Agenda item

1)         The Leader stated that he had agreed to consider this matter as an urgent item for the following reason:

“In light of the accelerating inflationary pressures and the “credit crunch” affecting both the wider economy and KCC, it is considered urgent business to ensure that the Cabinet takes decisive action for 2008/09 by allocating the revenue contingency for the current economic situation (set aside from the roll forward from 2007/08) and also have due regard to the continuing impact on the medium term plan 2009/12. Further, to recommend to Council that innovative action is taken to support the ongoing capital programme by the establishment of a second Property Enterprise Fund.”

(2)       Mr Carter stated that the combined impact of increased fuel and energy prices, together with a downturn in the property market, would have a significant impact on both the revenue and capital budgets in terms of increased costs and reduced capital receipts. With regard to the capital programme, Mr Carter stated that the Council required capital receipts of between £160m and £180m to fund its ambitious capital programme over the next 3 years, which the Council would not realistically achieve in the current economic climate. Accordingly, the establishment of a second Property Enterprise Fund would go a long way to achieving certainty for Directorates in terms the provision of a temporary borrowing facility and a guaranteed valuation of assets assumed in the MTP. He added, however, that additional work was still required to undertake a complete review of the Capital Programme, which might entail a re-phasing or curtailing of certain projects. It was anticipated that the Council would be in a position to re-publish a revised Capital Programme by the end of September.

(3)       Mr Chard stated that he was pleased the Council was acting quickly and decisively in the current economic climate, adding that the Council’s sound financial management in previous years had meant that the Council was in a fortunate position of being able to provide this additional support to its revenue budget, without needing to use reserves. He referred to the exempt appendix to the report, which had been prepared to provide further detail of where the additional revenue resources were most required. He also stated that the proposed establishment of the second Property Enterprise Fund was an elegant way of maintaining capital investment during the current economic conditions and avoided unnecessary fluctuations in the Council’s capital programme activity. It was noted that the intention of the Property Enterprise Fund was that it would neither be in surplus nor deficit at the end of the period. Mr Chard expressed his concern that the Consumer Price Index (CPI) would exceed the Retail Price Index (RPI) at some stage in the coming year, which would be bad news for people on fixed incomes, creating an even larger pressure on their available resources. Ms McMullan added that requests from Directorates for additional resources had not been accepted at face value and without challenge, but would continue to be monitored to ensure that they were realistic. Finally, Mr Chard offered his sincere thanks to all officers and Cabinet colleagues during the preparation of this important report.

(4)       Cabinet agreed to:-

(a)       Note the forecast impact of the current economic situation on the revenue position for 2008/09 and the medium term as shown in the report;

(b)       Agree the allocation of the £5.111m contingency for the current economic climate as detailed in paragraph 2.6 of the report;

(c)        Note the estimated impact on the services funded by the Dedicated Schools Grant as highlighted in paragraph 2.4.4 of the report; 

(d)       Agree the establishment of a second Property Enterprise Fund in order to defer disposing of the assets until prices improve, subject to approval by County Council in September, with a temporary borrowing facility capped at £85m, as detailed in Appendix 2 of the report; and

(e)       Support the inflationary impact on highways, as detailed in paragraph 4.2 of the report, be built into the revised capital programme for 2008-12, with a compensatory reduction elsewhere within the overall capital programme (which will be incorporated into the “Revenue and Capital Budget” report to be determined by Cabinet in September).