Local Government Finance Settlement and Integrated Planning Process

1. Local Government Finance Settlement and Integrated Planning Process Mike Parsons Overview & Scrutiny Committee 3 February 2012

2. Finance Settlement 2012/13 - Headlines • 2nd year of 2 year settlement – figures unchanged from previous announcement • No change to formula methodology from 2011/12 • Further council tax freeze grant for 2012/13 (but unlike the 2011/12 grant, this is one-off) • New distributional system planned from 2013/14 (Bill published just before Christmas)

3. Baseline Adjustments • Academy & Free School adjustment for local authority central services • No change to previously announced adjustments for 2011/12 or 2012/13 • Entirely new methodology proposed from 2013/14

4. Hertfordshire’s Figures 2012/13- Formula Grant 2011/12 Actual Formula Grant £200.7m - Baseline adjustments £ 2.4m = 2011/12 Baseline £198.3m 2012/13 Raw Formula Grant £162.0m + Damping £ 15.7m = Comparative Formula Grant £177.7m (-10.4%) + Freeze Grant 2011/12 £ 12.6m = 2012/13 Formula Grant £190.3m • comprising £3.6m RSG + £186.7m NNDR

5. Hertfordshire’s Figures 2012/13- Other significant grants • Council Tax Freeze Grant 12/13 £12.6m [one-off] • Early Intervention Grant £37.0m • additional £1.4m for targeted 2 year olds • Learning Disability Grant £38.4m • NHS Social Care Funding £10.6m • New Homes Bonus £2.0m

6. Revenue Spending Power • Calculated by Government as • Council tax requirement (2011/12) • Formula grant (adjusted) • Specific grants (where available) • NHS funding for Social Care • 2011/12 Adjusted estimate £791.5m • 2012/13 Estimate £773.4m • Change -£18.1m or -2.3%

7. Conclusions • Formula grant as expected; other grants little changed from 2011/12 • Great uncertainty from 2013/14 onwards, with anticipated new grant methodology (business rates, council tax benefit, school central services) and transfer of functions (public health) • IPP needs to reflect reduced grant funding and pressures • Inflation, inc. energy • Demography, numbers and complexity • Legislation, e.g. landfill tax, carbon commitment • Other, e.g. capital financing

8. Revenue Pressures 2012/13 • Inflation: £ 3.9m • Pay 0%; electricity 10%-26%; gas 17.7%-17.8% business rates 5.6% … • Demography: £9.3m • Learning Disability £5.3m; • Older People £2.9m; • Physical Disability £0.6m; • Mental Health £0.4m

9. Revenue Pressures 2012/13 • Legislation: £ 2.6m • e.g. Landfill Tax £2.2m • Capital Financing & Contingency: -£17.7m • reduction mainly due to reduced borrowing • Previous Policy Decisions:-£1.5m • Other: £ 1.1m NB only major items shown; totals include some negative items

10. Revenue Savings 2012/13 Previously delivered 2011/12 £88.5m Further savings identified* 2012/13 £38.2m = Total savings £126.7m *still to be delivered …

11. Revenue Savings 2012/13 • Significant areas already subject to member process, including: • Home to school Transport - £2.9M • Street Lighting - £0.7M • Libraries Hours - £1.5M • SMS - £1.4M

12. LEAN reviews in HCS Transfers to Serco Standards & School Effectiveness CLA strategy Careers – shift to schools Enablement MH services review Preventative and voluntary services review Highways, property & HR resourcing procurements Delayering and structural changes – inc SMB Terms & Conditions Day Crewing (F&R) Other Revenue Savings 2012/13

13. Looking ahead … 2013/14 2014/15 £m £m Identified 146 151 Gap - 33 Total 146 184 • Figures for 2013/14 and 2014/15 will depend on changes to grant distribution system • Assumes Council Tax freeze in all years • assumption only: decision will be required when setting budget in future years

14. Transformation Savings by Work Stream

15. Value for Money / Benchmarking • Detailed work undertaken – starting to see impact of transformation in some areas • Analysis will inform search for the further £33m savings required for 2014/15 • Next slide is 2009/10 CIPFA VFM analysis … the following slide is provisional and unverified 2010/11 version [note some data is clearly incorrect – e.g. Fire, Early Years]

16. Public Transport BS, Welfare and Inclusion School Improvement Adults<65 with MHN Special Educational Needs Planning and admissions Road Safety Fire Service Early Years Old People's Social Care Waste Disposal Libraries Performance Percentile Children's Social Care Highway Maintenance Adults<65 with LD High Cost Percentile Value for Money

17. 100 Provisional and unverified VFM 2010/11 Early Years BS, Welfare & Inclusion 90 Adult Education 80 School Planning & Admissions Street Lighting 70 Adults<65 with PD Older Peoples Social Care Road Safety School Improvement 60 Waste Disposal Libraries Public Transport Children's Social Care 50 Special Educational Needs Adults<65 with MHNs Adults<65 with LD Relative Performance (%) 40 30 20 10 Fire Highways Maintenance 0 0 10 20 30 40 50 60 70 80 90 100 Relative Cost (%) Source: Cipfa VFM Toolkit 2010/11. Significant changes from 2009/10 content and methodology noted. Further work being undertaken to analyse and verify the information, particularly for Fire and Early Years areas.

18. Capital Programme 2012/13 - 2015/16 • Proposed programme based on following principles • Major schemes in existing programme preserved • but Stevenage Fire Station now refurbishment, rather than new build • Croxley Rail updated for latest figures; and • Vehicle replacement programme reviewed • Continuation of current levels of funding for highways maintenance • New schemes only where funded principally from grant or s106 • e.g. Broadband, Fire Station improvements • Where possible grant used to substitute for prudential borrowing, and so reduce debt

19. Prudential borrowing & debt • One-off investment of £37.5m revenue funding (including the 2012/13 council tax freeze grant) to support 2012/13 capital programme • Significantly reducing need for prudential borrowing (which would otherwise have been required to fund the programme) and so reduces cost of debt in future years

20. Schools Budget • Funding per pupil (including mainstreamed grants) frozen at 2011/12 cash level • Minimum Funding Guarantee (MFG) for schools - set at -1.5% of their 2011/12 per pupil funding, before pupil premium • Pupil premium grant - additional to DSG and increased for 2012/13 to £600 per pupil entitled to free school meals* and Children Looked After (£250 for Service Children) *now includes those who have been in receipt at any time in previous 6 years

21. Reserves • Contingency 2012/13 £3.1m • General Fund balance – recommended increase in minimum prudent level to 3% (from 2.5%) of net revenue budget (=£24m) • plus Specific Reserves for particular purposes (the largest individual reserve being accumulated school balances)

22. Outstanding information • Final government formula grant settlement (though no changes expected) • Some further minor grant announcements from government departments • Lee Valley Park and Environment Agency levies

23. Timetable • Service Cabinet Panels 31 January – 7 February • Overview & Scrutiny 3 and 8 February • P&R Cabinet Panel 10 February • Cabinet 20 February [final] • Council 21 February

24. Questions