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					                       MAYOR AND CABINET

Date:           WEDNESDAY, 4 FEBRUARY 2004




                                                                                  SUPPLEMENTARY AGENDA
                                                                                  SUPPLEMENTARY AGENDA
Item No.                                                               Page No.



10    2004/05 Revenue Budget, 2004/05 Treasury                            1
      Strategy, Setting the Council Tax for 2004/05
      and the 2004/07 Capital Programme

11    Appointment to the Adoption and
      Permanence Panel




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                                                    MAYOR AND CABINET

Report Title                   2004/05 REVENUE BUDGET, 2004/05 TREASURY STRATEGY, SETTING
                               THE COUNCIL TAX FOR 2004/05 & 2004/07 CAPITAL PROGRAMME
Key Decision                          YES                                          Item No.

Ward                           ALL

Contributors                   EXECUTIVE DIRECTOR FOR RESOURCES & DEPUTY CHIEF EXECUTIVE

Class                          Part 1                                         Date:
                                                                              4th February 2004

                                                   1          SUMMARY

    1.1       This report seeks the Mayor‟s approval to finalise budget proposals (based
              upon current assumptions about the GLA precept and the Local
              Government Finance Settlement for consideration and endorsement by the
              Council on 11th February 2004, as follows:-
                   A net revenue budget of £368,010,000 for the Council. This includes
                    growth of £3.476m for Social Care and Health in respect of children‟s
                    placements, and a proposed schools budget of £144,613,000
                    (excluding Formula Specific Grant); and growth for other services
                   A Council Tax of £921.46p for the Council‟s own purposes. This is an
                    increase of £64.31p or 7.50%.
                   Proposals for the Other Services Capital programme and the Housing
                    Investment programme for 2004/05 –2006/07

    1.2       The final decision on the budget will be made at the Council's meeting on
              3rd March 2004 when the final position is known about the GLA precept
              and the Local Government Finance Settlement.

    1.3       In respect of the revenue budget this report is the final stage of a process
              which started with earlier financial surveys. The Financial Survey in July
              2003 considered a number of issues impacting on the budget and started
              the process of looking at savings which resulted in a package of savings to
              be considered by the Council on 11th February.

    1.4       Attached to this report for ease of reference is a summary document used
              for pre-decision scrutiny by the Executive Director for Resources and
              Deputy Chief Executive.

    1.5       This paper also gives the Mayor scope to reduce the Council Tax increase
              to less than 7.5%, or alter savings and growth proposals in this paper.

                                                    2          PURPOSE

              The purpose of this report is for the Mayor to note the forecast General
              Fund outturn for 2003/04 and to approve the following as his proposals
              (based upon current assumptions about the GLA precept and the Local




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          Government Finance Settlement) for consideration by the Council on 11th
          February 2004;
          i     the General Fund revenue budget for 2004/05;
          ii    the budget requirement and Council Tax for 2004/05;
          iii   the Council‟s capital programme for 2004/07; and
          iv    the Treasury Management Strategy for 2004/05

                                       3         RECOMMENDATIONS

          Revenue Budget

          The Mayor is requested to note that:

3.1       The Council is presently projecting a net overspend of £78k on its 2003/04
              budget of £342,296,500 following management action to mitigate
            pressures, and corporate resources to cover SC&H directorate. The net
              overspend relates to E&C outturn which will be carried forward and
                  charged to their 2004/05 budget as covered in para. 7.12.

  3.2       Savings of £2.656m will be recommended to full Council (ref. paragraph
                                            6.3).

          The Mayor is requested to agree:

          If agreed at this meeting the following are recommendations to the
          Council on 11th February 2004. They are predicated on the outcome of the
          GLA precept and the final Local Government Finance Settlement. The
          Council will then be able to make final decisions on 3rd March 2004 when
          the position is known about the GLA precept and the Local Government
          Finance Settlement. Officers consider there to be considerable certainty
          with regard to the figures for the settlement used in this report, save for
          possible changes due to revised tax bases; however the GLA precept
          remains an area of uncertainty.

    3.3       The Non-Schools FSS funding for budget pressures and growth items
             outlined in Section 9, form part of the Council‟s base budget with effect
                                          from 2004/05.

   3.4        The use of corporate once-off resources as covered in section 7 of this
                                              report.

3.5       That the specific formula grants set out in paragraph 11.21 be used for the
                                      purposes as set out .

    3.6      The Executive Director for Resources & Deputy Chief Executive issues
           revised cash limits for all directorates following the adjustments contained
                                            in this report.

      3.7        A General Fund Budget Requirement of £368,010,000 in 2004/05.

  3.8        An increase of 7.50% in Lewisham Council‟s element of Council Tax for
              2004/05, as set out in this report, is recommended to Council on 11th
                                          February 2004.

  3.9        An overall increase in Council Tax for 2004/05 of 8.77%, which includes
                       the proposed draft GLA precept increase of 11.94%.



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   3.10       Executive Directors will report on progress with delivery of savings for
               2004/05 as part of the regular revenue budget monitoring reports.

        3.11       Agree recommendations to the Council as set out in Appendix C

     3.12     The Overview Budget Briefing Paper for 2004/05 from the Executive
             Director for Resources and Deputy Chief Executive (see Appendix D) be
                            forwarded to Full Council for endorsement.

     3.13       That up to £200k once-off resources in 2004/05 from the ending of
                discounts on empty properties, be used for a project to bring empty
                                 private sector homes into use.

  3.14      The Mayor determines usage of £1.975m resources not allocated in this
            budget strategy as part of his final budget recommendations to Council.
          Using this funding to reduce the budget requirement for Council Tax would
           result in a Council Tax increase of 4.99% as covered in section 12 of this
                                              report.

  3.15      The formal reversal of both the 2003/04 savings for the Law Centre and
                         the Irish centre totalling £231k (ref. Para 9.5)

   3.16     That the Housing Revenue Account transfer a sum to the General Fund
          equivalent to the „HRA gain‟ as a result of the removal of rent rebates from
                         the HRA. (reference paragraphs 8.22 to 8.25).

    3.17      To delegate to the Executive Director for Resources and Deputy Chief
            Executive the setting of savings targets for 2005/06 for Directorates and
           thematic themes based on an overall target of delivering £5m with options
                                          totalling £6m.

          Treasury Management Strategy
          The Mayor is requested

          To recommend the Council

                                3.18       To agree the treasury strategy.

3.19       To approve the prudential indicators set out in paragraphs 16.59 to 16.85.

         3.20 To add money market funds to the list of approved investment
           instruments available to the Executive Director for Resources and Deputy
                  Chief Executive when managing the Council‟s investments.

         3.21 To add cash managed funds to the list of approved investment
           instruments available to the Executive Director for Resources and Deputy
                  Chief Executive when managing the Council‟s investments.

    3.22     To delegate to the Executive Director for Resources and Deputy Chief
              Executive authority during the course of the financial year to make
            amendments to the Prudential Indicators for Treasury Management to
              respond to market changes provided that there is no change to the
           Council's authorised limit for borrowing or Operational Boundary for debt.
            Any changes made under this delegation are to be reported to the next
                                   meeting of the full Council.

          Capital Programme


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          OSCP and HIP
          The Mayor is requested to approve the recommendations contained in
          paragraph 3.23 insofar as they are his responsibility, and to recommend
          that Council approve the recommendations, insofar as they are the
          responsibility of full Council under the Constitution:

     3.23     To agree that the £55,955,060 of HIP expenditure in 2004/05 which
           qualify as expenditure for the provision of affordable housing are treated
          as the Council's contributions towards the costs of "provision of affordable
          housing" for the purposes of Regulation 16 and 17 of the Local Authorities
          (Capital Finance and Accounting) Regulations 2003 and are treated as part
              of the Council‟s “available capital allowance” to be offset against the
            capital receipts from future disposals of housing land (before calculating
           the amount of receipts to be paid to the Secretary of State under pooling
           arrangements), save where the report seeking authority to dispose of the
           property specifically identifies or earmarks the receipt for expenditure for
                      an alternative purpose (Paragraphs 15.111 to 15.113)

          Capital Programme


          OSCP
          The Mayor is requested to recommend to Council

          The Mayor is requested to approve the recommendations contained in
          paragraphs 3.24 to 3.27 insofar as they are his responsibility, and to
          recommend that Council approve the recommendations, insofar as they
          are the responsibility of full Council under the Constitution:

3.24       Budget allocations to the schemes listed in Appendix V totalling £2.0m for
                            the 2004/05 AMP programme of works

   3.25      Budget allocations totalling £15.537m as detailed in paragraphs 14.20,
                14.21 and 14.27 to 14.39 and summarised in paragraph 14.49

     3.26      To delegate to the Executive Director for Resources & Deputy Chief
              Executive the approval of the business cases for additional borrowing
              under the Prudential Regime for Highways for a sum of up to £9m and
                Vehicles for a sum of up to £2m over the next three years of the
                         programme (ref. Paragraphs 14.42 and 14.43)

 3.27       the Prudential indicators relating to the Capital programme as detailed in
                                          paragraph 14.54

          The Mayor is requested to note:-

3.28 the limit of overprogramming being recommended in
     paragraph 14.51 by the Executive Director for Resources &
     Deputy Chief Executive and

3.29 the current planned level of overprogramming of £1.9m in the
     OSCP over the three year programme 2004/05-2006/07



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          HIP Recommendations

The Mayor is requested to approve the
     recommendations contained in paragraphs
     3.30 to 3.36, insofar as they are his responsibility,
     and to recommend that Council approve the
     recommendations, insofar as they are the
     responsibility of full Council under the
     Constitution:
3.30 the transfer of £0.350m to Social Care and Health as noted in
     paragraph 15.38.

3.31 the Housing Capital Programme for 2004/5 and indicative
     programmes for 2005/6 and 2006/7 as shown in appendix IV.

3.32 the continuation of the recycling of receipts as noted in
     paragraph .15.35

3.33 that £3.5m is set aside for Lewisham Town Centre Enabling
     works as noted in paragraph 15.39

3.34 the revised HIP contribution for Silwood SRB5 as noted in
     paragraph 15.51.

3.35 that £7.317m is set aside to support the registered social
     landlords programme as noted in paragraph 15.65.

3.36 that the sums indicated in the report in paragraphs 15.72 to
     15.109 be set aside for the purposes stated in those
     paragraphs

          The Mayor is requested to note:-

3.37 the resources for 2004/5, 2005/6 and 2006/7 as noted in
     paragraph 5.3 and appendix II.

3.38 the schemes already committed and approved for future years
     as noted in paragraphs 15.51 to 15.65.

3.39 the level of Disabled Facilities Grant as outlined in paragraph
     15.61.




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3.40 To note that HIP will be reimbursed at a future date in relation
     to Town Centre enabling works as set out in paragraph 15.39.

          Public Accounts Select-Committee

          The Mayor is asked to:-

  3.41      Consider the comments of Public Accounts Select-Committee section 17
            and the areas drawn to Members‟ attention in the final section 24 of this
                                           report.

                                      4      STRUCTURE OF REPORT

4.1       The structure of this report is as follows:

Section 5 outlines the steps that need to be taken to agree the budget

Section 6 provides a brief background to the budget strategy and the
context in
    which the budget has been developed.

Section 7 outlines the financial position of the authority.

Section 8 outlines the revised budget for 2003/04 and the 2004/05 budget.

Section 9 outlines Budget Growth and Pressures for 2004/05.

Section 10 sets out the subsequent recommended Budget Requirement.

Section 11 provides details on the outcome of the Local Government Finance
          Settlement.

Section 12 provides the calculations for setting the Council Tax for 2004/05 on
the
          assumption that the budget outlined in this report is agreed.

Section 13 provides the timetable for the 2005/06 budget strategy.

Section 14 outlines the Council‟s Other Services Capital Programme.

Section 15 outlines the Housing Investment (capital) & Major Repairs Allowance
           Programmes

Section 16 sets out the proposed Treasury Management Strategy for 2004/05

Section 17 contains comments from Public Accounts Select Committee on
          20th January 2004 on growth proposals.

Section 18 outlines the options in terms of Council Tax levels. It also details
           consultation with business representatives (the comments from
which
           will be reported at the meeting) and the unions.

Section 19 contains the financial implications of the report



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Section 20 contains the legal implications of the report.

Section 21 contains the crime and disorder implications of the report.

Section 22 contains the equalities implications of the report.

Section 23 contains the environmental implications of the report.

Section 24 gives conclusions and an executive summary to the report.

Section 25 sets out the call in and urgency issues.

Section 26 lists various background papers.

Revenue Appendices
Appendix A         Budget Report Reference Documents
Appendix B         Council Tax Ready Reckoner for 2004/05
Appendix C         Recommendations for the Council on 3rd March 2004
Appendix D         Executive Director for Resources and Deputy Chief
Executive‟s
                   Overview Budget Briefing Paper for 2004/05 – dated
            15.1.04
Appendix E         Indicative Cash Limits
Appendix F         Comments of the Public Accounts Select Committee
Appendix G         Comments made at the meeting with business ratepayers
Appendix H         Executive Director for Resources and Deputy Chief
                   Executive‟s statement required by s25 of the Local
                   Government Act 2003
Appendix I         Summary of Recommended Growth Bids for 2004/05
Appendix J         2004/05 Spreadsheet analysis of Growth Bids
Appendix K         2004/05 Recommended ongoing growth bids – detailed
                   proposals
Appendix L         2004/05 Recommended once-off growth bids – detailed
                   proposals
Appendix M         SC&H Voluntary Sector Budget Savings for 2004/05

Capital Appendices
Appendix I         Other Services Capital Programme 2004/07
Appendix II        Housing Capital Programme – Resources 2004/07
Appendix III       Housing Capital Programme – Site Assembly Costs
Appendix IV        Housing Investment Programme 2004/07
Appendix V         2004/5 Capital Bids under AMP Process (£200K and Under)

                           5     BACKGROUND TO DECISION MAKING

5.1       There is a statutory requirement for the Council to set the 2004/05 budget
          requirement and the Council Tax before 11th March 2004. Lewisham‟s
          Council Tax will be set by the Council on 3rd March 2004 to ensure prompt
          billing.

5.2       Under the Council‟s constitution the Mayor takes the lead on the
          preparation of and submits his proposed budget to the Council for
          consideration. If the Council does not agree the Mayor‟s proposals the
          Mayor then has to consider the Council‟s objections and place his
          proposals (amended or unamended) to a further meeting of the Council.



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          The Council cannot agree the budget until it has received the GLA‟s
          precept.

5.3       There are two external influences which cause uncertainties within this
          timetable.

                          The final local government finance settlement is not known at
                           the time of writing this report (but is expected shortly before
                           this meeting.
                          The GLA precept will not be known until after the 11th February
                           meeting of the Council.

5.4       The outcome of these issues will have implications for the budget. This
          report allows the issues concerning the budget to be debated at the 11th
          February meeting for a final decision on 3rd March.

5.5       The meeting of the Council on 3rd March will have to agree the Council Tax
          inclusive of the GLA precept.

5.6       It should be noted the timetable does not allow for call in by the Overview
          and Scrutiny Business Panel of the Mayor‟s proposals. In effect there is a
          Council „call in‟ provision. The process outlined above has given all
          Members opportunities for scrutiny of the Mayor‟s proposals.

5.7       The Council must seek by law to continuously improve service delivery,
          and set out its targets for improvement as part of its Best Value
          Performance Plan (BVPP). The BVPP will be presented to the Council in
          May or June. Linkages between the best value process and the budget
          process have been improved and these are discussed further in Section 13

5.8       Budget proposals this year have also been framed by collating existing
          service delivery plans into a Corporate Plan. This will be presented by Full
          Council before April 2004.

               6      BACKGROUND TO THE 2004/05 BUDGET STRATEGY

          Introduction
6.1       This section provides a brief background to the budget strategy and the
          context in which the budget has been developed

          The Council’s 2004/07 Financial Survey
6.2       The 2003/04 Budget and Council Tax report of 29th January 2003 (updated
          for the Council meeting on 5th March) led to the setting of the budget for
          2003/04. Mayor & Cabinet on 16th July 2003 received the sixth annual
          Financial Survey report, and reviewed the budget strategy for 2004/05 in
          the light of latest information and examined options for rolling forward the
          survey to 2006/07. The revised assumptions on the Council‟s spending
          and resource requirements over the next 3 years are outlined in Table 1.




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TABLE 1: ASSUMPTIONS WITHIN THE FINANCIAL SURVEY 2004/07

            Assumption                                       2003/06                    2004/07
                                                       5th Financial Survey      6th Financial Survey
                                                         (October 2002)               (July 2003)
            1 Increase in                            £9.3m in 03/04, £10.2m      £16.09m in 04/05,
            Government Funding                       in 04/05 & £10.6m in        £20.86m in 05/06 &
                                                     05/06.                      £8.34m in 06/07
            2 Council Tax increase                   Council Tax increases of    Council Tax increases
                                                     6.2% in 03/04, 6.2% in      of:
                                                     04/05, & 6.1% in 05/06.     up to 7.5% in 04/05,
                                                                                 up to 6.1% in 05/06,
                                                                                 up to 5.0% in 07/08
            3 Inflation                              2.5% net inflation on pay   2.5% net inflation on
                                                     and non-pay budgets         pay and non-pay
                                                                                 budgets. Plus an
                                                                                 additional ½% for pay
                                                                                 by way of a
                                                                                 contingency.
            4 Allowance for Budget                   Budget pressures            Up to £6.7m in 04/05
              Pressures and Growth                   £18.5m (2003/04) and        Up to £7.7m in 05/06
                                                     Growth (after Education
                                                     SSA) of £1.7m
                                                     (2003/04) with
                                                     education passporting
                                                     increases
            5 Savings                                Target of £11.95m in        £2.5m in 04/05
                                                     03/04 as set out in
                                                     Budget Issues report 19
                                                     June 2002.

          Decisions on savings
6.3       A report was presented to Mayor & Cabinet on 14th January identified
          savings proposals of £2.750m (with an option on one proposal that would
          have taken the savings to £2.760m). The Mayor agreed to savings
          proposals amounting to £2.656m to be recommended to Council on 11 th
          February. Additionally £94k was to be deducted from Education & Culture
          Directorate‟s allowance for inflation in respect of savings that were not
          agreed.

6.4       At the time of the savings report to M&C on 14/1 the proposals from SC&H
          on an across the board cut in the Voluntary Sector programme was being
          consulted on and so no further details were available. Appendix M now
          shows the detail of how the savings, totalling £45k, would be applied.

                  7       THE COUNCIL’S CURRENT FINANCIAL POSITION

          Introduction
7.1       This section looks at the Council‟s current financial position. It considers
          the following items:-

                          The 2002/03 outturn
                          The 2003/04 budget
                          Budget monitoring 2003/04
                          Forecast 2003/04 outturn for directorates
                          Forecast 2003/04 outturn for financial provisions



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                          Conclusion

          2002/03 outturn
7.2       The 2002/03 projected outturn was reported to Mayor & Cabinet on 29 th
          January 2003 as part of the budget report for 2003/04. At that time the
          projected outturn was an overspend of £1.543m. On the 25 th June 2003
          Mayor & Cabinet meeting the final outturn for 2002/03 was reported as an
          overspend of £0.208m, including the use of underspends on corporate
          provisions of £3.984m. The report went on to deal with the financing of
          the overspend by way of a drawdown of £0.208m from the cumulative
          General Fund balance, with an agreement that the General Fund balances
          would be restored to their recommended figure of £8.6m in 2003/04 by a
          contribution of £0.8m from working balances and a contribution of
          £0.208m from Social Care & Health‟s 2003/04 budget.

7.3       The final audited Statement of Accounts was reported to Council on 24 th
          September 2003. The District Auditor gave a clean audit opinion on the
          Accounts and the Council‟s financial systems, confirming that the Accounts
          presented fairly the financial position of the Authority for the year ending
          31st March 2003.

          Budget Monitoring in 2003/04
7.4       The Council‟s budget for 2003/04 was agreed at Council on 5th March
          2003. The budget requirement was set at £342.296m.

7.5       During 2003/04 there have been regular monitoring reports to Mayor &
          Cabinet and some of these reports have been scrutinised at both Public
          Accounts and Social Services Select sub-committees. Mayor & Cabinet on
          16th July received a monitoring report showing a projected overspend for
          the year of £3.554m. At that meeting it was agreed to hold £2m of
          corporate working balances against the overspend to help offset the
          overall council wide position. At that time S&CH were projecting an
          overspend of £1.657m and there were issues within Regeneration in
          respect of non deliverability of some savings for 2003/04.

7.6       The monitoring position based on information to July 2003 showed a slight
          worsening position to £1.812m overall projected overspend, with SC&H
          reporting £1.748m.

7.7       Mayor & Cabinet on 21st October received a monitoring report, based on
          information to the end of August, which showed £2.061m overall projected
          overspend, with SC&H reporting a higher overspend of £3.044m. At the
          meeting it was agreed that a Departmental and Central Expenditure panel
          would be implemented with regard to SC&H.

7.8       The following month the monitoring position had worsened again,
          primarily in SC&H Children‟s services, to an overall projected overspend of
          £2.451m before taking account of a planned underspend on corporate
          provisions of £1.9m, thus bringing the overall council wide projected
          overspend down to £0.551m.

7.9       The last report to M&C on 10th December showed a projected overspend of
          £147k. Within this position both E&C and Regeneration directorates were
          projecting spend getting much closer to budget with Resources directorate
          now firmly projecting an underspend. SC&H were still reporting a




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          significant overspend of £4.130m, with the Childrens services overspend
          projection of £4.4m.

7.10      SC&H DEP/CEP

            A formal moratorium has been in place since early November which
            covers all non-statutory commitments. The weekly directorate panels,
            chaired by the Executive Director for SC&H, consider requests to spend
            prior to submission to the central expenditure panel, and receive reports
            on high risk budgets. In particular it examines the Childrens placement
            budget and the Adult domiciliary care and Residential/Nursing Care
            budgets on a fortnightly basis.
            The central panel, comprising the Chief Executive and the Executive
            Director for Resources & Deputy Chief Executive, consider all requests on
            a weekly basis.

                                Forecast Outturn – 2003/04
7.11      The forecast outturn for directorates summarised in table 2 is based on
          expenditure incurred and income received up to the end of
          December2003.       The Table compares the revised budget, the previously
          reported council wide monitoring positions (12th November and 10th
          December Mayor & Cabinet meetings) and the latest forecast outturns for
          each directorate.




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            TABLE 2: FORECAST OUTTURN FOR DIRECTORATES FOR 2003/04

            Directorate                2003/04           Forecast        Forecast     Previous      Previous
                                       Revised           Outturn         Outturn      Variance      Variance
                                        Budget                           Variance     October      September
                                                                        December     monitoring    monitoring
                                          £m                 £m         monitoring      (M&C      (M&C 12/11)
                                                                           £m          10/12)          £m
                                                                                         £m
            Education &                 166.701           166.779           0.078         0.150         0.665
            Culture *
            Regeneration                  24.784            24.705         (0.079)       0.028          0.178
            *
            Resources –                     9.936             9.776        (0.160)      (0.015)       (0.056)
            Public
            Services *
            Social Care &                 86.137            90.229          4.092        4.130          3.906
            Health *
               Sub-Total               287.558          291.489             3.931        4.293         4.693
            Central                      29.406           28.676           (0.730)      (0.246)       (0.242)
            support
            services
            Asylum                                                890         890
            Seekers ***
            Capital                       39.697            39.697               0           0              0
            charges
            Corporate                   (14.365)         (16.457)          (2.092)      (1.900)       (1.900)
            Provisions
            Working                                        (2.000)         (2.000)      (2.000)       (2.000)
            balances –
                  Total                342.296          342.295           (0.001)        0.147         0.551
             Underspends                                                    0.079
            to be reserved
              for spend in
              2004/05 **
                Revised                342.296          342,374             0.078
                outturn
               2003/04



          * The budgets for the directorates exclude budgets for capital charges
          and central support service recharges as they are deemed to be non
          controllable by the directorates.
          ** Allowing for the underspend in Regeneration to be c/fd for spend in
          2004/05
          *** Asylum seekers (ex SC&H) – this projected overspend has only
          recently been identified since the service moved from SC&H to Resources
          in November 2004

                Forecast Outturn for Directorate of Education & Culture
                                   (Overspend of £78k)
7.12      The Education & Culture directorate reported to Mayor & Cabinet on 10
          December a projected overspend of £150k made up of overspends in Pupil
          Services and Strategy, Performance & Review, being offset by
          underspends in Community Services and School Effectiveness. The



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          position now shows a projected overspend of £78k including a bigger
          overspend on Pupil Services as a result of rising costs for SEN transport
          offset by an underspend of £200k on the provision for the New School.
          The net position of £78k is after the use of over £880k of earmarked
          reserves to fund once off costs particularly with regard to Creative
          Lewisham, Downham and Schools PFI costs. The £78k will be carried
          forward and charged to the directorate‟s cash limit in 2004/05 as an
          unauthorised overspend.

7.13      These figures exclude any potential underspends on Schools (including
          Nursery schools) as any underspends in these areas are automatically
          carried forward at the year end.

           Forecast Outturn for Directorate of Regeneration (Underspend of
                                             £79k)
7.14      The Regeneration directorate reported to Mayor & Cabinet on 10th
          December a projected overspend of £28k. The latest position is an
          underspend of £79k made up of overspends in Environment of £77k and
          Resources divisions of £27k, offset by underspends in Development of
          £34k, Housing of £49k and Transport of £100k. A local DEP is still in
          operation within some areas of Regeneration which has contributed
          towards the improved position. It is recommended that Regeneration
          directorate is permitted to reserve the projected underspend as a
          contingency for 2004/05 items.

                 Forecast Outturn for Directorate of Social Care & Health
                                   (Overspend of £4.092m)
7.15      Social Care & Health directorate reported to Mayor & Cabinet on 10th
          December a projected overspend of £4.130m. The latest monitoring now
          shows a position of a projected overspend of £4.092m, largely made up of
          £4.610m overspend in Children‟s services, underspend to budget within
          Adults Services totalling £177k and small underspends totalling £223k in
          support service budgets. An underspend of £68k in the Crime reduction
          service is now being projected. The overspend of £4.092m includes £208k
          overspends carried forward from 2002/03 in relation to Adult Asylum
          seekers grant and the directorate has recently received advice that this
          may now be funded but at a lower level than originally anticipated and this
          has been reflected in the monitoring. Although the monitoring
          information within Children‟s services has shown large monthly
          movements, the new Childrens database is fully operational and now
          providing more accurate and timely information on placement costs.
          (Section 9 includes further information on other actions within SC&H to
          manage their pressures on an ongoing basis).

            Forecast Outturn for Directorate of Resources

           Public Services (Underspend of £160k)
7.16      Public Services within the Resources directorate reported to Mayor &
          Cabinet on 10th December a projected underspend of £15k. The latest
          monitoring now shows an improved position of an underspend of £160k
          being projected at the year end. This position is made up of overspends on
          the difficult to control subsidy budgets offset by underspends on staffing
          budgets and increased income from both court income and funding from
          the DWP for projects.




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                     Central Support Services (Underspend of £730k)
7.17      Central support services within the Resources directorate reported to
          Mayor & Cabinet on 10th December a projected underspend of £246k. The
          latest monitoring now shows a projected underspend of £730k. Overall
          divisions within the directorate are now underspending, some as a result
          of delayed recruitment to vacant posts and some due to increased income
          levels. Property, previously reporting an overspend, are now projecting
          spend back in line with budget. Officers were due to recommend that
          Resources directorate be permitted to reserve both the underspends of
          £160k and £730k as a contingency for 2004/05 items.

7.18      However members are aware that the Asylum Seeker team (AST)
          transferred from SC&H to Resources in November 2003. At that time it
          was expected that the AST would break even against grant. However an
          overspend has come to light of £890k. Although the responsibility of
          SC&H in terms of financial monitoring, Resources directorate will take
          responsibility for this overspend and will therefore now achieve spend to
          budget overall at outturn. This treatment is reflected in table 2 earlier in
          this section.

7.19      The reasons for the overspend in AST are two fold. Firstly the numbers of
          adult and family asylum seekers is much lower than at the start of the
          year and the decline is much greater than predicted earlier in the year.
          This then has a significant impact on the level of grant income Lewisham
          can expect to receive. Secondly, advice received last week from the grant
          awarding body in connection with the additional grant claim for 2002/03
          (referred to in para 7.16) effectively halves the impact of both the
          additional claim and the income anticipated from claims for 2003/04.

           Corporate Financial Provisions (Underspend/surplus of £2.092m)
7.20      Financial provisions are budgets held for corporate purposes which do not
          form part of the controllable expenditure for individual directorates. They
          include capital expenditure charged to revenue (CERA), treasury
          management budgets such as Interest on Revenue Balances (IRB) and
          Debt charges as well as the Asset management Revenue Account (AMRA),
          working balances and various corporate provisions for items such as single
          status and early retirement budgets.

7.21      The projected outturn for corporate provisions is a planned
          surplus/underspend of £2.092m which includes the following:-

                          Estimated surplus on the IRB and debt management
                           expenditure budget of at least £500k
                          Use of £2m working balances held corporately to help offset
                           the council wide overspend
                          underspend on the corporate budget for single status
                          underspend of £555k on the 2003/04 Investment in Services
                           budget of £2.885m
                          underspend of £227k on the corporately held SC&H
                           contingency budget of £2.524m

            and allows the following reserves totalling £0.750m to be set up at
            outturn for spend in 2004/05




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                          an additional £100k for master planning spend in 2004/05 (on
                           top of the provision already set up in 2002/03 which has been
                           partly spent in 2003/04)
                          a “transitional” once off contingency budget of £0.5m for
                           childrens placements in 2004/05 (to be held centrally and
                           costs charged against the provision only with the agreement of
                           the Executive Director for Resources)(refer also to section 9
                           SC&H pressures and growth)
                          an additional £150k once off revenue budget to commission
                           further feasibility works in support of improving the Other
                           Services Capital programme bids and associated business
                           cases.



