MAYOR AND CABINET
Date: WEDNESDAY, 4 FEBRUARY 2004
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
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.
Contributors EXECUTIVE DIRECTOR FOR RESOURCES & DEPUTY CHIEF EXECUTIVE
Class Part 1 Date:
4th February 2004
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.
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
Government Finance Settlement) for consideration by the Council on 11th
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
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
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
3.4 The use of corporate once-off resources as covered in section 7 of this
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
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%.
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
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
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.
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)
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
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
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
3.30 the transfer of £0.350m to Social Care and Health as noted in
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
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
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
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
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
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
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
Section 12 provides the calculations for setting the Council Tax for 2004/05 on
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
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
will be reported at the meeting) and the unions.
Section 19 contains the financial implications of the report
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.
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
Overview Budget Briefing Paper for 2004/05 – dated
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
Appendix L 2004/05 Recommended once-off growth bids – detailed
Appendix M SC&H Voluntary Sector Budget Savings for 2004/05
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
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.
The Council cannot agree the budget until it has received the GLA‟s
5.3 There are two external influences which cause uncertainties within this
The final local government finance settlement is not known at
the time of writing this report (but is expected shortly before
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
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.
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
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
5 Savings Target of £11.95m in £2.5m in 04/05
03/04 as set out in
Budget Issues report 19
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
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
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
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
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
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
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
Education & 166.701 166.779 0.078 0.150 0.665
Regeneration 24.784 24.705 (0.079) 0.028 0.178
Resources – 9.936 9.776 (0.160) (0.015) (0.056)
Social Care & 86.137 90.229 4.092 4.130 3.906
Sub-Total 287.558 291.489 3.931 4.293 4.693
Central 29.406 28.676 (0.730) (0.246) (0.242)
Asylum 890 890
Capital 39.697 39.697 0 0 0
Corporate (14.365) (16.457) (2.092) (1.900) (1.900)
Working (2.000) (2.000) (2.000) (2.000)
Total 342.296 342.295 (0.001) 0.147 0.551
to be reserved
for spend in
Revised 342.296 342,374 0.078
* 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
*** 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
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
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
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.
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
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
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
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
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
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
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
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.
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
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.
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
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
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.
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 –
2003/04 Schools Budget (DfES) 140.454
Increase in FSS (provisional) 7.439
Increase in Specific Formula Grant
(EiC and Excellence Clusters) 0.165
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
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
“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
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
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
financial year that urgent attention is required to that aspect of the
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
recommendations for some revenue bids to be allocated once
off budget growth from the Public Service agreement(PSA)
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
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.
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
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,
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.
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
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
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.
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
Additional resources £0.125m
To Fairer charging Team
Commn review of Adults £0.100m
Domiciliary care (commn. £0.150m
Domiciliary care (new £0.151m
Finance support additional 3 officers £0.100m
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 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.
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
Special Grant - Planning £0.762m
Balance of 2003/4 growth £0.016m
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
The growth process mirrored that used in 2003/04 and involved officers in
directorates preparing bids for their directorate‟s DMT scrutiny and
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
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
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
Link to capital bids
Could the bid be joined up with others (across directorate)
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
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.
9.15 2004/05 Bids recommended for
E&C1/SC&H Identification Referral & Tracking £150k *
E&C2 Black & Ethnic Minority attainment £150k
E&C5 Safeguarding children-behaviour &
E&C7 Youth – Positive Action & Young £ 75k
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
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.
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
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
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
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
Schools 2004/05 revenue £226k
2005/06 revenue £226k
Other GF 2004/05 revenue £624k
Budgets capital £624k
2005/06 revenue £624k
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.
Potential Predicted %
No Target Directorate Reward Reward
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
3 Double Light Rail Use by Regeneration £602,854 £602,854 10
2010 and to 13.3 million in 0
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
6 Significantly increase the Regeneration £602,854 £0 0
average SAP rating of
Council homes throughout
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
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
contribution adoption can
make by providing
permanent families for
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:
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
RES06 Electronic Data record mgmt £496k (links to capital
(EDRM) for SC&H/Council
REG Britain in Bloom campaign £ 50k (M)
SCH2 Crime & Disorder Audit £ 60k
SCH06 Single Assessment process £242k
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
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
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
well as for revenue savings and has enhanced capacity for evidence based
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
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
Proposed Growth Bids
Recom m ended
Recom m ended
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.
Growth bid proposals 2004/05 linked to Community Strategy Priority
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
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
enterprise and business growth:
foster enterprise and sustainable
4 £20 £340
business growth, including the creative
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
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
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
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.
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.
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
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
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 independent action
and ensure the centrality of community
involvement in public service decision-
ensure equity in service delivery: design
9 diversity into local institutions and design 1 £242
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.
