per tonne is increasing year on year due

to the increase in landfill tax. WLWA is embarking on a major procurement to provide alternative treatment and disposal facilities to increase diversion from landfill and reduce costs in the medium to long term.

59. In 2011-12 WLWA is redistributing balances back to the constituent boroughs

so there will be a reduction in the cost. Place Shaping Overview 60. In 2011-12, to minimise impact on core services, the following have been

undertaken:

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• Built on technology investment to date and reviewed all processes,

systems and resource allocation within the Directorate in order to maximise efficiency and harvest savings without compromising core functions.

• Reduced expenditure on consumables. • Repositioned approach to support for businesses. • Increased charges to maximise income streams, taking account of current

market and economic conditions. • Created capacity to enable the Local Development Framework to be

progressed without the need for budget growth. 61. In 2012-13 and beyond, reductions in staff resources are required which will

reduce capacity and capability. However, core services will be maintained. 62. Central Government are consulting on changes to the national planning fees

with a possible option of service cost recovery. This may enable further cost gains to be realised and create a platform for further service development.

63. Equalities Impact Assessments have been carried out on all the proposed

efficiency savings. Examples of actions being taken to mitigate these are as follows:

• The removal of market factor supplements for some staff – this measure ensures equality across all staff in the service area and the impact of the change is being mitigated by alternative retention measures such as access to development opportunities. Staff have been fully engaged in the process and notice of changes has been given in good time.

• Changes to posts in Economic Development have increased job variety. The workload will need to be managed to ensure the staff have the capacity to complete workplans.

• The Government will provide a range of employment and business support initiatives. This will include the Work Programme, and Be Your Own Boss, but Harrow Council will cease to have a role in direct delivery.

Consultation 64. Director/Heads of Service have met with all teams in Place Shaping to inform

them of all relevant proposals. The Corporate Director has had 2 meetings with all Directorate staff and has carried out consultation which completed on 13th January 2011. Comments are currently being reviewed and the response to staff is being prepared. He has also met informally with all individual staff members identified at risk.

Legal and Governance 65. Investment is proposed to deal with the growth (and cost) of postal voting at

local elections and an historic misalignment of budgets within the Mayoralty service. Whilst absorbing a yearly 3% increase in legal casework, efficiencies will be made through the 'customer contact assess & decide' project, which will see customer contact for the Registrars Service being dealt with through Access Harrow; reductions in the cost of fees payable to the Solicitors’ Regulatory Society; and 'lean' reviews of legal processes.

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Finance 66. The Finance Directorate is seeking to

• Drive the financial strategy of the Council, and improve financial health/financial management

• Pay the right benefits at the right time • Continuously improve services for internal customers

67. The proposed budget includes significant investment in the Council’s IT service, via the contract with Capita, to improve performance, provide full disaster recovery, upgrade the infrastructure, and deliver the platform for transformation including remote and mobile working. A full equalities impact assessment and extensive consultation were carried out as part of the transfer of the service and this was reported to Cabinet and full Council earlier in the year.

68. The proposed budget also includes a procurement transformation which is

designed to drive out efficiency savings across the Council through better compliance, commercial negotiation and category management. The savings target is £2m per year, with investment in the function of £0.5m in 2011-12 to build the necessary capacity.

69. The budget includes some investment in the Finance function to build capacity

and improve balance sheet management, the control environment and support to the capital programme.

70. The Corporate Services blueprint, approved by Cabinet in January this year,

will drive out efficiency savings by automating more processes in payroll for instance. The blueprint was accompanied by an equalities impact assessment.

71. The Directorate is also leading on a review of concessionary travel and

proposals to change the way that the service is administered – centralising and moving to a single assessment – will come forward to Cabinet later in the year.

72. There are a range of smaller savings being made in insurance, parking

income collection, Corporate Anti-Fraud activity and occupational health. Chief Executive 73. Partnership, Development and Performance will be making savings over three

years that are enabled by the reduction in regulatory process following the abolition of the Comprehensive Area Assessment. In addition the Council's performance management process will be streamlined to avoid re-work and this is based on the premise that performance processes are undertaken consistently across Council services.

74. There will be significant savings in customer contact with the migration of a

range of new services into Access Harrow and with ongoing investment in channel migration and systems integration. Efforts to reduce avoidable contact will continue. Consultation with staff will continue through implementation. Equalities considerations have been taken into account and the impact should

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be low. Translation services are available. Hearing loops are in place on all desks. All desks are wheelchair accessible.

75. Human Resources and Development will lead on the procurement of a new

supplier of temporary and agency staff, working jointly with Hammersmith and Fulham.

76. Communications will streamline work across all channels to deliver a saving. Impact of budget on staff 77. The budget does have an impact on staff across the organisation. There are

individual proposals for restructures and/or deleting posts and there are transformation projects that result in a reduction in employee numbers. Every effort is being made to avoid compulsory redundancies where possible - through closely managing vacancies, improving our redeployment system and a voluntary severance scheme which was operated during 2010-11.

78. The impact on staff is being monitored for proportionality across grades -

senior management numbers will be reduced in line with the overall reductions.

79. The Trade Unions have been consulted on proposals affecting the workforce

at the Corporate and Directorate Joint Committees and the Better Deal for Residents Trade Union Forum.

Contingency 80. The budget includes a contingency of £1m. 81. The contingency in the base budget for the current year is £125k (which was

fully allocated to support grants to voluntary groups). This has been supplemented from unused pension provisions and other “technical” parts of the budget. An addition of £108k is included in the budget to provide a total contingency of £1m.

82. The contingency is intended to provide some cover for unforeseen events and

risks such as: • Demand for Children’s and Adults services • An increase in homelessness due to benefit changes • Achievement of income budgets • The outcome of consultation

83. The proposed policy for managing the contingency is attached at Appendix 7.

Funds will only be allocated from the contingency where there is clear evidence to support the case.

84. It is recommended that no funds are released from the contingency in 2011-12

until there is confidence about the delivery of procurement savings and clarity about the outcome of the consultation on Adults’ services.

85. During the current year the Council has received a grant of £300k for

homelessness and this has been set aside as an earmarked provision for future years.

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Fees and Charges 86. Cabinet approved the new fees and charges policy in October. 87. There is a separate report on the agenda setting out recommended fees and

charges for 2011-12. Members’ Allowances 88. In light of the economic position, it is proposed that members’ allowances will

be frozen in 2011-12. There are no proposed changes to the members’ allowances scheme.

Schools Budgets 89. The schools budget for 2011-12 is set out in Appendix 8. The per pupil DSG

funding in 2011/12 has been confirmed as £4,862, a cash freeze on 2010/11. 90. Cabinet is asked to approve the changes to the formula to allocate budgets to

individual schools as outlined in Appendix 8. Risk Assessment and Reserves Policy 91. The detailed risk assessment of the budget is attached at Appendix 9. 92. The most significant financial risks in 2011-12 are as follows:

• Uncertainty about the pay award and inflation for 2011-12 • Uncertainty about capital receipts for 2011-12 • The need to achieve revenue income targets • Possible increases in demand for services due to the recession, benefit

changes and demographic growth • The need to ensure that Children’s services can manage within the

approved budget next year, given the underlying pressures • The risk of litigation including planning appeals and procurement

challenges • The need to ensure that the transformation projects and other savings

identified are delivered • The funding challenges facing partner organisations, particularly the health

service 93. The proposed reserves policy is set out in Appendix 10. 94. Cabinet is asked to recommend the revised reserves policy to Council for

approval. If approved, the new policy will come into effect immediately. Virement Rules 95. The recommended virement rules are attached at Appendix 11. Report of the Chief Finance Officer 96. The report of the Chief Finance Officer is attached at Appendix 12. In

summary the budget is robust and reserves are adequate.

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Council Tax Resolution 97. The model council tax resolution is attached at Appendix 13. If party groups

recommend changes to the budget to February Council, a revised resolution will be produced in each case.

Capping 98. The proposed Council Tax increase for Harrow is zero, and as such the risk

of capping has been eliminated. GLA Precept 99. Appendix 1 excludes the GLA precept which is currently £309.82 for a band D

property. It is anticipated that there will be no precept increase in 2011-12, in line with the Mayor’s consultation budget. Therefore the combined council tax for a Harrow resident, at Band D, will be as follows:

Council Tax at Band D £ Increase Harrow services 1,186.55 0% GLA Precept 309.82 0% Combined total 1,496.37 0%

100. The final budget and precept for the GLA will be set at the London

Assembly meeting on 23 February. Reserves and Provisions Forecast 101. A reserves and provisions forecast is attached at Appendix 14. This

shows that the Council plans to maintain reasonable levels of general balances, earmarked provisions and reserves over the coming three years.

Housing Revenue Account 2011-12 to 2015-16 102. There is a separate report on the Housing Revenue Account on the

agenda. Capital Programme 2011-12 to 2015-16 103. There is a separate report on the Capital programme on the agenda. 104. The revenue budget reflects the anticipated cost of financing the

programme, and takes into account the forecast outturn for 2010-11 set out in the third quarter monitoring report.

Stakeholder Engagement 105. As noted above, the vision and priorities for 2011-12 have been the subject

of the “Let’s Talk” consultation with residents. 106. A series of meetings with stakeholders took place in January to share

information on the Council’s budget plans and seek comments. These are set out in Appendix 15.

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107. Overview and Scrutiny held a question and answer session with the Leader and Chief Executive on 12 January 2011 on the draft budget.

108. Minutes from these meetings have been circulated where available.

Legal implications 109. It is important that robust equalities impact assessments are completed

and that consultation is done where necessary. Financial Implications 110. Financial matters are integral to this report. Performance Issues 111. The Council’s budget supports all of its functions and services throughout

the year. Detailed performance measures for each service will be built into the Service Improvement Plans for 2011-12 to 2015-16 and progress will be monitored by Improvement Boards and reported on a quarterly basis.

112. With the reductions in budgets proposed for 2011-12, and the funding gaps

within future years it will be important to track the performance of all Council services to ensure that any reductions in service levels are quickly reported and mitigating actions are put in place. This report already covers a number of the performance challenges that the Council will face over the life of the Medium Term Financial Strategy and some of the specific challenges are as follows:

• Children’s Services: With rising levels of contacts and referrals of

vulnerable children within the borough there will be increased pressure on the service in a time of reducing budgets. The new integrated Children’s Services model will support the delivery of a more joined-up service for children and provide efficiencies;

• Adult Services: An aging population and a rise in the number of adults with complex needs is increasing the pressure on budgets, and impacting on services. Transformation projects such as the recently launched Reablement Service will shape the service to better support residents to live independently whilst making efficiencies;

• Public Realm: The cost of waste disposal continues to increase, which is mitigated to some degree by the high levels of performance in recycling and composting. Further efficiencies are being delivered by the better use of technology, allowing for current service levels to be maintained, despite the funding climate.

• Customer Contact: Telephone calls answered within timescales and the number of residents seen within 15 minutes when they visit the Council. Further roll out of channel migration towards web based contact and further integration of more services into Access Harrow will support the maintaining of performance whilst allowing for efficiencies;

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45. The Government’s plans to change the National Indicator Set will mean that the Council has to review the performance indicators it uses to measure services. Officers are currently reviewing these indicators in tandem with a Scrutiny Review so that the suite of indicators the Council uses in future represents the best way of measuring the impact of services on residents and the community.