          Best Value Accounting Code of Practice (BVACOP)
7.22      Officers have continued to refine the methodology for charging central
          support costs out to services. This includes charging out once off
          expenditure and this has been the case in 2003/04 for items such as ICT
          infrastructure costs, and this has resulted in higher levels of charges under
          BVACOP to the HRA than previously forecast for 2003/04. Other
          significant changes in 2003/04 have been the level and allocation of
          insurance charges, following the renewal in October 2003.

          Forecast outturn – general comment
7.23      In the current regime of cash limited budgets, non-authorised overspends
          by directorates in one year should be carried forward as the first call on
          their cash limited budgets the next year and underspends similarly carried
          forward for directorates to plan spend against in future years.

7.24      It is anticipated that the overall projected outturns for each directorate will
          not materially change with risks highlighted in the above projections that
          may lead to higher overspends in SC&H being offset by the probability of
          improved positions through DEP/CEP. The Executive Director for Resources
          & Deputy Chief Executive recommends that the DEP and CEP with regard
          to SC&H remains in place for the time being until he advises otherwise, to
          ensure tight control of spend for the remainder of 2003/04 financial year
          and the start of 2004/05.

7.25      This report recommends that for the purpose of reporting outturn for
          2003/04 that the following is planned based on figures in table 2 above:-

                    Underspend of £79k in Regeneration is carried forward into
                     2004/05
                    Overspend of £ 4.092m in SC&H is offset by:-
                        Use of £2m working balances
                        Use of £2.092m planned underspend in corporate provisions
                      Overspend of £78k in Education & Culture is carried forward as
                        the first charge on that directorate‟s cash limit in 2004/05

            For the purposes of the accounts for 2003/04, the £78k will be financed
            by way of a drawdown from the cumulative General Fund balances with
            the agreement that in 2004/05 these balances will be replenished by way
            of a charge of £78k to the E&C budget.


          The Housing Revenue Account



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7.26      The agreement of the budget for Housing Revenue Account (HRA)
          expenditure and income and rent levels is a separate process from the
          setting of the General Fund revenue budget and Council Tax. The Council
          is by law required to keep the HRA separate from other accounts of the
          Council. In addition there are separate consultation procedures which
          involve Council tenants.

7.27      However, Council tenants are also Council Taxpayers and are users of
          other Council services. It is important therefore that decisions on the
          General Fund budget requirement and Council Tax are not taken in
          isolation from decisions on rent levels.

7.28      The report on the HRA budget and rent increase is tabled for this meeting.
          Relevant recommendations will also be made to the Council. It should be
          noted that the expenditure and income of the HRA form part of the
          statutory calculations of expenditure and income, which have to be agreed
          by the Council as part of the budget setting process, and will therefore
          need agreement by the Council as appropriate.

                  8       2003/04 REVISED AND 2004/05 BASE BUDGET

          Introduction
8.1       This section sets out the 2003/04 revised budget and the construction of
          the 2004/05 base budget. It also considers issues relating to the schools
          budget and the removal of rent rebates from the HRA to the General Fund.

8.2       This section is structured as follows:

                          Adjustments to the 2003/04 revised budget
                          Savings
                          Inflation
                          Schools Budget
                          Removal of Rent Rebates from the HRA to the General Fund

          Adjustments to the 2003/04 Revised Budget
8.3       The starting point for the construction of the 2004/05 base budget is the
          2003/04 Revised Budget of £342.296.5m, as outlined in Table 2.

8.4       The revised budget includes transfers of budgets for one year only which
          need to be removed. This includes once-off expenditure agreed as part of
          the budget process for 2003/04 and any once off funding that has been
          agreed during the year from financial provisions.

          Savings
8.5       At its meeting on 14th January the Mayor and Cabinet agreed-

                      ”Subject to consultation, as appropriate, and to consideration of
                      any representations arising out of that consultation and to any
                      other legal requirements in relation to specific proposals, to agree
                      in principle the revenue savings of £2.656m, for inclusion in the
                      proposals to be made by the Mayor to Council in relation to the
                      2004/05 budget.”

8.6       Additionally it was agreed that £94k of savings not agreed in relation to
          the Education & Culture Directorate be met by a deduction from that
          Directorate‟s allowance for inflation.




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          Inflation
8.7       This year‟s inflation targets are made more complex following the widely
          anticipated announcement by the Chancellor of The Exchequer in his Pre-
          Budget Report that the Treasury would be adopting the Harmonised Index
          of Consumer Prices (HCIP) as its principal measure of inflation. HCIP is
          similar to the previous UK measure of inflation RPIX, but has a few
          fundamental differences; primarily much less weighting is given to housing
          related costs in HCIP than in RPIX. HCIP is consistently lower than RPIX,
          because of significant property related price inflation in the UK.

8.8       As HCIP is lower than RPIX, switching to this measure leads to a lower
          target for inflation. The Chancellor has asked the Monetary Policy
          Committee of the Bank of England to target inflation measured by HCIP at
          2%. To set this target in context, it is useful to look at the latest inflation
          data. November‟s RPIX was 2.5% compared with a HCIP of 1.3% - a
          difference of 1.2%. November‟s HCIP was 0.7% below target, compared
          with RPIX which was exactly on target at 2.5%. Certainly adoption of the
          HCIP as the target measure can be described as a slight loosening of
          interest rate policy.

8.9       Since the assumptions for inflation were predicated on RPIX, there are at
          the moment fewer available forecasts to analyse in relation to UK HCIP.
          However, stripping housing related costs out of the equation will certainly
          lead to a less volatile measure than RPIX. The Treasury states that:

          “CPI inflation is expected to rise slowly from early next year to reach its 2
          per cent target in 2005 as the effects of recovery in the global economy
          and this year's depreciation of sterling feed through to higher import
          prices.”

          Most economists are forecasting that CPI will rise from its November 2003
          1.3% level to between 1.7% and 2.0% by the end of 2005.

8.10      The Chancellor has stated that pension and benefit levels will be upgraded
          in line with inflation measured by the old measure RPIX. However, he has
          also made it clear that he expects to use the new target CPI as the
          benchmark for setting wages in the public sector.

8.11      The latest Quarterly Inflation Report published by the Bank of England in
          November, forecasts that, “At the new higher level of interest rates, the
          central projection is for RPIX inflation to remain around the target [2.5%]
          over the forecast period. The consensus of independent forecasts which is
          reported in the Inflation Report shows that average forecast is for RPIX
          inflation to fall to 2.4% by Q4 2004 (within a range of 2.2% to 2.9%).
          There is therefore a strong body of opinion supporting the likelihood that
          RPIX inflation will be extremely close to target during 2004.

8.12      The 2004/2007 Financial Survey stated that “the rate of inflation in the
          budget strategy should remain at 2.5%, which should provide adequate
          inflation for pay, and non-pay increases”.

8.13      There is strong evidence that public sector price and wage inflation is
          considerably higher than inflation in the private sector and overall
          economy. Many analysts put public sector inflation at 4%. Public sector
          earnings growth is currently running at 5.6% (Source: Royal Bank of
          Scotland).




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8.14      Given the reality of inflationary pressures both pay and prices in the public
          sector, it is prudent to continue to allow a rate of inflation of 2.5% for
          budgetary purposes. The lower 2% level of HCIP inflation, would create
          severe pressures on Directorate budgets. As the Financial Survey stated,
          “the model allows 2.5% for pay, this needs further consideration”. Despite
          no general pay claims outstanding, the model allows for an additional ½
          percent for 2004/05 by way of a contingency. Reference is made to this
          later in the report because it is now assumed that this additional resource
          is not required in the model.

           Schools Funding.
8.15      The Education Act 2002 enacted the concepts of a “schools budget” and a
          “LEA budget” which broadly divide education expenditure between schools
          and all other LEA functions. The DfES „passporting‟ regime now looks at
          the schools budget rather than the education expenditure as a whole.

8.16      Under the Act (as amended by the Local Government Act 2003) the LEA
          must, before the end of December , determine the proposed amount of
          their schools budget for the following financial year and give notice to the
          Secretary of State of the determination. If it appears to the Secretary of
          State that the amount is inadequate the Secretary of State may within 14
          days, issue a notice which, in effect, sets the schools budget. There is a
          process for authorities to object but the timescale and powers of the
          Secretary of State effectively mean the Council will need to set its budget
          on the basis of this notice. At its meeting on 10th December 2003 the
          Mayor & Cabinet agreed to inform the Secretary of State for Education and
          Skills of the Council‟s intention to passport the increase in Schools Formula
          Spending Share (£7.439m) and the increase in the relevant Specific
          Formula Grant (Excellence in Cities and Excellence Clusters) of £165k to
          the authority‟s schools budget. The Secretary of State has not issued a
          notice to the Council.

8.17      The Secretary of State has issued calculations of his view of the base for
          the schools budget and the Council has confirmed its intention to
          „passport‟ the „additional finance‟ the government has provided for schools.

8.18      This can be summarised as follows –
                                                                                  £m           £m

            2003/04 Schools Budget (DfES)                                                  140.454

            Passporting items
            Increase in FSS (provisional)                                         7.439
            Increase in Specific Formula Grant
                                 (EiC and Excellence Clusters)                    0.165
            Total Increase
            7.604

            Total                                                                          148.058


            Note 1) The DfES continue not to distinguish between the increase in expenditure that the
            Government support (FSS ) and the actual funding to support this increase (Formula Grant
            Allocation) and the resulting expected increase in Council Tax.

            Note 2) SFGs are a category of grant over which the Council has discretion on how to
            spend, although it is included in the passporting figure and DfES expect it to be spent on
            schools.




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8.19      As stated earlier the Secretary of State has powers to set the schools
          budget. A letter of 19th November 2003 from the DfES on passporting
          included the following comment –

                     “I am writing further to my letter of 10 November 2003 and the
                     announcement of the provisional local government finance
                     settlement to offer additional guidance on the administrative
                     arrangements for considering the exercise of the Secretary of
                     State‟s reserve power to set a minimum level of an authority‟s
                     schools budget.

                     “Ministers are looking for authorities at least to pass on in full to
                     their schools budget the increase in schools funding, both from the
                     schools formula spending share and from relevant specific formula
                     grants.”

8.20      The Education FSS is subject to its own ceiling calculation. This is an
          increase of 6.8% per pupil. It also has its own floor at 5% per pupil.
          Lewisham‟s increase is 6.0% per pupil (an increase of 5.5% overall).

8.21      The Council‟s Schools FSS (provisional) is £143.208m, and with specific
          formula grant of £3.444m this gives a total of £146.652m. The proposed
          schools budget, including formula grant, is £148.058m.

            Removal of Rent Rebates from the Housing Revenue Account to
            the General Fund

8.22      As a result of the Local Government Act 2003 rent rebates transfer from
          the HRA to the General Fund from 1st April 2004. Unsubsidised „incentive
          area‟, costs will no longer be a charge to the HRA but will instead fall to be
          met from the General Fund.

8.23      The Government has agreed to a transitional scheme so that authorities
          may, if they wish, make transfers from their HRA to their General Fund.
          For 2004/05 authorities may transfer any amount up to the entire
          „2001/02 HRA gain‟. For 2005/06 the maximum will be half of the „HRA
          gain‟.

8.24      The Government has chosen to use the 2001/02 figures, as these are the
          latest audited figures available. For Lewisham the maximum transfer set
          by ODPM is £924k. The estimate of these costs transferring from the HRA
          to the General Fund has recently been revised to £745k in 2004/05. It is
          proposed that the transfer be set at the actual cost of the transfer.

8.25      The proposed 2004/05 HRA budget provides for £700k to be transferred to
          the General Fund for this purpose.

                 9     BUDGET GROWTH AND PRESSURES FOR 2004/05

9.1       Each year in the budget process directorates usually bid for funding for
          pressures and growth, and also set out for Members their plans to contain
          their budget pressures for the following year, and agree any further local
          management action/savings required to balance resources within their
          revised cash limits. If pressures are identified where management
          action/savings are not agreed, this identifies from the outset of the


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          financial year that urgent attention is required to that aspect of the
          council‟s budget.

9.2       This section covers the following:

                        recommendations to fund a level of SC&H pressures projected
                       within the Children‟s placements budget
                       recommendations for revenue bids to be allocated ongoing
                       budget growth in 2004/05 in line with key policy and service
                       objectives
                       recommendations for some revenue bids to be allocated once
                       off budget growth from the Public Service agreement(PSA)
                       reward monies
                       analysis of the effect of the overall budget strategy (savings
                       and growth) across the Council
                       genuine budget pressures that may remain in directorates,
                       needing management action, that members need to be aware of
                       when reviewing the budget monitoring reports at the start of
                       2004/05

9.3       2004/05 Pressures and Growth
          The revised budget model shows an estimated £8.1m base budget
          available for pressures/growth after allowing for the provisional
          settlement. This figure allows for all other adjustments due to timing
          differences of cost pressures already built into the 2004/05 model and
          other technical adjustments notified as part of the provisional settlement
          and now worked through by officers. The figure is higher than expected
          following very recent guidance from ODPM that £700k in relation to the
          transfer of housing rebates from the HRA to the GF may remain charged
          to the HRA in 2004/5. It assumes a Council Tax of up to 7.5%, as
          estimated in the Financial Survey. This figure of £8.1m assumes that the
          provision for an additional 0.5% for pay inflation and an additional £0.5m
          for other pay pressures are no longer required. This has led to a higher
          resource base than expected at the time of the Financial Survey.

9.4       Additionally the Chancellor has made £1.4m available in the pre-Budget
          statement to Lewisham. Further consideration is made of this sum later in
          Section 13 of this report.

9.5       Additionally £762k Planning Delivery Grant is available, which is a specific
          formula reward grant. This does not require spending on Planning,
          although it is recommended to commit funds to this service as is covered
          by bids against this grant. In applying these funds, officers‟ advice is that
          the grant is likely to continue in future years, but clearly any usage needs
          to be caveated that at this stage the Council is not committing to longer-
          term base budget mainstream growth should the grant be withdrawn.

9.6       In addition to this £8.1m, £349k remains in the pot for rolling forward into
          the 2004/05 budget from the 2003/4 “Investment in Services” fund,
          assuming that officers recommendations on formally reversing on an
          ongoing basis the 2003/04 savings for both the Law Centre and the Irish
          Centre is now agreed. These remaining funds were held in abeyance on
          the assumption that some items that had not been recommended at that
          stage, might have been re-bid in the second half of the financial year via
          an additional process. These bids did not materialise and have been
          incorporated into 2004/5 bids.




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9.7       At the time (Mayor & Cabinet July 2003) of the final agreement of the
          2003/04 growth decisions space was created for the above treatment by
          the Chief Executive and Executive Director for Resources & Deputy Chief
          Executive deferring certain recommended items to be brought forward for
          reconsideration in the round for 2004/05. These were:

          Learning & Development for 3rd/4th Tiers                £233k
          Resources directorate Finance group manager             £ 50k
          Internal communications strategy                        £ 50k
          Total                                                   £333k

          All these bids have been reassessed as part of the 2004/05 process and
          are consistent with the CPA/IDeA action plans to build capacity in the
          organisation. It is therefore recommended that these 3 bids are allocated
          growth from the remaining 2003/04 investment pot for spend in 2004/05,
          leaving £16k.

9.8       CERA & Net Funds Available for Growth
          It is recognised that managing the interface between revenue and capital
                   becomes even more critical in light of the new Prudential regime of
          borrowing (a report on the Prudential regime was taken at the Mayor &
          Cabinet meeting on 14 January). When considering in the round the
          revenue and capital bids as part of the 2004/05 budget process, and
          following discussions that have led to this report, it became apparent that
          an option to shift additional resources from revenue to capital required
          consideration, given the scale and weight of capital bids. At present CERA
          in the OSCP is set at £2m a year. Over the last few years it has sometimes
          been necessary to reduce CERA in-year as a means of balancing the
          revenue budget. Members have also been briefed over the last couple of
          years via the Council‟s capital strategy as to the level of our investment
          backlog in our assets.

          It is recommended therefore that CERA is increased for 2004/05 by
          £1.25m to £3.25m per year (and will remain at this level for 2005/06 and
          2006/07) to enable some of the innovating and excellent capital bids to
          progress over the next three years within the OSCP, as is covered further
          in this report, in section 14.




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 9.9        Social Care & Health directorate
             Children’s Placements - Proposed new Contingency of £3.476m
          Officers in corporate finance and SC&H have assessed the likely level of
          pressures in Children‟s placements for 2004/05, based on the present
          projections for 2003/04 (a net overspend after management action of
          £4m+) as reported in Section 7. The projections for 2004/05, assume an
          increase in number of placements and inflation increases above 2.5%
          which makes total pressures of £5.7m. Assuming the new safeguarding
          children special formula grant of £1.224m can be used to offset these
          pressures, the pressures reduce to £4.476m.

          There are initiatives currently underway in SC&H which in time should help
          to reduce both the unit costs of some of these placement costs over the
          next year as well as to reduce the volume of new cases (over a longer
          period of time). Commissioning work underway will target the
          organisations with the highest level of spend to negotiate improved
          placement costs. It is therefore recommended that £1m be set as a
          target to be reduced from the projected costs for 2004/05, thus bringing
          the net pressures in this area to £3.476m for which it is recommended
          budget be given, but held corporately by the Executive Director for
          Resources & Deputy Chief Executive to top up SC&H contingency budgets
          which will be allocated subject to detailed business cases.

9.10 Proposed total ongoing budget allocation of £1.128m
     for other cost pressures

          Various cost pressures caused by grant regime and external decisions will
          occur for 2004/05 for which it is recommended that budget growth be
          given:

                     Concessionary fares (8.3% increase)               £0.340m
                     Shortfall in Residential allowance           £0.420m
                     Mental Health S117 reduced income            £0.190m
                     Free Nursing care                            £0.178m
                     Total                                        £1.128m

          No corporate growth is recommended for Domiciliary Care budgets.
          Although tight, it appears that measures being put in place are showing
          results that will contribute towards SC&H being able to contain the budget
          pressure in this area.




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9.11      Proposed treatment of the 2003/04 SC&H Contingency budget of
          £2.524m, held centrally in provisions, in the 2004/05 budget

            As part of setting the 2003/04 budget a total of £2.524m was
            recommended to be held centrally (not in the SC&H cash limit for
            2003/04) and agreement to draw on these funds was with approval of
            the Executive Director for Resources & Deputy Chief Executive. The
            £2.524m was made up of the following:-

                     Children‟s Services             New placements             £0.275m
                                                     In House Fostering         £0.772m

                     Adults Services                 New placements             £0.501m

                                                     Mental Health              £0.350m
                                                     Placements
                                                     Additional resources       £0.125m
                                                     To Fairer charging Team
                                                     Commn review of Adults     £0.100m
                                                     Domiciliary care (commn.   £0.150m
                                                     study)
                                                     Domiciliary care (new      £0.151m
                                                     Cases)

                     Finance support                 additional 3 officers      £0.100m
                                                     (Resources directorate)


                                          Total
          £2.524m
          As reported earlier in Section 7 of this report, £2.297m of
          these funds have been allocated in 2003/04; £100k to
          Resources for the finance support costs and the remaining
          £2.197m to SC&H, leaving a projected underspend of £227k
          in 2003/04.

          In reviewing the position for 2004/05, the Executive Director
          for Resources & Deputy Chief Executive considers it
          appropriate that the majority of these funds are now held by
          SC&H directorate on an ongoing basis within their cash limited
          budget for 2004/05 having made satisfactory business cases.
          The £100k for Resources finance already having been
          mainstreamed in the Resources directorate budget.

          It is therefore recommended that £2.268m is allocated to
          SC&H on an ongoing basis and covers all costs excluding
          £156k for Domiciliary Care which will continue to be held
          corporately as a contingency budget for 2004/05.




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9.12      Summary of available base budget resources for revenue growth
          Revised budget for pressures/growth
          after the provisional settlement,   £8.100m
          Chancellors announcement & other
          adjustments

          Special Grant - Planning                                    £0.762m
          Delivery

          Balance of 2003/4 growth                                    £0.016m

          Budget pressures
          Children‟s placements                                   -   £3.476m
          Other SC&H pressures                                    -   £1.128m

          CERA                                                    -   £1.250m

          Ongoing budget available for
          growth including                                            £3.024m
          Planning Delivery grant

9.13      2004/05 Growth Process and Bids Recommended for
          Ongoing Funding

          The growth process mirrored that used in 2003/04 and involved officers in
          directorates preparing bids for their directorate‟s DMT scrutiny and
          prioritisation.

          In identifying growth proposals consideration has been given to the
          existing policy framework through the Community Strategy and key
          service objectives and developing the tests against equality issues and
          performance indicators. Growth allocations are becoming more closely
          linked to enhanced performance against which managers can be held
          accountable.

          Directorates were asked to provide supporting information in relation to
          each growth proposal against various headings including the following:-

                         amount of growth given in 2003/04 if any in the area proposed
                          for growth now

                         amount of savings previously applied in 2003/04 or proposed in
                          2004/05

                         the ONE Community strategy priority MOST affected by the
                          service area being proposed for growth

                         the actual impact if any on the Community strategy priority

                         relevant impact on Key Performance indicators, BVPI‟s

                         directorate management team (DMT) proposed prioritisation for
                          Member consideration

                         Link to capital bids

                         Could the bid be joined up with others (across directorate)




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          Directorates were asked to complete documents detailing this information
          for each growth proposal. The attached budget spreadsheets (Appendix J)
          show the more detailed information supporting the analysis outlined
          below.

          A cross-directorate officer group involving finance and policy Heads of
          Service met and prioritised all bids for Member consideration in
          accordance with a newly developed “scoring matrix.” Bids were also
          discussed in a round of “Resource” member meetings at the end of
          November/early December and Cabinet Members identified their priorities
          at those meetings. During early January, the Mayor chaired a series of
          „Star Chamber‟ meetings to finalise budget recommendations in this area.

            In terms of process, lessons have been learnt from the growth exercise
            undertaken early in 2003/04. Officers have therefore tried to strike a
            balance between collecting management information to inform member
            decisions offset by not making the process too onerous for officers who
            sometimes wish to bid for relatively small amounts of budget growth.

9.14      In total 52 bids totalling over £6.3m were received as follows:

          E&C                 11 bids totalling £1.2m
          Regeneration 16 bids totalling £2.6m
          Resources           16 bids totalling £1.5m (including 3 b/f from 03/04)
          SC&H                 9 bids totalling £1.0m

                                          52 bids totalling £6.3m

          It should be stressed that whilst it is being recommended that SC&H
          receive corporate support for the children‟s placement budgets, it is
          important that their other bids for additional resources are considered in
          the round with other directorates. Some good bids have been received
          from SC&H that should not be ruled out because of the large amount of
          support already being proposed to their principle budget pressure.

          Based on all consultation carried out to date, the final recommended
          package for budget growth is as follows. Full details of bids are provided
          in Appendices to this report.




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9.15   2004/05 Bids recommended for
ongoing growth
                                                                              2004/05 growth
                                                                              recommended

          E&C1/SC&H             Identification Referral & Tracking            £150k *
          E&C2                  Black & Ethnic Minority attainment            £150k
          E&C5                  Safeguarding children-behaviour &
                                Attendance                                    £253k
          E&C7                  Youth – Positive Action & Young               £ 75k
                                People
          E&C8/RES              Young People‟s Panel by Youth
                                Service/P&P                                   £ 50k


                                TOTAL E&C                                     £678k

          RGN16       Safer routes to schools                                 £ 17k (M)
          RGN13       Private Sector grants                                   £ 33k (M)
          RGN         Graffiti                                                £ 80k (M)
          RGN16       Traffic Management                                      £ 28k (M)
          RGN15       Lighting                                                £ 50k (M)
          RGN04       Town centre management                                  £ 20k (M)
          RGN14       Supporting People                                       £123k
          RGN07/08/09 Development Planning/Development
                      Control/E service delivery of Planning                  £762k **
          RGN15       Highways resurfacing/footways/drainage                  £305k
          RGN12       Homelessness – additional PSL units                     £103k
          RGN05       Economic Development Management                         £ 40k
          RGN01       Trading Standards                                       £ 45k

                                TOTAL REGENERATION                          £1,606k

          SC&H3                 Transition management                      £ 81k
          SC&H1                 Threshold to Care Team                     £195k
          SC&H7                 Social Worker Recruitment Officer          £ 39k
          SC&HRW                Performance, Quality & Systems             £110k
          SC&H5                 Business support review (adults/childrens) £115k
          SC&H9 part            Community Safety (analyst)                 £ 33k (M)

                                TOTAL SC&H                                   £573k

          RES07                 „Hard to fill posts‟ recruitment officer      £ 29k
          RES12                 Corporate Asbestos officer                    £ 50k
          RES14                 Saturday Envirocall service                   £ 47k

                                TOTAL RESOURCES                               £126k

                                Total                                      £2,983k
Notes
   1.     (*) to be held by the Corporate Board overseeing IRT/information sharing for E&C/SC&H
          pending the Chief Executive‟s review of moving forward on the Green Paper etc
     2.   (**) using special delivery grant
     3.   The bids for IRT and BME Attainment have rising costs in 2005/6 that will require
          consideration in the 2005/06 budget model.




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     4.   Street Sweeping is receiving £280k redirection within Regeneration by means of the gross
          SELCHP savings not being taken corporately (M&C report 14/1/04).
     5.   Single Status will be dealt with through the corporate provision for this, and so bids are not
          being funded.
     6.   The new posts in SC&H and Resources will complement each other in terms of „hard to fill‟
          posts across the Council including social workers.
     M    These 8 bids were recommended by the mayor as a revision following the „Star Chamber‟
          process. Some items are adjusted from the original level of the bid by officers – marked as
          “part”.



          In summary these bids totalling £2.983m allocate most but not all of the
          £3.024m that is available for revenue growth, leaving a balance of £41k.
          Appendices show the summary of each of the recommended bids and the
          detailed recommended bids in full.

9.16      Public Service Agreement (PSA)
          With 3 months remaining out of the 3 years, current forecasts of reward
          monies becoming available over the next two years total £3.4m to £4.3m
          of the potential £7.23m. Through the LGA, we are aware that this is in line
          with most other LPSA pilots. It is still not clear as to how much will be
          paid by way of revenue and capital, but the likely ratio is 50:50.

          Members need to decide how much of these resources are allocated,
          through the corporate budget process, as a reward to the services that
          achieved PSA targets. Options include: rewarding those services that
          generated the reward; and/or rewarding those services that participated in
          the LPSA but did not generate reward grant; and/or using the reward to
          tackle Community Strategy priorities; and/or rewarding external
          agencies/schools for the element of grant they have been responsible for
          delivering; and/or providing general once-off support to the budget. These
          options are not necessarily mutually exclusive, and a mix and match
          approach is likely to be sensible.

          At present the assumption is that the reward monies attributable to the
          schools (currently estimated at £904k on PSA targets 10 and 11 – KS 3
          &4) will be returned to the schools over a 2 year period. Members will be
          aware that under the new arrangements there is a role for schools‟ forum
          to discuss how these once off resources are spent in 2004/05 and
          2005/06.




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          Assuming the PSA reward grant is payable 50% revenue and 50% capital
          and 50% being paid in 2004/05 and 50% in 2005/06, it is recommended
          that the following ONCE OFF resources are assumed to be available from
          PSA reward grant when setting the 2004/05 and 2005/06 revenue and
          capital budgets:-

                     Schools              2004/05                 revenue   £226k
                                                                  capital   £226k
                                          2005/06                 revenue   £226k
                                                                  capital   £226k

                     Other GF             2004/05                 revenue   £624k
                     Budgets                                      capital   £624k
                                          2005/06                 revenue   £624k
                                                                  capital   £624k
                                                                            £3.4m

          It is recommended that these funds for schools will be in addition to the
          passported schools‟ budget. In terms of our Section 52 statement it is
          important to notify DfES of the LPSA element so that this is not mistakenly
          included by the Department into their assumptions of Lewisham‟s schools‟
          budget and included in future years‟ passporting requirements.

          A prudent estimate of reward grant from LPSA is as follows.




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            TABLE 3

                                                                                Potential   Predicted    %
        No      Target                                      Directorate          Reward       Reward
                                                                                   Grant        Grant

        1       Reduce the reconviction                     Social Care &       £602,854           £0     0
                rate of young offenders by                  Health
                7 percentage points
        2       Reduce the rate of                          Social Care &       £602,854           £0     0
                robbery. (By 92 fewer                       Health
                robberies)
        3       Double Light Rail Use by                    Regeneration        £602,854     £602,854    10
                2010 and to 13.3 million in                                                               0
                2003-04.
        4       Reduce fly tipping                          Regeneration        £602,854           £0     0

        5       Reduce abandoned and                        Regeneration        £602,854     £602,854    10
                untaxed vehicles in the                                                                   0
                New Cross (New Deal for
                Communities) Area
        6       Significantly increase the                  Regeneration        £602,854           £0     0
                average SAP rating of
                Council homes throughout
                the borough
        7       To provide 100%                             Resources           £602,854     £361,712    60
                electronic service delivery
                by 2004, one year early.
        8       Improve cost effectiveness                  All Directorates    £602,854     £602,854    10
                by approximately 2.2%                                                                     0
                per annum
        9       Promote active citizenship                  Education &         £602,854     £361,712    60
                among young people                          Culture
        10      Increase % of 14 year olds                  Education &         £602,854     £602,854    10
                at or above the Key Stage                   Culture                                       0
                3 standard for maths,                       SCHOOLS
                English, science and ICT
        11      Increase % of pupils                        Education &         £602,854     £301,427    50
                obtaining 5 or more                         Culture
                GCSE‟s at Grades A*-C                       SCHOOLS
                and narrow the differential
                attainment levels between
                BME and white pupils
        12      Improve the life chances of                 Social Care &       £602,854           £0     0
                children in care by                         Health
                maximising the
                contribution adoption can
                make by providing
                permanent families for
                children.

                TOTAL                                                          £7,234,248   £3,436,267   48


            Beyond this estimate of £3.436m, officers consider that the following two
            additional sums are likely to be gained, but cannot be guaranteed at this
            stage for budget purposes:



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                         Increase the SAP rating of Council homes        - £602,854
                          instead of 0
                         Promoting active citizenship                    - £602,854
                          instead of £361,712

          At this stage it is proposed not to budget for the likely additional reward
          grant of £843,996 likely from these two items. Proposals for once-off
          revenue and capital elements are contained in the next paragraph in this
          report for spend in 2004/5 and 2005/6.

