BACKGROUND

1. BACKGROUND • Comprehensive Spending Review 2010 marked the beginning of the grant reduction programme • Local government anticipating a 28% cut in grant over the period • HCC reduction is 43% over period (around £80M) • Further cut of £27M in 2015/16 • Inflationary pressures of around £14M per annum • Social care demography and complexity pressures of £11.5M per annum • Total savings requirement of £200M from 2011/12 to 2015/16 • Net budget is around £750M

2. HCC RESPONSE • Aim to deliver 4 years savings in 2 - £55M in 2011/12 and £45M in 2012/13 • Based on original grant projections, this plus 1.9% council tax increase pa would have balanced the budget by 2014/15 • Scale of grant reductions was greater than expected • Council Tax Freeze Grant meant no base council tax income being generated each year • No savings target in 2014/15 to give time and capacity to deliver further £93M by 2015/16 financial year • Early delivery of savings in 2014/15 will provide funding for future transformation and change

3. BUSINESS RATE RETENTION • 2013/14 estimate of £451M to be collected across Hampshire (excluding unitaries) • 9% retained by HCC (£41M), £180M by districts • £225M goes back to Government • HCC receives £63M top up grant • Estimates for next year up to £465M BUT • Impact of accruing for potential appeals in current year producing significant deficits • Many authorities at the safety net threshold (i.e. loss of more than 7.5% of income)

4. BUDGET 2014/15 – FINANCIAL SUMMARY • £17.8M loss of Government grant • £12.4M inflation and base changes • £11.5M of social care growth • £6.3M of savings from Children’s for Early Intervention Grant loss and £3M of slipped savings from Adults • No increase in Council Tax • Nothing assumed for New Homes Bonus but Government have now confirmed that we will keep this • Net Deficit of £32.2M for the year - will be met by increased investment income and £25M draw from Grant Equalisation Reserve

5. UPDATE FOLLOWING SETTLEMENT • New Homes Bonus being retained in current form (funding for LEPs now through additional borrowing) • Council Tax Freeze Funding ‘in baselines’ from 2016/17 - £28.4M for HCC • Revenue support grant lower by £1.4M following further 1% cut to Departmental Expenditure Limits • Council tax surplus offset by business rates losses and RSG reduction • Still need £25M draw from reserves to balance the budget

6. TRANSFORMING THE COUNCIL TO 2015 • Programme based around corporate workstreams as in previous years. Key areas : • External spend • Working with Health (Better Care Fund and Public Health integration) • Integrated Business Centre • Senior management and staff overheads • IT Spend • Target of £93.2M to be in place by April

7. CAPITAL PROGRAMME Total Programme 542,926

8. CAPITAL INVESTMENT – CONFIDENTIAL UNTIL 29TH JANUARY • Broadband investment to deliver 95% coverage of super fast broadband - £13M HCC investment • Replacement for project resilience - £12M per annum using new homes bonus funding • £12M investment in Country Parks • Setting money aside for infrastructure investment to unlock key development sites • Grants for ‘Investing in Hampshire’ – Tourism and Heritage • School places continues to be a pressure - £30M extra from Government over next 2 years, £165M already being spent on providing 9,000 new school places across Hampshire • £45M extra care housing programme • Reviewing impact of flooding and potential remedies