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 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:
E&C Regeneration SC&H Resources
£k £k £k £k
Saving 720 652 550 734
% 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
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.
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.
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
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
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.
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
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.
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.
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.
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
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.
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
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
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
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
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.
TABLE 9: RECOMMENDED BUDGET REQUIREMENT FOR 2004/05
2003/04 Budget 342.296 5
Add: SSA readjustment 2.261 0
2004/05 Base Budget 344.657 5
Schools passporting 7.439 0
Non – Schools Inflation 5 187 0
Non – Schools Pressures/Growth 13.382 5
Savings (other than for redirection) 2.656 0
Recommended 2004/05 Budget 368.010 0
11 LOCAL GOVERNMENT FINANCE SETTLEMENT 2004/05
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
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
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
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
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
and Rent allowances as well as transfer to direct grant of Environment
TABLE 10: COMPARISON OF THE 2003/04
SETTLEMENT FSS, & ADJUSTED FSS AND
2004/05 PROVISIONAL SETTLEMENT FSS
FSS Block 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
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
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%.
TABLE 11: CALCULATION OF FORMULA
GRANT ALLOCATION IN 2004/05
Less: Assumed Notional Council Tax 80.948372
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
Comprehensive Performance Assessment
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
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
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.
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.
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
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
Tax base for 2004/05
The projected deficit in the collection fund as at 31st March
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
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.
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
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
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
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
Band Property Fraction Lewisham GLA Total
Value Council Precept Council 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.
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
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.
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
of Best Value will feed through into the budget planning process for
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.
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
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
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
Working smarter – Making better use of Council office
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
13.12 Table 14 outlines an indicative timetable for the Budget process, which
(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
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
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
October Regular monitoring reports on both revenue and capital
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
2004 Regular monitoring reports on both revenue and capital
Late Final settlement
February Regular monitoring reports on both revenue and capital
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
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
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
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
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
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
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
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.
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
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
Prudential 0 0 0 0 0
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)
(Over)/under 7,452 2,065 (750) 2,000 10,767
* the expenditure figure assumes full spend of the £2.8m investment
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).
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
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
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
14.27 Expansion of New Woodlands EBD Primary school and Closure of
Anerley EBD secondary school (Education & Culture Bid no. 16 for
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
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.
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
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
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.
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
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
14.35 New School Preparatory Works (Education & Culture - Bid no. 26
This bid is in connection with preparatory costs for the New school which
are currently estimated at £2.1m.
14.36 Youth facility for Bellingham (Education & Culture bid no.36 for
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
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
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
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
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
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
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
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
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)
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:-
Occupational Therapy – trfr from revenue (0.180)
Highways – trfr from revenue (0.150)
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)
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
HIP Overprogramming limit of 30% or £26m over 3 year
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
the level of Prudential borrowing over the next three years, the revised
OSCP position is as below.
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
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)
(Over)/under (869) (2,245) (860) 2,000 (1,974)
14.53 The core OSCP and Prudential resource allocations can be summarised as
follows across the directorates:
E&C Regeneration SC&H Resources
£k £k £k £k
Resource 12,548 12,078 1,280 305
% 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.
2002/03 2003/04 2004/05 2005/06 2006/07
£000s £000s £000s £000s £000s
Actual Estimate Estimate Estimate Estimate
2,784 3,643 2,412 60 60
1,495 2,849 1,491 500 -
17,726 24,840 23,696 6,747 1,200
8,025 14,448 9,898 9,146 7,455
- 3,358 2,017 6,000 6,000
5,767 21,572 22,305 16,669 13,018
35,797 70,710 61,819 39,122 27,733
40,704 46,101 33,610 32,491 21,691
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.
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.
15 HOUSING CAPITAL PROGRAMME
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.
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
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).
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
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
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
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
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
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.
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
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
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 -
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.
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
Aids and Adaptations (resources -£0.350 -£0.350 -£0.350
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
Single Regeneration Scheme (SRB) £4.229 £3.196 £0
Capital Expenditure from Revenue £1.500 £1.500 £1.500
Sub Total £55.915 £49.160 £34.709
Over-programming £11.306 £9.730 £6.815
Anticipated Programme £67.220 £58.890 £41.524
Definitions of Funding Categories
Annual Capital Grant (ACG)
15.27 This forms the bulk of the HIP allocation and is in effect a borrowing
Disabled Facility Grant (DFG)
15.28 This is exchequer support to the private sector for renovation grants for
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
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.
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.
Estimated 2003/04 2004/05 2005/06
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.
Estimated 2004/05 2005/06 2006/07
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)
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
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.
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
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.
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
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.