Environmental Impact 113. The draft budget incorporates the resources to deliver the Council’s

climate change strategy. Risk Management Implications 114. As part of the budget process the detailed budget risk register has been

reviewed and updated. This helps to test the robustness of the budget and support the reserves policy.

Corporate Priorities 115. The budget for 2011-12 supports delivery of the Council’s new vision and

priorities.

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Section 3 - Statutory Officer Clearance

Name: Myfanwy Barrett � Chief Financial Officer Date: 31 January 2011

On behalf of Name: Jessica Farmer � Monitoring Officer Date: 4 February 2011

Section 4 – Performance Officer Clearance

On behalf of

Name: Alex Dewsnap � Assistant Chief Executive

Date: 1 February 2011

Section 5 – Environmental Impact Officer Clearance

Name: John Edwards � Divisional Director Date: 1 February 2011

(Environmental Services)

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Section 6 - Contact Details and Background Papers Contact: Myfanwy Barrett

Corporate Director of Finance, 020 8420 9269 Background Papers:

• Integrated Planning 2011-12 to 2015-16, reports to July and October cabinet meetings

• Draft Revenue budget 2011-12 to 2015-16, report to December cabinet

• Supporting templates for individual proposals (Part II) exempt by virtue of paragraphs 2 and 3 of Schedule 12 A of the Local Government Act 1972 (as amended) on the grounds that it contains: information which is likely to reveal the identity of an individual and information relating to the financial or business affairs of any particular person (including the authority holding the information)

Call-In Waived by the Chairman of Overview and Scrutiny Committee

NOT APPLICABLE [Call-In only applies to recommendations in remit of Cabinet]

21

Appendix 1

Medium Term Financial Strategy 2011-12 to 2015-16 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 Budget Budget Budget Budget Budget Budget £m £m £m £m £m £m Budget Requirement Brought Forward

171.685 175.509 171.088 170.348 169.674

Capital Financing Costs 0.331 0.721 1.571 0.100 -3.231 Grant Changes 8.464 -0.497 1.900 1.900 4.480 Other Technical Changes 2.081 2.240 1.955 1.800 0.800 Inflation 2.238 2.650 5.500 5.500 5.500 Adults -2.480 -0.545 0.400 1.500 1.500 Housing -0.280 -0.180 -0.150 0.000 0.000 Children's Services -1.141 0.198 0.119 -0.095 -0.036 Community & Environment

-4.178 0.397 0.144 0.000 0.000 Place Shaping -0.149 -0.445 -0.424 0.000 0.000 Legal & Governance 0.021 -0.050 -0.071 0.000 0.000 Corporate Finance -0.093 -2.123 -2.000 0.000 0.000 Chief Executive -0.735 -0.865 -0.513 0.000 0.000 Cross Cutting Transformation Projects

-0.255 -1.129 0.000 0.000 0.000

General Investment Provision

0.000 2.000 2.000 2.000 2.000

FUNDING GAP 0.000 -6.793 -11.171 -13.379 -11.619 Total Change in Budget Requirement

3.824 -4.421 -0.740 -0.674 -0.606

Revised Budget Requirement

171.685 175.509 171.088 170.348 169.674 169.068

Collection Fund Deficit/-surplus

-1.448 -1.978 -0.500 -0.500 -0.500 -0.500

Formula Grant -67.764 -70.126 -64.598 -61.208 -57.818 -54.428 Amount to be raised from Council Tax

102.473 103.405 105.990 108.640 111.356 114.140

Council Tax at Band D £1,186.55 £ 1,186.55 £1,216.21 £ 1,246.62 £ 1,277.78 £ 1,309.73 Increase in Council Tax (%)

- 0.00 2.50 2.50 2.50 2.50

Tax Base 86,362 87,148 87,148 87,148 87,148 87,148 Assumed collection rate 98.25% 98.25% 98.25% 98.25% 98.25% 98.25% Gross Tax Base 87,900 88,700 88,700 88,700 88,700 88,700

22

Appendix 2(i)

Detailed Budget Proposals – Technical Changes 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Capital and Investment Capital financing costs and investment income 331 721 1,571 100 -3,231 Total 331 721 1,571 100 -3,231 Grant Changes Specific Grants 11,044 -497 1,900 1,900 1,900 Council Tax Support Grant -2,580 2,580 Total 8,464 -497 1,900 1,900 4,480 Concessionary Fares Freedom pass costs 874 300 300 300 300 Withdrawal of Transport for London funding for Taxicard mobility assessments

28

Levies and Subscriptions Local Government Association /London Councils - reduction of 25%

-70

Reduction in contribution to LBGS -357 Other levy changes -100 Provisions and Reserves Contribution to provisions for debt/litigation 100 100 75 Contribution to insurance provision 250 350 300 Contingency Amend contingency to £1m in total 108 Capitalisation strategy/recharges strategy Reduce reliance on capitalisation 1,000 1,000 1,000 1,000 Miscellaneous Carbon Reduction Commitment scheme 303 Additional Trade Union facility time during Transformation

45

Changes to support charges -100 Provision for other items in years 2 to 5 490 280 500 500 Total Other Technical Changes 2,081 2,240 1,955 1,800 800

23

Appendix 2(ii) Detailed Budget Proposals – Inflation 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Pay Award @ 0% for 2 years, then 2% 0 0 2,150 2,150 2,150 Provision for 2010-11 pay award brought forward -550 National Insurance Contributions increase of 1% with banding adjustments

700

Inflation on goods and services @ 2% 1,650 1,900 1,950 1,950 1,950 Additional provision for electricity and gas price increases

140

National Non Domestic Rates on Council properties above 2%

48

Contingency 500 1,150 1,150 1,150 Inflation total 1,988 2,400 5,250 5,250 5,250 Pension contributions Employer's Pension Contributions @ 0.25% 250 250 250 250 250 Pensions total 250 250 250 250 250 Combined Total 2,238 2,650 5,500 5,500 5,500

24

Appendix 2(iii) Better Deal for Residents Programme Cross-cutting projects 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Customer Contact and Assess and Decide project

-214 -369

Business Support Project -175 -626 Mobile & Flexible Working - to be confirmed

Human Resources and Finance support to programme

134 -134

Total -255 -1129 0 0 0

25

Appendix 2 (iv)

Detailed Budget Proposals – Adults and Housing Adults 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Investment in Services Demography - Learning Disabilities 1000 1000 1000 1000 1000 Demography - Physical Disabilities 500 500 500 500 500 Demography - Older People 0 0 0 0 0 Demography - Mental Health 0 0 0 0 0 Total Investment 1500 1500 1500 1500 1500 Other Efficiencies Productivity Contract Management -500 -200 -100 West London Alliance Adults Joint Procurement

-350 0 0

Social Care Realignment -1000 0 0 Reduction in external day care provision -300 0 0 In house Residential Accommodation -100 -250 0 Financial Assessment Team -100 0 0 Voluntary Severance Scheme -200 0 0 Supporting People -250 0 0 Prevention Reablement -350 -750 -900 Partnership CNWL: Mental Health efficiencies -250 -100 -100 Voluntary Sector Service Level Agreements

-180 -100 0 Savings subject to consultation -400 -645 Total Other Efficiencies -3980 -2045 -1100 0 0 Total Efficiencies -3980 -2045 -1100 0 0 Net -2480 -545 400 1500 1500

26

Housing 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Efficiency Programme Housing Register Administration -12 Temporary Accommodation -143 Increase salary allocations to Housing Revenue Account

-85

Income Generation - charging for advice provided to developers

-40

Housing Needs -180 West London Housing Needs Partnerships -150 Total Efficiency Programme -280 -180 -150 0 0

27

Appendix 2(v) Detailed Budget Proposals – Children’s Services 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Investment in Services Shortfall in Unaccompanied Asylum Seekers Grant

280

Two Qualified Social Worker posts to ensure safe caseload following increase in child protection cases

84

Special Education Needs Home to School Transport –New Routes

120

Special Education Needs Home to School Transport – loss of spot hire savings

120

New short breaks for disabled children duty from 1.4.11

45

New parental right of Special Education Needs appeal

35

Safeguarding - Funding for current pressure on children looked after placements

375

Safeguarding - Demographic growth 225 225 225 Chair of Child Protection Review Panel 25 Integrated Children’s System 40 Total Investment 1,349 225 225 0 0 Transformation Special Needs Transport 2 - Savings -303 -101 -56 -45 -36 Special Needs Transport 2 - Costs 148 4 - Review of Achievement & Inclusion -450 0 -50 -50 Total Transformation -605 -97 -106 -95 -36 Other Efficiencies Reductions in the contract for universal Connexions

-300

Reduction in youth workers and services for targeted activities

-400

Reduction in Staffing in the Youth Offending Team

-94

Stop Development of youth website -10 Savings on Admin plus Charging for Summer Uni

-30

Stop/Charge for programmes delivered in schools and Ethnic Minority Achievement Service

-42

Rationalisation of Buildings -63 Review operating model of Wealdstone Youth Centre to reduce subsidy

-10

Extended School Start Up grant – Area Based Grant passported to clusters

-293

Reduction in subsidy on After School Clubs and play schemes

-50

28

2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Management Restructure in Fostering/Adoption Support

-50

Children Looked After post -44 Reduction in training -11 Management Restructure in Children with Disabilities/Special Education Needs Assessment

-65

Moving of Sensory & Communication Team into Alexandra Ave

-23

Children with disabilities Client Costs -50 Stop/Charge for Special Education Needs services to schools

-50

Carer's Grant -30 Review of Quality and Access provision for early years practitioners

-100

Children's Centres - Increased partnership working

-100

Education Welfare - holding vacancy for one year

-22 22

Education Psychology - holding post vacant for six months

-48 48

Total Efficiency Programme -2,490 -27 -106 -95 -36 Net Total -1,141 198 119 -95 -36

29

Appendix 2(vi)

Detailed Budget Proposals – Community and Environment 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Investment WLWA Levy 1,533 180 Environment - above inflationary increases/budget pressures

Automatic Signals Transport for London) 20 Winter Gritting - Low emission zone vehicles 91 TOTAL above inflationary pressures 111 0 0 0 0 Materials recycling 27 Loss of income from Schools Service Level Agreement/Grant - to be confirmed

139

Total Investment 277 1,533 180 0 0 Transformation Radio-frequency identification (RFID) / Libraries re-org: efficiencies

-780 -343

Radio-frequency identification (RFID) / Libraries re-org: on going costs

41 3

Radio-frequency identification (RFID) / Libraries re-org: one off marketing costs

10 -10

Streets / Grounds efficiencies -791 -296 Streets / Grounds - one off marketing costs 5 -5 Streets / Grounds - ongoing costs 78 Trading Standards review -200 Property and Infrastructure review -300 TOTAL from Transformation -1,937 -651 0 0 0 Other Efficiencies Environment Savings WLWA Levy -1,101 10% reduction in energy costs council wide 0 -60 Vehicle Fleet contract -100 Full cost recovery for grounds maintenance to Schools / housing

-110

Parking Review -75 SALIX energy efficiency savings at Queens House car park

-8

London Permit Scheme -230 Fees and charges increases -171 School Travel Advisor -reduction in expenditure to match grant ending

-22

Community Safety Anti-Social Behaviour - reduction in expenditure to match grant ending

-3

Total from Environment -1,710 -170 0 0 0 Community and Culture Savings Community Development review of structure and service re-provision

