Agenda item

To note the draft budget and MTFP and suggest any other issues which should be reflected in the draft budget and MTFP prior to Cabinet on 23 January and County Council on 9 February 2017

(1)       Andy Wood (Corporate Director for Finance and Procurement) introduced the report which provided information about the key assumptions underpinning the budget proposals and savings relevant to the remit of the Policy & Resources Cabinet Committee.  The report also included information from KCC’s consultation on its proposed budget, the Chancellor’s Autumn Budget Statement and the provisional local government finance settlement

(2)       Mr Wood said that grants to the authority from government had reduced by £46 million and the pressures on spending set out in the Medium Term Financial Plan amounted to £66 million.  Of this £66 million, £51 million was unavoidable and included pressures arising from inflation, the introduction of the living wage and increased demand for services such as waste disposal, education and social care.  The balance of £15 million was accounted for by a pay and performance improvement provision, funding the borrowing cost of the capital programme, and a “pot” to respond to market sustainability issues in the domiciliary and residential care sector to ensure the authority was able to meet the requirements of the Care Act.

(3)       Mr Wood also said that the income from Council Tax would increase by £34 million and this was based on a 2% increase in the size of the tax base, a 2% increase in Council Tax (up to the point at which a referendum would be triggered) and a 2% Social Care Levy. He said it was possible to increase the Social Care Levy to 3% in one year but it could not exceed a total of 6% over three years.

(4)       When pressures on spending, the loss of grants and increases in Council Tax were taken together, savings of £78 million were required to balance the budget.  He said a risk assessment had been conducted on proposed savings and an update on the assessment would be reported to Council on 9 February 2017.

(5)       Mr Wood said that the authority had held £202 million in reserves at the beginning of 2016/17 and, if the proposed budget were agreed the authority, would have reserves of £180 million by the end of 2017/18.  He considered that this was a prudent reserve but not excessive by any means.

(6)       Mr Shipton (Head of Financial Strategy) said: local government spending would remain “flat-cash” between 2015/16 to 2019/20 and that this flat-cash included council tax, additional social care funding and reductions in central government grants.  Flat-cash meant there would be no additional funding for rising costs or demand pressures and these would have to be funded by savings or spending reductions. 

(7)       Mr Shipton said the dip in the government grant for 2017/18 had been partially offset by an announcement within the local government settlement which offered greater flexibility in setting the social care Council Tax precept, and a new one-off Social Care Support Grant in 2017/18.  The Social Care Support Grant was funded out of New Homes Bonus (NHB) by bringing forward the proposed changes from 2018/19.  However, in Kent this was at the expense of district councils (which collectively would receive £6.2m less NHB than announced in SR2015) and KCC would receive £4.6m more.

(8)       Mr Shipton concluded by saying that people tended to support increases in Council Tax when authorities took time to explain the reasons.

(9)       In response to questions, Mr Wood said that it was better to allocate the social care levy at 2% each year as it was being added to bigger tax base however Cabinet would take a view on the approach to be taken at its meeting on 23 January 2017. Mr Shipton said the increase in the number of households in the county accounted for about 50% of the increase in the Council Tax base with the balance made up by changes to discount schemes and Council Tax support schemes administered by district councils.  Mr Shipton confirmed that the increase in demand for services arising from the increase in the number of households had been considered in developing the Medium Term Financial Plan.

(10)     Some apparent discrepancies in the figures in the report and the Medium Term Financial Plan were explained by the presentation of the budget in an A-Z format in the report.

(11)     In response to questions, Mr Wood undertook to provide a briefing note about the reserves being drawn down and to brief Members about the proposed re-structure of the Finance team.

(12)     Resolved that the draft budget and MTFP (including responses to consultation and Government announcements) be noted.