9.17      2004/05 Budget allocation of once off funding

          It is proposed that the £1.248m (2 x £624k once-off revenue in 2004/5
          and 2005/6 respectively) PSA monies are used as part of the Budget
          Strategy over the next 2 years.

          It is recommended that allocations totalling £1.215m are made from these
          monies, leaving a balance of £33k to roll forward into next year‟s re-
          assessment of reward grant allocations.

          EC12                  Film Development                   £ 72k (M)
          EC10                  Audience Development               £ 45k (M)
          EC03                  Externalisation of Creative
                                Lewisham agency                    £100k (funds for 04/05)
          ECRW                  Capacity for MACE/Capital          £150k
                                Project Management
          RES06                 Electronic Data record mgmt        £496k (links to capital
bid)
                               (EDRM) for SC&H/Council
          REG                  Britain in Bloom campaign           £ 50k (M)
          SCH2                 Crime & Disorder Audit              £ 60k
          SCH06                Single Assessment process           £242k
                               Total                              £1,215k

          Allocations to E&C, Resources and Regeneration are specifically linked to
          rewarding services that generated the reward grant; whilst the allocations
          to SC&H are using the reward grant generated by meeting corporate
          targets.

          Further to the £100k provided above for 2004/05, funds will be required to
          meet the remaining three years of the tapered 4 year (2005/06 –
          2007/08) funding commitment that has been given to the Creative
          Lewisham Agency.
          This will be modelled for in future years budgets.

          Growth is required next year for Regeneration and Resources with regard
          to the transfer of liquor licensing to local government. The associated
          costs and income will be assessed during the transitional first year (and
          covered by corporate working balances in 2004/05) and then feature as a
          growth bid for 2005/6 as required.

9.18      Analysis of recommended growth proposals (both ongoing and
          once off) in the context of the Council’s policy framework

9.18.1 The approach adopted for the 2004/05 revenue growth exercise is broadly
       comparable to that used earlier this year in the 2003/04 growth process as


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          well as for revenue savings and has enhanced capacity for evidence based
          decision making.

9.18.2 The methodology has included trialling the use of a revenue growth
       scoring mechanism. This tool was developed in conjunction with policy and
       resource leads in directorates and has ensured that the systematic and
       objective review and evaluation of revenue growth proposals can take
       place. The broad consensus of directorate representatives is that this
       approach should be further refined and embedded into the process for
       recommending growth bids in future years to Members.

9.18.3 In common with the revenue savings exercise, the Community Strategy
       has been used as a focal point for decisions made in relation to revenue
       growth. Directorates have therefore, been asked to make clear what
       impact their proposals will have upon the deliverability of Community
       Strategy priorities. Set out below is a short analysis of the findings that
       have emerged from this work.

9.18.4 In total, 99 growth bid proposals (as grouped bids equalling 52) were
       made for 2004/05 totalling £6.32m. This figure includes £333K carried
       over from 2003/04. In total 47 proposals have been recommended worth
       £4.531m. Of these, £3.316m are for ongoing growth and £1.215m for
       once off growth. A further £1.789m worth of proposals have not been
       recommended.

9.18.5 The diagram below gives a percentage breakdown of growth proposals and
       shows that 53% were recommended for ongoing funding and 19%
       recommended for once off funding. In contrast 28% of proposals were not
       recommended.

                                           Proposed Growth Bids


                              Not
                        Recom m ended
                             28%

                                                                  Recom m ended
                                                                       53%

                                      Once Off
                                      funding
                                        19%




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         Links to Community Strategy priority

9.18.6 The table below gives information on how proposals relate to Community
       Strategy priorities. It shows that of the £3.316m recommended for
       ongoing growth in 2004/05 Community Strategy priority 10: „improve the
       efficiency and sustainability of local public services’ attracts £991K worth
       of proposals. This priority also has the highest value of growth proposals
       not recommended (£1.158m.)

9.18.7 Elsewhere, priority 6: ‘secure sustainable regeneration of Lewisham as a
       place – its housing, transport and environment’ attracts £915K of
       proposals recommended for ongoing growth and has the lowest value of
       proposals (£35K) not recommended against it.

          TABLE 4

             Growth bid proposals 2004/05 linked to Community Strategy Priority
                                                                            Not
                                                      Recom-   Once off   Recom
                                                      mended   funding mended
                                                      £,000s    £,000s    £,000s
                 Crime: reduce crime and the fear of
              1  crime and make Lewisham a safer       £153       £60      £107
                 place
                     health: sustain and improve the health
              2                                                   £669   £496         £90
                     and well-being of local people
                     education: raise educational
              3      attainment, skill levels and                 £518   £150
                     employability
                     enterprise and business growth:
                     foster enterprise and sustainable
              4                                                   £20                 £340
                     business growth, including the creative
                     industries
                     cultural vitality: develop cultural
              5      vitality – building on Lewisham's                   £217
                     distinctive cultures and diversity

                     regeneration: secure sustainable
              6      regeneration of Lewisham as a place –        £915   £50          £35
                     its housing, transport and environment

                     welfare dependency: reduce welfare
                     dependency, promote independence
              7
                     and increase the life chances of
                     vulnerable members of the community
                     engage local communities: help
                     local communities to develop their own
                     capacity for mutual support and
              8      independent action and ensure the            £50                 £59
                     centrality of community involvement in
                     public service decision-making
                     processes




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                     ensure equity in service delivery:
              9      design diversity into local institutions                        £242
                     and design out discrimination

                     improve effectiveness, efficiency
                     and sustainability of local public
             10      services: optimise investment in                       £991*           £1,158
                     infrastructure and improve the
                     stewardship of assets
              Total                                 £3,316     £1,215    £1,789
* This figure includes deferred growth bids for 2003/04 totalling £333K.

Recommended growth bids linked to community strategy priority

9.18.7 The diagram below gives a percentage breakdown of recommended
       growth bids linked to Community Strategy priorities and shows that
       Community Strategy priority 10 attracts 30% of growth proposals - the
       highest percentage. Priority 6 attracts the next highest percentage of
       proposals, 28%. The lowest proportion of proposals, by value, is just 1%
       for proposals affecting priority 4.

                             Recommended growth bids 2004/05 linked to
                                   Community Strategy priority

                                                                   1    4
                                                                  5%   1%
                         10                                                    2
                        30%                                                   20%




                     8
                    2%                                                          3
                                                                               16%

                                             6
                                            28%




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Ward impact

9.18.8 The analysis of recommended growth proposals revealed that only one
       proposal will have a specific ward impact. This is RGN04: Town Centre
       Manager for £20K.


Equalities impact

9.18.9 The revenue growth proposals (including one off funding) have been
       subject to an equalities impact assessment. No adverse impacts for
       equality groups have been identified.

9.18.10 The table immediately below shows that of the 47 proposals
       recommended for ongoing growth, 27 have been identified as having an
       equalities impact. The highest number of these (7) are under Community
       Strategy 2: „sustain and improve the health and well-being of local
       people.‟ However, the highest value of proposals for ongoing growth with
       equalities impact £727K appears under priority 10.

          TABLE 5

                    Equalities Impact
                                                                                       Once
                                                                     No.    Recom-      off
                                                                      of    mended   funding
                                                                     bids   £,000s    £,000s
                    Crime: reduce crime and the fear of crime
             1                                                        4      £153     £60
                    and make Lewisham a safer place
                    health: sustain and improve the health and
             2                                                        7      £669     £496
                    well-being of local people
                    education: raise educational attainment,
             3                                                        4      £518     £150
                    skill levels and employability

                    enterprise and business growth: foster
             4      enterprise and sustainable business growth,       1      £20
                    including the creative industries

                    cultural vitality: develop cultural vitality –
             5      building on Lewisham's distinctive cultures       3      £217
                    and diversity

                    regeneration: secure sustainable
             6      regeneration of Lewisham as a place – its         2      £73
                    housing, transport and environment

                    welfare dependency: reduce welfare
                    dependency, promote independence and
             7
                    increase the life chances of vulnerable
                    members of the community




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                    engage local communities: help local
                    communities to develop their own capacity
                    for mutual support and independent action
             8
                    and ensure the centrality of community
                    involvement in public service decision-
                    making processes
                    ensure equity in service delivery: design
             9      diversity into local institutions and design               1                £242
                    out discrimination

                    improve effectiveness, efficiency and
                    sustainability of local public services:
            10                                                                 5      £727
                    optimise investment in infrastructure and
                    improve the stewardship of assets

                    Total                                                     27     £1,927     £948

9.18.11 The table below gives a breakdown of all bids and the financial
       information for equalities groups and shows that the equalities group for
       „age‟ has the highest value of bids totalling £2.855m or 63% of the
       proposals made for growth.

          TABLE 6


                                                              Impact
                                                              £,000s
                                                                                           % of
             Equalities
                                                                             Total     recommended
               Group
                                     High            Medium            Low                 bids
             Disability             £1220               £328       £253      £1801         40%
                 BME                £1446              £1155           £0    £2601            57%
               Gender               £1020               £873       £233      £2126            47%

                Age                 £2169              £8686           £0    £2855            63%
             Lesbian &                                                       £1135            25%
                Gay                  £335               £462       £338

9.18.12 The table below shows recommended growth proposals by impact and
       shows that most proposals will have a high or medium impact on various
       equalities groups.




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          TABLE 7



                                                                                   Impact
            Equalities Group                                          High          Medium          Low
            Disability                                                       11              4            3
            BME                                                              12             10
            Gender                                                            8              7            1
            Age                                                              19              4
            Lesbian & Gay                                                     3              4            4
             Total proposals - 27


9.19      Overall Effect of Revenue Budget Process
          The budget is an important means for the organisation to redirect into
          priority areas, to meet material pressures, and to support improvements
          to service delivery. The effect of the budget strategy (adding items
          deferred from 2003/4, new allocations for 2004/5 and the resources given
          to meet SC&H pressures) can be summarised as follows. Further to
          inflation uplifts, the net effect of savings of £2.656m and growth/pressures
          of £7.920m is net additional resources for directorates totalling £5.264m:

          TABLE 8

                                           E&C       Regeneration                 SC&H      Resources
                                             £k                £k                    £k            £k
            Saving                          720               652                   550           734

            s **
            %                      27.1%             24.6%                20.7%           27.6%
            Growth                       678                      1,606           5,177             459
            %                      8.6%              20.3%                65.4%           5.8%
            Redirection                 (42)                       954            4627            (275)
            + Once-Off                   367                      *250             302              496
            % Once Off             25.9%             17.7%                21.3%           35.1%
     *               see section in report on CT discounts
     **              The figure for savings in E&C excludes those not taken at the M&C meeting on
                     14/1/04 (£67k for Youth services and £27k for Community Sector grants)


9.20      For future years we will aim to provide the form of analysis in an
          alternative approach according to the priorities in the forthcoming
          Corporate Plan to complement the directorate breakdown given above
          which has fairly limited use.

9.21      The next section summarises budget pressures that will remain in the
          other three directorates, Education & Culture, Regeneration and Resources
          in 2004/05 that will require careful and considered management and
          monitoring:-




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9.21.1 Education & Culture


          E & C – Schools Block
          Schools are expected to meet the costs of inflation and all other additional
          employee costs from within the passporting figure. This includes the costs
          of non-teaching staff, teachers pay, single status and other related
          additional costs. There are also a number of other pressures which must
          be contained within the passporting figure.

          In the current year schools have faced a difficult financial position as
          standards funds were reduced and the costs of teaching staff rose
          significantly. Many schools are using their existing balances in order to
          manage current year budgets and this cannot continue. The 2004-05
          settlement includes a pupil „guarantee‟ that requires all education
          authorities to pass on a minimum increase, usually 4%, to all schools. In
          addition, there is an expectation that education authorities will provide
          transitional support to schools with financial difficulties and the council has
          received a grant of £103k to provide such support.

          Members will be aware that the Executive Director for Resources & Deputy
          Chief Executive has advised E&C to maintain a vigilant monitor on schools
          balances following the recommendation to allow for higher deficits. If the
          quantum of balances fall too low the licensed deficits would fall as a
          cashflow pressure to the Council. Education & Culture do not expect this
          to happen however and are monitoring this on a regular basis.


          E & C – Other
          The non –schools areas of the Education and Culture budget are contained
          within the Council‟s financial strategy and will be subject to savings,
          growth and inflation adjustments to their cash limits. In the current year,
          the key budget pressures have related to the additional costs of Special
          Educational Needs transport of £548k and early retirement and voluntary
          redundancy costs £729k. The SEN transport budget is currently part of a
          wider Best Value Review of transport and it is not proposed to make any
          immediate shift of resources in advance of the full findings of the review.
          The pressure on the early retirement and voluntary redundancy budget, in
          the current year, largely relates to redundancies in schools as a result of
          problems associated with the current year budget settlement.

9.20.1 Regeneration


          Land Charges fee income - £107k
          The Land Charge fee income budget has been increased in previous years
          in line with the steady increase in actual income receipts. However, this
          income has been falling throughout 2003-4 due to a reduction in the
          volume of searches and a significant shift to personal searches. This
          income stream will always be dependent on the state of the housing
          market and therefore income targets are difficult to forecast. The shift
          from full searches (£150) to personal searches (£10) is also contributing
          to the pressure on the budget. The full pressure could be as high as
          £257k but internal re-direction from forecast additional Development
          Control income is estimated to partially offset this sum to £107k.




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          Flytipping - £64k
          The increased volume of flytipping has continued during 2003-4 and there
          is every likelihood that this trend will remain through 2004-5 with
          estimated costs of £64k in excess of the current budget.


          Green Scene - £106k
          The existing budget for parks anticipates income from the Council‟s
          contractor (Glendales) for default notices. The contractors level of
          performance is such that this budget is forecast to underachieve again in
          2004-5 by at least £106k.


          Neighbourhood Warden Schemes- £50k
          Several Neighbourhood Warden schemes have been established within the
          borough, predominately servicing council housing estates and chargeable
          to the HRA.     However, to the extent that this service benefits the wider
          community, an appropriate charge must be made to General Fund. Of
          the total costs of the Catford scheme, approximately £50k is estimated to
          benefit the wider public community and no budget currently exists for this
          charge.

9.20.3 Resources


          Public Services
          Due to an increase in the number of people claiming benefits and changes
          in subsidy funding arrangements (which have not been matched by a
          corresponding amount of growth), benefits subsidy is an ongoing base
          budget pressure. For 2003/04 an overspend of £400k is currently being
          projected in this area which will be covered by underspends elsewhere in
          Public Services. However there is no guarantee this will be possible in
          2004/05.

          The Public Services budget also includes Customer Services. There are
          pressures on Access Point, Call Point and other customer service areas
          where managers continually review the balance between resources and
          improving service delivery.


          Property & Administration
          There is an ongoing base budget pressure on the repairs and maintenance
          budget for the corporate estate due to the under investment over the last
          few years and the resulting poor state of repair of many of the buildings.
          In the longer term this will be addressed through work currently being
          undertaken in relation to property rationalisation but in the short to
          medium term these pressures will remain.




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9.20.4 Social Care & Health
        Summary of Social Care & Health directorate budget for 2004/05

The above recommended budget growth, together with inflation for pay
and non pay and assuming that all savings are delivered in full, will leave
the directorate managing pressures in the range of £1.8m-£2.5m
(although included in this figure is £1m for children’s placements against
which the Executive Director for Resources will be holding a £0.5m once
off provision – as discussed earlier in section 7).

The pressures are particularly in the area of Social worker pay,
Supporting People, Residential/Nursing Care fees and Domiciliary care
(as mentioned earlier in this section). Activity outlined below is key to
containing pressures and the following “projects” will require to deliver
their objectives if SC&H costs are to be contained within their proposed
2004/05 budget

                                    Children’s Commissioning
          A temporary commissioning resource has been in place for some months.
          The detailed analysis of the most expensive placements is complete.
          Negotiations are in progress with providers to reduce costs.

                             Financial Business Improvement (FBI)
          The two databases at the heart of the project are in place. The Children‟s
          database is fully operational and providing essential information on
          placements costs. The Adults database is functional, but there are
          significant data quality issues in the core Swift system from which the
          database feeds. Adults Services are working on their client data. Progress
          is being made on the timely processing of invoices. For example 85% were
          paid within 30 days in November.

                                        Fairer Charging
          The restructuring of the team is complete and extra resources have been
          made available to clear the backlog of cases. The action plan is on course.
          Work is underway to improve payment methods to make it easier for
          clients to pay.

                                     Residential & Nursing
          Negotiations with providers are almost complete on revised rates. These
          are being contained within the additional resources agreed. Work on cost
          & volume contract arrangements is in progress to secure placements for
          Lewisham residents at an affordable cost. There are likely to be above
          inflation demands from providers again in 04/05. Each 1% demand over
          and above the modelled 2.5% will increase costs by £100k.

                                           Home Care
          The modernisation manager is in place and has started to make progress
          in terms of the detailed analysis and in reducing unproductive hours. This
          includes a focus in managing sickness absence. She will be presenting a
          number of options in the new year to make further progress.




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                                   9.21       Corporate Budget Pressures

          Insurance - Over the past few years, there has been substantial
          contraction of the insurance market caused by some insurance failures,
          mergers between insurers and the impact of the falling stock market.
          Catastrophe losses, for example the World Trade Centre, earthquakes,
          hurricanes, severe European floods, higher court awards, new legislation
          and an increased 'claims culture' have created a volatile market where
          insurers are imposing punitive premium increases on even low hazard,
          claims free risks. Property insurers are particularly reluctant to provide
          cover for Authorities with schools and housing stock and this has meant an
          unhealthy lack of choice for some Authorities.

          A full tender of insurances was undertaken in October 2003 and the likely
          impact of the insurance markets was taken into account when the 2003/4
          budget and 2003/4 HRA budget was set with an increase of approximately
          30% overall being anticipated. The insurance programme was re-
          structured at this renewal, resulting in higher levels of self-insurance for
          property risks to mitigate the effects of the insurance markets and
          maximise the availability of affordable cover at catastrophe levels in the
          longer term. The effects of this, coupled with significant variation in the
          'rating' applied to individual types of risks by the new insurers and
          deterioration in claims histories for some services was applied to the best
          value accounting model for charging and the outcome was that the
          increased charges did not fall consistently over all services.

          The insurance markets show little sign of recovery in the short-term and
          whilst long term agreements have been entered into with insurers
          wherever possible, it is considered prudent to assume that insurance costs
          will continue to escalate at above inflation and make appropriate budget
          provision for the foreseeable future. This has been taken into account in
          the Council- wide budget strategy.

            Single Status and other pay pressures - Budget provision exists for
            negotiating the next phase of the single status agreement (the effect of
            job evaluation and implementation of the 36 hour week). The
            negotiations will need to be conducted in such a way to ensure additional
            costs are contained within the additional budget provision. There is a
            legal requirement to introduce the 36 hour week with effect from April
            2004 and sufficient budget provision exists for the Council to meet that
            requirement.

            Capital Expenditure Revenue Account (CERA) –As discussed earlier in this
            section, it is recommended that for 2004/05, 2005/06 and 2006/07, the
            budget now assumes a provision of £3.25m per annum is available (the
            original £2m plus £1.25m as discussed earlier in paragraph 9.7).

            Treasury Management – At present we budget for a contribution to the
            corporate base budget from debt management and technical
            adjustments, and the Council continues to perform well in this respect
            although the performance on interest on revenue balances is getting
            harder to deliver in the climate of hardening financial markets. This will
            require reviewing as part of the 2005/06 budget process and in the
            context of the Prudential regime.




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9.22                 Other
            Executive Directors must ensure that all other budget pressures referred
            to in earlier paragraphs in this section are contained within next year‟s
            cash limited totals. Cash limits in line with the recommendations of this
            report are currently being constructed.

            Final cash limits for each directorate will be published in the 2004/05
            corporate budget book in the normal way. This may include a number of
            adjustments – including budgets for asylum seekers - to be finalised by
            the Executive Director for Resources & Deputy Chief Executive.

                 10 RECOMMENDED BUDGET REQUIREMENT 2004/05


          Introduction
10.1      This section outlines the 2004/05 recommended budget. This section is
          structured as follows:
                   Brief comments on the likely GLA precept and the position of
                    other boroughs
                   Recommended Budget Requirement for 2004/05

10.2      The GLA are consulting on a precept increase of around 12%. Officers
          have now calculated an increase in Lewisham‟s element of Council Tax of
          7.5%, which will equate to an overall increase of around 8.8% (including
          the collection fund deficit). These calculations are predicated on the
          outcome of the GLA precept and the final Local Government Finance
          Settlement. The Council will not be able to make final decisions until 3 rd
          March.

10.3      Anecdotal evidence suggests that many London boroughs are likely to
          increase their Council Tax by high single percentage increases. Bearing in
          mind other authorities‟ likely increases, Lewisham‟s absolute level of
          Council Tax next year is still likely to remain in the middle section of
          London boroughs

            Recommended 2004/05 Budget Requirement
10.4      Section 9 of the report has made recommendations to Members on the
          passporting of Schools FSS increase, non-education FSS budget pressures
          and the use of financial provisions. The result of these recommendations,
          if agreed, would lead to a budget requirement of £368.010m The
          construction of the recommended budget is set out in Table 9.




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          TABLE 9: RECOMMENDED BUDGET REQUIREMENT FOR 2004/05

                                                                                           £M
             2003/04 Budget                                                               342.296 5
             Add: SSA readjustment                                                           2.261 0

             2004/05 Base Budget                                                          344.657 5


             Add:
             Schools passporting                                                             7.439 0
             Non – Schools Inflation                                                         5 187 0
             Non – Schools Pressures/Growth                                                 13.382 5
                                                                                          370.666 0
             Less
             Savings (other than for redirection)                                            2.656 0




             Recommended 2004/05 Budget                                                   368.010 0

             Requirement
             11 LOCAL GOVERNMENT FINANCE SETTLEMENT 2004/05


          Introduction
11.1      This section provides details of the outcomes arising from the 2004/05
          Local Authority Finance Settlement.

11.2      The provisional local authority finance settlement was announced to the
          House of Commons on 19th November 2003. Details of the final settlement
          will be announced at the end of January 2004 and are not expected to
          contain any significant changes.

11.3      The 2004/05 Provisional Settlement was somewhat unique, as additional
          RSG was announced after the initial Settlement, by the Chancellor of the
          Exchequer in his Pre-Budget Statement to the House of Commons. Total
          additional funding was £340m for England, of which Lewisham received an
          additional £1.434m, bringing our total Formula Grant to £289.412m. This
          section is written on the basis of the provisional settlement plus the Pre-
          Budget additional grant.

          Formula Spending Shares
11.4      This is the second Settlement based on a new methodology of Formula
          Grant Distribution, which was initiated last year after a consultation by the
          Office of the Deputy Prime Minister in summer 2003. It is constructed on
          the concept of Formula Spending Shares, which, in their application to the
          settlement‟s calculations, replace Standard Spending Assessments. As part
          of the new system the Government has built in a greater degree of
          resource equalisation. This is achieved by the use of FSSs being more in
          line with what local authorities are spending nationally, rather than SSAs,
          (which were based on government‟s view of what local authorities should
          be spending). This resource equalisation benefits high needs/high resource
          authorities such as Lewisham. However this increase is not backed by



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          additional resources at a national level and if Lewisham were to spend at
          FSS its council tax would need to rise by around 11%.

11.5      FSSs are not the Government‟s view of what an individual authority should
          be spending. The Local Government Minister Nick Raynsford summarised
          the position when he announced the 2003/04 settlement in the Commons
          on the 5th December 2002:

          “One of the major problems with the old SSA system was that it
          attempted to take a view on what authorities need to spend. That was
          unrealistic and inconsistent with our approach to devolving responsibilities,
          so we will not continue the arrangement. Notional spending allocations do
          not imply anything about the budget or spending choices that will need to
          be made. Councils, in consultation with their council taxpayers should
          properly take such decisions. The one exception in respect of the
          Government‟s key priority of education: we have said that we want to see
          authorities pass on increases to schools.”
          Hansard 5 December 2002: Column 1066
11.6      The FSS is used to calculate the authority‟s revenue support grant. For
          each block (or sub-block) an element is calculated by formulae, which
          contain the following basic components.

                         A basic amount for each client group – common to all
                       authorities
                       A top-up for deprivation (not for Highways, or capital
                       financing) compensating authorities for the additional costs
                       incurred providing services in deprived areas
                       A top up for area costs – reflecting the fact that there are
                       additional costs on items such as salaries and business rates in
                       certain parts of the country.
                       Other top-ups for to meet cost pressures arising from issues
                       such as, rural sparsity, population density and visitors and
                       commuters.

11.7      ODPM as usual calculated an adjusted 2003/04 FSS to the effect of
          changes in responsibilities and changes in grant delivery. The main
          changes are set out below and give a net increase of £2.361m.

11.8      Lewisham‟s provisional 2004/05 FSS is £370.692m. This is an increase of
          4.74% over the adjusted 2003/04 FSS for Lewisham, which is just below
          the national increase of 4.9%. The provisional settlement provided, on an
          adjusted basis, £729k less funding than allowed for in the financial survey.
          However, when netted against the additional grant announced by the
          Chancellor, funding actually increased by £705k more than was forecast.
          The FSS increase for Education was £8.08m (5.14%) – however, the
          increase for the schools block was 5.48%. Passporting for the Education
          block as a whole is restricted to the schools block, which means there is an
          expectation that £7.439m of the increase in grant, will be passported to
          schools.

11.9      The adjustment of the FSS for Social Services (£7.235m) is due to transfer
          into FSS of the Quality Protects Grant.

11.10 The adjustment to the EPCS FSS (minus £4.861m) is mainly due to
      transfers to special grant of Non-HRA Rent Rebates, Council Tax Benefit


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          and Rent allowances as well as transfer to direct grant of Environment
          Agency levies.


          TABLE 10: COMPARISON OF THE 2003/04
          SETTLEMENT FSS, & ADJUSTED FSS AND
          2004/05 PROVISIONAL SETTLEMENT FSS

                    FSS Block                              Settlement
                                                            2003/04
                                                                             Adjusted
                                                                             2003/04
                                                                                          Provisional
                                                                                          Settlement
                                                               FSS             FSS         2004/05
                                                               £’M             £’M            £’M
            Education                                           157.132         157.132         165.212
            Personal Social Services                             98.287         105.523         111.565
            Highway maintenance                                   8.732           8.732           8.338
            Environmental, Protective                            77.069          72.209          74.934
            and Cultural Services
            Capital Financing                                       10.318       10.305         10.644
            Total                                                 351.539      353.900        370.693

      External Support
11.11 External support is provided in the form of Revenue Support Grant and
      income from the National Domestic Rate pool, which added together, are
      now known as Formula Grant Allocation. In order to calculate an
      authority‟s FGA an assessment is made of the contribution the
      Government expects from Council Taxpayers. The Government proscribes
      an Assumed National Council Tax (previously Council Tax for Standard
      Spending) and each authority‟s share of this (i.e. shared between the
      various tiers) is multiplied by its Council Tax base (for RSG purposes). FGA
      is the difference between FSS and the assumed income from Council Tax.

11.12 As previously mentioned the change to FSS does not by itself put
      additional funding into the system. Assumed Notional Council Tax for
      2003/04 was £1,037, and for 2004/05 is £1,059, an increase of 2.07% on
      a like for like basis. Prior to the additional £340m additional RSG funding
      announced in the Pre-Budget Report, the increase would have been 3.9%.
      (This includes an assumption of an increase in Council Tax yield equivalent
      to 0.8%).

11.13 Lewisham‟s Settlement was at the ceiling in 2003/04, resulting in a loss of
      grant of £2.68m. The floors and ceilings for 2004/05 were set at 4% and
      7.5% respectively, raised after the increased Pre-Budget funding from
      initial levels of 3.5% and 5.8%. Lewisham‟s change in grant between
      2003/04 adjusted and 2004/05 provisional was 6.2%, meaning that we
      received our grant increase in full. (Prior to the Pre-Budget Report
      additional grant, Lewisham‟s increase was 5.6%.) Allowing for the effect of
      the ceiling in 2003/04, the grant increase is 4.8%.




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          TABLE 11: CALCULATION OF FORMULA
          GRANT ALLOCATION IN 2004/05
                                                                                      2004/05
                                                                                        £M
            FSS                                                                       370.692683
            Less: Assumed Notional Council Tax                                          80.948372
                                                                                      289.744311
            Less: Scaling Factor*                                                        0.332254
            Formula Grant Allocation                                                  289.412057

            Less: National Non-domestic Rate income                                     70.907307
            Revenue Support Grant                                                     218.504750


            *Funding taken from ceiling authorities used to fund the floor. Authorities
            between the floor and ceiling have their grant scaled down to meet the remaining
            gap.


          Comprehensive Performance Assessment
          and Capping
11.14 Capping arrangements are set out in reserve powers in the Local
      Government Act 1999, and have applied from the financial year beginning
      1st April 2000. They allow the Secretary of State to look back over two or
      more years when deciding if increases in the budget requirement are
      excessive – but not beyond 1998/99.

11.15 If the Secretary of State decides that the budget requirement of an
      authority is excessive, he has four options:

             i     He may designate the authority in-year (as was previously the sole
             option);
          ii       He may designate the authority for the following year;
             iii   He may set a notional budget requirement to be used for the
             purposes of comparisons instead of the actual requirement to decide if
             the budget requirements are excessive; or
             iv    He may designate the authority over a number of years, starting
             in-year or the following year.

11.16 The Secretary of State will take account of the increase in budget
      requirement as well as the increase in Council Tax level when determining
      if an authority is spending excessively. There is potential for formal or
      informal measures to be considered in Lewisham‟s case. Members will wish
      to consider this as part of their deliberations on this report as well as the
      issues summarised in Section 20 of this report. (This report projects an
      increase in adjusted budget requirement of £23.352m, or 6.8%).