-175 -135 0 0 0

30

2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Cultural Strategy Review 0 -300 0 0 0 Harrow Arts Centre business plan -54 -38 -36 0 Review of Music Service -100 -27 0 0 0 Harrow Arts Centre Electricity savings from Salix investment

-23

Gayton Library Premises costs -185 185 Fees and charges increases -29 Preventing Violent Extremism -reduction in expenditure to match grant ending

-145

Grants to the Voluntary sector reduced by 15% -97 Total from Community and Culture -808 -315 -36 0 0 Total Other Efficiencies -2,518 -485 -36 0 0 Total Efficiency Programme -4,455 -1,136 -36 0 0 Net Total -4,178 397 144 0 0

31

Appendix 2(vii)

Detailed Budget Proposals – Place Shaping 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Investment Local Development Framework - One off Resource to complete core strategy and policy documents 219 -219

One Off National Non Domestic Rates refund in 2010-11 included in base 200 Total Investment 419 -219 0 0 0 Other Efficiencies Business Management Consumables -27 -18 0 Revenue Projects -10 -6 -8 Agency staff -49 0 0 sub total Business Management -86 -24 -8 0 0 Corporate Estates Staffing reductions/restructuring proposals -99 sub total Corporate Estates 0 0 -99 0 0 Economic Development Staffing reductions/restructuring proposals -70 0 -82 Consumables -8 0 0 Review of support for Harrow in Business -76 0 0 Grant to Harrow In Business for transition period 50 -25 -25 Rates budget from Harrow in Business premises 0 -9 0 Revenue Projects -20 -6 0 sub total Economic Development -124 -40 -107 0 0 Major Projects Revenue Projects -30 0 0 sub total Major Projects -30 0 0 0 0 Planning Services Staffing reductions/restructuring proposals -217 -162 -195 Introduce charge for all site specific householder pre application duties other than Duty Planner -15 0 0 Introduce Planning Performance Agreements for major strategic applications with associated re-charge provision. -20 0 0 Introduce differential charging policy for planning applications to provide for fast track income generation 0 0 -15 Review of planning fees due to change in government policy -50 sub total Planning Services -302 -162 -210 0 0 Other Technical Support -26 0 0 sub total Other -26 0 0 0 0

32

2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Total Efficiency Programme -568 -226 -424 0 0 Net Total -149 -445 -424 0 0

33

Appendix 2 (viii) Detailed Budget Proposals – Legal and Governance Proposal 2011-12 2012-13 2013-14 2014-15 2015-16 £000 £000 £000 £000 £000 Investment in Services Elections 31 Mayoralty 20 Total Investment 51 0 0 0 0 Efficiency Programme Legal Practice -30 -50 -71 Total Efficiency Programme -30 -50 -71 0 0 Net Total 21 -50 -71 0 0

34

Appendix 2 (ix)

Detailed Budget Proposals – Finance 2011-12 2012-

13 2013-14 2014-15 2015-16

£000 £000 £000 £000 £000 Investment Information Technology Service 1,608 Strengthening corporate accounting team 160 Total Investment 1768 0 0 0 0 Transformation Programme Corporate Services Review -45 -103 Procurement review including strengthening team

-1,500 -2,000 -2,000

Reduction in external audit fees -100 Concessionary travel assessment and renewal process

70

Concessionary travel -Taxicard: reduction in scheme contribution

-58

Total Transformation Programme -1,633 -2,103 -2,000 0 0 Other Efficiencies Insurance efficiency review -30 Parking income team staff reduction -28 Corporate Anti Fraud Team income - proceeds of crime

-5 -20

Occupational Health contract -35 Senior Management Restructure (with Chief Executive's Department)

-100

Saving to mirror cut in HB Admin grant -30 Total Other Efficiencies -228 -20 0 0 0 Total Efficiency Programme -1,861 -2,123 -2,000 0 0 Net Total -93 -2,123 -2,000 0 0

35

Appendix 2 (x)

Detailed Budget Proposals – Chief Executive 2011-12 2012-13 2013-14 2014-15 2015-16

£000 £000 £000 £000 £000 Transformation Resourcing contract -290 -210 Total Transformation -290 -210 0 0 0 Other Efficiencies Partnership Development & Performance Restructuring -169 -229 -165 Non Payroll -79 -16 -10 Human Resources & Development Corporate Training -50 0 0 Learning and Development Commissioning Arrangements -15 -45 0

Restructuring 0 -75 -75 Trades Union Reductions 0 0 -45 Redeployment support 18 -18 Business Transformation & Customer Service

Programme Management Office Reduction 0 -40 0 Access Harrow 0 -200 -200 Communications Reduction -150 -50 0 Total Other Efficiencies -445 -655 -513 0 0 Total Efficiency Programme -735 -865 -513 0 0 Net Total -735 -865 -513 0 0

36

Appendix 3

Commentary 1. This commentary explains the technical assumptions which support the MTFS

attached at Appendices 1 and 2. Tax Base and Collection Fund 2. The tax base for 2011-12 is 87,148 with a collection rate of 98.25%. The

MTFS currently assumes no growth in the number of band D households each year thereafter, due to the economic climate, and no change in the collection rate.

3. The forecast surplus on the collection fund at the end of 2010-11 is £1.978m. 4. The final Council Tax base for 2011-12 and collection fund position were

approved by Cabinet in December 2010 and January 2011 respectively. Capital Financing Costs and Investment Income 5. The budget includes a provision for capital financing costs consistent with the

planned level of capital expenditure. The detailed figures are affected by anticipated capital expenditure and capital receipts in the current year and future years, and asset types, as well as interest rates. As part of the Spending Review in 2010, the borrowing rates for the Public Loans Works Board (PWLB) were increased by 1%. The investment income estimates are based on forecast cash flow and interest rates for lending.

Government Grants 6. A briefing on the Provisional Local Government Settlement which was

published on 13 December is attached at Appendix 4. 7. The total reduction in area based grant and specific grants is £9.4m, however

the Council had already planned for grant reductions in Adult services totalling £1m, giving a net reduction of £8.4m.

8. There is an increase in formula grant of £2.3m, so in aggregate the Council’s

funding has reduced by around £7m. Concessionary Fares 9. There are considerable uncertainties around the settlement with TfL and

government grant funding. However, the information from London Councils suggests that there will be increased costs of £0.9m next year. This has been offset to some extent by the transfer of grant from London Councils to individual boroughs.

10. An annual increase of around 4% is expected from 2012-13 onwards. 11. The sum of £28k has been provided to offset the withdrawal of funding by TfL

for taxicard assessments.

37

Levies and Subscriptions 12. A reduction of 25% in the subscriptions to LGA and London Councils is

expected. 13. The Council’s contribution to the London Boroughs Grants Scheme is

reducing by £357k and this was reported to Cabinet in January. 14. There are other reductions in levies of £100k. Provisions and Reserves 15. The sum of £275k over 3 years has been included to increase the annual

contributions to the provisions for bad debts and litigation. The sum of £900k over 3 years has been included to increase the annual contributions to the provision for insurance. This is in line with actuarial advice. The establishment of reasonable provisions and earmarked reserves is an important element of the Council’s drive to improve financial stability.

Contingency 16. There is a contingency of £125k in the base budget. This has been

supplemented by using available capacity in pension provisions and other technical parts of the budget. The addition in the MTFS of £108k takes the total contingency to £1m. This will be used to fund high priority projects and deal with unforeseen events.

Capitalisation 17. The sum of £1.0m per year for 4 years has been provided to reduce the

Council’s reliance on capitalisation. Carbon Trading 18. The spending review made it clear that whilst Councils will have to make

payments on the basis of carbon emissions there will no longer be any rebates. This is an extra cost of £303k next year. The costs for later years are uncertain.

TU Facility Time 19. The previous administration made a commitment to increase the TU facility

time budget for the duration of the transformation programme. Changes in Support charges 20. Changes in the allocation of charges for support services generate a saving to

the general fund of £100k. Provision for years 2-5 21. This provision is to deal with unforeseen pressures.

38

Pay and Pensions 22. The pay award has been assumed to be 0% for the next 2 years, and

thereafter 2% per year. This will be kept under review in the light of this year’s pay negotiations.

23. The Council provided £550k for this year’s pay award which is unlikely to be

needed and can be rolled forward into next year. 24. The sum of £700k has been provided for the increase in national insurance

contributions of 1%, and this figure is net of the impact of the band changes. 25. A provision of 0.25% has been made for the increase in pension contributions

in each year. The triennial valuation as at 31 March 2010 is being carried out during 2010-11 and any changes to the contribution rate will take effect from 2011-12. The increase of 0.25% per year is consistent with early discussions with the actuary. The Hutton Review may have a significant impact on future pension costs.

Inflation 26. An assumption of 2% has been used for price inflation in each year. Both

RPI and CPI are currently above 2% (4.8% and 3.7% respectively in December). However, these indices are not directly relevant to Council activities. RPI includes housing costs for instance, and fuel prices are having a significant impact on both at present. VAT changes also feed into both indicators.

27. All Directorates are expected to negotiate with suppliers to minimise the cost

of any increase in contract prices, so the actual inflation that they face will vary. Directorates will allocate their inflation provision to budgets where it is most needed and make efficiencies to address any shortfall.

28. An additional provision has been made of £140k for inflationary increases

above 2% for utility costs. This is being reviewed in the light of current market conditions and the terms of the Council’s contracts.

29. An allowance of £48k has been made for the increase in the Council’s

business rates above 2% (ie the rates payable on its own properties). 30. An inflation contingency of £500k in 2012-13 and £1,150 in the three

subsequent years has been included, given the uncertainty around pay and the fact that price inflation currently exceeds 2%.

39

Appendix 4 Local Government Settlement Introduction 1. The Provisional Settlement was announced 13 December 2010 and the Final

Settlement on 31 January 2011. The settlement covers the financial years 2011-12 and provisionally 2012-13. Harrow’s final settlement figures were virtually unchanged from December with just a £14k increase in formula grant in 2011-12 and a reduction of £8k in 2012-13. It should be noted that the Government’s figures for change all take as the 2010-11 base, the position following the in-year cuts in June 2010 and not the original settlement announced in January 2010.

2. The settlement is based on the Spending Review cash limits announced on 20 October 2010.

3. There have been a significant number of changes to the Local Government

finance system: • The number of specific grants has been reduced with a number being

rolled into formula grant or dedicated schools grant or incorporated into a smaller number of grants

• Area Based Grant has ended with some elements included in specific grants or formula grant. Some elements have simply ended.

• Damping has been changed so that it does not just apply to formula grant but a new concept of revenue spending power. This latter concept also includes specific grants, Council Tax, and NHS funding for Social Care that they are expected to pass to Local Authorities.

4. Headline Formula Grant Changes

Adjusted 2010-11

Actual 2011-12 %

Adjusted 2011-12

Provisional 2012-13 %

Formula Grant

Formula Grant Change

Formula Grant

Formula Grant Change

£m £m £m £mHarrow 78.145 70.126 -10.3% 69.566 64.598 -7.1%London Boroughs 4756.557 4221.728 -11.2% 4200.271 3879.19642 -7.6%England 32654.64 29419.34 -9.9% 29284.8 27128.1055 -7.4% 5. In 2010-2011 Harrow’s actual formula grant is £67.8m. Harrow also receives

area based grant (ABG) of £13.2m (which was subsequently cut by £1.3m in year) and specific grants in the order of £34m. Specific grants have changed significantly compared to 2010-2011.

