Agenda item

To receive a report that sets out the proposed draft Budget 2016/17 and Medium Term Financial Plan (MTFP) 2016/19 as it affects the Policy and Resources Cabinet Committee.  The report includes extracts from the proposed final draft budget book and MTFP relating to the remit of this committee (although these are exempt until the Budget and MTFP is published on 11^th January).  This report also includes information from the KCC budget consultation, Autumn Budget Statement and provisional Local Government Finance Settlement as they affect KCC as a whole as well as any specific issues of relevance to this committee

Andy Wood (Corporate Director Finance and Procurement), Dave Shipton (Head of Financial Strategy) and Jackie Hansen (Finance Business Partner) were in attendance for this item

(1)       Mr Wood gave a presentation setting out the context in which the proposed budget was being developed.  A copy of the presentation is available on-line as an appendix to the minutes.  He also said that the late announcement of the Local Government Finance Settlement meant there had been insufficient time to interpret and analyse it so that the Medium Term Financial Plan (MTFP) could be published in full.  It was anticipated that appendices 1-3 would be published early next week.

(2)       Mr Wood said the Local Government Finance Settlement, announced on 17 December, meant the Council was £18 million worse off than anticipated as a result of the reduction in Revenue Support Grant (RSG). This was on top of the £30 million reduction anticipated and an additional spending demand estimated to be £80 million. This would  require savings or additional income of £126 million for 2016/17 in order to balance the budget.  Around £33 million of this would come from the proposed council tax leaving a £94 million savings target. 

(3)       Mr Wood said the Council would respond to the Government’s consultation and, in particular, about: the extra spending demands on local authorities particularly those with social care responsibilities; the distribution formula which was flawed; the absence of floors and ceilings, the more favourable treatment of inner London boroughs; the late announcement of the Settlement and the failure to carry out any consultation prior to the announcement of the provisional settlement; as well as offering to work with Government to develop a new social care needs formula. 

(4)       Mr Wood said the council tax base was better than expected and the council tax collection fund might be better than anticipated however some of the reserves that had been drawn down to balance the budget would need to be repaid in future years.

(5)       Mr Carter said the County Councils’ Network would respond to the Government’s consultation and in particular would develop a coherent response to the Government’s view that flat cash was sustainable over the next four years.  The County Councils’ Network considered that funding for social care needed to increase over the next three years and, as a minimum, the Better Care Fund needed to be brought forward to year 2 of the Settlement. 

(6)       Mr Carter also said that the re-distribution formula needed to be reviewed urgently to be effective for 2017/8 and this, in turn, would create a better basis from which to consider Business Rates equalisation.

(7)       In response to questions, officers said that:

(i)         A decision had not yet been made about whether to take up the offer of a guaranteed four-year settlement particularly as the Council’s response to the consultation was that the RSG distribution was unfair and should be changed;

(ii)        External consultants had been engaged to validate responses to the budget consultation. Past experiences had shown that people responded more readily to external consultants and that they were better able to recruit a representative sample of the population. This provided KCC with a genuinely independent view to help set budget priorities and council tax levels;

(iii)       By 2019/20, based on the existing methodology, it appeared that 10 of the district councils would receive a negative RSG and that Tonbridge and Malling and Maidstone Borough Councils would be among those in that position in 2017/18. 

(iv)       Further analysis and briefing for Members on the impact of the RSG was planned.

(v)        The key to balancing budgets in 2019/20 was the improved Better Care Fund but it was likely to come with conditions attached. 

(vi)       It was already clear that the proposed changes to the local government funding system with 100% Business Rate retention (when introduced) would not compensate for the reduction in RSG over the next four years.  The Government had made it clear that the additional income from Business Rates would be used to fund additional responsibilities, for example, to replace ring-fenced public health grants and costs associated with the full implementation of the Care Act 2014.

(8)       RESOLVED that:

(a)       The draft Budget and MTFP (including responses to consultation and Government announcements) be noted;

            (b)       Officers be thanked for their work in preparing the draft budget.