11.17 As Members will be aware the Council was once again assessed as „good‟
      in the Audit Commission‟s 2003 CPA assessment. This previously meant
      (inter-alia) that the Council should be exempt from reserve council tax
      capping powers. However, Ministers have made it clear that the additional
      funding announced in the Pre-Budget Report amounting to £340m
      nationally and £1.434m for Lewisham is intended to ensure that


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          authorities constrain their Council Tax increase levels. Both the Deputy
          Prime Minister and the Local Government Minister have made it clear that
          their expectations are for low single figure increases. They have also made
          it clear than any increases in Council Tax which are considered to be
          “excessive” will risk Council‟s budgets being capped. The Deputy Prime
          Minister stated in December 2003 that:

            “It is my view that next year local authorities can and should deliver
            council tax increases in low single figures…however, I repeat today that
            authorities must be in no doubt that I am prepared to use my capping
            powers next year if that proves necessary.”

11.18 The Council now has complete freedom over use of income from certain
      civil penalties and is able to take advantage of the new trading powers
      enabled in the Local Government Act 2003. In addition, the Council has
      the scope to reduce discounts on second homes and remove or reduce
      discounts on vacant properties. A separate report was presented to the
      Mayor and Cabinet on 28th January on these issues.

       Freedoms
11.19 Revenue grants are now classified as Ring-fenced, Specific Formula and
      Formula Grants. Specific Formula grants are distributed outside the
      general formula but with no restrictions as to how they are spent. Specific
      grants, which were significantly increased in 2004/05, include in Education
      the Education Transitional Support Grant and Childcare Grant and in
      Personal Social Services the Access and Systems Capacity Grant.
      Government continues to pursue its policy of removing ring-fencing from
      grants – the proportion of ring-fenced grants fell from 13.3% in 2003/04
      to 11.1% in 2004/05 – with a stated target of less than 10% by 2005/06.
      (The proportion of total grants that are ring-fenced).

11.20 Quality Protects Grant has been transferred into PSS FSS control total in
      2004/05, with an adjustment to the 2003/04 baseline to reflect the
      transfer amounting to £7.235m for Lewisham. The new Safeguarding
      Children Grant, which totals £100m nationally includes £90m to be
      allocated in line with the Children‟s FSS formula. The remaining £10m is to
      be made available to authorities most affected by the “Hillingdon
      Judgement”, to cover the additional costs of supporting children under the
      provisions of the Children (Leaving Care) Act 2000 – the exact mechanism
      for distributing this element of the grant is still to be determined.

11.21 Generally the budget assumes Specific Formula Grants are allocated to the
      Directorates where the original specific grant was spent, as the budgetary
      pressures in relation to these grants still exist. The EiC Excellence Clusters
      SFG is earmarked for the schools budget, as this is required for
      passporting. It is proposed elsewhere in this report the new Safeguarding
      Children grant is allocated to SC&H to meet their pressures. The Planning
      Delivery Grant is proposed for the funding of growth but proposals around
      planning delivery are considered in this report.

       Final Settlement
11.22 The final Settlement is expected at the end of January. Final (updated)
      tax-base figures will be used in the final Settlement calculation and this
      could result in some changes in our final Formula Grant allocation.

                            12 CALCULATION OF THE COUNCIL TAX




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          Introduction
12.1      This section of the report sets out the calculation of the Council Tax for
          2004/05 based on the recommended budget. It covers the following
          areas:

                        Tax base for 2004/05
                        The projected deficit in the collection fund as at 31st March
                       2004
                       The Greater London Authority precept
                       Details of the calculation of the Band D Council Tax

12.2      If Members decide to set the budget requirement at a level other than that
          recommended, alternative calculations of the Council Tax would have to be
          made. A ready reckoner is available in Appendix B, which shows how the
          Council Tax will vary with the budget requirement.


          Tax Base for 2004/05
12.3      The Tax base is a measure of the authority‟s ability to raise revenue from
          local taxation. A proposed tax base for 2004/05 of 85,297 was considered
          by Mayor and Cabinet on 28th January for approval by the Council that
          evening.


     Estimated surplus/deficit in the Collection Fund
as at 31st March 2004
12.4      Collection Fund surpluses or deficits reflect whether the Council over or
          under achieves its collection targets. This therefore requires a calculation
          to be made of how much the Council has already received for the Council
          Tax in the current and past years but also how much of the outstanding
          debt it expects to collect.

12.5      A calculation was carried out as at 12th January 2004. This calculation
          showed that there is an estimated deficit on the Collection Fund in respect
          of Council Tax, for the years 1993/94 to 2003/04 of £404,000.

12.6      Any estimated deficit from time to time in the Collection Fund in respect of
          Council Tax is shared with precepting authorities in proportion to relative
          shares of budgeted Council Tax income in the current financial year. This
          means that £320,179 of the £404,000 deficit has to be included in the
          calculation of Lewisham‟s Council Tax. The balance will be met by the
          Greater London Authority.

12.7      The Council is still collecting small amounts of Community Charge. The
          Council also has to calculate whether there is any surplus or deficit in
          respect of Community Charge. The current calculations estimate that there
          is neither a surplus nor deficit in relation to Community Charge collection.


          Precepts
12.8      The Council Tax has to be set at a level that will not only cover the cost of
          services provided by the Council, but also precepts issued by the Greater
          London Authority. The GLA are consulting on a precept of about £251 This
          would add about £27 to the Council Tax at Band D. The GLA precept
          increase would be about 12% from 2003/04. It is not possible for the
          Council to agree a budget until the precept is known. Therefore the



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          proposals to the Council on 11th February are for consideration, subject to
          the precept (and other matters referred to earlier).


          Limitation of the Council Tax benefit
          subsidy
12.9      This was abolished in 2002/03


          Council Tax calculation
12.10 Table 12 shows the calculation of the Council Tax at Band D for 2004/05
      assuming members agree to the recommended budget of £368,010,000.

          TABLE 12: CALCULATION OF COUNCIL TAX BASED ON SPEND OF
          £368,010,000.

                                                                                        2004/05

            Budget Requirement                                                          £ 368,010,000
            Less: RSG – provisional                                                     £ 218,504,750
            Less: NNDR - provisional                                                     £ 70,907,307
            Add: Deficit in collection fund                                                 £ 320,179
            Council Tax requirement                                                     £ 78,918,122
            Divide by: Council Tax base (Band D equivalent) proposed                           85,297
            Council Tax for Lewisham Services (Band D)                                      £ 925.22
            Add: Precept demand from the GLA (consultation)*                                 £ 251.19
            Total Council Tax (Band D)                                                     £ 1176.41

12.11 The calculation of Council Tax for different Council Tax bands is shown in
      Table 13, based on the Band D Council Tax calculated in Table 12.

          TABLE 13: COUNCIL TAX FOR DIFFERENT COUNCIL TAX BANDS IN
          2004/05

             Band           Property              Fraction        Lewisham      GLA         Total
                             Value                                 Council    Precept    Council Tax
                                                                     Tax
                             £’000                                    £         £             £
                A          Up to 40                  6/9             616.81   167.46          784.27
                B            40-52                   7/9             719.61   195.37          914.98
                C            52-68                   8/9             822.41   223.28        1,045.69
                D            68-88                   9/9             925.22   251.19        1,176.41
                E           88-120                   11/9          1,130.82   307.01        1,437.83
                F          120-160                   13/9          1,336.42   362.83        1,699.25
                G          160-320                   15/9          1,542.03   418.65        1,960.68
                H          0ver 320                  18/9          1,850.43   502.38        2,352.81

          *GLA figure based on interpretation of consultation

12.12 The Council will be required to make statutory calculations under the Local
      Government Finance Act 1992. These include the calculation of gross
      expenditure, income and net expenditure and the Council Tax for each
      band. Appendix C includes the gross expenditure and income calculations
      if Members agree the budget recommended set out in this report, which
      they will eventually be asked to consider on 3 rd March.




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12.13 Appendix C also includes recommended resolutions for the Council
      meeting, based on recommendations on the 2004/05 Budget and Council
      Tax in this report.

12.14 Members may wish to consider the effect of setting an alternative budget
      requirement than is set out in this report. A ready reckoner is provided at
      Appendix B to show the effects of varying the budget requirement on
      Council Tax levels.

          Impact of Chancellor's Additional Resources to Local Authorities

12.15 There has been much coverage in the national media over recent months
      with regard to council tax levels in England & Wales. Members will be
      aware of a recent LGA proposal for central government to widen the tax
      base available to local government in order to reduce the present gearing
      effect whereby increases in a local authority's budget are amplified to a
      high factor council tax increase. Discussion of this will be covered in this
      summer's Financial Survey, 2004-9 in terms of possible effects on
      Lewisham's financial policy.

12.16 The government has recognised pressures on council tax through the
      Chancellor making £340m available to local authorities to, specifically,
      reduce tax increases. Lewisham's share of this is £1.4m.

12.17 Of course, Members' first duty is to set a prudent and balanced budget on
      officer advice. In determining the use of the additional £1.4m, the Mayor,
      and in turn Full Council, will need to ensure that if commuted to a lower
      tax increase, it is not at the expense of an otherwise sound financial plan
      for the coming year.

12.18 This year, owing to the new Prudential Regime which is predicated on local
      authorities soundly managing their revenue budgets, there is an additional
      legal requirement for the chief financial officer ('section 151 officer') to
      issue a statement on the robustness of revenue estimates and reserves
      used in the budget. The Executive Director for Resources & Deputy Chief
      Executive's statement for the Mayor & Cabinet and then Full Council is
      attached at Appendix H.

12.19 My advice is that the budget set out in this report, consistent with a 7.5%
      increase in the Lewisham council tax, is well founded in terms of budget
      estimates and the adequacy of reserves. It is not imprudent, therefore, for
      the £1.4m (so far not taken into account) to be used to reduce the tax
      increase if Members so wish. Members should note, however, that this
      adjustment appears to be once-off in nature and so will create a base
      issue to be dealt with in the 2005/6 budget round.

12.20 The Mayor has indicated to officers that he wishes to recommend to Full
      Council a tax increase of no more than 4.99% This requires resources to
      be identified of £1.975m to bridge this gap, netted down to £575k after
      allowing for the Chancellor's statement.

12.21 As said above, in considering option to identify £575k the Mayor and Full
      council will wish to determine that it is prudent to do so in terms of their
      ongoing duty to set a balanced budget. Also the Deputy Chief Executive
      must validate, under the new requirement, the robustness of these
      estimates.



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12.22 Officers have formulated two recommended proposals and one contingent
      proposal to bridge the gap of £575k:

12.22.1              that the Mayor's intention to bring forward the annual savings/cuts
                     exercise from October/ December to April/June next year, in order
                     to improve financial planning and the ability to generate cross-
                     cutting efficiency gains, will generate a once-off saving next year.
                     This is assessed as £375k from 2005/6 savings (targeted at £5m
                     via options of £6m) that may be delivered early in the second half
                     of 2004/5. Although an assumption that 7.5% of the options that
                     will be drawn up in April to June can be delivered by October
                     onwards, is at the top end of the likely yield, my advice is that this
                     is a reasonable/robust estimate. Members should note that this
                     saving appears to be once-off in nature and so will create a base
                     issue to be dealt with in the 2005/6 budget.

12.22.2              The removal of ECUs, that is essential car user allowances (£705),
                     from several hundred officers across the Council will result in a
                     base budget saving to salary budgets, that may be clawed back, of
                     up to £200k. However, this saving does require some discussion
                     with regard to whether it is appropriate within our policy framework
                     for this saving to be taken toward the council's overall budget.

12.22.3              Members are aware that my general advice is against
                     hypothecation since it limits Members' ability to judge issues and
                     priorities in the round. Over the last 5 years this advice, particularly
                     with regard to the capital programme and the use of receipts, has
                     generated sums for priority redirection that otherwise would not
                     have been available. However, when agreeing in September 2001
                     to proposals for green staff travel (that have led to the introduction
                     of £100 permits for staff and the removal of Z permits from
                     Members) the report and discussion at committee involved
                     recommendations to hypothecate new income for staff green travel
                     initiatives. As a result of this, the £60k income from staff permits is
                     being ringefenced for such initiatives rather than being offered up
                     as corporate resources.

12.22.4              The Deputy Mayor has given indications throughout the budget
                     process that all or part of the saving from the removal of ECUs
                     should be ringenced in addition to the £60k already proposed.
                     Although delegated to officers to implement the proposals, there is
                     an argument that the policy steer given at the time at committee
                     overrides more recent developments for management to rationalise
                     these payments and make savings not envisaged at the time.

12.22.5              Of course, other measures have been financed form mainstream
                     budgets to support green travel, which to some extend may be
                     considered to count as the commitment that was made. For
                     example, elsewhere on this agenda the base budget growth for
                     safer routes to schools for parents & staff (£17k) is related to this
                     policy area. Similarly, the introduction of 161 key worker travel
                     supplements (KWTSs) in SC&H has cost mainstream budgets £113k
                     and coverage for associated £100 permits some further £16k. The
                     costs of £100 permits to other directorates is an additional £8k. In
                     summary some £154k is being committed from mainstream
                     budgets to support green staff travel policy.


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12.22.6              As said above, Members may wish however to commit some of the
                     £200k saving that has been identified to increase the provision of
                     £60k for staff green travel initiatives. For example, Members may
                     take the view that although circa £154k has been committed from
                     mainstream budgets, this still leaves some £46k that is „lost‟ to this
                     policy area if the full £200k is taken toward the budget.

12.22.7              If this is the case, up to £50k could be covered by agreeing that
                     the additional income of £50k from cemeteries & crematoria that
                     has already been agreed in service terms by M&C is taken into the
                     budget as a saving. The recent „Star Chamber‟ process had
                     identified this anyway as an item that should be brought forward in
                     April for early delivery, or to be used before then in response to
                     any imbalance in the budget model. Officers‟ advice is that this is
                     the preferred saving to bring forward as a replacement from across
                     the Council. The Executive Director for Regeneration concurs that
                     this would be possible. Financial advice is that generating £200k
                     from ECU savings (£200k) and/or cemeteries & crematoria income
                     (£50k) is reasonable and robust.

12.23 Finally, Recommendation 3.14 of this report invites the Mayor to
      determine the treatment of the £1.975m resource identified in this
      section. If used to lower taxation, this will result in a Lewisham increase of
      4.99% instead of 7.50%.

12.24 It must be stressed that once-off measures (such as the £375k from early
      savings and £1.4m from the Chancellor) will/may require coverage for
      2005/6 in the base.

                        13 BUDGET STRATEGY 2004/05 TIMETABLE

13.1       As shown earlier the Council enters 2004/05 with a number of budget
          pressures that require attention, as set out in Section 9 above.

13.2      Progress has been made on improving the links between the BVPP and the
          budget process. Directorates have considered the Community Strategy in
          reviewing their budgets for identification of savings and growth proposals.
          The planning process for the BVPP will follow on from the setting of the
          budget. This will help inform the budget process for the following year.

13.3      Progress has been made in improving the Council‟s approach to joined up
          service and financial planning. Both savings and growth proposals have
          been assessed against their impact on meeting the priorities set out in the
          community strategy. This policy led approach to financial planning will
          feed through into the service planning process, the results of which will be
          published in the Best Value Performance Plan.

          Best Value Performance Reviews
13.4      Best Value reviews seek to improve service deliver by accurately aligning
          resources to key policy and service objectives. The financial element in
          each Best Value review has been strengthened. Each BV review must
          produce recommendations and an improvement plan to deliver
          demonstrable improvements in terms of a combination of cost and quality,
          and specifically the six E's of Economy, Efficiency, Effectiveness plus
          Equality, Environmental Sustainability and E Government. The outcomes




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          of Best Value will feed through into the budget planning process for
          2005/06.

          Savings 2004/05
13.5      In identifying the savings for 2004/05 members and officers considered
          these in the context of the Community Strategy, harm to key service
          objectives, performance indicator impact, equalities impact etc. This
          process will continue in future years. It is planned to start the savings
          process for 2005/06 in April 2004 which will allow for consideration,
          scrutiny and review at a time ahead of other aspects of the budget to
          avoid competing demands on the time of Members and Officers involved in
          the budget process.

          Future Growth
13.6      As set out above growth for 2004/05 has been considered in the context
          of the Community Strategy, performance indicator impact, equalities
          impact etc. Work is currently underway to develop new organisational or
          corporate priorities. These will underpin our work with partners to
          implement the broader community strategy priorities. In future years, it is
          intended that budget proposals will be presented in the context of the
          corporate priorities.

13.7      Budget proposals also need to take account of plans to improve service
          performance and move the organisation‟s CPA score up from good to
          excellent.

          Future Budget allocations.
13.8      Work has been undertaken this year in looking at growth and the
          implications for performance. This work will continue so that future
          allocations will be clearly linked to enhanced performance against which
          service management is accountable. At present we at times set service
          targets and cite the lack of budget if its not achieved (or cite meeting
          targets as a reason for overspending). This needs putting right so that the
          environment is that services have enhanced financial support, but are also
          more accountable, for improved delivery.

          Programme for Organisation Efficiency
13.9      The Council‟s annual budget process identifies proposals from services to
          make base budget reductions by directorates‟ specific proposals. In
          addition, there are a number of Council-wide projects that should facilitate
          Lewisham‟s resolve to improving organisational efficiency, leading to cost
          reductions with some achievable Council-wide savings over the medium to
          long term. The Efficiency Programme was officially launched by the
          Council in September 2003 and is being used as the main driver in making
          the Council‟s services, in terms of their design and delivery, more efficient.

13.10 The programme overall is being sponsored by the Cabinet Member for
      Resources. Officers across the Council who are responsible for the
      individual projects within the programme have developed project plans
      and have been set key milestones for each of these. A mechanism to
      measure and monitor progress is shortly to be finalised, and this progress
      will be reported on a regular basis to the Mayor‟s Management Board. It is
      intended that some of these workstreams will over time feature in future
      years‟ budget strategies. Some of the themes currently included in the
      ongoing efficiency programme are as follows:-

                          Streamlining of financial systems and processes



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                        Working smarter – Making better use of Council office
                     accommodation
                        Enhancing recruitment and retention and capacity building
                        Developing Business cases for procurement and commissioning
                        Information and communication technology
                        Achieving improved financial outcomes for Best Value Reviews
                     and Spend to Save Reviews

13.11 Some of these projects and business cases will sometimes be dependent
      on the availability of once-off resources for implementation before
      potential revenue savings can be delivered in future years' budget
      strategies.

      Timetable
13.12 Table 14 outlines an indicative timetable for the Budget process, which
      will:

          (i)        Allow the Mayor, Members and officers adequate time to consider
                     and make savings & growth proposals,
            (ii)     allow for any slippage for achieving the budget strategy; and
          (iii)      ensure the organisation has clarity about its financial prospects.

                                     TABLE 14 - INDICATIVE TIMETABLE
            Date                Activity

            April to            Initial savings target for 2005/06 set. Officers work
            July                up and scrutinise budget savings proposals.
            2004                Scrutiny by members (June). Approval by Mayor &
                                Cabinet and Council (June/July).
            June/               Revenue outturn 2003/04 reported to Mayor & Cabinet
            July 2004
                                Revenue outturn 2003/04 reviewed by PAC
            July 2004           Financial Survey reported to Mayor & Cabinet.

                                Regular monitoring reports on both revenue and capital


            Sept 2004           Financial Survey reviewed to take account of (Government)
                                Spending Review 2004. Revised report submitted to Mayor &
                                Cabinet if appropriate.


            Sept to             Officers work up and scrutinise growth proposals
            Oct 2004
            October             Regular monitoring reports on both revenue and capital
            2004

            Nov to              Series of Resource member meetings to discuss pressures
            Dec 2004            and growth issues

                                Scrutiny by PAC of proposals on pressures and growth

            Mid Late            Provisional Local Government Finance Settlement announced
            November
            2004



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            December
            2004                Regular monitoring reports on both revenue and capital



            Late                Final settlement
            January
            2005
            February            Regular monitoring reports on both revenue and capital
            2005

            February            Final budget recommendations (including growth proposals)
            2005                reviewed at PAC
                                including latest revenue monitoring position

                                Final budget recommendations (including growth proposals)
                                agreed at Mayor and Cabinet
                                including latest revenue monitoring position

                                Council agrees (or refers back) Mayor‟s proposals on budget.

                                Mayor and Cabinet considers any Council objections

            March               Budget and Council Tax for 2005/06 agreed at Full Council
            2005


          Cash limits for 2005/06 and 2006/07
13.13 The Financial Survey included an initial estimate of cash limits for years
      two and three of the strategy (2005/06 and 2006/07). These will be
      considered further for the next Financial Survey taking account of
      decisions on the 2004/05 Budget.

                         14.OTHER SERVICES CAPITAL PROGRAMME

          Asset Management Planning (AMP) Process
14.1      The 2004/5 financial year is the third year of the Single Capital Pot.

14.2      Asset Management Planning aims to channel resources into those areas
          where they will most effectively deliver the Council‟s service goals. The
          government believes that in order to do this the Council must have a
          process for linking service strategies to its capital strategy which
          determines how its capital resources are generated and allocated and its
          Asset Management Plan which determines how its assets are managed.

14.3      Previously the government‟s view on how effective these processes are
          determined the level of discretionary resources which were allocated to the
          Council, although this year that process has stopped. The assessments for
          2002 and 2003 are set out in the table below and it is pleasing to report
          the improvement to good for the assessment of the Council‟s 2003 capital
          strategy, which also scores under the Corporate performance assessment
          (CPA) framework.


          TABLE 15

                                               2002               2003


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       Asset Management                        Good               Good
       Capital Strategy                        Satisfactory       Good


14.4      The government expects that capital programmes will be derived from
          asset management plans which in turn must be prepared from the analysis
          of credible data obtained from building condition surveys. This in turn is
          expected to lead to a coherent strategy for establishing capital programme
          works, planned maintenance works and responsive repairs systems.

14.5      The emphasis is on looking at the Council‟s assets and capital resources as
          a whole and determining how best to utilise them to support service
          strategy.

Prudential Regime for Borrowing

14.6      The development of improved asset management planning that focuses on
          life cycle cost which ties in both revenue and capital costs into the decision
          making process will also be fundamental to the Council‟s ability to take
          advantage of the new prudential regime for borrowing.

14.7      A separate report on the changes in Local Government Capital Finance
          under the Prudential regime was presented to Mayor & Cabinet on 14
          January 2004 for noting.


          The Current Position for Lewisham on AMP
          Strengths
                         The Council has established an asset management plan which
                       has been assessed as being good by the government.
                       Resource allocation is now determined centrally enabling
                       allocation decisions to be made on a consistent basis.
                       The Council is continuing to commission stock condition
                       surveys that will inform future Asset Management Plans
                       The Council has commenced tendering for both annual
                       monitoring of inspections of known asbestos materials (from
                       1998 survey) of non housing stock) and for surveys of the
                       remaining non housing stock
                       The Council is implementing various initiatives to ensure
                       compliance with the current and future DDA legislation including
                       assessment on non housing stock of issues such as building
                       access and service delivery access
                       In setting the 2004/05 budget for the first time capital and
                       revenue resource allocation decisions are being taken at the
                       same time in line with service and policy priorities in a more
                       coherent and collective manner using newly developed
                       prioritisation methodologies

          Weaknesses
                 Corporate and service plans do not always contain sufficient
                 explicit service objectives to inform investment planning
                 The devolved nature of property management results in a lack
                 of standard systems for cost recording, service procurement and
                 building management. This minimises the ability to collect
                 effective information to assist in the asset management process



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                           The devolved nature of property management limits the
                          effective pooling of expertise and increases the cost and
                          complexity of managing the asset base

14.8      Officers review progress in Asset Management Planning at the Finance and
          Asset Management Group (FAMG). Core areas identified for development
          in the future include:

                        Improved use of feasibility studies
                        More robust revenue and capital cost estimates (using the
                       Council‟s construction project partners on the capital side)
                       Better project risk analysis
                       Accurate historic building maintenance cost data on a building
                       by building basis
                       Stock Condition data for all the Council‟s assets
                       Clear processes for submitting and assessing capital bids
                       (piloted successfully this year but further improvements can be
                       made for future years)
                       Reviewing delivery of property management (currently
                       underway as part of the review being led by the Head of Asset
                       Strategy)


14.9                 Prioritisation of AMP Projects
          Capital bids under the AMP category are for urgent minor improvements
          and / or planned maintenance projects that have an estimated value
          between £20K and £200K inclusive of professional fees. The 2004/5
          round of AMP bids have been evaluated and prioritised on the basis of
          elemental building condition, urgency of the works and the impact of
          building condition upon the delivery of services.

14.10 In setting the OSCP budget for 2004/05-2006/07 the base budget
      allocation of £2m per year for AMP schemes for non schools and non
      housing has been retained and rolled forward to 2006/07. In addition
      £1.2m per year of CERA is available from the schools budget to support
      these types of schemes for schools.

14.11 Bids against the £2m for non schools/non housing were initially evaluated
      and prioritised against the established criteria by the Head of Property
      Services and then endorsed by the Head of Corporate Finance and
      Property, in discussion with FAMG, who agreed the final recommended
      projects for funding out of the 2004/05 allocation.

14.12 In addition to the £2m for 2004/05 there is an AMP contingency of
      £310,833, which is the accumulated roll over from 2002/03 and 2003/4
      AMP budgets. This contingency is being held to address latent/unforeseen
      building disrepair that emerges during the 2004/5 financial year. The
      contingency fund is administered by the Head of Corporate Finance and
      Property, in consultation with FAMG, who will receive and consider urgent
      projects on an ad-hoc basis during the course of the year.

14.13 For the AMP budget for 2004/05 it is recommended that budgets are
      allocated to schemes as set out in Appendix V for non schools/non housing
      assets with a contingency budget of over £310,833 remaining available to
      deal with in year unforeseen issues that may arise.




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        Schools AMP allocations
14.14 At the time of writing this report it is not yet determined how the £1.2m
      for schools should be allocated for 2004/05 Together with a decision as to
      the allocation of the PSA capital reward grant funds of £226k in each of
      the years 2004/05 and 2005/06 (reference section 9 of this report), this
      will be reported back early in 2004/05 as part of the regular OSCP
      monitoring reports. There are various demands on these resources
      including: undertaking access audits to schools to meet the requirements
      of the Disability Discrimination Act (DDA) legislation, continuation of
      condition survey/asbestos survey works in schools and the costs of
      construction project management and strategic advice from external
      consultants on Education & Culture „s capital schemes.

      OSCP 2003/04-2005/06 Outturn Position
14.15 The latest OSCP monitoring report (Mayor & Cabinet 14 January 2004)
      informed Members that the OSCP is currently under programmed by over
      £5.5m over the three year programme with £2.8m of the Investment in
      Services budget remaining to be allocated.

14.16 Based on the assumptions contained in that report, budgets have been
      rolled forward to create a new rolling three year capital programme
      covering the years 2004/05 to 2006/07.

14.17 In rolling the capital budgets forward allowances have been made for the
      latest forecast resource positions on capital receipts, for additional
      resources forecast to be available in 2006/07 and the decisions included
      earlier in Section 9 of this report of increasing CERA from £2m per annum
      to £3.25m per annum for each of the next three years, 2004/05, 2005/06
      and 2006/07 and the additional PSA capital resources totalling £624k for
      each of 2004/05 and 2005/06 for non schools and the £226k for each of
      the same two years for schools. At this stage it is also assumed that £8m
      of accumulated BCA for the new school provision, as indicated by the
      DfES, is notionally allocated to that scheme and not available to allocate to
      other schemes as part of this process. The under programming position
      has therefore changed to become £10.767m. This report now sets out
      options for allocating these additional resources together with the
      remaining £2.8m Investment in Services budget held over from 2003/04.

14.18 The draft budget position is set out in Table 16 below. This is the position
      prior to resource allocation decisions that are being recommended to this
      committee.

          TABLE 16

         Budget to                                                                   Future
         Resources                       2004/05            2005/06      2006/07     years     Total
                                         £‟000s             £‟000s       £‟000s      £‟000s    £‟000s
         Supported Capital                   8,971              2,000        2,000         0      12,971
         expenditure
         Prudential                                    0            0           0         0           0
         Borrowing
         Capital receipts                      5,088             3,800           0    2,000       10,888
         Capital Grants                       15,105             5,946       4,405                25,456
         Revenue                               5,481             4,462       4,450        0       14,393
         Total resources                      34,645            16,208      10,855    2,000       63,708
         Less Budgeted                      (27,193)          (14,143)    (11,605)        0     (52,941)
         expenditure *


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         (Over)/under                           7,452             2,065   (750)   2,000   10,767
         programming

          * the expenditure figure assumes full spend of the £2.8m investment
budget

      Investment in Services pot
14.19 As reported earlier £2.8m remains to be allocated from this budget (in the
      table above it assumed as budgeted expenditure) as reported in the last
      monitoring report and this can now be added to the £10.767m available
      through the level of underprogramming. The total resources available for
      allocation are now £13.567m.

      SC&H Occupational Therapy and sensory services
14.20 Provision of adaptations in LBL housing to enable people who have a
      disability to reach and use basic essential facilities at home. Adaptations
      can promote independence, reduce risk, support carers, and reduce
      domiciliary care needs and associated costs and can also assist in hospital
      discharge. Agreed capitalisation of £60k for three years totalling £180k
      from revenue budgets (as per the savings report to M&C on 14 January).

      Highways
14.21 Also as part of the revenue budget savings report, it was agreed that
      £50k of works currently being undertaken in Highways and paid for in
      revenue should be treated more appropriately as capital and so a £150k
      allocation from capital is required for the next three years to meet this
      requirement.

      Capital Bids assessment and evaluation
14.22 Officers across the Council have been working on capital bids for resources
      over the next three years of the programme.

14.23 All of these bids have been assessed in a similar process to that of
      revenue including cross directorate officer group of policy and resource
      leads, to evaluate revenue implications, evaluate risk and reviewing likely
      project timescales and funding requirements. The process on assessing
      capital bids then involved Resource meetings with the Cabinet member for
      Resources and then Star Chamber meetings with the Mayor.