6. As part of the settlement both ABG and a number of specific grants have been

rolled into formula grant, rolled into DSG or stopped. At the time of writing there are still a number of specific grants that have not been announced.

40

Prudent assumptions have been made on the likely amounts received e.g. New Homes Bonus, some Home Office Grants and PFI Grant.

7. The position summarising the grants received is shown below. There are

however a number of grants where local authority level allocations have not been announced yet such as PFI and Stronger Safer Communities.

2010-11 grant

2011-12 grant

Difference Variance

£m £m £m %Formula Grant 78.1 70.1 -8 -10.3Specific Grants* 15.7 17.4 1.7 10.8

Specific grants rolled into DSG

18.7 18.7 0 0

Total 112.5 106.2 -6.3 -5.6 *The specific grant figure for 2011-12 includes the funding of £2.6m to support the Council Tax freeze. Health Funding For Social Care 8. The settlement includes £2.6m of Health Funding (£2.5m in 12-13) which

should be paid to Harrow by the PCT in respect of social care costs via an agreement under section 256 of the 2006 NHS Act. At this stage it is not clear if the Council will need to commit to additional expenditure in order to secure this funding. This additional funding has not been allowed for in the budget proposals pending the conclusion of negotiations with the PCT.

Council Tax Support Grant 9. This is a new grant paid to authorities that would otherwise set an increase in

Council Tax of 2.5% or less for 2011-12. This then enables them to reduce the increase by 2.5%. The grant is £2.58m for Harrow and is payable for 4 years. This mechanism provides a very strong incentive for authorities not to increase their Council Tax in 2011-12.

Topslice of Formula Grant for Academies 10. The Government has applied a topslice to the formula grant to fund central

costs assumed to be transferred to academies. For Harrow this is £614k in 2011-12 rising to £1,098k in 2012-13. The topslice applies whether any schools in an area convert to academies or not.

Formula Grant Methodology Changes 11. There have been a number of changes to the methodology used to distribute

formula grant. Some are beneficial to Harrow while others are not. 12. Capital Financing. Support for capital expenditure from 2011-12 will be

delivered by capital grant and not by supported borrowing. This addresses

41

the problem that authorities had that supported borrowing did not translate into additional funding due to the operation of the formula grant damping mechanism.

13. Area Cost Adjustment. The weighting attributed to labour costs has been

reduced with the effect that London and the South East are disadvantaged. 14. Concessionary Fares. Previously grant for Concessionary Fares was paid

as a specific grant to London Councils in London. This was then used to offset the cost of freedom passes. This has now been incorporated into Formula Grant on a formula basis that is beneficial to London Boroughs.

15. Damping. As in previous years, a funding “floor” will be applied to each

authority to minimise year-on year changes in its level of cash grant. In 2011-12 floors will be set at a negative level for the first time, guaranteeing each authority a maximum decrease in funding (rather than a minimum increase, as has previously been the case). A new floor system is proposed which reflects the extent to which authorities rely on formula grant. Each authority’s budget requirement is financed either by formula grant or council tax – “grant dependency” is defined as the proportion of each authority’s 2010/11 budget requirement that was funded through the 2010/11 formula grant. For social service authorities, councils are grouped into four floor bands according to their level of grant dependency. Harrow is in band 3 the second lowest level of dependency. Harrow is for the first time in several years above the floor and contributes £5.9m to the pool supporting authorities with the largest losses in 2011-12. This reduces to £4.0m in 2012-13.

42

Appendix 5

Budget Book Extract Adults and Housing Objective Analysis 2011-2012

Employees Premises Service Expenditure

SSC / Recharges

Capital Financing

Total Expenditure Grant Misc

Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Adult Services A&H Transformation Service Development 132 - 122 498 - 752 - 46 - 46 705 A&H Transformation 60 - - 8 - 67 - 67 Complaints 182 - 79 48 - 310 - 310 374 - 201 553 - 1,128 - - 46 - 46

1,082

Commissioning & Partnerships Catering Services 560 13 431 310 3 1,317 - - 768 - 768 550 Community Equipment 57 - 1,553 5 - 1,616 - - 1,156

- 1,156 460

Contracts 904 44 620 558 - 2,127 - - 292 - 292

1,835 Framework-I Support 181 - 121 126 499 927 - - - 927 Helpline 872 2 87 118 14 1,092 - - 540 - 540 553 Mental Health 277 30 4,443 80 65 4,896 - - 197 - 197

4,699

Partnership Development 316 - 1,509 4 - 1,829 - - 69 - 69

1,760 Strategic Commissioning 190 1 4 6 - 201 - - - 201 Supporting People 179 - 3,819 33 - 4,030 - - 113 - 113 3,917

43

Objective Analysis 2011-2012


SSC / Recharges

Capital Financing


Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 3,536 90 12,587 1,240 581 18,035 - - 3,133

- 3,133

14,901

Long Term Care & Safeguarding Care Mgt 1,352 24 213 646 973 3,208 - - 8 - 8

3,200

Purchasing Budget - - 26,137 12 - 26,149 -

4,529 - 6,619 -

11,148

15,000 NRCs 1,959 202 1,377 278 322 4,139

- 986 - 97

- 1,083

3,056

In house Residential 4,115 78 999 414 58 5,664 - - 1,533 -

1,533

4,131 Safeguarding 215 - 7 3 - 224 - - 25 - 25 199 Shared Lives 115 - 258 17 - 391 - - 243 - 243 148 7,756 304 28,992 1,369 1,353 39,775

- 5,516 - 8,525

- 14,041

25,734

Reablement & Personalisation Care Mgt 3,312 1 70 1,699 - 5,082 - - 166 - 166

4,916

Purchasing Budget 7 - 11,977 4 - 11,989 - - 213 - 213

11,776 Northwick Park Hospital 554 - 388 - - 942 - - 94 - 94 848 Training 410 - - 3 - 413 - - - 413 Transport - - 1,891 - - 1,891 - - -

1,891

4,282 1 14,326 1,707 - 20,316 - - 472 - 472

19,844 Strategic Management LDDF - - 157 3 - 160 - - - 160 Strategic Management 1,031 - 75 325 - 1,432 - - 132 - 132

1,300

1,031 - 232 328 - 1,591 - - 132 - 132

44

Objective Analysis 2011-2012


SSC / Recharges

Capital Financing


Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 1,459

Adult Services Total 16,980 396 56,338 5,197 1,935 80,845

- 5,516 - 12,309

- 17,824

63,021

Housing Complaints - - - Housing Needs 1,765 16 451 763 249 3,244

- 600 - 121 - 721

2,523

Housing Partnerships 605 41 - 18 628 - 40 - 40 588 Other GF Services 280 11 19 284 - 594 - 594 Resident Services - Watkins 500 3 - 3 - 17 - 483 - 26 - 26 457 Travellers Site 11 13 4 28 - 2 - 2 26 Housing General Fund Total 3,150 41 521 1,016 249 4,977

- 600 - 189 - 789

4,188

ADULTS & HOUSING TOTAL 20,129 436 56,859 6,214 2,184 85,822

- 6,116 - 12,497

- 18,613

67,209

45

Adults and Housing Analysis of Changes

2010-11 Budget Revised

Virement / Restructuring Inflation Investment Efficiencies Other SSC

Capital Financing

2011-12 Budget

Adult Services A&H Transformation Service Development

774 - 165 5 - - 22

- 7

120 - 705

A&H Transformation - 42 0 - - 18 8 - 67 Complaints - 301 3 - - - 5 - 310

774 177 9 - - 22 11

133 -

1,082

Commissioning & Partnerships Catering Services

664 - 47 14 - - - - 85 3 550

Community Equipment 455 90 3 - -

- 61 - 27 - 460

Contracts 2,011 - 42 12 - - 43

- 101 - 2 - 0

1,835

Framework-I Support 1,432 - 8 - - 35 - 9 - 486 927

Helpline 197 296 0 - - - 46 14 553

Mental Health 5,765 - 753 6 - - 250

- 31 - 28 - 9

4,699

Partnership Development 2,138 - 164 36 - - 190

- 61 2 -

1,760

Strategic Commissioning 236 - 45 2 - - 2 6 - 201

Supporting People 3,844 - 80 - - 250 223 20 -

3,917

16,743 - 666 162 - - 768

- 29 - 61 - 478

14,901

46

Analysis of Changes



Capital Financing

2011-12 Budget

Long Term Care & Safeguarding Care Mgt

2,416 - 3 - - 780 1 -

3,200

Purchasing Budget 16,895 - 10 320 - 897

- 1,405 6 -

15,000

NRCs 3,129 - 102 29 - - 48

- 3 - 5 55

3,056

In house Residential 3,453 725 34 - - 175 - 81 13

4,131

Safeguarding 170 27 2 - - - 1 - 199

Shared Lives 188 - 5 - - 45 - - 0 - 148

26,251 650 83 320 - 1,165

- 628 84 68

25,734

Reablement & Personalisation Care Mgt

4,875 - 4 - 56 0 - 19 -

4,916

Purchasing Budget 11,475 - 5 980 - 653

- 34 3 -

11,776

Northwick Park Hospital 907 - 27 12 - -

- 48 4 - 848

Training 535 - 64 8 - - 67 - 1 - 413

Transformation Grant - 250 - - - - 248 2 - -

Transport 2,135 21 42 - -

- 306 - -

1,891

19,677 - 70 72 980 - 664

- 141 - 9 -

19,844

Strategic Management LDDF

157 - 1 - -

- 1 2 - 160

47

Analysis of Changes



Capital Financing

2011-12 Budget

Strategic Management 1,072 153 496 200 - 718 77 19 -

1,300

1,229 153 498 200 - 718 76 21 -

1,460

Adult Services Total

64,674 244 823 1,500 - 3,337

- 711

169 - 410

63,021

Housing Services Complaints

299 - 299 -

Housing Needs 3,248 - 141 23 - - 200

- 499

126 - 34

2,523

Housing Partnerships 600 54 4 - - 80

- 36 46 - 588

Other GF Services 573 38 6 - -

- 37 14 - 594

Resident Services - Watkins 608 - 345 3 - - 173 18 - 457

Travellers Site 27 - - - -

- 1 - - 26

Housing General Fund Total 5,355 - 693 36 - - 280

- 400

204 - 34

4,188

ADULTS & HOUSING TOTAL 70,029 - 449 859 1,500 - 3,617

- 1,111

373 - 444

67,209

48

Children’s Services Objective Analysis 2011-2012

Employees Premises Service

Expenditure Capital Financing

SSC/ Recharges

Total Expenditure Grant

Misc Income

Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Schools Development 5,081 208 1,517 69 1,010 7,885 -3,287 -2,822 -6,109 1,776 Quality Assurance, Commissioning & Schools 1,929 1 3,133 0 814 5,877 -2,338 -762 -3,100 2,777 Early Years Service 4,082 142 6,177 34 617 11,052 -9,614 -236 -9,850 1,202 Safeguarding, Family Placement and Support 6,435 161 6,211 67 1,845 14,719 -121 -175 -296 14,423 Special Needs Service 6,558 21 8,795 258 5,852 21,484 -9,465 -2,809 -12,274 9,210 Young Peoples Services 2,961 231 3,639 17 1,225 8,073 -2,115 -78 -2,193 5,880 Schools 100 0 150,020 5,374 110 155,604 -150,009 -31 -150,040 5,564 Children's Services Total 27,146 764 179,492 5,819 11,473 224,694 -176,949 -6,913 -183,862 40,832

49

Children’s Services Analysis of Changes

2010-11 Budget


2011-12

Budget £000 £000 £000 £000 £000 £000 £000 £000 Schools Development 2,004 51 30 0 -450 -19 160 1,776 Quality Assurance, Commissioning & Schools 2,111 494 57 25 23 0 67 2,777 Early Years Service 1,445 0 37 0 -543 200 63 1,202 Safeguarding, Family Placement and Support 13,531 -30 169 724 -135 3 161 14,423 Special Needs Service 8,516 64 143 320 -436 356 247 9,210 Young Peoples Services 7,431 58 113 280 -949 -1,161 108 5,880 Schools 5,399 -11 1 0 0 180 -5 5,564 Children's Services Total 40,437 626 550 1,349 -2,490 -441 801 40,832

50

Community and Environment Objective Analysis 2011-2012



SSC/ Recharges


Misc Income

Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Libraries 2,445 616 916 145 1,191 5,313 0 -383 -383 4,930 Community & Development 1,224 104 1,385 0 376 3,089 -799 -271 -1,070 2,019 Cultural Services 2,235 461 407 264 -642 2,725 -179 -781 -960 1,765 Community Safety 4,225 355 1,749 558 1,460 8,347 0 -9,822 -9,822 -1,475 Property 3,765 1,903 391 1,494 -4,539 3,014 -50 -518 -568 2,446 Infrastructure 2,325 576 3,748 5,528 423 12,600 0 -1,346 -1,346 11,254 Climate Change 304 0 325 0 -17 612 0 0 0 612 Public Realm Services 9,468 1,440 10,188 813 4,656 26,565 0 -5,183 -5,183 21,382 Directorate & Support 491 0 222 0 151 864 0 0 0 864 26,482 5,455 19,331 8,802 3,059 63,129 -1,028 -18,304 -19,332 43,797

51

Community and Environment Analysis of Changes

2010-11 Budget


Capital Financing

2011-12

Budget £000 £000 £000 £000 £000 £000 £000 £000 £000 Libraries 5,751 0 49 0 -924 0 156 -102 4,930 Community & Development 2,321 -32 60 0 -392 0 62 0 2,019 Cultural Services 1,706 280 23 0 -196 0 -66 18 1,765 Community Safety -1,011 0 26 0 -374 0 -8 -108 -1,475 Property 2,712 289 75 139 -327 0 -363 -79 2,446 Infrastructure 10,593 0 95 111 -252 -90 137 660 11,254 Climate Change 170 36 3 0 0 303 100 0 612 Public Realm Services 23,301 -384 151 27 -1,965 0 327 -75 21,382 Directorate & Support 953 -123 42 0 0 0 -8 0 864 46,496 66 524 277 -4,430 213 337 314 43,797

52

Place Shaping Objective Analysis 2011-2012



SSC/ Recharges


Misc Income

Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Business Management 939 0 100 34 730 1,803 -7 0 -7 1,796 Planning Services 2,394 3 392 186 1,109 4,084 0 -1,946 -1,946 2,138 Economic Development Research & Enterprise 404 9 101 6 312 832 0 -1 -1 831 Corporate Estate 352 152 35 0 -109 430 0 -871 -871 -441 Major Development Projects 261 2 1 36 -185 115 0 0 0 115 4,350 166 629 262 1,857 7,264 -7 -2,818 -2,825 4,439 Analysis of Changes

2010-11 Budget


Capital Financing

2011-12

Budget £000 £000 £000 £000 £000 £000 £000 £000 £000 Business Management 1,215 0 12 0 -112 419 291 -29 1,796 Planning Services 2,634 0 26 219 -302 -332 -53 -54 2,138 Economic Development Research & Enterprise 898 0 7 0 -124 64 -6 -8 831 Corporate Estate -286 0 6 0 0 0 -105 -56 -441 Major Development Projects -32 0 0 200 -30 -151 92 36 115 4,429 0 51 419 -568 0 219 -111 4,439

53

Legal and Governance Objective Analysis 2011-2012



SSC/ Recharges


Misc Income

Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Legal & Governance 3,660 33 1,471 8 2,461 7,633 0 -4,067 -4,067 3,566 LEGAL & GOVERNANCE TOTAL 3,660 33 1,471 8 2,461 7,633 0 -4,067 -4,067 3,566 Analysis of Changes Virement/ 2010-11 Restructuring Capital 2011-12 Budget 2009-10 Inflation Investment Efficiencies Other SSC Financing Budget £000 £000 £000 £000 £000 £000 £000 £000 £000 Legal & Governance 1,174 2,155 44 51 -30 0 186 -14 3,566 LEGAL & GOVERNANCE TOTAL 1,174 2,155 44 51 -30 0 186 -14 3,566

54

Corporate Finance Objective Analysis 2011-2012



SSC/ Recharges


Misc Income

Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Finance & Procurement 14,213 955 0 1,032 16,200 -700 -17,340 -18,040 -1,840 Risk Audit & Fraud 1,522 2,529 13 738 4,802 -4,018 -4,018 784 Shared Services 2,808 10,456 326 1,608 15,198 -4,172 -4,172 11,026 HITS 288 4,738 1,955 480 7,461 -9,251 -9,251 -1,790 Revenues & Parking 1,481 575 102 1,827 3,985 -250 -861 -1,111 2,874 Benefits & Assessments 1,674 95,522 363 1,586 99,145 -81,986 -16,027 -98,013 1,132 Corporate & Democratic Costs 3,296 2,787 877 6,960 -4 -1,059 -1,063 5,897 CORPORATE FINANCE TOTAL 25,282 0 117,562 2,759 8,148 153,751 -82,940 -52,728 -135,668 18,083

55

Corporate Finance Analysis of Changes 2010-11 Virement/ Capital 2011-12 Budget Restructuring Inflation Investment Efficiencies Other SSC Financing Budget £000 £000 £000 £000 £000 £000 £000 £000 Finance & Procurement 4,696 194 245 722 -2,100 -644 -376 -11 2,726 Risk Audit & Fraud -201 309 14 250 -70 0 481 0 783 Shared Services 9,975 -17 24 972 -103 0 118 58 11,027 HITS -409 -138 21 1,608 0 -34 -2,982 144 -1,790 Revenues & Parking 2,517 20 13 0 -28 0 31 25 2,578 Benefits & Assessments 1,463 -188 15 0 0 0 139 0 1,429 Corporate & Democratic Costs 3,650 -2,056 0 0 -527 0 263 0 1,330 CORPORATE FINANCE TOTAL 21,691 -1,876 332 3,552 -2,828 -678 -2,326 216 18,083

56

Chief Executive Objective Analysis 2011-2012



SSC/ Recharges


Misc Income

Total Income

Net Budget

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Chief Executive Department 803 146 333 1,282 -165 -165 1,117 Customer Services & BTP 3,921 4 2,377 4,886 2,090 13,278 -14,997 -14,997 -1,719 Partnership Policy & Development 2,392 710 -34 878 3,946 5 -669 -664 3,282 Human Resources 1,965 247 231 759 3,202 -3,322 -3,322 -120 Communication 96 640 178 914 -1,052 -1,052 -138 ASSISTANT CHIEF EXECUTIVE TOTAL 9,177 4 4,120 5,083 4,238 22,622 5 -20,205 -20,200 2,422 Virement/ Analysis of Changes 2010-11 Restructuring Capital 2011-12

Budget 2010-11 Inflation Investment Efficiencies Other SSC Financing Budget £000 £000 £000 £000 £000 £000 £000 £000 £000 Chief Executive Department 539 54 70 -119 544 Customer Services & BTP 238 228 31 -7 -2,209 -1,719 Partnership Policy & Development 3,988 -76 22 40 -238 131 -10 3,857 Human Resources 302 20 15 135 -355 -242 4 -121 Communication 9 -20 1 -150 21 -139 ASSISTANT CHIEF EXECUTIVE TOTAL 5,076 206 139 175 -743 0 -216 -2,215 2,422

57

Appendix 6 Levies, Contribution and Subscriptions The table below shows the main levies, contributions to other bodies, and subscriptions that the Council will pay in 2011-12. These sums are set by other bodies and are outside the Council’s control. With the exception of the subscriptions to London Councils and the Local Government Association, the payments are compulsory.

2010-11 2011-12 Change Change Comments £000 £000 £000 %

West London Waste Authority 6,699 5,598 -1,101 -16 Lee Valley 264 259 -5 -2 London Councils 258 193 -65 -25 London Boroughs Grants 747 390 -357 -48 Freedom Passes 7,463 8,337 874 12 Environment Agency 178 178 0 0 provisional Traffic Control 304 306 2 0.7 Local Government Association 50 45 -5 -10 indicative London Pension Fund Authority 330 299 -31 -9 provisional Total 16,293 15,605 -688 -4% Note. The 2010-11 figure for West London Waste Authority has been adjusted to include the budgets for s52(9) and COWSLOPS as these have been incorporated into the levy from 2011-12.

58

Appendix 7 Policy on Use of Contingency General Principles 1. As a general principle, Directorate budgets should be structured to cover business as usual and any flagship projects and initiatives that were agreed as part of the budget and service planning round.

2. Budgets which are “demand led” should be set to deal with the forecast level of activity. For Adults and Children’s social care, this should reflect forecast client numbers and needs. For planning appeals it should reflect the usual level of activity, and for winter gritting it should reflect the average weather conditions etc.

3. Income budgets should be set taking into account likely activity levels and any changes in fees and charges.

4. The contingency should be used to deal with unforeseen/exceptional items and one-off projects that are approved during the year.

Appropriate uses 5. It is recommended that the contingency is used for the following purposes:

Category A: Unforeseen items/pressures • To deal with demographic risk, where the number of clients or cost per client varies from the estimate in Children’s or Adults services

• To deal with unexpected increases in demand for services due to policy changes, for instance an increase in homelessness due to housing benefit changes

• To deal with seasonal risks, such as exceptionally bad weather or a flu pandemic

• To deal with tonnage risk, where the number of tonnes disposed of via West Waste varies from the estimate in Environment services

• To deal with the consequences of recession • To deal with major planning appeals and litigation • To deal with uncertainty due to consultation on proposals • To deal with unexpected income shortfalls due to changes in the external environment or changes in the law/regulations

Category B: One-off items • To fund small one-off projects which are high priority and have the Leader’s support

• To fund one off procurement exercises • To fund invest to save proposals

59

Criteria 6. It is recommended that any bids to use funds from the contingency should meet the following criteria:

Category A: Unforeseen items/pressures • Event is unforeseen/exceptional and could not reasonably have been predicted during the budget round

Category B: One-off items • Project is high priority or will generate future savings

7. Clear evidence will be required to support variations from estimated demand. For Adults and children’s social care this should be reconciled to the challenge panel documentation on demographic pressures.

8. Contingency funds will not be used where there has been a failure to deliver planned savings (except where this is due to the outcome of consultation) or properly manage spending.

Approval Process 9. Use of the contingency will be subject to approval by CSB, in consultation with the Leader, as part of the monthly monitoring.