14.24 For those bids involving a material level of construction and building
      works, our construction project partners, MACE were asked to review them
      to gain some assurance as to the adequacy of the cost estimates and
      associated time plans for delivery. The bids for Mulberry, New Woodlands,
      Moonshot and Mornington centre relocation have been reviewed by MACE
      and the first three bids have been revised upwards to take into account
      their observations and comments.

14.25 In total 36 bids were received as part of the process with 5 bids being
      withdrawn.

14.26 The bids now being recommended for funding for inclusion in the OSCP for
      2004/05 – 2006/07 are as follows and in recommending their inclusion,
      the Executive Director for Resources & Deputy Chief Executive has
      satisfied himself that each of the bids are prudent, affordable and
      sustainable.




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14.27 Expansion of New Woodlands EBD Primary school and Closure of
      Anerley EBD secondary school (Education & Culture Bid no. 16 for
      £3.505m)
       Closure of Anerley and the relocation of KS3 facility to New Woodlands
       was a recommendation arising from the Best Value Review. The project
       is the expansion of New Woodlands primary school to include the
       proposed new KS3 facility on the same site. The bid was submitted to
       the DfeS in 2003 for targetted funding but unfortunately was not
       successful. The capital receipt arising from the disposal of Anerley school
       is now assumed in the 3 year programme.


          The bid is linked to a number of associated staff movements out of New
          woodlands and into Bromley Road and the new Children and Young
          Persons Centre (see bid 18 below).

          The bid has been reviewed by our construction project management
          partners and as a result the original bid of £2.875m has been increased to
          £3.505m, including a £400k contingency. Mace have identified that the
          current proposals seem to have generous room size allocations and
          officers in E&C confirm no revenue affordability issues associated with this
          scheme.
14.28 Children and Young People Centre (Joint working with Health)
      (Education & Culture - Bid no. 18 for £1.3m)
       The Children Centre is a major plank of the Joint Strategic Plan for
       Children and Young People and forms part of the integration for
       modernisation of Children‟s Services. It creates a firm foundation for the
       development of integrated services and puts Lewisham at the forefront of
       the national policy on Children and Young People‟s Services. The centre
       (on the site of the Old Prendergast school) will offer an integrated, child
       focused, specialist service for children and their families with special
       health, education and social care needs. The Primary Care Trust (PCT)
       own the freehold of the site and the costs of the scheme in total is
       estimated at £10m with the contribution required from Lewisham Council
       being estimated at £1.3m based on a template of space required for SEN
       (relocating from New Woodlands) and the disabled social worker team
       (relocating from Bromley Road).
          The PCT have identified revenue funding shortfalls of £182k. Lewisham‟s
          revenue contribution is expected to be at the current level of LMS budgets
          and SC&H budgets. It is recommended that the capital contribution to this
          scheme is capped at £1.3m.

14.29 Moonshot (Education & Culture - Bid no. 17 for £2.445m)

This project is focussed on bringing an existing
      derelict asset (Pagnell
Street Centre in New Cross) back into working use.
      The proposed future use of the building will be
      shared between Surestart, Deptford Green
      School, and Irie Dance Theatre.
          The project will provide a new entrance foyer and café, a single storey
          extension to accommodate Surestart, along with a nursery for 25 children,
          and ICT, art and drama and sports facilities for Deptford Green school.



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          There is a lost opportunity cost (capital receipt) of sale of this valuable
          community site if developed. The plans for the renovation were not
          mentioned in the Directorate Property Plan (DPP) and hence the Council‟s
          Asset Management Strategy. However, this project involves partnership
          working and will bring a redundant asset back into use which offsets the
          potential for sale.

          This bid has been reviewed by our construction partners MACE and the
          original bid of £2.7m has been increased to £3.195m based on additional
          works identified for a roof over the new dance studio, a substation and a
          client contingency budget (for uncosted items in the cost estimate) of
          £360k.

          Match funding contributions from Deptford Green (£250k) and Surestart
          (£500k) have been proposed with the contribution from Surestart
          dependent on being in the building by mid Autumn 2004. Lewisham's
          contribution is therefore reduced to £2.445m.

          Revenue affordability and sustainability have still to be fully demonstrated
          and will require careful monitoring by Education & Culture after the site
          opens and if the usage and occupancy of the site changes over time.

14.30 Skate Park facilities for the Youth (Education & Culture – Bid no.
      28 for £166k)

          Creation of possibly one or maybe two areas for young people in the
          Borough with the option of securing external funding to provide a third in
          the North of the borough. A feasibility study has been undertaken and the
          findings reported in December.

14.31 Mornington Centre – Reprovision (Education & Culture - Bid no, 20
      for £2.582m)

          The Mornington centre CEL unit was identified as a decanting location for
          the Schools PFI in June 2001 with an estimated date for requirement of
          the site in July 2004. The Granville Park facility was identified as a
          preferred site to carry the main functions of the teaching role. However,
          there were significant building works required to the existing facilities due
          to poor accommodation layout and the high levels of asbestos on the site.

          A number of options were considered whether to provide a traditional,
          modular or a mix of both as the build solution within the constraints of
          both the site and planning requirements in terms of height, parking and
          being located within a conservation area. The limitations for transfer to
          the Granville Park site will establish a need to provide for various parts of
          the service at other locations. These include HQ staff, workshops and
          other facilities where there is a need for larger units that are in very short
          supply within the property portfolio.

          It is also proposed to meet the costs of refurbishment and decanting office
          staff and craft related activities to alternative locations at Drake House,
          Deptford and Louise House, Forest Hill.

          The service has been the subject of a Best Value Review and the provision
          of facilities at Granville Park would allow for more creative and innovative
          use of assets.




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14.32 Blackheath Environmental Improvements (Regeneration - Bid no
      6. for £171k)
          The overall project of £2m involves three partners - Lewisham and
          Greenwich Councils and English Heritage. Its purpose is to develop a co-
          ordinated vision and management approach for the Heath's future.
          Landscape architects have prepared the strategy and public consultation
          has been sought on all elements. This scheme was reported to Mayor &
          Cabinet earlier in the year and it is recommended that phase 1 of the
          works of £171k is agreed at this stage.


14.33 Tellytalk (Resources – Bid no. 1 for £305k)

            The current version of TellyTalk is old and needs replacing if it is to
            continue to feature as one of the Council‟s customer service channels.
            The Technology Store solution, developed using our requirements, is
            unique and will put TellyTalk back to the fore front in video conferencing
            technology. This solution meets many of the Councils‟ corporate
            objectives and the proposal is to commit capital to fund the development
            of TellyTalk. The revenue implications can be contained in Public Service
            budgets from 2004/05 ongoing. This bid has been reviewed by the ICT
            strategic manager for its fit with the overall ICT strategy for the council.

14.34 Challenging Needs Service (CNS) – Renovation and extension
      works at Mulberry day centre (Social Care & Health - Bid no. 7 for
      £1.1m)

            The scheme is to provide dedicated space for the CNS that is safe for
            users, staff and other users and provides increased capacity for the
            forecast growth in need. The Challenging Needs Service supports people
            who have Learning Disabilities and/or Autism and that present with
            behaviours that challenge mainstream services. They work intensively
            1:1 with clients to help them manage anti-social behaviours. The service
            helps prevent the breakdown of care arrangements, eg where the client
            lives with parents, and integration into mainstream services.

            This bid is for renovations and an extension to the Mulberry Resource
            Centre to accommodate the service.The cost plan is based on a sketch
            plan design and client brief that could change significantly once detailed
            design commences. The bid has been increased to 2004 prices as original
            estimates were based on 2002 figures. Due to omissions a client budget
            of £370k has been incorporated into the budget and hence the bid has
            increased from the original £730k to £1.1m.
          This bid is a spend to save type scheme as if the extension and
          refurbishment is not progressed clients will need to be placed out of
          borough. If forecasts of usage are correct over the next four years this
          could result in additional revenue costs to the service of £1.8m. Allied to
          this service improvement the site of 58 Westbourne Drive has been
          declared surplus and could generate a capital receipt for the OSCP in
          future years

14.35 New School Preparatory Works (Education & Culture - Bid no. 26
      for £2.1m)
          This bid is in connection with preparatory costs for the New school which
          are currently estimated at £2.1m.




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14.36 Youth facility for Bellingham (Education & Culture bid no.36 for
      £450k)

          To provide a dedicated space for young people as part of the Becorp
          leisure development in Bellingham. A youth club used to be housed in
          Athelney school but had to be closed owing to space difficulties.
14.37 Mortuary Relocation (Regeneration - Bid no. 31 for £307k)

          The relocation is linked to the site assembly of the new school. Lewisham
          intend to combine their facility with Lewisham Hospital's Mortuary.
          Regeneration have identified this scheme as a short term key issue in their
          Asset Management Plan. The pre-tender estimate of the scheme is £307k.

14.38 Registry Relocation (Regeneration - Bid no. 35 for an estimated
      £600k)

          Lewisham are in negotiations with the Hospital to sell the land on which
          the Registry is currently sited. This sale will assist the Hospital with its
          strategic plans. A new site will therefore be required to house the
          Registrar Service. Feasibility studies are currently underway and
          information will become available over the next few weeks as to options
          and estimated costs.

          This scheme is mentioned as a medium term key issue arising in the
          Regeneration Asset Management Plan for 2005/08.
14.39 Electronic Social Care Records (ESCR) Project (Social Care &
      Health Bid no. 11 for £180k)
          The ESCR project aims to create an electronic version of the client case
          file. The AMP recognises the benefits of the ESCR pilot and has included
          this as an area that needs to be addressed. The bid is comprehensive but
          is heavily reliant on certain aspects of ICT infrastructure being in place.
          Provision for hardware or storage and the network upgrade identified as
          high risk are currently in the ICT work plan for 2004/05.

          The project has four phases. Phases I & II have been funded from
          Department of Health funding (£330k). The 3rd phase of £180k is this bid.
          The final phase for roll-out has not been submitted and is estimated at
          £671k. It is not clear whether funding from the Department of Health is
          available for this or the final phase and this is currently being pursued by
          officers.

14.40 Art House (Education & Culture - Bid no. 12 for £150k)

          Repairs to the Grade II listed building known as the Art House that
          accommodates 58 artists in Deptford. Works include emergency health &
          safety works including electrics, and repair to dangerous plasterwork.

          There is a potential opportunity for seeking partners. Work is being carried
          out to work up four options ranging from retention of the building to
          externalisation (keeping artists workshops). It is unlikely that the building
          will have any substantial value in the marketplace. The costs involved in
          renovation could spiral.
            The latest estimate of works is £150k, arising from a defects report in




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            October 2001. Due to the nature of the bid and it being under £200k, it
            is being recommended for a budget allocation under the Asset
            management planning 2004/05 budget.

          Bids being recommended under Prudential Borrowing regime

14.41The following bids are now being recommended for resources under the
      Prudential regime for borrowing over the next few years. However further
      work is underway with officers in corporate finance and Regeneration to
      assess the revenue budgets required to support both a) differing levels of
      investment in Highways as part of the Best Value review options analysis,
      and b) in Vehicles. The Executive Director for Resources & Deputy Chief
      Executive will have to satisfy himself that both business cases are prudent,
      affordable and sustainable before committing the authority to any level of
      unsupported borrowing. To that effect, therefore, it is recommended that
      Mayor & Cabinet delegate to the Executive Director for Resources &
      Deputy Chief Executive the power to agree the business cases in
      accordance with the framework outlined above and to report back to M&C
      as part of the OSCP monitoring reports when done so.

14.42 Highways Schemes (Regeneration Bid no. 29 for £9m)
       There is a continuing urgent need to address the condition of the
       Council‟s transport infrastructure including roads, footways, drainage,
       traffic schemes and street lighting. The estimate of the backlog for
       investment is an estimated £50m although further condition survey work
       is underway which will inform future levels of investment need.

            A £9m highways and footways programme over the next 3 years is being
            recommended as part of the Best value review findings as the preferred
            option for investment. It is recommended that this can be funded
            through Prudential on the back of revenue pump- priming (to be funded
            from corporate provisions on a spend to save basis) and ultimate
            insurance savings from an improved inspection regime and earlier
            repudiation of insurance claims. Together with the revenue growth being
            recommended in this area, this will enable the service to deal with both
            short term repairs and maintenance as well as a sustainable planned
            maintenance and reconstruction programme. Procuring a programme of
            works of this size over 3 years will ensure improved value for money for
            the works to be undertaken.

            It is recommended that the Executive Director for Regeneration reports
            back early in 2004/05 on the proposed programme of works when
            details have been worked up.

14.43 Vehicle Replacement programme (Regeneration Bid no. 19 & 24
      for £2m)
          Bid relates to £1.0m of vehicles in phase I for fleet replacement for
          services for housing repairs, passenger services, and environmental
          services. Phase II is a bid of £1.4m relates to the fleet for refuse
          collection, housing repairs, passenger services and lighting services.
          Members are aware of the need to replace its vehicles and information
          from Regeneration suggests a need to invest of the order of £2.4m. As
          this bid is about replacing vehicles and most of the vehicles used in these
          service areas are already leased and maintained, revenue budgets exist to
          fund the revenue costs. Hence these bids have been assessed under the
          Prudential regime and it is recommended that £2m is planned for spend



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          over the next three years on vehicle replacement. If the replacement is
          of a vehicle that was originally bought (some 8+ years ago) then
          Regeneration would have to find new revenue budgets to support the
          borrowing, on the basis that no leasing/financing budget exists for this at
          present.

          Asset Strategy project
          It is assumed that the Asset strategy project will be a major scheme
          undertaken through the Prudential regime in future years.
          The following bids are not recommended for OSCP funding at this
          stage:-

14.44 CCTV Digitalisation (Social Care & Health - Bid no. 21 for £1.68m)

          This bid is made up of three parts:-

          1) to ensure that the CCTV is operational if there is a power cut, the
             installation of an Uninterruptable Power Supply for £290k

          2) additionally digital storage is proposed to complement the current
             analogue data recording system with costs of £810k.

          3) furthermore a capacity to provide rapid deployment cameras has been
             bid for with associated costs of £568k.

          The Mayor has signposted that although it is not possible to fund CCTV
          improvements on this occasion, this bid will be the first call as and when
          additional OSCP funds become available.
14.45 Hither Green school (Education & Culture – bid no. 25 for £605k)

          M&C agreed to additional funding for the Hither Green school expansion
          project in October 2003. Further condition and suitability works including
          lighting, internal decorations and IT upgrades and the installation of a lift
          for wheelchair access were not given funding at that time. This bid
          totalled £605k for these works.

14.46 Fairlawn Nursery (Education & Culture – bid no.23 for £1.8m)

          A range of options have been put forward including a new build option.
          The building is in a very poor state and has serious H&S and DDA issues.
          Although not recommended it is anticipated that some of the urgent H&S
          works can be carried out under the schools Asset management planning
          (AMP) programme of works.

14.47 Leemore Centre (Social care & Health – bid no. 9 for £1m)

          This bid is for the extension of the Intensive support service for Adults
          with complex and multiple disabilities based at Leemore centre. This bid is
          at a very early stage and will require a feasibility study to be undertaken
          for more detailed workings before being considered in the next bidding
          round.

14.48 Town Centre Enabling works (Regeneration – bid no. 27 for up to
      £3.5m) (refer to Section 15 Housing Capital Programme for proposed
      treatment of spend and proposed re-imbursement to HIP from OSCP of
      part of the costs)



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14.49 REVISED RESOURCE POSITION AND BUDGET ALLOCATION

            Should the recommendations contained in this report in paragraphs
            14.27-14.39 be approved, the resource position becomes as follows:-

          Resources                                                         £13.567m

          Less:
          Resource Allocations

          Occupational Therapy – trfr from revenue                (0.180)
          Highways – trfr from revenue                            (0.150)

          Moonshot                                                (2.450)
          Mornington centre - reprovision                         (2.582)
          New Woodlands                                           (3.505)
          Children & Young People Centre                          (1.300)
          Skate Park facilities                                   (0.166)
          Youth facility for Bellingham                           (0.450)

          Electronic Social Care records                          (0.180)
          Mulberry Day Centre - renovation                        (1.100)
          and refurbishment

          Blackheath – the next 50 yrs                            (0.171)
          Relocating of Registry service                          (0.600)
          Mortuary relocation                                     (0.307)

          Tellytalk upgrade & development                         (0.305)

          Preparatory costs for New School                        (2.100)

          Revised Resources (Overprogramming level)                         £1.97m

14.50 At present it is proposed to over-programme OSCP by an estimated
      £1.9m. This includes site assembly for the new school which may
      conceivably be funded by DfES when final projections are submitted. At
      present there is a further estimated gap on the project that requires a bid
      to DfES in any event.

14.51 A level of overprogramming of this size (£1.9m on a total 3 year
      programme of around £75m) is not unreasonable. It is, however,
      recommended that for both OSCP and HIP, the Executive Director for
      Resources & Deputy Chief Executive agrees a limit for each capital
      programme, for which the level of overprogramming is required to be
      maintained within. For the purposes of the current programme, it is
      recommended the limits are as follows:-

                     OSCP Overprogramming limit of 3% or £5m over 3 year
                     programme
                     HIP Overprogramming limit of 30% or £26m over 3 year
                     programme

14.52 Each of the above recommended bids has been profiled for spend over the
      next three years and together with the recommendations in this report re




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          the level of Prudential borrowing over the next three years, the revised
          OSCP position is as below.

          TABLE 17

          Revised Resource and budgetted expenditure position if the
          recommendations in this report are approved

Budget to Resources                                                                     Future
                                         2004/05            2005/06         2006/07     years      Total
                                         £‟000s             £‟000s          £‟000s      £‟000s     £‟000s
Supported Capital                            8,971              2,000           2,000         0       12,971
expenditure
Prudential Borrowing                           4,000             4,000          3,000          0      11,000
Capital receipts                               5,088             3,800              0      2,000      10,888
Capital Grants                                15,105             5,946          4,405          0      25,456
Revenue                                        5,481             4,462          4,450          0      14,493
Total resources                               38,645            20,208         13,855      2,000      74,708
Less Budgetted                              (39,514)          (22,453)       (14,715)          0    (76,682)
expenditure
(Over)/under                                    (869)             (2,245)       (860)      2,000     (1,974)
programming


14.53 The core OSCP and Prudential resource allocations can be summarised as
      follows across the directorates:

          TABLE 18

                                      E&C             Regeneration                 SC&H      Resources
                                        £k                      £k                    £k            £k
        Resource                    12,548                  12,078                 1,280           305
        allocations
        %                    47.9%                46.0%                     4.9%            1.2%

14.54 Prudential Indicators

          The following Prudential Indicators relate to the Other Services and
          Housing Capital Programme and must be reported to Full Council as part
          of the Prudential Regime.

          The first indicator sets out the Council's total capital programme split
          between the General Fund and Housing.




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          TABLE 19

       Capital
     Expenditure
                                   2002/03            2003/04       2004/05     2005/06    2006/07
                                     £000s              £000s         £000s       £000s      £000s
                                     Actual           Estimate      Estimate    Estimate   Estimate

Social Services
                                         2,784              3,643      2,412         60         60
Resources
                                         1,495              2,849      1,491        500           -
Education
                                       17,726             24,840      23,696       6,747      1,200
Regeneration
                                         8,025            14,448       9,898       9,146      7,455
Corporate
                                                -           3,358      2,017       6,000      6,000
Housing GF
                                         5,767            21,572      22,305      16,669     13,018
Total non-HRA
                                       35,797             70,710      61,819      39,122     27,733
HRA
                                       40,704             46,101      33,610      32,491     21,691
Total
                                      76,501           116,811       95,429      71,613     49,424

          The second indicator shows the effect of unsupported borrowing (i.e.
          borrowing not funded by revenue support for debt by government) on the
          Council Tax and Housing rent.

          TABLE 20

      Impact of Capital Expenditure Decisions
(a) for the Band D Council Tax
                                          2004/05                              2005/06     2006/07
                                            £4.97                                £4.97       £3.73
(b) for average weekly housing rents
                                          2004/05                              2005/06     2006/07
                                            £0.00                                £0.00       £0.00


          Further indicators are laid out in the Treasury Strategy Report.




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                               15 HOUSING CAPITAL PROGRAMME

          Summary
15.1      This section outlines the resources expected to be available for capital
          expenditure on housing in 2004/5, 2005/6 and 2006/7. It proposes the
          programme for next year within a framework of the Council‟s overall
          priorities for regeneration recognising that we aim to make Lewisham the
          best place in London to live, work and learn.

          Policy Context
          Decent Homes Standard
15.2      The 'Sustainable Communities Plan 'Building for the Future' published by
          the Office of the Deputy Prime Minister (ODPM) in February 2003, set out
          an ambitious programme for local authorities to drive forward thriving and
          sustainable communities. It sets a framework for the long-term task of
          regenerating deprived areas, to produce a 'step change' in housing supply,
          improve conditions for private tenants, and provide a range of investment
          options to deliver decent homes, in recognition that 'A decent home is at
          the heart of a sustainable community'. Changes to the methods of
          housing policy and finance are also set out leading to a more regional and
          sub regional way of working. The plan recognises the strengths of the
          Neighbourhood Renewal approach to regeneration and the emphasis is
          firmly placed on the local provision of public services.

15.3      Critically for local authorities the Communities Plan placed the Decent
          Homes Standard Targets firmly in the forefront of national priorities and
          outlined improved delivery mechanisms for local authorities to achieve
          them.

15.4      The Decent Homes Standard is a commitment to bring all social housing
          up to a decent condition by 2010. The number of households living in non-
          decent conditions must be reduced by a third by 2004 and a half by 2005.
          According to ODPM guidelines, a decent home must meet the current
          statutory minimum standard for housing, be in a reasonable state of
          repair, have reasonably modern facilities and services and provide a
          reasonable degree of thermal comfort.

15.5      In order to meet the Decent Homes Standard the Government has
          specified that local authorities are to carry out a stock condition survey
          and complete an options appraisal to investigate the investment options
          that fit best for each area. Lewisham‟s approach to meeting the Decent
          Homes Standard was outlined in The Way Forward report, agreed by
          Mayor and Cabinet on the 17 September 2003. This report outlined our
          strategy to meeting the decent homes target through:

                          The Capital Programme
                          Major Regeneration Schemes
                          The Brockley PFI

15.6      For the remaining 'non-decent' stock we are pursuing a range of housing
          investment options set out by the ODPM in the 'Communities Plan' and our
          local housing policy through:

                          An Arms Length Management Organisation (ALMO)
                          A stock transfer
                          A Private Finance Initiative (PFI).



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          Local Policy context
15.7      In 2000 The Council set up an independent Housing Commission to look at
          fresh approaches and to explore ways to increase investment, quality and
          choice in housing. Following extensive consultation the Council published a
          Housing Commission Action Plan called “Building Successful Communities”
          in October 2000. The findings of the Housing Commission forms the basis
          of the Council‟s 10-year investment and management strategy. The
          Commission made key recommendations for the future of housing
          management and investment within the borough. It stated that:

          “It is crucial that Lewisham gives much more attention to its strategic role
          to promote and achieve improvements in the quality of housing…the
          demands placed on the local authority by managing such a vast stock of
          housing risk undermining this strategic role.”

          “The Commission therefore sets out a vision for the borough as a „skilful
          orchestrator‟ of …housing services rather than that of a direct provider.”

15.8      The Housing Commission addressed the future of Housing management
          and investment in Lewisham and we committed ourselves to exploring a
          range of options to improve the quality of the boroughs housing and
          housing services. As the Government has introduced the Decent Homes
          Standard, the natural delivery mechanism for Lewisham is to utilise its
          existing housing policy and explore the agreed options.

15.9      Building on the approach taken by the Housing Commission our housing
          strategy is fully in line with current government policy outlined in the
          Communities Plan and sets an ambitious framework for both investment
          and ongoing management. Recommendations set out by the Housing
          Commission for our housing investment and management options are
          proposed as the way forward for all local authorities in meeting the Decent
          Homes Standard. Furthermore, our policy corresponds with the
          government approach to deliver decent homes within the context of
          neighbourhood renewal, working in partnership with key stakeholders and
          ensuring full resident engagement.

15.10 Lewisham commissioned a stock condition survey in 2001 to determine
      the percentage of non-decent Council homes in the borough. The survey
      revealed that the majority of the stock failed to meet the decent homes
      standard, and at April 2003 it was estimated that over 17,000 homes (61
      per cent) of our stock was non-decent. It is now believed the sample was
      too small given the diversity of our stock and a further stock condition
      survey is currently underway to supplement the original survey findings, it
      is anticipated that the survey overestimated the number of non-decent
      homes.

15.11 Our Capital Programme continues to play a crucial role in improving our
      housing stock. The priority schemes list drawn up annually enables us to
      maximise the number of non-decent properties brought up to the Decent
      Homes Standard.

      New financial arrangements under the Local Government Act 2003
15.12 Fundamental changes to the allocation of mainstream housing capital
      funds have been introduced, applicable from 2004/05, following the
      changes to Local Government finance under the Government Act 2003 and




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          the first under the new regional housing arrangements established as part
          of the Sustainable Communities plan.

15.13 Under the Local Government Act 2003, credit approvals will be abolished
      and a new prudential capital finance system will be introduced from 1 April
      2004.

15.14 From 2004/05 Government support for capital investment will be
      described as either Supported Capital Expenditure (Revenue), known as
      SCE(R), or Supported Capital Expenditure (Capital Grant), known as
      SCE(C). SCE can be further classified as either single pot SCE(R)/SCE(C)
      or ring-fenced SCE(R)/SCE(C).

15.15 Previously, credit approvals from central government set the limit of a
      local authority‟s long-term borrowing, and attracted Revenue Support
      Grant (RSG) or Housing Revenue Account Subsidy (HRAS) towards the
      financing costs of loans (interest payments and provisions for the
      repayment of principal). Under the new system, unless, exceptionally, a
      national limit is imposed, a local authority will be free to make its own
      borrowing decisions according to what it can afford. However, central
      government support for borrowing through RSG/HRAS will continue to be
      given on the basis of a named amount of capital expenditure, which the
      borrowing will support.

15.16 The local authority will take the totality of Government support, both
      SCE(R) and SCE(C), into account in setting its prudential limits for the
      forthcoming financial year.

      New Regional housing arrangements
15.17 As set out in the Sustainable Communities plan Regional Housing Boards
      (RHBs) have been established in each region to make recommendations to
      Ministers on how housing investment resources (Regional Housing Pots)
      should be allocated to address regional housing priorities.

15.18 In London, the priorities are set out in the London Housing Strategy 2003,
      which was prepared by the London Housing Board in consultation with
      local authorities and other stakeholders in the region. The new
      arrangements cover the housing funds allocated to both local authorities
      (apart from the Major Repairs Allowance, support for Disabled Facilities
      Grants and Homelessness funding) and housing associations. The RHBs
      make recommendations on the split of funding between local authorities
      and housing associations, where the fund should be allocated within the
      region and the broad, activities which it should support, e.g. provision of
      new affordable, housing elements of area regeneration.

15.19 The agreed investment priorities for London are as follows;

                        to increase the supply of affordable housing, including homes
                       for key workers.
                       to reduce homelessness and the use of inappropriate
                       temporary accommodation.
                       to bring social housing up to Decent Homes Standard.
                       to modernise the private rented sector and help more people in
                       private housing have decent homes, particularly low
                       income/vulnerable homeowners and tenants and older people.




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15.20 In order to avoid major disruptions in existing programme RHBs were
      required, in drawing up their recommendations, to allocate a formula-
      based minimum share of resources to each authority and to provide for all
      housing association schemes already approved by the Housing
      Corporation.

15.21 The RHB's recommendations on allocations for 2004/05 and 2005/06 were
      submitted to ODPM Ministers at the end of July 03. These included a
      recommendation that 70% of the local authority component of the London
      region housing pot for 2004/5 and 2005/6 should be allocated to boroughs
      on a formulaic Generalised Needs Index (GNI) basis but adjusted so that
      no London borough receives a reduction in its allocation of more than 30%
      in each of the two years compared with 2003/4. The Board's
      recommendations were accepted subject to an element of the allocation to
      the Housing Corporation for new supply of social rented homes being re-
      directed to key worker housing to meet the Government's commitment to
      spend £1 billion on key worker housing over the three years 2003/4 to
      2005/6.

15.22 In line with the Regional Housing Strategies, the South East London Sub-
      regional Housing Group (with Bexley, Bromley, Greenwich & Southwark)
      will work in partnership to identify housing need and then obtain funding
      from the Regional Housing Board. These changes indicate that local
      authorities are likely to rely more heavily on RSLs for delivery of large
      scale regeneration schemes and that budget allocations for refurbishment
      and new build of properties will be increasingly dependent on regional and
      sub regional priorities. So receiving allocations (outside use of the 3
      options) for achieving the Decent Homes Standard in Lewisham may have
      to be balanced with the needs of boroughs in our regional and sub -
      regional area.

15.23 The Communities Plan also announced the end of the LASHG, which is
      used to fund major regeneration projects. Transitional arrangements have
      been made, but funding mechanisms for later phases of existing schemes
      across the borough dependent on LASHG are as of yet uncertain.

      Anticipated Resources for 2004/5, 2005/6 and 2006/7
15.24 On 6th January 2004 the Government Office for London (GOL) announced
      Lewisham‟s allocation for 2004/5. The allocation is for a total of
      £7,111,000 made up of £6,805,850 single pot for housing investment and
      £305,150 supported capital expenditure (SCE) for support for private
      sector renewal support grant. Table 21 below shows the anticipated
      resources for 2004/5, 2005/6 and 2006/7 a definition of each element is
      given in paragraphs 15.27 to 15.44 below and a more detailed breakdown
      in appendix II.

15.25 It should be noted that this represents a significant reduction from last
      year following the ODPM‟s acceptance of the RHB's recommendations on
      allocations for 2004/05 and 2005/06.

15.26 It is possible that additional resources will be issued by the ODPM office at
      a later date. However for the purposes of this report this has not been
      taken into account. If any additional resources are issued at a later date
      then officers will report back to Mayor and Cabinet.