10. Use of the contingency will be reported to cabinet as part of the quarterly monitoring.

11. The sum available will be split between Category A and Category B in a ratio of approximately 80:20.

12. Within each category approval will generally be on a first come first served basis.

Unspent balances 13. Any unspent balance from the contingency will be added to general reserves at the end of the year.

60

Appendix 8

School Budget 2011-12

1. Introduction Dedicated Schools Grant (DSG) is used to fund both the individual schools budget (ISB) and centrally retained items. The former goes to schools, whilst the latter is held by the Local Authority to spend on specific items such as Early Years (private and voluntary sector nurseries) and fees for out of borough pupils at independent special schools.

2. 2011/12 Settlement

The Department for Education (DfE) announced in December the school funding settlement for 2011/12. The per pupil DSG funding in 2011/12 has been confirmed as £4,862, a cash freeze on 2010/11. Based on indicative pupil numbers it is estimated that the council will receive £145.1m of DSG in 2011-12. The actual 2011/12 DSG is based on the January 2011 pupil level annual school census (Plasc) numbers and as this will differ from the pupil projections used to estimate the grant this figure is subject to change. Schools will be notified of their final 2011-12 budget, based on January pupil numbers, by March 2011. The grant is not expected to be finalised by DfE until summer 2011.

Currently schools receive funding from a complex range of grants. From 2011/12 the DfE have mainstreamed the majority of these grants into the Dedicated Schools Grant (DSG). All ring fencing or grant conditions previously attached to the income cease which gives schools more flexibility as to how they use their school budgets. The DfE translated the total 2010/11 funding from these grants into additional DSG per pupil of £674 for 2011/12, which is a cash freeze at 2010/11 levels. Based on the estimated pupil numbers it generates further DSG in 2011/12 of £20.1m.

A legal Minimum Funding Guarantee (MFG) is retained to provide some protection to school funding however it is a negative figure. The regulations state that no school will experience a reduction in their school budget greater than 1.5% per pupil, before the pupil premium is applied. This applies to both the Dedicated School Grants and the newly mainstreamed grants. Due to the full year impact of the change to the age of transfer Harrow will need seek approval from the DfE to lift the Minimum Funding Guarantee for Harrow schools in 2011/12. 3. Schools Budget 2011/12 The estimated total Schools Budget in 2011/12 is £145.1m, which is a slight increase from £144.1m in 2010/11 due solely to the increase in pupil numbers. The 2011/12 school’s budget was considered by School’s Forum in January. Given the cash freeze in per pupil funding in order to provide the headroom needed to meet unavoidable growth pressures the full minimum funding guarantee of -1.5% will be applied. Schools Forum was consulted regarding the allocation of the headroom and it was agreed that the following items be funded.

61

(a) Special School Growth - £449k has been allocated to fund the full year impact of the expansion of special school places that took place from September 2010.

(b) Age of Transfer Transitional Protection Funding - Based on initial projections it is estimated that £293k will be required to fund the age of transfer transitional protection funding in 2011/12.

• Additional Funding for ASD units - £448k has been allocated to fund the full year impact of the new ASD units at Priestmead, Alyward and Whitmore that took place during 2010/11.

• Growth in Out of Borough Special School Places – There has been increasing pressure on the special educational needs out of borough placements and growth of £500k has been allocated in 2011/12.

It is not expected that there will be any headroom available after funding the above, however it would shared pro rata in sectors (i.e. Special Schools getting the appropriate share based on place factors not on pupil numbers).

Pupil Premium

Schools will receive a new pupil premium for 2011/12 for disadvantaged pupils. The premium for 2011/12 has been confirmed as £430 per eligible pupil and will be based on the number of pupils eligible for Free School Meals as recorded on the January 2011 census. Based on the free school meal numbers, as at January 2010, it would generate £2.334m of additional funding for Harrow schools.

Schools Specific Contingency The schools specific contingency forms part of central items. The majority of the areas to be funded from contingency in 2011/12 have now been considered by Schools Forum and the details are shown below. The contingency includes trigger funding for the growth in pupil numbers expected from September 2011. The provision for new high value costed statements has also been increased to reflect actual levels of expenditure in recent years. The comprehensive spending review indicated that a legislative change will be introduced to allow penalties in respect of the Carbon Reduction Commitment scheme to be charged to the school budget. A provision is being held in contingency as a potential call awaiting confirmation of the legislative change.

£’000 Headroom Available 2,979 Less Special School Growth (449) Age of Transfer Transitional Protection Funding (293) Growth in Out of Borough Special School Placements

(500) Additional funding for ASD Units (448) Schools Specific Contingency (1,270) Balance 19

62

Description of Items 2011-12 Budget £’000

2010-11 Budget £’000

Pupil & FSM trigger funding 500 500 SEN - New Statements 450 450 Krishna Avanti interim funding 0 50 Autism in mainstream schools 0 232 Good to Outstanding 80 80 AST Co-ordinator 30 30 Leadership Development 30 30 Carbon Reduction Commitment 180 0 Total 1,270 1,372

Central Items The budget for the central items within the Dedicated Schools Grant has been reviewed and consulted with Schools Forum. Central items expenditure for 2011/12 has been reduced by £164k, equal to the Minimum Funding Guarantee (MFG) reduction of 1.5%. During 2010/11 there has been a significant pressure of the Special Educational Needs out of borough placements and growth of £500k has been agreed to meet these additional costs. Further details are shown in the table below. Central Items 2010-11

Budget £’000

Movement

£’000 2011-12 Budget £’000

SEN – Out of Borough 6,419 500 6,348 SEN & Specialist Support Services

2,069 0 2,093 Pupil Referral Unit 1,221 0 1,236 Admissions 706 0 707 Early Years 540 0 551 Other 4 0 4 Minimum Funding Guarantee reduction to be allocated

0 (164) (164) Total 10,959 336 11,295 School budgets in 2011/12 reflect the full year impact of the change to the age of transfer. This will result in a transfer of pupils and funding from the primary sector to secondary schools. The authority is requesting that the DfE set aside the statutory minimum funding guarantee for schools losing funding from the change, as was the case in 2010/11. This is the final year where we expect the MFG to be set aside. The age of transfer protection funding model will provide transitional relief to schools facing significant budget reductions where they have balances below recommended levels.

4. School Budgets 2012/13 onwards The DfE has indicated that there will be a continued cash freeze in school budgets however they have not confirmed any funding details for future years. To assist schools with their financial planning indicative 2012/13 and 2013/14 budgets will be issued based on a 1.5% decrease in the DSG rate per pupil. These will be reviewed and updated when the details of the future school funding formula is confirmed.

63

5. Changes to the School Formula Funding The changes to school funding announced in the 2011/12 funding settlement has necessitated changes to Harrow schools funding formula. Schools Forum agreed to allocate the grants mainstreamed into the DSG on the same basis as 2010/11, less the minimum funding guarantee of -1.5%. In respect of the following grants a different allocation methodology was deemed more appropriate. The following changes have been considered and agreed by Schools Forum.

Grant Name Proposed 2011/12 Allocation School Development Grant – AST Funding

Allocation to be determined following further consideration by Schools Forum.

SDG - Targeted Support for Primary Strategies

Allocate funding per school as per 2010/11 allocation in original 2010/11 budget less 1.5% MFG. Any remaining funding, which historically may have been used to provide central functions, will be distributed to primary schools on a per pupil basis

EMAG – Allocated to schools Translate the 2010/11 EMAG funding into a per pupil rate for each school and then multiply by January 2011 pupil numbers.

Making Good Progress (1:1 tuition)

Allocate on the 2010/11 indicative allocation based on need.

Given the cash freeze in funding, coupled with the growth in pupil numbers and pupils with special educational needs, it has been challenging to set a balanced budget. To manage the pressures Schools Forum have agreed a reduction the hourly rate used to calculate high value costed statements and will be considering changes to the trigger funding to be allocated in year from contingency.

64

Appendix 9 Risk Assessment A risk assessment has been conducted. Whilst individually none of the risks are particularly high, a view must be taken on the likelihood of several of these risks materialising in any one-year, and the combined impact. Of course, several of these risks could generate either an over-spend or under-spend – for instance interest rates can go up or down. There are other examples of opportunities or windfalls that need to be taken into account such as rate rebates and additional grant income. The following approach has been used: Likelihood Rating Description Range Midpoint A Very High >80% 90% B High 51-80% 65% C Significant 25-50% 38% D Low 10-24% 17% E Very Low 3-9% 6% F Almost impossible 1-2% Impact Rating Description I Catastrophic II Critical III Marginal IV Negligible For each identified risk, the worst-case scenario in terms of possible overspend or income shortfall has been identified and multiplied by the likelihood. The risks have been quantified as shown in the table above. The total value of risk that has been quantified for 2011-12 is £5.8m. However, the budget for 2011-12 includes a contingency of £1m which is intended to cover unforeseen costs and risks (demography, waste tonnage, homelessness, income generation etc). Therefore the net risk is £4.8m. The risk level is greater in 2012-13 and 2013-14 due to the scale of the funding gaps and the need to identify savings via the transformation programme.

65

Budget Risk Register 2011-12

1. By-election 2. Inflation – pay and prices 3. Inflation – utilities 4. Treasury Management 5. Asset management 6. Income collection 7. Income from enforcement 8. Income from land charges 9. Changes to grand regime 10. Economic risk – capital receipts 11. Economic risk – demand for services 12. Litigation against the Council 13. Major Fraud 14. Increased Pension fund contributions 15. Levies, Precepts and Subscriptions 16. Poor budget management 17. Financial control environment 18. Insurance claims 19. Demographic changes: additional demand for social care 20. Population growth rates 21. System failure 22. Lack of disaster recovery capability 23. New policy/legislation 24. Safeguarding 25. Natural disaster /accident/terrorist incident 26. Adverse weather conditions 27. Government efficiency agenda 28. Achievement of savings 29. Transformation programme 30. LAA 31. Strategic partnerships 32. Commercial partnerships

A Very High

B High

10,11,23,24

C Significa

nt 2,3,7,8,

12,21 19,22,28

D Low

1 9,16,17, 20,26,27

31,32

E Very Low

15 6,13,18, 25,30

4

F Almost Impossi

ble

29 5,14

4 Negligible

3 Marginal

2 Critical

1 Catastrophic

Like

lihoo

d Impact

66

2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 POLITICAL RISKS

1 By-Election D IV 10 17% 1.7 D IV 10 17% 1.7 D IV 10 17% 1.7 There is provision in the budget for the scheduled elections and one by-election a year. Worst case is based on two by-elections in one year.

ECONOMIC / FINANCIAL RISKS

2 Inflation - Pay and prices

C III 2000 38% 760 D III 1000 17% 170 D III 1000 17% 170 The 2011-12 budget is based on 0% pay and 2% prices. There is some risk as general inflation is running above 2% and the pay award has yet to be agreed. For years 2 and 3 the MTFS is based on 2% for pay and prices plus an inflation contingency.

3 Inflation - utilities C III 200 38% 76 D III 200 17% 34 D III 200 17% 34 The 2011-12 budget reflects forecast prices.

4 Treasury Management - investments and borrowing

E II 2000 6% 120 E II 2000 6% 120 E II 2000 6% 120 The risk of losing a deposit is low. The budget reflects the current base rate and anticipated borrowing costs.

67

2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 5 Asset management. F III 500 2% 10 F III 500 2% 10 F III 500 2% 10 The Council

consistently scored 3 for asset management under the Use of Resources assessment. Backlog maintenance is significant and the capital programme funds the highest priority work.