          TABLE 21




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            Anticipated resources                                 2004/05    2005/06    2006/07
            Annual Capital Guideline (ACG)                          £6.806     £7.328     £0
            Disabled Facilities Grant (DFG) *                       £0.300     £0.300     £0.300
            Capital Receipts generated by                          £18.000     £8.000     £6.000
            Right to Buy Sales *
            Recycled Capital Receipts from                          £7.288     £8.086     £6.159
            2003/04
            Aids and Adaptations (resources                        -£0.350    -£0.350    -£0.350
            transfer)
            Enabling works to Lewisham Town                        -£3.500     £0         £0
            Centre (resource transfer)
            Major Repairs Allowance (MRA)*                         £21.337    £21.100    £21.100
            Private Sector Renewal Support                          £0.305     £0         £0
            Grant
            Single Regeneration Scheme (SRB)                        £4.229     £3.196     £0
            Grant
            Capital Expenditure from Revenue                        £1.500     £1.500     £1.500
            Accounts (CERA)
            Sub Total                                              £55.915    £49.160   £34.709

            Over-programming                                       £11.306     £9.730     £6.815

           Anticipated Programme                                   £67.220    £58.890   £41.524
          * Estimated


          Definitions of Funding Categories

      Annual Capital Grant (ACG)
15.27 This forms the bulk of the HIP allocation and is in effect a borrowing
      approval.

       Disabled Facility Grant (DFG)
15.28 This is exchequer support to the private sector for renovation grants for
      the disabled.

      Capital Receipts generated by Right to Buy Sales (RTB)
15.29 This is the useable part of the estimated capital receipts from right to buy
      sales. Any variation will be reported through the quarterly position
      statements.

      Recycled Capital Receipts from 2003/04
15.30 It is current policy for capital receipts from regeneration schemes to be
      applied to the Other Services Capital Programme (OSCP). However On 19
      December 2001 Executive Committee agreed to the recommendations of
      the report entitled ‟Leaseholder/Freeholder buy backs‟ that an exception to
      this policy be introduced and receipts from 2001/2002 and 2002/2003
      could be recycled and used to support schemes in the following year‟s
      housing capital programme. This was again agreed last financial year by
      Mayor and Cabinet and costs incurred in 2003/04 are estimated to be
      £7.288m. Therefore resources amounting to the same amount are
      expected to support the capital programme in line with previous Cabinets
      decisions. Actual figures will be reported back to Mayor and Cabinet after
      the end of the current financial year when the capital accounts are closed
      and actual costings are known.




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      Capital Receipts from 2003/04 - Current Schemes Costs
15.31 In allowing this exception it was recognised that there are costs associated
      with leaseholder and freeholder buy backs. These are essential if
      regeneration schemes are to proceed but mitigates against further
      regeneration projects. It was also noted that an additional benefit of this
      recycling is that where Capital Receipts are released from the sale and
      redevelopment of the land within a regeneration scheme, they can be used
      to reimburse costs incurred on the acquisition of other interests in the land
      within the previous 5 years. The part of the receipt used for acquisition
      costs and expenses therefore becomes 100% usable rather than being
      subject to set aside at 50% or 75%.

15.32 Additionally where a site within one of the specified regeneration schemes
      creates a positive value, the first call on that receipt will be to finance the
      buybacks by reimbursing the costs of site assembly. This recycling helps
      to cover all site assembly costs such as leaseholder and freeholder buy
      backs as well as home-loss and disturbance payments.

15.33 The estimated costs of site acquisition are set out in table 22 below. They
      cover leaseholder buy-backs, home-loss, demolition costs and associated
      costs. These are also shown in appendix III.

          TABLE 22

                 Estimated                 2003/04                 2004/05       2005/06
                 Spend
                 Sundermead                £1,500,000              £3,764,010    £3,402,895
                 Kender                    £2,626,000              £2,484,000    £1,476,000
                 Honor Oak                 £382,200                £0            £0
                 Pepys                     £828,000                £738,000      £0
                 Silwood                   £1,951,590              £1,100,000    £1,280,000
                 Total                     £7,287,790              £8,086,010    £6,158,895

15.34 Therefore officer are expecting that resources of the same amounts will be
      available to assist the capital programme in the following years. Table 23
      below shows this in more detail.

          TABLE 23

                 Estimated                2004/05                 2005/06       2006/07
                 Recycled
                 Receipt
                 Sundermead               £1,500,000              £3,764,010    £3,402,895
                 Kender                   £2,626,000              £2,484,000    £1,476,000
                 Honor Oak                £382,200                £0            £0
                 Pepys                    £828,000                £738,000      £0
                 Silwood                  £1,951,590              £1,100,000    £1,280,000
                 Total                    £7,287,790              £8,086,010    £6,158,895




15.35 It is recommended that Mayor and Cabinet agree this exception for the
      remainder of the current schemes.

          Aids and Adaptations (Resource Transfer)



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15.36 As in past years it is suggested that a resource transfer of £0.350m for
      aids and adaptations is made to the Social Care and Health Directorate
      who will project manage the scheme. In order to maintain good
      accountancy practices in Lewisham the resources set aside for this scheme
      are subsequently transferred to the directorate running the scheme.

15.37 Any under-spend of these resources incurred by Social Care and Health
      will be transferred back to the Regeneration Directorate. To eliminate the
      possibility of incurring an under-spend officers will monitor this scheme
      monthly and will transfer back any unspent resources following the third
      quarter review. These will be re-allocated to ensure full use of resources.

15.38 It is recommended that Mayor and Cabinet approve the resource transfer
      to Social Care and Health.

      Enabling Works to Lewisham Town Centre
15.39 Some enabling works will be required to allow the town centre
      development to proceed. It is assumed that the costs associated with the
      enabling works will be charged to HIP. The current bid is up to £3.5m and
      when proceeds via the town centre redevelopment special purpose vehicle
      are ultimately received at a future date (7yrs +), HIP will be reimbursed
      by the value associated with the disposal of the present site, whilst HIP
      pays for the new site on the housing related matter without gain from the
      ultimate receipt to the Council. It is recommended that Mayor and Cabinet
      approve that the sum of £3.5m be set aside for these works.

15.40 As a result of the comprehensive spending review the Government
      announced in July 1999 that funds would be directed to local authorities
      through the Major Repairs Allowance (MRA). This is calculated using a set
      formula (which does not include a general needs index). It is intended to
      provide funds to clear the backlog of repairs and avoid future deterioration
      of stock but can be used to fund borrowing. The advantage is that the MRA
      is guaranteed for the three years allowing the Council to carry out a great
      deal of forward planning. Councils are required to produce business plans
      and carry out stock condition surveys to show how the priorities have been
      set and what options have been considered. The MRA is ring-fenced to the
      Housing Revenue Account (HRA). Lewisham will receive £21.337m in
      2004/05.

      Private Sector Renewal Support Grant
15.41 The Government continues to pay grant at 50% on environmental works in
      renewal areas. The grant is available for renewal areas declared before 1
      April 1999 including Rushey Green. Under the prudential regime, this
      grant will be a real resource available to fund capital expenditure.

      Single Regeneration Scheme (SRB) Grant
15.42 A total of £81m will be invested in Silwood SRB 5 over the lifetime of this
      scheme. Following extensive negotiations with the London Development
      Agency it has been agreed that this year the allocation will be £4.229m.
      As reported above a separate report on the scheme is being presented to
      Mayor and Cabinet.

      Capital Expenditure from Revenue Accounts (CERA)
15.43 Elsewhere on the agenda for Mayor and Cabinet a report on the Housing
      Revenue Account 2004/05 recommends a reduction in the CERA
      contribution from £1.8 to £1.5m in order to meet the additional demands
      for planned maintenance.



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      Over-programming
15.44 Due to the nature of the capital programme and the complex issues
      involved in running such a large capital programme, e.g. in depth tenant
      consultation, tendering process, construction market forces, bad weather
      etc Lewisham has always adopted a policy of over-programming. This
      ensures that Lewisham fully spends its ODPM allocation and is therefore
      favourably assessed by ODPM.

       Proposed Programme 2004/05, 2005/06 and 2006/07
15.45 This year Lewisham will be setting a three-year indicative programme in
      line with Central Government objectives. Resource assumptions have
      been made, as set out above, for the forthcoming year and the
      subsequent two years and this report also sets a three-year programme.
      It is envisaged that this will enable Lewisham to run a true rolling
      programme which should lead to achieving spend earlier on in the financial
      year. Previous programmes have, in the main, been set on an annual
      basis. This has meant that most schemes would normally only get on site
      in the Autumn/ winter following the specifying, consulting and tendering
      process. With the new approach schemes will be continually drawn-up
      and let depending on available resources.

15.46 As mentioned earlier in this report, since the introduction of the Decent
      Homes Standard Lewisham has had to review its Policy commitments. For
      all future years any proposed programme will be split into three
      categories:

                           i) Contractual commitments - this relates to schemes where
                          Lewisham has awarded a contract, entered into or has a legal
                          agreement to proceed with certain contracts / schemes.

                      Policy Commitments - this now covers programmes that meet
                      
                   the Decent Homes Standard.
         and finally
                  iii) New Initiatives - these schemes would have no effect on
                   meeting the Decent Homes Standard but Lewisham may wish to
                   allocate a certain amount of resources to avoid high maintenance
                   costs etc.

15.47 As noted in paragraph 15.26 above should additional resources become
      available from the ODPM during the year, officers will seek Mayor and
      Cabinet approval to earmark these against Decent Homes Schemes.

      Housing Investment Programme 2004/5, 2005/6 and 2006/7
15.48 Attached as appendix IV is a spreadsheet showing the proposed
      programme for 2004/5 and indicative programme for 2005/6 and 2006/7.
      Each element is detailed below.

      Contractually Committed Schemes
15.49 These are schemes where Lewisham has entered into a legal agreement to
      resource certain schemes. Costs should not increase as they are already
      known and have been formally agreed with the parties concerned. Table
      24 below shows the schemes within this category for 2004/05. A detailed
      explanation of each category is shown in paragraphs 15.51 to 15.65.

          TABLE 24




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            Contractually Committed Schemes                             Amount
            Silwood Estate (SRB5) HIP Contribution                                     £1,027,000
            (additional to the amount already
            contained within the carry over figure
            shown below)
            Silwood Estate (SRB5) Grant Contribution                                   £4,229,000
            Carry Over from Previous Years (previous                                   £2,789,000
            years programme which exceeded
            resources)
            Schemes already committed for future                                      £36,381,100
            years. A detailed breakdown of this is
            shown in Table 26)
            Disabled Facilities Grant (*estimated)                                       £500,000
            Registered Social Landlord Programme                                       £7,361,490

            Total                                                                    £52,287,590


      Contractually Committed Schemes (Detail)
15.50 All the schemes in this category have received prior approval.

      Silwood Estate (SRB5) HIP Contribution
15.51 The figure shown above is in addition to an allocation to the figure already
      contained within the „schemes already committed for future figure‟
      (£174,400). The SRB5 Silwood programme already has an agreement is
      place between Lewisham and the London Development Agency. This
      agreement states that Lewisham must match fund this scheme by at least
      £6.9m from its Housing Investment Programme (HIP) resources.

15.52 A review of this scheme has been undertaken and the estimated
      expenditure required has increased due to the additional works
      encountered as part of the site assembly works, e.g., leaseholder buy-
      backs etc. As detailed in this report these costs have previously been
      resourced through recycled receipts and as set out in Para. 15.35 we are
      seeking Mayor and Cabinet approval to continue this practice until the
      scheme is completed.

15.53 The revised estimated costs for this scheme are shown in the tables below.
      The first table shows the already agreed existing programme. The second
      table shows the total revised costs, and finally the third table shows the
      variance between the two. It is these amounts that it is envisaged would
      be resources from recycled receipts generated through asset disposal.

15.54 Mayor and Cabinet are asked to approve the revised costs as detailed in
      table 25 below.

          TABLE 25

                                     2004/05               2005/06      2006/07       Total
            Current                  £174,400              £2,382,200   £0            £2,556,600
            Approved HIP
            Funding

            Revised HIP              £1,201,400            £5,779,200   £5,054,000    £12,034,600
            Funding
            required



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            Variance                 £1,027,000            £3,397,000       £5,054,000             £9,478,000


      Silwood Estate (SRB5) Grant Contribution
15.55 As stated within the funding agreement, the London Development Agency
      has agreed to issue Lewisham with Grant resources amounting to
      £4,229,000 for 2004/05.

15.56 Although this may change pending the signing of the forthcoming SRB
      Delivery Programme, it is recommended that Mayor and Cabinet agree this
      year's allocation of £4,229,000. Any changes will be reported back to
      Mayor and Cabinet once any announcements have been made.

      Carry Over from Previous Years.
15.57 The 2003/4 programme amounts to £70,416,000 and exceeds resources
      by £2,789,000 or 4.12%. Any such over-programming is automatically
      transferred over in the following year at the end of the financial year. The
      Council is unable to spend more than the resources determined at the
      time.

      Schemes Already Committed and/or Approved for Future Years
15.58 Last year a number of Decent Homes schemes were approved for inclusion
      within the capital programme for 2003/04. For practical and financial
      reasons a number of the schemes were phased over several years. To
      ensure value for money it was agreed that future phases be tendered
      together. Schemes tendered were awarded on the basis of 2003/04
      construction prices and even though these schemes will progress over a
      number of years, one of the contracts let will increase from any inflation
      rises. This also led to a reduction of fees as smaller contracts incur a
      higher fee percentage than larger contracts. A full list of all such schemes
      is shown in table* below.

15.59 Overall approximately £33m of the £36m of these schemes are targeted
      towards Decent Homes Standard works with the remainder put towards
      other schemes. Tables 26 and 27 below show this in summary and detail
      respectively.

          TABLE 26

            SUMMARY                                    2004/05         2005/06      2006/07        TOTAL

            DECENT HOMES SCHEMES                         £11,575,800     £204,900             £0     £12,857,700
            SILWOOD ESTATE (SRB5)                         £4,403,300   £5,579,400             £0      £9,982,700
            PARTNERSHIP WORKS (KENDER &
            SUNDERMEAD)                                   £5,624,000     £470,000             £0      £6,094,000
            PRIORITY AREAS (KENDER &
            HONOR OAK)                                   £10,411,400     £263,900             £0     £10,675,300
            ESSENTIAL WORKS                                £654,600       £15,000             £0       £669,600
            ENERGY                                           £97,200           £0             £0         £97,200
            HOMELESSNESS                                   £171,700            £0             £0       £171,700

            SUB TOTAL DECENT HOMES                       £32,965,000   £6,533,200             £0     £40,548,200

            RSL / RGRA                                    £2,347,300   £1,000,000     £899,000        £4,246,300
            LIFTS                                            £18,800           £0           £0           £18,800
            UPGRADING AERIALS                             £1,050,000                                  £1,050,000




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            SUB TOTAL OTHER SCHEMES                       £3,416,100   £1,000,000   £899,000    £4,246,300


            GRAND TOTAL                                  £36,381,100   £7,533,200   £899,000   £44,813,300




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            TABLE 27


            DETAILED
            BREAKDOWN                                        2004/05      2005/06    2006/07   TOTAL
            DECENT HOMES
            SCHEMES
            MILFORD TOWERS LIGHTING AND
            SECURITY                                         £10,200                               £10,200
            NORTHDOWNHAM PHASE 2                             £17,500                               £17,500
            WINCHFIELD ROAD                                 £426,200      £84,900                 £511,100
            PITMAN HOUSE                                     £27,300                               £27,300
            CROSSWAY COURT                                   £50,000                               £50,000
            TRINITY ESTATE                                £3,790,000     £120,000               £3,910,000
            ACHILLES ESTATE                                 £932,300                              £932,300
            DENWOOD                                          £51,000                               £51,000
            MEADOWS ESTATE (GREEN
            SCHEME)                                       £1,323,100                            £1,323,100
            BECKENHAM HILL ESTATE                            £24,700                               £24,700
            MILLCROFT HOUSE                                  £62,400                               £62,400
            KEMSCOTT AND NORTHMOOR                           £11,500                               £11,500
            BRASTED CLOSE                                     £9,400                                £9,400
            MERCATOR ESTATE                               £1,807,300                            £1,807,300
            PLUMMER COURT                                 £1,068,800                            £1,068,800
            SINGLE ELEMENT WORKS (REWIRE)                    £23,100                               £23,100
            CHINBROOK ESTATE                                  £8,100                                £8,100
            LUCAS COURT                                   £1,345,600                            £1,345,600
            EVELINA ROAD                                    £241,100                              £241,100
            CORDWELL ESTATE                                   £8,900                                £8,900
            CHIDDINGSTONE                                     £4,300                                £4,300
            THE GREEN HOUSE / DACRE
            HOSTEL                                          £160,000                             £160,000
            LEYBRIDGE                                       £200,000                             £200,000

            SILWOOD (SRB5)
            SILWOOD SRB HIP CONTRIBUTION                    £174,400    £2,383,200              £2,557,600
            SILWOOD SRB GRANT
            CONTRIBUTION                                  £4,228,900    £3,196,200              £7,425,100

            PARTNERSHIP WORKS (KENDER &
            SUNDERMEAD)
            KENDER PARTNERSHIP WORKS                        £710,000     £470,000               £1,180,000
            SUNDERMEAD PARTNERSHIP
            WORKS                                         £4,914,000                            £4,914,000
            SITE ASSEMBLYSUB TOTAL                        £5,624,000     £470,000        £0     £6,094,000

            KENDER TRIANGLE REFURBISHMENT
            WORKS                                         £2,479,500      £52,500               £2,532,000
            HONOR OAK REFURBISHMENT
            WORKS                                         £7,931,900     £211,400               £8,143,300


            ESSENTIAL
            WORKS
            THE FORESHORE ROOFS                               £38,700                             £38,700




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            GILMORE ROAD ASBESTOS WORKS                           £2,700                            £2,700
            LEYBRIDGE COURT BALCONY
            SCREENS                                         £470,000                              £470,000
            EWART ROAD CO-OP                                £142,500        £15,000               £157,500
            PAGODA GARDENS RENEWAL OF
            WATER MAINS                                            £700                               £700


            ENERGY
            ENERGY EFFICIENCY WORKS
            CONTRACT 24                                       £46,100                              £46,100
            ENERGY EFFICIENCY WORKS
            CONTRACT 25                                       £51,100                              £51,100


            HOMELESSNESS
            WOOLSTONE ROAD / VULCAN ETC                       £7,000                                £7,000
            BISHOPTHORPE / RUSHEY GREEN                       £7,400                                £7,400
            ALL HOSTELS                                       £2,000                                £2,000
            SYDENHAM ROAD                                     £1,900                                £1,900
            ARNON OAK                                       £100,000                              £100,000
            BARING ROAD                                      £50,000                               £50,000
            ROKEBY                                            £1,000                                £1,000
            ST DONNATS                                        £2,400                                £2,400
            HOMELESSNESS SUB TOTAL                          £171,700            £0         £0     £171,700


            OTHER SCHEMES

            RSL / RGRA
            EVELYN PCT                                        £79,400                              £79,400
            RGRA BOWNESS ROAD GROUP
            REPAIR SCHEME                                     £22,100                              £22,100
            RGRA SCOOBY AND WILDFELL
            GROUP REPAIR                                    £264,400                              £264,400
            RGRA CONSULTATION BUDGET                         £10,600                               £10,600
            RGRA ENVIRONMENTAL FUTURE
            YEARS                                           £150,000       £200,000    £99,000    £449,000
            RGRA BUILDING PROGRAMME
            FUTURE YEARS                                  £1,820,800       £800,000   £800,000   £3,420,800


            LIFTS
            BREDGAR LIFT 2                                        £4,400                            £4,400
            KEMSLEY LIFT 2                                        £4,400                            £4,400
            MAPLE HOUSE                                           £3,000                            £3,000
            LEYBRIDGE                                             £7,000                            £7,000

            UPGRADING AERIALS                             £1,050,000                             £1,050,000



       Disabled Facilities Grant (*estimated)
15.60 The Disabled Facilities Grants (DFG‟s) are mandatory and require local
      authority match funding of 40% from HIP. Although officers are currently
      waiting for the official announcement from the ODPM it is envisaged that
      the level of funding for this programme will be identical to that of previous
      years. For the purpose of this report officers have therefore assumed DFG
      resources of £300,000 and therefore Lewisham‟s contribution to this
      scheme would be a further £200,000, making the total programme
      £500,000.



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15.61 It is recommended that Mayor and Cabinet agree this year's allocation of
      £0.500m.

      Registered Social Landlord Programme
15.62 Since the demise of the LASHG programme, (which means that Lewisham
      will not receive capital paid out to set aside against debt redemption),
      approval has been given to continue funding pipeline development
      schemes.

15.63 The 2004/05 programme to fund housing association schemes consists
      principally of investment in Silwood‟s existing and continued phased
      development. Silwood is being jointly funded by the Housing Corporation
      to deliver a total of 554 homes, 472 for rent and 82 shared ownership.

15.64 Evelyn Street £52,000 represents the final tranche payment for a jointly
      funded programme with the Primary Care Trust to provide 2 group homes
      for people with learning difficulties.

15.65 It is recommended that Mayor and Cabinet agree this year's allocation of
      £7,316,578.

Current Decent Homes Schemes

      Priority Estate Site Assembly Schemes (Kender, Honor Oak, Sundermead
      and Pepys)
15.66 Schemes currently in progress are Kender, Sundermead and Pepys. All of
      these are either near completion or have just a couple of years remaining.
      As mentioned previously in this report this programme covers the costs
      required to obtain sites for future disposal. It covers all leaseholder /
      freeholder buy-backs costs, home-loss payments, demolition costs and
      associated costs. Silwood site assembly costs are detailed under the
      contractually committed section of this report. All associated costs would
      be recyclable from the capital receipts, generated through asset disposal,
      should this committee agree with the recommendation contained within
      this report.

15.67 Contained within the „Schemes Already Committed / Approved for Future
      Years‟ some resources have already been earmarked for these particular
      programmes. Tables 28, 29 and 30 below show this in more detail. The
      first table shows any allocation already contained within the „Schemes
      Already Committed / Approved for Future Years‟ figure. The second table
      shows the total allocation required. The third table shows the variance
      between the two which is the additional amount required to complete
      these schemes.

            TABLE 28: -Site Assembly                               2004/05     2005/06    2006/07
            schemes (Allocations Already
            Committed / Approved for Future
            Years’)
            Kender                                                  £710,000   £470,000        £0
            Sundermead                                            £4,914,000         £0        £0
            Pepys                                                         £0         £0        £0

            TABLE 29: -Site Assembly                               2004/05     2005/06    2006/07
            schemes (revised allocations
            required)


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            Kender                                                  £2,484,000    £1,476,000        £0
            Sundermead                                              £3,764,010    £3,402,895        £0
            Pepys                                                     £738,000            £0        £0

            TABLE 30: -Site Assembly                                  2004/05      2005/06     2006/07
            schemes (Variance – additional
            resource required)
            Kender                                                   £1,774,000   £1,006,000        £0
            Sundermead                                            -(£1,149,990)   £3,402,895        £0
            Pepys                                                      £738,000           £0        £0

15.68 It is recommend that Mayor and Cabinet approve that the schemes are
      allocated the resources detailed in the tables 8, 9 and 10 above.

      Kender Triangle Priority Area - Refurbishment Works
15.69 This scheme has only two years remaining with all refurbishment works
      due for completion within 2004/05. It is estimated that 2005/06 would
      solely be to cover the costs of retentions. All contracts have now been
      awarded, with the exception of the last environmental contract which is
      due to be tendered within 2004/05.

      Honor Oak Priority Area – Refurbishment Works
15.70 This scheme has only two years remaining with all refurbishment works
      due for completion within 2004/05. It is estimated that 2005/06 would
      solely be to cover the costs of retentions. All contracts have now been
      awarded.

      Energy Efficiency Works
15.71 This will be the 10th year of this programme, during this time all tenants
      in the borough without central heating have been made an offer of having
      a system installed. The focus of this scheme is now changing to upgrading
      old systems and energy conservation works such as loft and cavity wall
      insulation. The works contained within this project fall within the criteria of
      the Decent Homes Standard.

15.72 It is recommended that Mayor and Cabinet agree an allocation of
      £2,000,000 for 2004/05.

      Central Boilers
15.73 Technical Services have carried out a review of all communal boiler
      systems and produced a renewal programme for all sites, based on a 15-
      year lifetime for a boiler. The programme produced is based on repair
      history, age and condition of the boiler units only, and in a number of
      cases the equipment within the individual properties will also need to up-
      graded.

15.74 Table 31 below shows the installations that are considered to be of the
      highest priority and are recommended for inclusion in the 2004/5
      programme. Technical Services will prioritise the boilers in this list up to
      the approved budget (inclusive of fees) and progress will be noted in the
      quarterly reports.

          TABLE 31




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                   Area            Address                                                No
                                                                                          Boilers
           Deptford                Ludwick Mews                                           3
           Forest Hill             Kelmscott,                                             1
           Homeless                Mayfield 47 Burnt Ash Hill                             2
           Persons
           Ewart Road              Dalmain Road 17-35,37-55 and Ewart Road,30- 2
           TMO                     48,50-68 Boiler House no1
            Ewart Road             Ewart Road 78-96,98-116,118-140, Boiler House 2
           TMO                     no3
           Ewart Road              Colvin Close 1-11 and Malham Road 107-        2
           TMO                     125,127-145,147-165 Boiler House no6

15.75 It is recommended that Mayor and Cabinet agree that £0.500m is set
      aside to carry out works to the boilers listed above.

      Major Void Programme
15.76 Over the past six years Lewisham has allocated funds to deal with the
      backlog of empty homes due to a lack of funding. Although the backlog
      has now been eliminated, each year a number of properties are identified
      as needing more than £20,000 to bring them up to a lettable standard and
      therefore fall outside the existing R&M repairs specification.

15.77 It is recommended that Mayor and Cabinet agree that £0.25m be set aside
      to fund works in this category.

      Homelessness Schemes
15.78 Each year the group prepares bids to refurbish and renovate the hostels
      and homes in their responsibility. The Supported Housing and Homeless
      Section have presented bids and the following are recommended for
      inclusion in the 2004/5 programme. (All costs are inclusive of fees) are
      shown in table 32 below.

          TABLE 32

            Scheme                                          Description of Works        Estimate
            11 & 13 Lawrie Park and                         Underpinning                £50,000
            Frogmore
            Mayow Road                                      Damp proofing and upgrade   £22,500
                                                            of ventilation system
            Kender, Ashlee, Mayfield,                       Refurbishment               £403,200
            Rokeby and 11 & 13 Lawrie
            Park
            Ashlee, 89 Hurstbourne                          Renew windows               £92,400
            Rd.,45 Carholm Rd.,
            John Baird Court

            Total                                                                       £568,100


15.79 It is recommended that Mayor and Cabinet approve £0.570m expenditure
      for the schemes noted in table 32 above.

      Disabilities Schemes
15.80 Each year a sum is set aside to carry out adaptations to Council properties
      to enable residents to continue to reside in their homes.



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15.81 It is recommended that Mayor and Cabinet agree that £0.175 is set aside
      for disabilities schemes.

      Cash Incentive Scheme
15.82 Lewisham is proposing for a second year to run it‟s own Cash Incentive
      Scheme (CIS) from the main capital programme. It targets tenants who
      are currently living in 2 or more bedroom properties who would like to
      become owner-occupiers. The scheme identifies suitable applicants and
      pays a grant that the tenant can use as a deposit to purchase their own
      home in the private sector. Consequently freeing up much-needed Council
      Housing.

15.83 It is recommended that Mayor and Cabinet approve £0.500m for the CIS
      initiative in 2004/2005.

      Repairs and Maintenance (R&M)
15.84 The housing division's repair service managers will be encouraged to make
      savings on their repairs and maintenance budgets in order to undertake
      small scale schemes. To act as an incentive it is proposed to match fund
      any savings made with a contribution from capital.

15.85 The location and nature of these schemes will be subject to consultation
      with Neighbourhood Committees.

15.86 It is recommended that Mayor and Cabinet agree that £0.500m is
      allocated for schemes of this nature.

      Feasibility Reports
15.87 This allocation will enable all service units to work up future capital bids
      effectively. These resources will enable more detailed and technically
      accurate bids to be identified and will go some way towards eliminating
      officers coming back to Mayor and Cabinet next year requesting additional
      resources.

15.88 It is recommended that Mayor and Cabinet approve £1.000m for these
      studies in 2004/2005.

      Disrepair
15.89 Each year legal action in respect of disrepair is instigated against the
      Council by a number of residents. Most of the legal costs, compensation
      and repair costs of these actions are met from the Housing Revenue
      Account. However in some cases the cost of the works is in excess of
      £20,000.

15.90 It is recommended that Mayor and Cabinet approve that £0.100m is set
      aside to cover the costs of these works.

      Essential Works Schemes
15.91 These bids cover unavoidable work required to the structure or principal
      service of a building where there is an immediate and major risk to
      personal safety, where a building is or may become uninhabitable, to meet
      statutory minimum safety standards or the maintenance of essential
      existing services.

15.92 Bids that met these criteria were invited on 21st October 2003 with a
      closing date for returns on 25th November 2003. Bids were received



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          which are currently being assessed by independent consultants to verify
          that they fully meet Lewisham‟s criteria, these are shown in table 33
          below. However at this stage it is envisaged that the schemes received to
          date will not exceed the proposed £1m budget. It is anticipated that bids
          will be forthcoming throughout the year. So rather than delay any
          essential works officers will hold this budget and allocate resources
          dependant on schemes fully meeting the criteria and available resources.
          The position of this budget will be reported back to Mayor and Cabinet as
          part of the quarterly monitoring reports.

          TABLE 33

           No. of            Scheme Address                       Type of Works            Estimate
           Units                                                                           (incl.
                                                                                           fees)

           1                 69 Henry Cooper Way                  underpinning of flank        22,500
                                                                  wall
           1                 170 Mayeswood Rd                     underpinning                45,000
           24                Elywn Gardens                        re-roofing                  95,000
           92                Hawke Tower                          roof renewal                43,000
           26                Conifer House                        flat roof renewal          115,000

           2                 65 Sunderland Rd                     underpinning                60,000
           2                 59-61 Upton                          underpinning               136,200
           2                 9 Aylward Rd                         underpinning                28,500
           20                14-33 Church Vale                    roof                        80,000
                                                                  renewal/structural
                                                                  works
           2                 16 Peak Hill Gdns                    structural works incl.       29,000
                                                                  flooring & flank wall
           2                 58 Wood Vale                         underpinning                 24,000

                                                                  Total                     £678,200


15.93 It is recommended that Mayor and Cabinet agree that £1.000m is set
      aside for essential works schemes in 2004/05.

      New Decent Homes Schemes
15.94 As shown in appendix II once existing commitments and new „non-decent
      homes schemes‟ are taken into account £8.000m is available for new
      decent homes schemes. Mayor and Cabinet are aware that on 17
      September 2003 approval was given to enhance the stock condition
      survey to improve the database of information. This survey was completed
      just before Christmas 2003 and information is now being inputted and
      verified. Officers will use this to identify new schemes and these will be
      reported to Mayor and Cabinet in the quarterly reports.

15.95 It is recommended that Mayor and Cabinet approve that £8.000m be set
      aside for new decent homes schemes in 2004/5.

           Other Initiatives




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      Private Sector Housing Grant
15.96 Poor quality housing not only has an impact on the health, safety and the
      quality of life of the occupants, it also undermines the regeneration and
      environmental sustainability of an area. In Lewisham, the private sector
      housing stock accounts for the majority of the total housing stock.
      Improving the condition of the borough‟s private sector housing stock is
      therefore of vital importance to the health, social and economic well-being
      of the borough as a whole.

15.97 Housing assistance comprises a range of Discretionary Renovation Grants
      (DRG) and a mandatory Disabled Facilities Grant (DFG). DRGs are
      available for the improvement or repair of a dwelling and to bring empty
      units of residential accommodation back into use. DRGs are subject to a
      test of the applicant‟s resources, which determines their ability to
      contribute towards the cost of the works. Providing DFGs is a mandatory
      requirement, to help disabled tenants and homeowners remain in their
      own home. Applications for DFGs must be supported by a referral from the
      Council‟s Occupational Therapy Team.

15.98 It is recommended that Mayor and Cabinet agree that £2.0m is set aside
      for private sector schemes.

      Rushey Green Renewal Area
15.99 This programme was set for all years as part of last years Bids Report.
      Table 34 below shows the resources allocated for this scheme for the next
      three financial years.

          TABLE 34

            RGRA                                       2004/05         2005/06        2006/07
            Bowness Road – Building                       £22,100                £0          £0
            programme *
            Scooby and Wildfell                             £264,400             £0          £0
            Building Programme *
            Consultation Budget                            £10,600             £0             £0
            Environmental Budget                          £150,000       £200,000        £99,000
            Building Programme                          £1,820,800       £800,000       £800,000
            Total                                      £2,267,900      £1,000,000      £899,000

* Contractually committed (Bowness Road / Scooby & Wildfell building schemes)

15.100 The Rushey Green ward was declared a renewal area in 1998 following a
       Neighbourhood Renewal Assessment (NRA). The Council has committed
       £10.2m over a period of 10 years to regenerate the area. The budget has
       been divided: £6.7m to improve private sector housing and £3.5m for
       various environmental improvements.

15.101 As an area-based initiative the renewal area seeks to address disrepair
       and reverse the process of decline in private sector properties, as well as
       improving the visual amenity of the area and creating a sense of
       confidence.


15.102 The Renewal Area is the largest in the country with over 4000 properties
       and a high percentage of low-income households. It seeks to carry out a
       targeted co-ordinated approach to encourage private investment and
       wider revitalisation of the local community.



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       Lift Renewal Programme
15.103 Table 35 below shows the lifts that have been programmed for works in
       2004/5. These lifts have been identified as being the most unreliable and
       costly to maintain. Technical services will tender these and the costs will
       not exceed £1m inclusive of fees, which are not included in the estimate.

          TABLE 35

            Lift                                                         Estimated Cost
            Maple House (lift 2)                                         £70k
            Pitman House (lift2)                                         £98k
            Kingsfield House (lift 2)                                    £90K
            Merryfield House (lift 2)                                    £90k
            Clairville Point (lifts 1 and 2)                             £230k
            20-80 Giffin Street                                          £90k
            Magnolia House (lifts 1,2 and 3)                             £290k

15.104 It is recommended that Mayor and Cabinet approve an allocation of
       £1.000m to refurbish these lifts.

       Communal Aerials
15.105 In 2005/2006 the Government has indicated that the transmission of
       analogue television channels will cease and only digital television will be
       available in the London area. Housing residents will not be able to receive
       programmes unless communal aerials are upgraded. In the 2001/2002
       Stage 2 report Members agreed to the setting up of a rolling programme
       for the upgrading of communal aerials as noted in table 36. The cost for
       this scheme is contained in the schemes already committed/approved for
       future year‟s allocation as noted above.

          TABLE 36

            2002/2003                  2003/2004                  2004/2005     Total
            £0.6m                      £1.05m                     £1.05m        £2.7m

       Estates Environment
15.106 Officers have carried out a survey of the bin chambers of all estates and
       consider that a number need to be upgraded to meet health and safety
       requirements.

15.107 It is recommended that Mayor and Cabinet agree that £0.150m is set
       aside to carry out these works.

       Garage conversions
15.108 This is a pilot scheme to provide additional bedrooms to properties by
       converting integral garages. This will provide larger properties for the
       existing residents thus reducing the pressure on the housing stock.

15.109 It is recommended that Mayor and Cabinet agree to £0.100m being set
       aside for this pilot scheme.

       Pooling of receipts and affordable housing
15.110 Part I of the Local Government Act 2003 and the regulations made under
       it require local authorities to “pool” (i.e. pay to the Government) a
       proportion of capital receipts from disposals of housing land. The



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          proportion to be pooled is 75% for land with dwelling-houses on it and
          50% for other land. The balance of the receipt is then available to support
          the authority's capital programme.

15.111 The Local Authorities (Capital Finance and Accounting) Regulations 2003
       made under the 2003 Act allows the authority to offset certain expenses
       incurred on "the provision of affordable housing" against the capital
       receipts from qualifying sales of housing land before calculating the
       amount of the capital receipt to be paid to the Government under the
       pooling arrangements. The exemption does not apply to Right to Buy
       sales, large scale stock transfers or sales to prospective residential owner
       occupiers. The exemption effectively means that the authority may use a
       higher proportion of the capital receipt (up to 100% of it) for the provision
       of affordable housing.

15.112 The "provision of affordable housing" is widely defined as including the
       cost of constructing, converting, enhancing or providing dwellings to meet
       the housing needs of persons on low incomes. The new homes may be
       provided by the authority themselves or by a registered social landlord
       with a contribution from the authority. A large part of the Council's
       proposed expenditure under the HIP would fall within this wide definition.
       It would therefore be possible for the Council, if a decision is made to rely
       upon the new exemption, to offset against future qualifying disposals of
       housing land, a significant proportion of the likely expenditure under the
       HIP as being the Council's contribution to the provision of affordable
       housing.

15.113 Schemes in the 2004/5 Housing Programme that meet the definition of
       affordable housing and could take the advantage of this change total
       £55,955,060.




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                16 TREASURY MANAGEMENT STRATEGY FOR 2004/05

                                               Purpose of this Section

     16.1 The Executive Director for Resources and Deputy Chief Executive is
        required under financial regulations and under the Councils Treasury Policy
           Statement, which regulates the operation of Treasury activities in the
          Council, to present to the Council a statement of the Council‟s treasury
        strategy for the coming year. The treasury strategy will set out anticipated
          borrowing requirements, forecast interest rates, forecast cash balances
              and a borrowing and lending strategy in light of these forecasts.

  16.2      This report will also set out the financial indicators which are required to
          be prepared by the Council each year under the prudential code for capital
          finance in Local Authorities which was introduced by the Local Government
           Act 2003. This section of the report will include the treasury management
            indicators whilst the capital programme section of the report will include
                             the indicators for the capital programme.

          The report is set out as follows:

          Section
           Recommendations
           Borrowing Requirements
           Interest Rate Forecast
           Cash Balances
           Borrowing and Lending Strategy
           Prudential Limits
           New Lending Instruments
           Conclusions


                                              Borrowing Requirements

       16.3 The Councils level of borrowing is currently regulated by the Local
          Government and Housing Act 1989 which utilises a mechanism known as
            the Aggregate Credit Limit (ACL) to regulate the level of the Council‟s
           external debt. Within the ACL the most important element is the credit
           ceiling. The credit ceiling is designed to identify the Council‟s financing
                       requirements deriving from its capital activities.

16.4      The credit ceiling increases by the sum of borrowing approvals used to
          finance capital expenditure and reduces by the level of reserved capital
          receipts and by the Minimum Revenue Provision both of which the LGHA
          1989 requires to be set aside to repay debt.

16.5      The Council‟s policy is to ensure that its average level of external debt
          matches its mid year credit ceiling. This policy ensures that the cost of
          financing debt in the Council‟s General Fund is minimised.

16.6      From the 1st of April 2004 the elements of the LGHA 1989 relating to
          capital finance will be repealed and replaced by the Local Government Act
          2003. The implications of this Act for capital finance at Lewisham were set
          out in a report to the Mayor and Cabinet meeting of the 14 th of January
          2004.




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16.7      Under the Local Government Act 2003 the credit ceiling is replaced by a
          measure known as the Capital Financing Requirement (CFR). The purpose
          of the CFR is broadly the same as the credit ceiling in that it is designed to
          measure the Council‟s borrowing requirement for the financing of its
          capital activities. The Council is not allowed to and does not enter into long
          term borrowing to fund its revenue activities.

16.8      There are however some key differences between the credit ceiling and
          the CFR. Under the LGHA 1989 when calculating the credit ceiling a
          proportion of the opening balance at the beginning of each year had to be
          set aside each year to repay debt. This proportion was 4% for the General
          Fund and 2% for the HRA. The requirement to repay 2% of Housing debt
          has been removed when calculating the CFR.

16.9      When calculating the credit ceiling the LGHA 1989 required that a
          proportion of all housing capital receipts was required to repay debt. This
          requirement has been removed from the CFR calculation. These reserved
          receipts are now pooled and must be paid over to the government.

16.10 The credit ceiling is increased by the level of borrowing approvals granted
      by government. When calculating the CFR the CFR is increased by the
      total borrowing requirement in respect of capital activity. This includes
      both the borrowing requirement supported by government and that funded
      by Council Tax payers and housing tenants.

16.11 The combined effect of removing some of the elements of the calculation
      that triggered debt repayments and the ability of the Council to divert
      revenue budgets to fund core capital priorities results in an increase in the
      projected borrowing requirement over the next three years.

16.12 The biggest single factor is that reserved capital receipts which are
      forecast to reduce the Council‟s debt by £56m in 2003/4 will from the 1st
      of April 2004 no longer be used to repay debt but will be required under
      the Local Government Act 2003 to be paid over to central government.

16.13 The Council‟s Treasury Strategy has been revised to take account of these
      changes and has been based on a three year forecast of the Capital
      Financing Requirement (CFR) based on forecast levels of capital
      expenditure and resources. Any expenditure not to be funded from direct
      capital grant, capital receipts or revenue must be financed from borrowing
      either externally or from the Council‟s internal balances.

16.14 Table 37 indicates that over the next three years from March 2004 to
      March 2007 the Councils CFR is forecast to increase from £391.3m to
      £423.1m an increase of £31.6m. The Treasury Strategy is based on net
      borrowing of £31.6m as set out in Table 37.




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Table 37 Capital Financing Requirement and Debt Forecasts
                  CFR    External     Net
      @ 31-3               Debt    Borrowing
                  £,m      £,m        £,m
      2003/4       391.3     391.2
      2004/5       407.0     406.8        15.6
      2005/6       416.2     416.3         9.5
      2006/7       423.1     422.8         6.5

16.15 The effect of the new capital finance regime is that the Council has moved
      from being a net redeemer of debt to being a net borrower. This is due
      primarily due to the reserved element of capital receipts being paid over to
      the government rather than utilised to repay debt. The increased revenue
      costs of servicing the higher level of debt will be offset by an increase in
      the level of Housing Subsidy paid to the Council by the government.

16.16 The Council is forecasting a net borrowing requirement of £31.6m over the
      three years to the 31st of March 2007. This compares with a forecast
      requirement to repay £35.4m in 2004/5 and 2005/6 contained in the 2003
      treasury Strategy report.

16.17 When entering into new borrowing, consideration is given to the cost of
      financing the debt and the impact the borrowing will have on the Council‟s
      debt maturity profile and on the Councils average debt level when
      compared to its mid year CFR. This ensures that the Council minimises the
      cost of debt charges in the General Fund.

                                               Interest Rate Forecasts

16.18 Last years Treasury Strategy report was based on a central forecast of a
      weak economic performance for most of 2003 giving way to a moderate
      recovery late in the year. There was concern as to how the economy
      would perform in the absence of any discernible economic recovery,
      particularly in the United States and Europe. The uncertainty over events
      in Iraq and the prospect of a war further dampened optimism.

16.19 The central forecast has proved broadly accurate. Economic conditions
      were broadly weak for the first half of the year. Strong economic data
      from the United States led to a change of sentiment in markets in
      September and October. Both equity market values and interest rates
      since then have been on a broadly upward trend and have exceeded the
      levels anticipated at the beginning of the year.

16.20 At the beginning of 2004 there is a much greater degree of optimism
      surrounding the year ahead than existed at the beginning of last year.
      That is not to say that there are not risks. The expanding US economy is,
      as usual, expected to be the driving force behind a general recovery in
      world economies in 2004.

16.21 There are concerns, which are principally related to the huge trade deficit
      the US is currently running, as well as the levels of borrowing of both its
      consumers and its government. The US is currently reliant on foreign
      investment to fund these deficits.




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16.22 In the UK the indebtedness of consumers, a seemingly uncontrollable
      housing market and imbalances between a strongly growing service sector
      and an ailing manufacturing sector remain causes for concern. These
      factors present the bank of England‟s monetary policy committee (MPC)
      with a dilemma as to how to control house prices and borrowing without
      damaging the country‟s fragile manufacturing base.

16.23 In Europe the weakness of the recovery, which is not being supported by
      the European Central Bank engaging in the kind of aggressive interest rate
      cuts taken by the American Federal Reserve, raises the question as to its
      sustainability. The key concerns are the effect of external shocks from
      unforeseen events elsewhere in the world and the risk of the high value of
      the Euro significantly damaging German exports.

16.24 The interplay between these factors will determine the direction of world
      economies in 2004. The Treasury Strategy sets out a central forecast
      based on a most likely outcome and then examines the impact of a more
      positive and a more negative economic outlook.

          Central Forecast

16.25 The Council‟s central forecast (Table 38) is that the UK continues with a
      moderate recovery supported by a more upbeat global environment driven
      principally by the US economy. UK public sector borrowing remains strong.
      The MPC raises interest rates to contain consumer borrowing and house
      price inflation, but keeps the rate rises at a modest level for fear of tipping
      the economy into recession.

16.26 In this scenario base rates rise in June and September and then remain
      stable for the remainder of the financial year.

Table 38 Central Interest Rate Forecast
               Base       LIBID                                   PWLB
               Rate 3mth 6 mth 12 mth 5 yr                        10 yr 20 yr
       Mar-04 4.00    4.0    4.2    4.5 5.0                           5.2 5.2
       Jun-04 4.25    4.2    4.6    4.8 5.2                           5.5 5.5
       Sep-04 4.50    4.5    4.7    5.0 5.3                           5.6 5.6
       Dec-04 4.50    4.5    4.7    5.0 5.4                         5.7   5.7
       Mar-05 4.50    4.5    4.7    5.0 5.4                           5.7 5.7
      LIBID – Investment Rates
      PWLB - Borrowing Rates

          Recessionary Forecast

16.27 The downside risks to the central forecast, which would result in a UK
      recession, are that interest rate rises undermine the housing market
      resulting in negative house price inflation. The threat of negative equity
      triggers a sharp slowdown in retail spending which undermines the
      economy. Weaker growth results in a further deterioration in public sector
      finances and leads to upward pressure being maintained on long term
      interest rates due to the increased government borrowing requirement.

16.28 In this scenario (Table 39) it is expected that the Bank of England would
      cut interest rates to support the economy. Longer term rates would rise
      due to the government issuing debt to fund the public sector deficit.




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Table 39 Recessionary Interest Rate Forecast
              Base        LIBID            PWLB
              Rate 3mth 6 mth 12 mth 5 yr 10 yr   20 yr
       Mar-04 4.00    4.0     4.2  4.5 5.0    5.2    5.2
       Jun-04 4.25    4.2     4.2  4.2 4.5    4.6    4.7
       Sep-04 4.25    4.1     4.1  4.0 4.3    4.4    4.5
       Dec-04 4.00    3.8     3.7  3.6 4.0    4.3    4.5
       Mar-05 3.75    3.6     3.5  3.4 3.8    4.3    4.5
      LIBID – Investment Rates
      PWLB - Borrowing Rates


          Higher Growth Forecast

16.29 If economic growth returns to a higher level and house price inflation and
      consumer expenditure remains robust there is a risk that consumers build
      up an unsustainable level of debt through higher house prices and equity
      withdrawal. In this situation the MPC may act more aggressively to
      forestall credit growth by larger increases in interest rates.

16.30 In this case (Table 40) short term interest rates would rise throughout the
      period to March 2005 when the bank base rate is forecast to be 5.5%.
      Longer term rates are also forecast to reflect this rise as markets factor in
      higher rates over the medium term. The higher rates are considered as
      the only effective solution available to control house price inflation and
      equity withdrawal when house prices are at unrealistic levels due to a
      shortage of housing stock.

          Table 40 Higher Growth Forecast
                  Base        LIBID            PWLB
                  Rate 3 mth 6 mth 12 mth 5 yr 10 yr 20yr
           Mar-04  4.00   4.0     4.2  4.5 5.0    5.2  5.2
           Jun-04  4.25   4.3     4.6  4.9 5.2    5.5  5.5
           Sep-04  4.75   4.7     5.1  5.3 5.6    5.9  5.8
           Dec-04  5.25   5.2     5.4  5.6 5.9    6.1  6.0
           Mar-05  5.50   5.5     5.7  6.0 6.3    6.3  6.3


16.31 The Council‟s treasury strategy has been prepared on the basis of the
      forecasts set out in Table 41. When formulating the strategy the risks
      posed by the alternative interest rate scenarios indicated in Tables 3 and 4
      have been considered.

                                                       Cash Balances

16.32 The Council is currently forecasting average cash balances, excluding
      schools balances, of £70m. These balances are projected to earn interest
      at the rates set out in Table 41. Budgets are set at a prudent level as any
      failure to achieve the budget targets set would need to be financed from
      savings made elsewhere in the Council‟s budgets. Interest rates are
      volatile and can change significantly within a financial year.

16.33 Whilst current forecasts are that interest on cash balances will generate a
      budget surplus, these forecasts should not be relied upon to support




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          expenditure elsewhere in the Council‟s budgets. Should surpluses be
          realised the resources will support the corporate budget planning process.

          Table 41 Forecast Interest on Cash Balances
                  Cash Rate Interest Budget
                   £,m   %      £,m    £,m
          2003/04    80   3.8      3.1    2.0
          2004/05    70   4.0      3.1    2.0
          2005/06    60   4.5      2.7    2.0
          2006/07    60   4.5      2.7    2.0


    16.34 Interest payable on the Council‟s debt portfolio is shown in Table 42.
           These figures are based on the interest rate forecasts outlined in the
        previous section and the borrowing strategy set out in section 6. The total
         capital financing cost consists of interest, MRP (repayment of debt), and
                     premiums and discounts on restructuring of debt.

16.35 Overall debt charges reduce up until 2004/05. From this year onwards the
       key drivers of debt reduction, setting aside reserved capital receipts to
      repay debt and Housing MRP, are removed due to changes introduced by
      the Local Government Act 2003. Debt levels and therefore debt financing
                      costs start to rise from 2004/05 onwards.

     16.36 As debt chargeable to the HRA is mirrored by Housing subsidy, debt
           charge budgets in the HRA have been increased in line with increasing
          debt charges. No unsupported borrowing is forecast to take place in the
                              HRA over the next three years.

    16.37 The shortfall between forecast debt charges and the budget is due to
         budget provision for the increased borrowing in the General Fund Capital
        Programme still having to be made. The Council is forecasting to enter into
           £11m of unsupported borrowing over the next three years. As capital
        schemes are signed off the budget provision to finance the borrowing costs
         will be identified and the budget shortfall will be funded. The shortfalls in
            the 2005/06 and 2006/07 budgets will be addressed in the 2005/06
                                       budget process.




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          Table 42 Interest Payable on Debt
                  Average Average Interest MRP Premiums Total Budget
                    Debt     Rate               Discounts
                    £,m       %      £,m                  £,m  £,m
          2003/04    420.1      6.20   26.1 9.7       2.9 38.7   38.5
          2004/05    401.6      6.06   24.3 3.6       3.3 31.2   30.1
          2005/06    409.5      6.09   24.9 4.2       3.0 32.1   30.2
          2006/07    419.4      6.16   25.8 4.5       2.8 33.1   30.7

   16.38 For 2004/05 the table shows a projected overspend of £1.1m over the
          budget of £30.1m. This represents the additional costs of borrowing
          (largely Prudential borrowing of £4m) for which revenue budgets are
                                    required to fund.

    16.39 In the case of unsupported borrowing for Highways Section 14 of this
           report recommends funding from corporate provisions for the initial
           borrowings so once the business case is signed off by the Executive
          Director for Resources & Deputy Chief Executive, revenue budgets to
          support the borrowing will be vired to the debt management budget.

16.40 Similarly for unsupported borrowing for Vehicle replacement, the business
      case will identify revenue budgets that already exist in Regeneration and
        once signed off by the Executive Director for Resources & Deputy Chief
       Executive, appropriate revenue budgets in Regeneration can be vired to
                             the debt management budget.

                                        Borrowing and Lending Strategy

 16.41 The overall objective of the Council‟s treasury strategy is to minimise the
        long term cost of borrowing and to maximise the return on investments
                      consistent with an acceptable level of risk.

          Lending

   16.42 The central interest rate forecast set out in section 3 assumes that the
       Bank of England base rate rises gradually to 4.5% by September 2004 and
        remains stable at that level for the rest of the financial year. The average
                 rate assumed for Treasury investment purposes is 4%.

16.43 The Executive Director for Resources and Deputy Chief Executive regularly
      reviews interest rate forecasts and the Council‟s cashflow in order to select
         appropriate periods for investing the Council‟s monies with a view to
            maximising returns consistent with an acceptable level of risk.

          Borrowing

 16.44 The principal change in the Council‟s borrowing strategy results from the
        Council moving from the Council moving from being a net redeemer of
                 debt in 2003/04, to being a net borrower in 2004/05.

  16.45 The Council‟s debt portfolio consists primarily held of fixed interest rate
       debt held at interest rates varying form 4.25% to 10.25%. In addition the
          Council has £45m of semi variable market debt at interest rates of
                                between 1.5% and 4.67%.




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      16.46 These loans have maturity periods varying from 1 to 39 years. The
           repayment profile of the Council‟s debt portfolio is set out in Table 43.

   16.47 As can be seen from Table 43 comparatively little debt is scheduled to
         mature in the next 5 years. To repay a loan earlier than its scheduled
                redemption date requires the agreement of the lender.

16.48 The Council is forecasting a net borrowing requirement of £31.6m over the
        next three years. Consideration will be given to the interest cost of new
       loans, future interest rate forecasts as well as the maturity profile of the
                                 Council‟s debt portfolio.

16.49 Given the weighting towards fixed loans in the Council‟s debt portfolio and
            the bias towards longer maturities the strategy will focus on the
       opportunity to borrow over the shorter term up to 10 years. The interest
      cost of financing these loans is likely to be lower and borrowing for shorter
        periods this will assist in smoothing the maturity profile of the Council‟s
                                       debt portfolio.




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                   Table 43


                                                    LBL Debt Repayment Profile

           35

           30

           25

           20
                                                                                                                                 Variable
    £,m




                                                                                                                                 Fixed
           15

           10

            5

            0
            05

                   07

                          09

                                 11

                                        13

                                               15

                                                      17

                                                             19

                                                                    21

                                                                           23

                                                                                  25

                                                                                         27

                                                                                                29

                                                                                                       31

                                                                                                              33

                                                                                                                     35

                                                                                                                            37
             /

                    /

                           /

                                  /

                                         /

                                                /

                                                       /

                                                              /

                                                                     /

                                                                            /

                                                                                   /

                                                                                          /

                                                                                                 /

                                                                                                        /

                                                                                                               /

                                                                                                                      /

                                                                                                                             /
          04

                 06

                        08

                               10

                                      12

                                             14

                                                    16

                                                           18

                                                                  20

                                                                         22

                                                                                24

                                                                                       26

                                                                                              28

                                                                                                     30

                                                                                                            32

                                                                                                                   34

                                                                                                                          36
                                             Effect of Higher Interest Rates

    16.50 Higher interest rates than those contained in the central interest rate
                         forecasts will have the following effects.

 16.51 An increase in short term interest rates will have the effect of raising the
         level of interest earned on revenue balances by £0.7m for every 1%
                                        increase.

  16.52 An increase in interest rates will not have a major impact on the cost of
         managing the Councils debt portfolio as the portfolio consists mainly of
       fixed interest debt and the Council is therefore protected from the effects
          of interest rate increases. The cost of new borrowing will however be
       effected by rate rises. For every 1% rise in rates the cost of financing the
        Council‟s net borrowing requirement of £31.6m would increase by £0.3m
                                        per annum.


                                             Effect of Lower Interest Rates

 16.53 Lower interest rates than the central interest rate forecasts will have the
                                   following effect.

   16.54 A reduction in short term interest rates will have the effect of reducing
       interest earned on revenue balances by £0.7m for every 1% decrease. The
                       assumed rate in the central forecast is 4%.




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 16.55 A reduction in long term interest rates will start to have an impact on the
           Council‟s debt management strategy. Whilst the Council was a net
       redeemer of debt, lower interest rates were a risk for the Council as they
             increased the cost of premiums payable on debt redemption.

    16.56 As the Council is now a net borrower lower interest rates provide the
            opportunity of funding capital investment at a lower cost. Every 1%
         reduction in longer term interest rates results in a £0.3m reduction in the
        annual cost of funding the Council‟s net borrowing requirement. There will
         only be a gradual reduction in the cost of financing the Council‟s existing
        debt as this is primarily in fixed interest loans. Interest savings will only be
          realised as the loans mature and are replaced by new loans at cheaper
                                              rates.

  16.57 The variation between the interest rates in the central scenario and the
       alternatives is less than in previous years. The central forecast is held with
       greater confidence than has been the case for the last three years. It must
          however be borne in mind that the very nature of major shocks to the
                        world economy is that they are unexpected.

   16.58 The Council‟s treasury strategy is reviewed on a regular basis and any
        variation from the central forecast or the alternatives will be considered
         and appropriate action taken to minimise the risk and secure the best
                      outcome for the Council‟s financial position.

                                                 Prudential Indicators

      16.59 Under the prudential regime for capital finance in Local Authorities
        introduced under the Local Government Act 2003 the Council is required to
         set a number of prudential indicators for its capital and treasury activities
         prior to the start of the financial year. The indicators relating to the capital
                 programme are included in the capital section of this report.

16.60 The treasury indicators are contained in the following section of the report.

         Capital Financing Requirement
      16.61 The Capital Financing Requirement (CFR) measures the authorities
           requirement to borrow to finance its capital investment activities. The
               indicator shows the CFR for both the HRA and General Fund.




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                                                           Table 44
           Capital financing requirement                  31/03/04 31/03/05    31/03/06   31/03/07
                                                             £000s     £000s      £000s      £000s
                                                          Estimate  Estimate   Estimate   Estimate
          Non-HRA                                          290,883   296,822    303,757    308,757
          HRA                                              100,425   110,658    113,374    114,776
          Total                                            391,308   407,480    417,131    423,533


      Operational Debt Boundary
 16.62 The operational debt boundary represents the level of borrowing that the
        Council anticipates will be required to finance its capital activities. The
       operational boundary has been set at the level of the Council‟s maximum
                              forecast CFR for each year.

16.63 The operational debt boundary should not be breached over the long term.
      It may be breached in the short term if for example the Council wished to
        borrow money in March to fund the following years capital programme.
         This might occur if interest rates were forecast to rise and the Council
                       wished to lock in to lower interest rates.

                                                            Table 45

              Operational boundary for external
                            debt
                                                                  2003/04 2004/05 2005/06 2006/07
                                                                    £000s   £000s   £000s   £000s
          Borrowing                                               446,603 407,480 417,131 423,533
          Other long term liabilities                                   0       0       0       0
          Total                                                   446,603 407,480 417,131 423,533


                         Authorised Limit for External Debt
   16.64 The authorised limit represents the maximum level of debt the Council
         may have outstanding at any one time. This limit may not be breached.

   16.65 The limit has been set at £100m above the operational boundary. The
          primary reason for having a limit that is significantly higher than the
        operational limit is to enable the Council to reschedule its debt should the
                                         need arise.

 16.66 It may be that when rescheduling takes place that new debt is taken out
      before old debt is repaid. In this event the Council‟s borrowings may, for a
             short period, significantly exceed the operational boundary.

            The limit also allows for borrowing to fund short term cashflow deficits or
           borrowing in anticipation of the following years capital expenditure.




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                                                            Table 46

           Authorised limit for external debt
                                                             2003/04 2004/05 2005/06 2006/07
                                                               £000s   £000s   £000s   £000s
          Borrowing                                          446,603 507,480 517,131 523,533
          Other long term liabilities                              0       0       0       0
          Total                                              446,603 507,480 517,131 523,533


                          Fixed Interest Rate Exposure Limit
16.67 This limit sets the maximum net exposure the Council may have to fixed
      interest borrowings and investments.

16.68 Fixed rate borrowing and investments ensure certainty of borrowing costs
      and investment returns. Fixed interest do not however vary with changes
      in market rates. A debt portfolio that is wholly in fixed interest rates will
      not be able to take advantage of falls in market rates until debt matures
      and needs to be refinanced.