6 Income collection: council tax, business rates, housing benefit overpayments, parking enforcement, sundry debtors, rents and service charges

E III 250 6% 15 E III 250 6% 15 E III 250 6% 15 Collection performance has improved considerably in the last few years, and the bad debt provision is reviewed quarterly.

7 Income from parking services and parking enforcement

C III 500 38% 190 C III 500 38% 190 C III 500 38% 190 There are pressures in this area in 2010-11 and the 2011-12 budget includes no additional income. There is some ongoing risk given the current climate.

8 Income from land charges

C III 279 38% 106 C III 279 38% 106 C III 279 38% 106 The 2011-12 budget includes an income target of £279k. There is some risk given the recent Information Commissioner decision and the economic climate.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 9 Changes to grant

regime D III 500 17% 85 C III 500 38% 190 C III 500 38% 190 The budget for 2011-

12 and 2012-13 reflects the local government settlement but some grants have yet to be confirmed. There is uncertainty in later years.

10 Economic risk - capital receipts

B III 500 65% 325 B III 500 65% 325 B III 500 65% 325 The MTFS assumes capital receipts of £7m in 2011-12 and £5m in later years. There is risk due to the economic climate, however the risk is based on alternative financing costs.

11 Economic risk - demand for services

B III 1,000 65% 650 B III 500 65% 325 B III 500 65% 325 There may be additional demands on services such as housing due to the recession and housing benefit changes.

12 Litigation against the Council

C III 1,000 38% 380 C III 1,000 38% 380 C III 1,000 38% 380 The MTFS includes an annual contribution to a provision for litigation including employment and planning related matters. Some of this risk will be covered by insurance, but individual cases can have significant cost.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 There is a heightened risk of a procurement challenge due to the EU remedies directive.

13 Major fraud E III 100 6% 6 E III 100 6% 6 E III 100 6% 6 No major cases in recent years.

14 Increased Pension Fund contributions

F III 500 2% 0 D III 500 17% 6 D III 500 17% 6 The MTFS provides for an increase in employers contributions at 0.25% per year following the recent triennial valuation (final report awaited). This reflects advice from the actuary.

15 Levies, Precepts and Subscriptions

EIV 50 6% 3 EIV 50 6% 3 EIV 50 6% 3 The Council pays a range of levies, precepts and subscriptions. These are set by other bodies and usually known before the budget is approved. The risk in relation to LPFA has been covered.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 16 Financial Management

- poor budget management

D III 1,000 17% 170 D III 1,000 17% 170 D III 1,000 17% 170 Risk mitigated by budget monitoring arrangements, refresher training, improvement boards. During 2010-11 the Council experienced serious issues with the Capital Programme which are being addressed for 2011-12. Budget includes some additional resource to improve financial management.

17 Financial control environment

D III 1,000 17% 170 D III 1,000 17% 170 D III 1,000 17% 170 The control environment has been strengthened in recent years. Budget includes some additional resource to improve financial management.

18 Insurance claims E III 500 6% 30 E III 500 6% 30 E III 500 6% 30 An actuarial review has been carried out at regular intervals, the annual contribution is being steadily increased and the balance in the provision reflects the claims liability.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000

SOCIAL RISKS

19 Demographic changes: additional demand for social care.

C II 1000 38% 380 C II 1000 38% 380 C II 1000 38% 380 The MTFS reflects anticipated demand for social care for both Children and Adults. However, small fluctuations can generate considerable cost and the Children's service budget has been under considerable pressure in recent years.

20 Population growth rates D III 0 0 0 D III 0 0 0 D III 0 0 0 The MTFS reflects the grant settlement which in turn reflects the population figures. There are concerns about housing benefit caps forcing families from Inner London to Outer London.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 TECHNOLOGICAL RISKS

21 System failure C III 250 38% 95 C III 100 38% 38 C III 100 38% 38 IT environment

relatively stable. Restoration costs are covered by insurance. However, the risk is heightened by the transfer to Capita during 2010-11 and the transition period.

22 Lack of disaster recovery capability

C II 1000 38% 380 C II 1000 38% 380 C II 1000 38% 380 The IT contract with Capita includes a comprehensive DR solution and provision is made to implement this in the MTFS. However, there is a risk whilst the new arrangements are put in place. Some recovery costs would be covered by insurance.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 POLICY/LEGISLATIVE / REGULATORY

23 New policy/legislation B III 1000 65% 650 B III 500 65% 325 B III 0 65% 0 Generally changes

have a long lead in time, but there are risks due to the extensive policy agenda of the new government and the speed of implementation of changes in some areas.

SERVICE RISKS 24 Safeguarding - recent

high profile cases have resulted in a significant increase in referrals

B III 250 65% 162.5 B III 250 65% 162.5 B III 250 65% 162.5 Detailed plans put in place in Children's services including case reviews.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 EMERGENCIES

25 Natural disaster,

accident or terrorist incident

EIII 837 6% 50 EIII 837 6% 50 EIII 837 6% 50 The government has a scheme (the Bellwin scheme) that covers authorities for 85% of costs of a major disaster above 0.2% of annual budget (£632k). The risk to the Council is 100% of costs below the threshold and the 15% above it, so if the total cost of the incident was £2m the council would be liable for £837k.

26 Adverse weather conditions

D III 100 17% 17 D III 100 17% 17 D III 100 17% 17 There is some provision in the budget for seasonal work. This risk relates to exceptionally bad weather.

EFFICIENCY RISKS

27 Government efficiency

agenda DIII 0 0 0 DIII 0 0 0 DIII 0 0 0 Formal monitoring of

progress against government efficiency targets has now been scrapped.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 28 Non-achievement of

allocated savings included in the budget

C II 2,000 38% 760 C II 1,000 38% 380 C II 1,000 38% 380 The MTFS includes efficiency savings totalling £13m in 2010-11. Progress will be carefully monitored. A detailed plan is being developed for procurement savings.

29 Transformation programme fails to deliver substantial contribution to the funding gap in years 2 and 3 of the MTFS

F IV 0 2% 0 C II 6,000 38% 2280 C II 15,000 38% 5700 The transformation programme is well advanced, however there are implementation risks and funding gaps are substantial from year 3 onwards.

PARTNERSHIP / CONTRACTUAL RISKS

30 Partnership failure –

LAA (now in final year) EIII 0 6% 0 EIII 0 6% 0 EIII 0 6% 0 The LAA has been

agreed and is being monitored and all projects will be completed in 2011-12. Projects were revised during 2010-11 to reflect the cut in funding.

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2011-12 2012-13 2013-14 Ref Risks Risk

rating Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Risk rating

Worst case

Likelihood Net risk

Mitigation/Comments

£000 % £000 £000 % £000 £000 % £000 31 Breakdown of

relationships with strategic partners (PCT, Police, businesses, voluntary sector)

D II 1,000 17% 170 D II 1,000 17% 170 D II 1,000 17% 170 The HSP governance arrangements have been revised. Good working relationships exist between partners. There are ongoing concerns about the PCT's financial position, but agreement was reached about liabilities for 2010-11. 32 Commercial

Partnership failure (Capita, Kier, Enterprise Mouchel)

D II 0 17% 0 D II 0 17% 0 D II 0 17% 0

TOTAL 19,326 5,762 22,176 6,434 30,676 9,529 Contingency Provided

in 2011-12 1000

Remaining risk 4,762

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Appendix 10 Reserves Policy The recommended reserves policy is as follows:

The risk assessment of the budget dictates the minimum level of general balances required. One of the calls on any underspend at the end of the year will be a contribution to general balances. The value of the contribution will be determined with regard to the size of the underspend, the underlying strength of the balance sheet, the need to support the transformation programme, and other priorities.

The rationale for this policy is set out below. Councils need balances so that they can deal with unforeseen calls on resources without disrupting service delivery. It is the responsibility of each authority to set its level of reserves based on local conditions, but taking into account national factors. Although advice can be sought from the external auditor, it is not their responsibility to prescribe the appropriate level. It is good practice for a risk assessment to be carried out to determine the level of reserves and the External Auditor expects the Council to review its reserves on an annual basis. The risk assessment above shows that the total risk identified has been quantified at £4.8m for 2011-12. However, the appropriate level of reserves for a council to hold is extremely subjective. It is important to find a balance between being at risk of wiping out all reserves in a single bad year and having excessive reserves and thereby wasting taxpayer’s money. The Council should at least be able to cope with a modest overspend in any one year and still be in a stable financial position. The target level of reserves depends on:

• The degree of risk contained in the budget • The effectiveness of budget monitoring during the year • The effectiveness of balance sheet management during the year • The extent to which the Council has earmarked reserves and provisions to

deal with specific items The Council is continually working to improve financial management and the emphasis in 2011-12 will be on the accuracy of capital budget management and forecasting. In addition more emphasis will be placed on balance sheet management going forward. The Council has built up more appropriate annual contributions to provisions for debt, litigation and insurance in the last few years, and strengthened its balance sheet, but still has few earmarked reserves. Taking all this together, the target level for reserves should be £5m-£7m.

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As at 31 March 2010 the level of General Fund Reserves was £6.3m, which is within the recommended minimum level. A decision will be made a year end on the best use of any available capacity.

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Appendix 11 Virement Rules 1. Under the Constitution the Council is required to specify the extent of virement

within the approved budget which may be undertaken by the Cabinet (Ref 4C-2m). Any other changes to the budget are reserved to the Council, other than any changes necessary to ensure compliance with the law, ministerial direction or government guidance.

2. Virement for these purposes is taken to include not only the transfer of budget

provision between budget heads (including reserves or contingency provisions if such exist) but also the transfer of funds from general balances by way of a supplementary estimate. Virement rules apply equally to expenditure financed by increased income including grants.

3. A temporary virement relates solely to the current year – the changes are only

made in the current year and the budget reverts back to its original state in the following financial year. A permanent virement is a permanent change to the budget.

Virements requiring Council approval 3. The approval of Council is required for any virement which:

• Is a permanent virement, which creates an ongoing financial commitment over and above the approved budget, and/or involves a major change in policy as described by the Budget and Policy Framework

• Involves the transfer of funds between revenue and capital budgets; • Is a temporary virement that is greater than £500,000 and represents a

major change in policy as described by the Budget and Policy Framework. 4. These provisions are subject to annual review as part of the budget setting

process.

Virements for which the Cabinet is responsible 5. The approval of the Cabinet is required for any temporary virement greater

than £100,000. 6. The Cabinet may only approve temporary virements which are greater than

£500,000 if they have been demonstrated not to represent a major change in policy as described.

7. The Cabinet may only approve permanent virements that have been

demonstrated not to create an ongoing financial commitment over and above the approved budget or imply a major change in policy.

8. The Cabinet delegates approval of temporary virements below £100,000. Virements delegated by the Cabinet to officers 9. For temporary virements less than or equal to £100,000 and greater than

£50,000, the relevant Corporate Director and the Director of Finance (or

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his/her nominated officer) may effect virements, subject to consultation with the relevant Portfolio Holder in each case.

10. Temporary virements less than or equal to £50,000 may be approved by the

relevant Divisional Director and reported to their Corporate Director as part of monthly monitoring process. Virements above the specified limits or about which the relevant Portfolio Holder has concerns, must be referred to the Cabinet for approval.