16.69 The Executive Director for Resources and Deputy Chief Executive advises
      that in the case of the Council‟s borrowing this factor can be managed by
      controlling the maturity profile of the Council‟s debt by ensuring that a
      proportion of the Council‟s debt is due to be refinanced within each year
      and is therefore responsive to changes in market rates.

16.70 On balance the protection offered by fixed rates against potential
      increases in interest rates is considered to offset the potential loss of
      flexibility in the event that market rates fall.

16.71 Investments are short term for up to one year and are therefore
      reasonably responsive to market rate changes. Any investments placed in
      excess of one year will be subject to limits discussed later on in this
      section.

16.72 The Council‟s investment and debt portfolio‟s are therefore heavily biased
      towards fixed rate borrowings and investments.

                                                            Table 47

            Net Fixed Rate Exposure Limit
                                                         2004/05    2005/06    2006/07
                                                            £000s      £000s      £000s
          Borrowing                                       507,480    517,131    523,533
          Investments                                    (80,000)   (70,000)   (70,000)
           Net Fixed Rate Exposure                        427,480    447,131    453,533


                        Variable Interest Rate Exposure Limit
16.73 This limit sets the maximum net exposure the Council may have to
      variable interest borrowings and investments.

16.74 Whilst the Council favours fixed rate investments and borrowings and
      chooses to manage interest rate exposure through its debt maturity
      profile, it would be imprudent not to allow an element of exposure to



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          variable rates as this provides the opportunity to hedge interest risk
          exposure at points in time when interest rates are forecast to fall and
          current rates are not considered good value.

16.75 Variable interest rate exposure is limited to 25% of the overall debt
      portfolio.

                                                            Table 48

           Net Variable Rate Exposure Limit
                                                             2004/05 2005/06 2006/07
                                                               £000s   £000s   £000s
          Borrowing                                          126,870 129,283 130,883
          Investments                                              0       0       0
           Net Variable Rate Exposure                        126,870 129,283 130,883



                 Maturity Limits on Fixed Interest Rate Borrowing
16.76 This limit sets the maximum proportion of fixed interest borrowing that the
      Council may have in each period set out in the table below.

16.77 To have too much debt maturing in one period would expose the Council
      to interest rate risk. For example maturing debt may have to be
      refinanced in a year in which interest rates were very high. By limiting the
      amount of debt maturing in any 12 month period the Council minimises its
      interest rate risk on debt refinancing.

                                                            Table 49

            Fixed Rate Borrowing Maturity Limits
                                                                  Upper Limit Lower Limit
          Under 12 months                                                 10%          0%
          12 months and within 24 months                                  10%          0%
          24 months and within 5 years                                    40%         10%
          5 years and within 10 years                                     40%         10%
          10 years and above                                              80%         50%


                       Investments in Excess of 364 Days
16.78 The Local Government Act removes the limit on Council approved
      investments having to have a maturity date of 364 days or less. Councils
      may now invest for longer periods.

16.79 This provides the opportunity to earn higher investment returns and to
      have greater certainty over interest earnings.

16.80 Longer term investments are however more exposed to interest rate risk.
      For example at the moment an investment over three years at 5.5% may
      seem like good value. If interest rates rise to 6% in 18 months time the
      investment will start to look like poor value. Interest rates are volatile and
      the longer the investment period the greater the uncertainty.

16.81 Longer term investments are also more exposed to counterparty risk.
      Before entering into any investments in excess of one year the Council‟s
      counterparty list will need to be amended following an assessment of
      which institutions have sufficiently strong long term credit ratings for the



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          Council to feel confident of placing funds with them for periods in excess of
          one year.

16.82 If the Council makes longer term investments it must be sure that it does
      not need the money before the investment is due to mature.

16.83 For these reasons long term investments should be managed to control
      the risks attached to them. Final guidance is still to be confirmed by the
      ODPM.

16.84 Provisional limits have been set out in the table below. These limits are
      based on a prudent assessment of the balances that the Council sets aside
      year on year which are not required to fund the Council‟s cashflow
      requirements.

                                                            Table 50

            Investment Limits in Excess of 364 Days
                                                                    > 1 Year > 2 Years > 3 Years
                                                                       £000s     £000s     £000s
          Investments                                                 30,000    20,000    10,000


          Ratio of Financing Costs to Net Revenue Stream
16.85 The total cost of the Council‟s borrowings including interest, debt
      repayment and premiums and discounts as a percentage of the Council‟s
      net revenue stream is set out for both the HRA and the General Fund in
      the table below.

                                                            Table 51

           Ratio of financing costs to
              net revenue stream
                                                   2002/03        2003/04    2004/05    2005/06    2006/07
                                                     £000s           £000s      £000s      £000s      £000s
                                                    Actual        Estimate   Estimate   Estimate   Estimate
                                  Non-HRA            1.65%           1.65%      1.95%      2.05%      2.11%
                                      HRA           26.31%          25.68%     18.18%     18.16%     18.49%


                           New Investment Instruments
16.86 The Council‟s treasury policy statement requires that any amendments to
      the investment instruments that the Executive Director for Resources and
      Deputy Chief Executive is authorised to use are approved by full Council.

16.87 This report requests approval for the Executive Director for Resources and
      Deputy Chief Executive to utilise money market funds and cash
      management funds.

      Money Market Funds
16.88 Money market funds are pooled investment vehicles that are used to place
      short term deposits.

16.89 Money market funds must have a AAA credit rating and an average
      weighted maturity of invested funds of 60 days or less.




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16.90 What this means in practice is that in terms of their security they are more
      secure than the banks on the Council‟s counterparty list. The funds
      investments are more diversified than the Council‟s current investments
      and therefore the failure of any bank to whom the fund had invested
      would have a smaller impact on the Council than if the Council had
      invested in the bank directly.

16.91 The interest returns on investments are less than the average return that
      the Council earns. The fund would be used as an alternative to the Council
      placing funds overnight with the CoOp bank. There are times when for
      cashflow reasons the Council needs to hold cash on short term deposit.
      Sometimes the overnight interest rates earned on these funds are very
      low. A money market fund is likely to be able to offer better rates at times
      than overnight market rates.

16.92 Money Market funds therefore offer the potential for an enhanced
      investment return as well as reduced counterparty risk.


      Cash Management Funds
16.93 Money Market funds are primarily short term investment vehicles. Cash
      Management funds on the other hand invest for the longer term and may
      also invest in certificates of deposit and gilts as well as fixed cash
      deposits.

16.94 Cash Management funds are a way of diversifying investments that on
      their own may carry an increased risk but as part of a large fund offer the
      prospect of an increased return for a small increase in risk.

16.95 The level of risk can be managed by the nature of the investments and the
      maturity profile of investments which the Council authorises the fund
      manager to utilise.


                                                          Conclusion

        16.96 The economy is forecast to grow at a moderate rate in 2004/05.

16.97 Interest rates are forecast to rise to 4.5% as the bank of England attempts
              to control house price inflation and consumer credit growth.

  16.98 The main risk to the treasury strategy is higher interest rates which will
        increase the cost of the Council‟s new borrowing. These costs would be
          offset in part by increased earnings on the Council‟s cash balances.

    16.99 The Council‟s borrowing costs are forecast to be £31.2m in 2004/05.

 16.100 The Council is forecasting to earn £3.1m on its cash balances in 2004/05.

  16.101 The new prudential regime comes into effect from 1st of April 2004. The
        Council is proposing to enter into £4m pounds of additional borrowing in
                     2004/05 £4m in 2005/06 and £3m in 2006/07.

 16.102 The Council is recommended to approve the prudential indicators set out
                                    in section 7.




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  16.103 The report seeks approval of the Council to add Money Market Funds to
               the list of the Council‟s approved investment instruments.

  16.104 The report seeks approval of the Council to add Cash Managed Funds to
                the list of the Council‟s approved investment instruments.

          17 COMMENTS FROM PUBLIC ACCOUNTS SELECT COMMITTEE

17.1      The PAC have considered the savings proposals and reported their
          comments earlier. PAC considered the growth proposals at its meeting on
          20th January and their comments are included at Appendix F. Although it is
          for the Mayor to propose and the Council to make final decisions, best
          practice, as set out in the statutory guidelines for Councils with Executive
          arrangements under the 2000 Act, is for early involvement of the scrutiny
          process, with which the Council has complied.

                                                   18 OPTIONS

18.1      There are an almost infinite number of options, including savings and
          growth, available in setting the Council‟s budget and Council Tax. The
          process set out above has enabled the Council to deal with this in a
          structured manner to lead to the recommendations set out above. In
          terms of the revenue budget Appendix B gives a ready reckoner for
          different levels of expenditure and Council Tax.

18.2      An integral part of the Council‟s budget setting process is consultation with
          our residents, business ratepayers and staff representatives

18.3      Lewisham carries out a residents survey each year. A representative
          sample of residents, selected randomly, was interviewed in November
          2003 to track perceptions about Council services and image. Residents
          were asked to identify their top three areas of personal concern from a list
          of fourteen. Council tax came out as second overall in this list with 31%
          raising it as a concern. This compares with the 2002 survey where Council
          Tax came out as ninth overall with 17% raising it as a concern. (The full
          residents survey will be published later.) A similar London wide survey
          commissioned by the ALG, showed that overall 36% of Londoners raised
          Council Tax as a concern.

18.4      Business rates are set nationally by central Government. However, the
          Council has a statutory duty to consult with business ratepayers about its
          spending plans. An advertisement was placed in the local press on 14th
          January 2004 inviting members of the Lewisham business community to
          contact us for information about the 2004/05 budget proposals. The
          meeting will take place on 29th January. Officers will make a presentation
          of the budget strategy and priorities based on the financial survey,
          developments since such as the local government finance settlement, and
          the key issues set out in this report and specific proposals likely to be of
          interest to business. The comments of the meeting will be tabled at this
          meeting.

18.5      Directorates are consulting directly with Trade Unions on the proposed
          savings as appropriate.

                                    19 FINANCIAL IMPLICATIONS



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19.1      The financial implications are as set out in the report

                                        20 LEGAL IMPLICATIONS

          Capital Programme

          Generally
20.1      Generally only expenditure relating to tangible assets (e.g. roads,
          buildings or other structures, plant, machinery, apparatus and vehicles)
          can be regarded as being expenditure for capital purposes. (Section 40 of
          the Local Government and Housing Act (LGHA) 1989).

20.2      The Local Government Act 2003 (“the 2003 Act”) introduces a new
          “prudential” system of financial control replacing the current system of
          credit approvals, with a system whereby local authorities are free to
          borrow or invest so long as their capital spending plans are affordable,
          prudent and sustainable. Authorities are required to determine and keep
          under review how much they can afford to borrow having regard to the
          CIPFA Prudential Code of Capital Finance in Local Authorities. The Code
          requires that in making borrowing and investment decisions the authority
          is take into account the issues of affordability, prudence and sustainability,
          value for money, stewardship of assets, service objectives and practicality.

20.3      Authorities are also required to produce and keep under review for the
          forthcoming year a range of indicators based on actual figures and these
          are the indicators appearing at paragraphs 16.59-16.85 and 14.54 of the
          report. The Code says that movement may be made between the various
          indicators during the year by an authority‟s Chief Finance Officer as long
          as the indicators for total Authorised Limit and total Operational Boundary
          for external debt remain unchanged. Any such changes are to be reported
          to the next meeting of the Council. It is recommended that authority to
          make such changes is delegated to the Executive Director for Resources.

20.4      Under Section 5 of the 2003 Act the prudential indicator for the total
          Authorised Limit for external debt is deemed to be increased by an amount
          of any unforeseen payment which becomes due to the authority within the
          period to which the limit relates which would include for example
          additional external funding becoming available but not taken into account
          by the authority when determining the Authorised Limit. Where Section 5
          of the Act is relied upon to borrow above the Authorised Limit the Code
          requires that this fact is reported to the next meeting of the Council

20.5      The Capital programme set out in the report considers these issues

          Budget approval process
20.6      The Local Government Act 2000 (“the 2000 Act”) and Regulations and
          Guidance made under it says that it is the responsibility of the full Council
          to set the Council‟s budget including all its components and any plan or
          strategy for the control of the Council's capital expenditure. Regulations
          provide that it is for the Executive to have overall responsibility for
          preparing the draft budget for submission to the full Council to consider.
          Once the budget has been set it is for the Mayor & Cabinet to make
          decisions in accordance with the statutory policy framework and the
          budgetary framework set by the Council.
            The Statutory Guidance recommends that authorities‟ standing orders or
            financial regulations should contain provisions to enable the Executive to



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            take decisions which are contrary to or not wholly in accordance with the
            budget or capital plan provided that any additional costs incurred can be
            offset by additional income, contingency funds or savings from elsewhere
            within the budgetary allocations to Executive functions.


          Overprogramming
20.7      Members have a duty to ensure that the Council acts lawfully. The Council
          must set and maintain a balanced budget and must take steps to deal with
          any projected overspends and identify savings or other measures to bring
          budget pressures under control. This may be by way of savings, slippage
          of other schemes or contributions from revenue. If a level of
          overprogramming is built into the programme to reflect likely slippage
          then officers will need to manage the programme to ensure that actual
          expenditure does not exceed the resources available.

          Re-cycling of capital receipts
20.8      Under the Local Government & Housing Act 1989 and related Capital
          Finance Regulations the Council is obliged to set aside for debt redemption
          purposes a proportion of any capital receipts derived from the disposal of
          land held for housing purposes. This requirement was subject to certain
          exemptions, often referred to as “in/out rules” under the Regulations. The
          2003 Act introduces a replacement regime under which the requirement to
          setaside part of housing receipts for debt redemption is abolished and
          replaced with a new pooling requirement. Under the pooling
          arrangements authorities are required to pay to the Secretary of State a
          proportion of capital receipts from disposals of housing land, the
          proportions being 75% for land which includes dwelling-houses and 50%
          for other land. The Local Authorities (Capital Finance and
          Accounting)(England) Regulations 2003 allow authorities to reduce the
          amount to be paid to the Secretary of State by the aggregate of:
                the authority‟s administrative costs of the disposal
                amounts spent within the preceding 3 years in improving the land
                the authority‟s “total capital allowance”.

          The “total capital allowance” for this purpose is made up of expenditure
          incurred by the authority on various types projects and items specified in
          the Regulations including the provision of affordable housing, regeneration
          projects, acquiring interests in land and other improvements to facilitate
          disposal and expenditure on buying back properties previously sold under
          the RTB. These items which make up the “total capital allowance” are
          similar, although not identical, to the “in/out” rules under the old regime‟

          Revenue Budget and Council Tax

20.9      The Council must calculate its Budget Requirement for the year in
          accordance with Section 32 of the Local Government Finance Act (LGFA)
          1992. This calculation for 2004/05 must be made before 11 th March 2004.

20.10 Although the Council must set the amount of Council Tax for each of the
      categories of dwellings in its area before 11th March 2004, it cannot do so
      before 1st March 2004 unless all the preceptors have issued their precepts.
      (Section 30(2) and Section 30(7) of the LGFA 1992). Therefore it is not
      possible to set the Council Tax at the Council meeting on 11 th February.
      Additionally the LGFA 1992 provides that the Council may not set an
      amount of Council Tax earlier than the date of issue to the authority of the
      last precept capable of being issued to it by a major precepting authority



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          (or 1st March if earlier) (Section 30(6)). It cannot adopt a precept prior to
          11th February. Consequently discussion about the budget requirement,
          council tax and GLA precept at any Council meeting prior to 11 th February
          cannot take final decisions. It may make recommendations based on
          assumptions but the Council will set the budget and Council Tax at a
          subsequent meeting currently scheduled for 3rd March

20.11 The Council‟s constitution provides for the Mayor to make proposals on the
      budget but the final decision rests with the Council. If the Council does not
      accept the Mayors proposals it may object to them and ask him to
      reconsider. The Mayor must then reconsider and submit proposals
      (amended or unamended) back to the Council which may overturn them
      by a two-thirds majority.

20.12 The Council is required to consult representatives of non-domestic
      ratepayers about its proposals for revenue and capital expenditure
      (Section 65 of the LGFA 1992). The Council has to take into account the
      responses of the consultation with an open mind and these responses will
      be reported to the Council

20.13 In considering the report Members must:

                         Understand the law that regulates the decision-making power
                       and give effect to it („direct itself properly in law‟);
                       Take into account all relevant matters, as required generally
                       and by the particular law at issue;
                       Leave out of account irrelevant considerations;
                       Act for a proper purpose, exercising powers for the public
                       good;
                       Not reach a decision which no authority could reasonably
                       reach;
                       Comply with the rule that local government finance is to be
                       conducted on an annual basis;
                       Act with procedural propriety, in accordance with the rules of
                       fairness; and
                       Ensure that action taken is properly authorised by the authority
                       itself or those to whom the authority has delegated the power to
                       do so.

20.14 The Council‟s discretion must not be restricted by previous commitments it
      may have given and it should make its decision in the light of present
      circumstances.

20.15 Members need to consider the consequences of designation by the Deputy
      Prime Minister under the „capping‟ provisions of the LGA 1999.

      Revenue Budget
20.16 The Council must calculate its Budget Requirement in accordance with
      Section 32 of the Local Government Finance Act 1992. The calculation
      must be made before 11 March 2004.

20.17 Under Section 32(2)(a) to (e) of the LGFA 1992, as amended, the Council
      must make a calculation of:




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                           (i) The expenditure which the authority estimates it will incur in
                          the year in performing its functions and will charge to a revenue
                          account for the year (Section 32 (2)(a));

                           (ii) Such allowance as the authority estimates will be
                          appropriate for contingencies in relation to expenditure to be
                          charged to a revenue account for the year (Section 32(2)(b));

                           (iii) The financial reserves which the authority estimates it will
                          be appropriate to raise in the year for meeting its estimated
                          future expenditure (Section 32(2)(c));

                           (iv) Such financial reserves as are sufficient to meet so much
                          of the amount estimated by the authority to be a revenue
                          account deficit for any earlier financial year as has not already
                          been provided for (Section 32 (2)(d)); and

                           (v) Any amounts which it estimates will be transferred form its
                          General Fund to its Collection Fund pursuant to a direction from
                          the Secretary of State under Section 98(5) of the LGFA 1988 and
                          charges to a revenue account for the year other than any
                          amounts which it estimates will be transferred in accordance with
                          a direction under that sub-section relating to the difference
                          between amounts in respect of Community Charges credited and
                          charged to a revenue account for any earlier financial year
                          (Section 32 (2)(e)).

20.18 Under section 32(3)(a) to (c) of the LGFA 1992, as amended, the Council
      must make a calculation of:

                            The sums which it estimates will be payable for the year into
                          its General Fund and in respect of which amounts will be credited
                          to a revenue account for the year, other than sums which it
                          estimates will be so payable in respect of redistributed non-
                          domestic rates and revenue support grant. (Section 32(3)(a));

                           Any amounts which it estimates will be transferred from its
                          Collection Fund to its General Fund pursuant to a direction from
                          the Secretary of State for the Environment under Section 98(4)
                          of the LGFA 1988 and credited to a revenue account for the year
                          other than any amounts which it estimates will be so transferred
                          in accordance with a direction under that sub-section relating to
                          the difference between amounts in respect of Community
                          Charges credited and charged to a revenue account for any
                          earlier financial year (Section 32(3)(b)); and

                           The amount of the financial reserves which the authority
                          estimates that it will use in order to provide for the items
                          mentioned in paragraphs 20.17 (i), (ii) and (v) above (Section
                          32(3)(c)).

20.19 Under Section 32(4) of the LGFA 1992 if the aggregate calculated under
      sub-section 32(2) of the Act (paragraph 20.17) exceeds that calculated
      under sub-section 32(3) of the Act (paragraph 20.18 ), the authority must




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          calculate the amount equal to the difference. The amount so calculated
          shall be its Budget Requirement for the year.

      Council Tax
20.20 Section 33 (1) of the LGFA 1992, as amended, requires Lewisham to
      calculate its Basic Amount of Council Tax for 2004/05, as follows:

          (R-P)/T

          where:

          R is the Council‟s 2004/05 Budget Requirement (see paragraph 10.4);

          P is the aggregate of the sums which the authority estimates will be
          payable to it in 2004/05 in respect of redistributed non-domestic rates and
          revenue support grant, increased or reduced by the amount calculated in
          accordance with the following formula:

          W+ X – (Y +Z)

          Where:

          W is the amount of any sum which the authority estimates will be
          transferred in the year from its Collection Fund to its General Fund in
          accordance with Section 97(3) of the 1988 Act as substituted by Part III of
          Schedule 10 of the 1992 Act (i.e. a share of any surplus on its Collection
          Fund);

          X is the amount of any sum which the authority estimates will be:

          (i)     Transferred from its Collection Fund to its General Fund in
          accordance with a direction under Section 98(4) of the Act relating to the
          difference between amounts in respect of community charges credited and
          charged to a revenue account for any earlier financial year; and

          (ii)       Credited to a revenue account for the year;

          Y is the amount of any sum which the authority estimates will be
          transferred in the year from its General Fund to its Collection Fund in
          accordance with section 97(4) of that Act as substituted by Part III of
          Schedule 10 of the 1992 Act (i.e. a share of any deficit on its Collection
          Fund); and

          Z is the amount of any sum which the authority estimates will be:

          (i)     Transferred from its General Fund to its Collection Fund in
          accordance with a direction under Section 98(5) of that Act relating to he
          difference between the amounts in respect of community charges credited
          and charged to a revenue account for any earlier financial year; and

          (ii)       Charged to a revenue account for the year.

          T is the Council‟s 2004/05 Tax Base as calculated at the Council meeting
          on 28th January 2004 in accordance with Section 35(5) of the LGFA 1992.




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20.21 The application of the formula set out in paragraph 20.20 gives a Basic
      Amount of Tax which represents the amount of Lewisham‟s tax for its own
      services for Band D dwelling within the Borough.

20.22 Under Section 36 of the LGFA 1992 the Council has to calculate the
      amount of tax applicable to dwellings in each valuation band (i.e. the
      amount for each of the categories of dwellings). This is calculated by
      multiplying the Basic Amount of Tax calculated as in paragraph 20.20 by
      the number which, in the proportion set out in Section 5(1) of the LGFA
      1992, is applicable to dwellings listed in particular valuation band divided
      by the number which in that proportion is applicable to dwellings listed in
      valuation band D.

20.23 Section 40 of the LGFA 1992 requires Major Precepting Authorities (in the
      Council‟s case only the GLA) to issue precepts to Lewisham before 1st
      March 2004 for 2004/05. These precepts must state the amount of tax
      calculated by each Major Precepting Authority which is applicable to each
      of the categories of dwellings.

20.24 The amounts of Council Tax to be set for Lewisham‟s residents in 2004/05
      are the aggregate of Lewisham‟s Basic Amounts of Tax for each of the
      categories of dwellings calculated in paragraph 20.22 and the Major
      Precepting Authorities Amounts of Tax calculated for each of the
      categories of dwellings in paragraph 20.23.


    Robustness of estimates and adequacy of
financial reserves
20.25 The Local Government Act 2003 s25 requires, when the authority is
      making its calculations under s 32 of the Local Government Finance Act
      1992, the Chief Finance Officer to report to it on

                 (a) the robustness of the estimates made for the purposes of the
          calculations, and

                     (b) the adequacy of the proposed financial reserves.

          The comments of the Executive Director for Resources and Deputy Chief
          Executive are contained in Appendix H, and these will be reported to the
          Council.

          Schools Budget.

20.26 Attention is drawn to paras. 8.15 to paras 8.16 which summarise the
      requirements of the Education Act 2002, as amended by the Local
      Government Act 2003..

                          21 CRIME AND DISORDER IMPLICATIONS

21.1      Officers were asked to identify any implications for crime and disorder in
          their growth proposals and these were taken into account when these bids
          were considered.

21.2      There are no other specific implications relating to this report.




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                                   22 EQUALITIES IMPLICATIONS

22.1      The revenue (including one off funding) and capital bids have been subject
          to an equalities impact assessment. All the proposals to be funded will
          enable the Council to deliver accessible services to the whole of Lewisham.
          In particular, the capital bids for excluded young people and young people
          with disabilities, (ref. 16 and 18) and the reopening of Moonshot (ref 17)
          will support the Council's duties under the Race Relations (Amendment)
          Act 2000 to promote equality of opportunity and good relations between
          groups. The Social Care and Health bid (ref 11) to provide electronic Social
          Care and Health records will support the Council in achieving its target of
          level 5 of the Equality Standard by 31st March 2005. This target is
          predicated on sound information systems which the proposed electronic
          record system will provide.

22.2      No adverse impacts for equality groups have been identified.

22.3      In relation to the Housing Capital Programme targeting resources in the
          areas of greatest need will significantly benefit a large number of residents
          many of whom will be women, black, elderly, people with disabilities and
          on low income.

22.4      There are no other specific implications relating to this report.

                               23 ENVIRONMENTAL IMPLICATIONS

23.1      Works carried out under the Housing Investment Programme will lead to
          greater energy efficiency, reduced maintenance costs and lower fuel bills
          for residents and will also reduce the level of harmful gases being released
          into the air.

23.2      Officers were asked to identify any implications for the environment in
          their growth proposals and these were taken into account when these bids
          were considered.

23.3      There are no other specific implications relating to this report.

                                               24 CONCLUSION

24.1      Section 25 of the Local Government Act 2003 requires the chief financial
          officer to report to an authority when it is making the statutory
          calculations required to determine its council tax. The authority is required
          to take the report into account when making the calculations. The report
          must deal with the robustness of the estimates included in the budget and
          the adequacy of the reserves for which the budget provides.

24.2      The ODPM‟s Local Government Circular No. 2 suggests that appropriate
          information and advice is given at earlier stages when the draft budget is
          under consideration by, for example, the Executive.

24.3      CIPFA‟s Local Authority Accounting Panel Bulletin 55 „Guidance Note on
          Local Authority Reserves and Balances‟ gives guidance to local authority
          finance directors on the establishment and maintenance of local authority
          reserves and balances. (The ODPM circular makes specific reference to this
          guidance). In drafting this commentary the Executive Director for
          Resources and Deputy Chief Executive has taken account of this advice.




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24.4      A draft of the CFO‟s statement that will be made to the Council is attached
          at Appendix H.

            Concluding remarks

24.5      This report has set out an integrated revenue and capital financial plan for
          2004/05 that will direct funding to maintain key Council services as well as
          provide new resources to improve key outputs committed in the Best
          Value Performance Plan. This Budget for next year continues to be
          formulated in the context of a 3-year rolling strategy that should ensure
          the authority remains on course to deliver its programme of business
          without internal or external shocks in any one year. Similarly, on a
          positive side the Council has also aggregated resources to build an exciting
          capital programme.

                             25 CALL IN AND URGENCY
25.1      Normally Executive decisions are subject to call in. However if the call in
          applies the decision to be made by Mayor & Cabinet cannot be reported to
          the Overview and Scrutiny Business Panel until the meeting on Monday
          16th February, after the Council meeting on 11th February. The Chair of
          Council has therefore been asked to agree in writing to the matter being
          treated as urgent and should not be subject to call in under rule E15, prior
          to referral to Council on 11th February, because of the need to resolve
          budget issues in time for the bills to be delivered early in March.

                   26 BACKGROUND DOCUMENTS AND ORIGINATOR

            Short Title of                             Date       File Location   Contact         Exempt
            Document                                                              Officer         Informa
                                                                                                  tion

            S Bishop letter to CEOs                               1st floor       Martin Butler
                                                       19/11/03   Lewisham
                                                                  Town Hall
            Settlement Briefing                        17/12/02   1st floor       Martin Butler
                                                                  Lewisham
                                                                  Town Hall
            Response to provisional                    13/2/03    1st floor       Martin Butler
            settlement                                            Lewisham
                                                                  Town Hall

          For further information on this report please contact:

          Generally
          Rob Whiteman                    Executive Director for Resources & Deputy Chief
                                          Executive on 020 8314 8013


Julie Bennett     Head of Corporate Finance &
      Property on
                  020 8314 8736
          For revenue
          Martin Butler                   Group Manager Budgets and Financial Planning on
                                          020 8314 6539
          For OSCP


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          Adam Barrett                    Group Manager Capital and Treasury on
                                          020 8314 7182
          Nigel Mascarenhas               Team Leader Capital and Treasury on
                                          020 8314 9299

          For treasury
          Adam Barrett                    Group Manager Capital and Treasury on
                                          020 8314 7182

          For HIP
          Robert Weyman                 Acting Head of Strategic Development
                                         on 020-8314 6401.

          Matthew Drake                   Acting Capital Programme Manager on
                                           020-8314 7187




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MAYOR AND CABINET

   Report Title                         APPOINTMENT TO THE ADOPTION AND PERMANENCE PANEL

Key Decision                                                                             Item No. 11

Ward

Contributors                                     CHIEF EXECUTIVE/HEAD OF COMMITTEE BUSINESS

Class                                                          Part 1         Date: 4 FEBRUARY 2004




    1.        Purpose of the Report

                  To make an appointment to the Adoption and Permanence
                   Panel for the remainder of the current municipal year.

    2.        Recommendation

                 To appoint Councillor Nash to serve on the Adoption and
              Permanence Panel for the remainder of the municipal year.

    3.        Background

            3.1 Following the resignation of Councillor Onuegbu from the
         membership of the Adoption and Permanence Panel it is necessary
         to appoint another member of the Council to serve on the Panel for
                        the remainder of the municipal year.

    3.2       It is proposed that Councillor Nash be appointed to fill the vacancy on
              the Panel for the remainder of the municipal year.

    4.        Financial Implications

                    There are no financial implications arising from this report.

    5.        Legal Implications

                     There are no specific implications arising from this report.

    6.        Urgency




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          It has not been possible to give 5 clear days notice of this
  matter and in accordance with the Provisions of Regulation 15 of the
   Local Authorities (Executive Arrangements)(Access to Information)
   Regulations 2000, written notice has been given to the Chair of the
    Overview & Scrutiny Business Panel and the report made publicly
                  available by posting at the Town Hall.

BACKGROUND PAPERS

None

If there are any queries on this report, please contact Mike Brown,
Head of Committee Business, extension 48824.




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