11. Budgets may only be transferred between revenue or between capital budget

heads provided that they: • do not involve new policy or policy change; • do not involve an increasing commitment in current or future years that

cannot be contained within existing approved budget allocations; and • do not conflict with any prior decision made or policy or plan or strategy

adopted by the Cabinet. Recognition of virements 12. As part of monthly monitoring procedures directorates should be forecasting

the full year outturn position. Where action plans to address potential overspends do not reduce the forecast overspend, temporary virements should be made from underspendings elsewhere to reflect the forecast overspend that is not covered by measures in the action plan. Action plans that address overspends of £100,000 or more should be approved by the Cabinet.

13. If directorates do not effect virements in accordance with the virement rules

the Corporate Director of Finance has the power to require virements to be effected.

14. When virements are reported they will be assumed to be temporary virements

unless it is specifically stated that they are permanent virements. 15. Where a virement is moving funds from one directorate to another, both

Corporate Directors must approve the transfer. 16. Where a new capital scheme is to be added to the capital programme or an

existing capital scheme is to be deleted from the capital programme Cabinet approval must be sought.

Cumulative virements 17. Where successive virements to or from the same budget head result in the

cumulative virement reaching the above thresholds, approval should be sought as set out above.

Carry Forward Policy 18. In general a revenue or capital budget is available for the year in question and

unspent balances will not be carried forward. However, the Cabinet may agree to carry forward an unspent balance from one year to the next dependent upon the merits of the case put forward. Unspent balances will only be considered for carry forward where:

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• the Council’s revenue/capital budget is not overspent in total; • reserves and balances are at an appropriate level; and • the item is fully funded from grant and the grant will be lost if the item is not

carried forward. 19. All other commitments will have to be accommodated within the new year

budget

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Appendix 12

Report of the Chief Finance Officer Under the Local Government Act 2003 the Corporate Director of Finance (in her capacity as the Chief Finance Officer under S151 of the Local Government Act 1972) is required to comment on the robustness of the budget and the adequacy of reserves. Her report is set out below. Robustness of the Budget Clearly the economic climate and the Local Government Settlement make this budget round particularly challenging and there is considerable uncertainty about public sector pay, inflation, interest rates, the property market, and employment levels. All these issues affect the Council’s own finances and every effort has been made to ensure that the technical assumptions underpinning the budget are robust. The economic climate also has major implications for Harrow’s residents and businesses and may therefore create additional demand on services. In my view the budget is robust. I have taken a number of factors into account in arriving at my opinion:

o Reasonable assumptions have been made in relation to inflation o Service managers have made reasonable assumptions about demand led

pressures and taken a prudent view of volatile areas o Savings proposals have been explored in some detail and Directorates

have confirmed that they are achievable o The grant settlement for 2011-12 and 2012-13 has been published (with a

few grants still to be announced) o Prudent assumptions have been made about capital financing costs and

investment income o The recommended increases in fees and charges are in line with the

assumptions in the budget o A risk assessment has been conducted o The budget for 2011-2 includes a contingency of £1m to help manage risk

A sensitivity analysis for the key assumptions is attached. Adequacy of Reserves The Council has suitable provisions and some earmarked reserves to deal with particular issues such as insurance claims, bad debts, litigation and employment matters. General balances are adequate.

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Budget Monitoring The Local Government Act 2003 also introduced requirements in relation to budget monitoring and management action. Budget monitoring arrangements are in place in Harrow. These arrangements are continually being developed, and the risk areas identified in the assessment will be kept under review. The financial position can change relatively quickly and any adverse variations must be identified and addressed promptly by service managers to avoid further calls on reserves.

2011-12 Budget Sensitivities Budget area Assumption in 2011-12 budget Change

Impact

Pay

Increase of 0% + 0.5% + £550k General Prices Inflation

Increase of 1% +/- 0.5% +/- £420k

Utilities Inflation

Increase in line with general inflation at 1%

+/- 1% +/- £17k

Investment Income

Base rate is 0.5% for the year

+/- 0.5% +/- £220k Council Tax collection rate

Collection rate of 98.25% +/- 0.25% +/- £260k Note that a variation in the collection rate would be managed within the collection fund in year and have an impact on the revenue budget the following year

84

Appendix 13 Model Council Tax Resolution Harrow Council

Council Tax Resolution 2011-2012 Cabinet to approve as part of the Summons for Council, the model budget and Council Tax resolutions reflecting the recommendations of Cabinet and the GLA precept. Council is requested to determine the level of the Council Tax for 2011-2012 in the light of the information on the precept and make the calculations set out in the resolution shown below. (1) To note that at its meeting on 15 December 2010 the Council calculated the

amount of 87,148 as its Council Tax Base for the year 2011-2012 in accordance with Regulation 3 of the Local Authorities (Calculation of Council Tax Base) Regulations 1992 made under Section 33 (5) of the Local Government Finance Act 1992.

(2) That the following amounts be now calculated by the Council for the year 2011-2012, in accordance with Sections 32 to 36 of the Local Government Finance Act 1992:

(i) Being the aggregate of the amounts which the Council estimates for the items set out in Section 32 (2) (a) to (e) of the Act. (Gross expenditure) £559,815,183

(ii) Being the aggregate of the amounts which the Council estimates for the items set out in Section 32 (3)(a) to (c) of the Act. (Gross income including use of reserves) £384,306,299

(iii) Being the amount by which the aggregate at (i) above exceeds the aggregate at (ii) above, calculated by the Council, in accordance with Section 32(4) of the Act, as its budget requirement for the year.

£175,508,884

(iv) Being the aggregate of the sums which the Council estimates will be payable for the year into its General Fund in respect of redistributed non-domestic rates, revenue support grant, increased by the amount of the sums which the Council estimates will be transferred in the year from its Collection Fund its Collection Fund in accordance with Section 97(4) of the Local Government Finance Act 1988 (Collection Fund Surplus) £72,103,425

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(v) Being the amount to be raised from Council Taxes Calculated as the amount at 2 (iii) above less the amount at 2 (iv.) above.

£103,405,459

£1,186.55

(vi) Being the amount at (v) divided by the Council Tax Base, calculated by the Council at its meeting on 15 December 2010 in accordance with Section 33 (1) of the Act, as the basic amount of its council tax for the year. (The average Band D Council Tax )

(vii) Valuation Bands

A B C D E F G H £ 791.03 922.87 1,054.71 1,186.55 1,450.23 1,713.90 1,977.58 2,373.10

Being the amounts given by multiplying the amount at (vi.) above by the number which, in the proportion set out in Section 5(1) of the Act, is applicable to dwellings listed in a particular valuation band divided by the number which in that proportion is applicable to dwellings listed in valuation band D, calculated by the Council, in accordance with Section 36(1) of the Act, as the amounts to be taken into account for the year in respect of categories of dwellings listed in different valuation bands.

(3) That it be noted that for 2011-2012 the Greater London Authority stated the following amount in precept issued to the Council, in accordance with section 40 of the Local Government Finance Act 1992, for each of the categories of dwellings shown below

Valuation Bands

A B C D E F G H £ 206.55 240.97 275.40 309.82 378.67 447.52 516.37 619.64

(4) That, having calculated the aggregate in each case of the amounts at (2)(vii) and (3) above, the Council, in accordance with Section 30(2) of the Local Government Finance Act 1992, hereby sets the following amounts as the amounts of Council Tax for the year 2011-2012 for each of the categories of dwellings shown below

Valuation Bands

A B C D E F G H £ 997.58 1,163.84 1,330.11 1,496.37 1,828.90 2,161.42 2,493.95 2,992.74

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HARROW COUNCIL

REVENUE BUDGET SUMMARY 2011-2012 2010-

2011 2011-2012

Original Budget

Original Budget

£000 £000 Local Demand - Borough Services

Adults and Housing 70,029 67,208 Children’s 40,437 40,832 Community and Environment 46,496 43,797 Place Shaping 4,332 4,439 Legal and Governance 1,174 3,566 Assistant Chief Executive 5,076 2,422 Corporate Finance 21,691 18,083 Transformation Programme 0 -389 Total Directorate Budgets 189,235 179,958

Inflation and Corporate items 2,075 2,269 Provisions for debt/litigation 225 325 Capital Financing adjustments -6148 -3,989 Interest on Balances -690 -474 Council Tax Support Grant 0 -2580 Area Based Grant -12922 0 Total – Baseline 171,775 175,509

Capitalisation -90 0 Contribution to Balances 0 0 Total Net Expenditure 171,685 175,509

Collection Fund Surplus b/f -1448 -1978 Formula Grant -67,764 -70,126 Local Demand on Collection Fund 102,473 103,405

Funds / Balances Balances Brought Forward 5,716 6,294 Adjustment to Balances 0 0

Balances Carried Forward 5,716 6,294 Council Tax for Band D Equivalent Harrow (£) 1,186.55 1,186.55 Increase Harrow (%) 0.00% 0.00% Taxbase 86,362 87,148

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Appendix 14 Forecast reserves and provisions General Balances

2011 -12 2012-13 2013 - 14 £m £m £m Estimated balances at start of year

6.8

6.3

6.55

Estimated contribution in year*

0.5

0.75

0.5

Estimated use of balances in year

1.0

0.5

0.325

Estimated balances at year end

6.3

6.55

6.725

(i) Appendix 10 sets out the recommended reserves policy. On the basis of this an estimate is made around contribution to balances in year which will need to be assessed annually based on the policy.

(ii) Use of balances in year is based on the Risk Assessment at Appendix

9 which is updated annually. It covers risks categorised as A-B less the assumed use of contingency which stands at £1m in 2011-12. Directorates are expected to take action to contain pressures contained in C–E. The estimated use of balances should be worst case scenario where no other viable funding mechanism remains.

88

Earmarked Reserves

Estimated Reserves at start of year 1 April 2011

Planned Contributions included in MTFS

Estimated Use of reserves in year

Estimated Reserves at year end 31 March 2012

£m £m £m £m Employee and Litigation Related

2. 250

-

1.0

1.250

Insurance Reserve

0.500

-

-

0.500

Note:

• Employee and Litigation reserve to be set up as part of 2010–11 year end closure of accounts to deal with potential costs of Transformation Programme

• Insurance reserve will be transferred to insurance provision in year if

required. Provisions Estimated

position at 1 April 2011

Planned Contributions included in MTFS

Estimated Use of reserves in year

Forecast Balances at year end 31 March 2011

£m £m £m £m Insurance provision

4.6

1. 155

1.0

4.755

Employee Related Provision

0. 410

-

0.310

0.100

HRA Disrepair Provision

0.114

-

0.114

-

Litigation Provision

0.440

0. 275

0.090

0.625

Sundry Bad Debt Provision

1.070

0.050

-

1.120

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Appendix 15 Stakeholder Meetings A series of meetings with key stakeholders to share information took place in January. They are listed below: Stakeholder Meeting

Date

Tenants and Leaseholders

Tenants and Leaseholders Consultative Forum

5 January 2011

Tenants and Leaseholders

Harrow Federation of Tenants and Residents Associations

20 January 2011

Partner organisations

Harrow Chief Executives 24 January 2011

Local Businesses

Harrow Business Consultative Forum

24 January 2011

Unions Employees Consultative Forum 25 January 2011

Schools Schools Forum

25 January 2011

report for: cabinet · cabinet approved the year ahead statement in october 2010, and approved ......

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