Contractually Committed Schemes Amount
Silwood Estate (SRB5) HIP Contribution £1,027,000
(additional to the amount already
contained within the carry over figure
Silwood Estate (SRB5) Grant Contribution £4,229,000
Carry Over from Previous Years (previous £2,789,000
years programme which exceeded
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
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.
2004/05 2005/06 2006/07 Total
Current £174,400 £2,382,200 £0 £2,556,600
Revised HIP £1,201,400 £5,779,200 £5,054,000 £12,034,600
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
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
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
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
BREAKDOWN 2004/05 2005/06 2006/07 TOTAL
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 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 &
KENDER PARTNERSHIP WORKS £710,000 £470,000 £1,180,000
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
THE FORESHORE ROOFS £38,700 £38,700
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 EFFICIENCY WORKS
CONTRACT 24 £46,100 £46,100
ENERGY EFFICIENCY WORKS
CONTRACT 25 £51,100 £51,100
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
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
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
15.61 It is recommended that Mayor and Cabinet agree this year's allocation of
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
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
Current Decent Homes Schemes
Priority Estate Site Assembly Schemes (Kender, Honor Oak, Sundermead
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
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
TABLE 28: -Site Assembly 2004/05 2005/06 2006/07
schemes (Allocations Already
Committed / Approved for Future
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
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
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
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.
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-
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
Area Address No
Deptford Ludwick Mews 3
Forest Hill Kelmscott, 1
Homeless Mayfield 47 Burnt Ash Hill 2
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
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.
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.
Scheme Description of Works Estimate
11 & 13 Lawrie Park and Underpinning £50,000
Mayow Road Damp proofing and upgrade £22,500
of ventilation system
Kender, Ashlee, Mayfield, Refurbishment £403,200
Rokeby and 11 & 13 Lawrie
Ashlee, 89 Hurstbourne Renew windows £92,400
Rd.,45 Carholm Rd.,
John Baird Court
15.79 It is recommended that Mayor and Cabinet approve £0.570m expenditure
for the schemes noted in table 32 above.
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.
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
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.
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
15.88 It is recommended that Mayor and Cabinet approve £1.000m for these
studies in 2004/2005.
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
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
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
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.
No. of Scheme Address Type of Works Estimate
1 69 Henry Cooper Way underpinning of flank 22,500
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
2 16 Peak Hill Gdns structural works incl. 29,000
flooring & flank wall
2 58 Wood Vale underpinning 24,000
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.
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.
RGRA 2004/05 2005/06 2006/07
Bowness Road – Building £22,100 £0 £0
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
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.
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.
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.
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.
2002/2003 2003/2004 2004/2005 Total
£0.6m £1.05m £1.05m £2.7m
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
15.107 It is recommended that Mayor and Cabinet agree that £0.150m is set
aside to carry out these works.
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
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
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
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:
Interest Rate Forecast
Borrowing and Lending Strategy
New Lending Instruments
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
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.
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.
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.
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
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.
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.
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
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
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.
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.
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%.
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
LBL Debt Repayment Profile
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%
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
Effect of Lower Interest Rates
16.53 Lower interest rates than the central interest rate forecasts will have the
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%.
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
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.
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.
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.
Operational boundary for external
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
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.
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
16.72 The Council‟s investment and debt portfolio‟s are therefore heavily biased
towards fixed rate borrowings and investments.
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
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
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.
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
Council to feel confident of placing funds with them for periods in excess of
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
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
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.
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
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.
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
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.
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.
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.
18.1 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
18.5 Directorates are consulting directly with Trade Unions on the proposed
savings as appropriate.
19 FINANCIAL IMPLICATIONS
19.1 The financial implications are as set out in the report
20 LEGAL IMPLICATIONS
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
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.
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
(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
Not reach a decision which no authority could reasonably
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
Ensure that action taken is properly authorised by the authority
itself or those to whom the authority has delegated the power to
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
20.15 Members need to consider the consequences of designation by the Deputy
Prime Minister under the „capping‟ provisions of the LGA 1999.
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:
(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
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
calculate the amount equal to the difference. The amount so calculated
shall be its Budget Requirement for the year.
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 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)
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
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
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.
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
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
(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
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
21.2 There are no other specific implications relating to this report.
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
23.3 There are no other specific implications relating to this report.
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.
24.4 A draft of the CFO‟s statement that will be made to the Council is attached
at Appendix H.
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
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
S Bishop letter to CEOs 1st floor Martin Butler
Settlement Briefing 17/12/02 1st floor Martin Butler
Response to provisional 13/2/03 1st floor Martin Butler
For further information on this report please contact:
Rob Whiteman Executive Director for Resources & Deputy Chief
Executive on 020 8314 8013
Julie Bennett Head of Corporate Finance &
020 8314 8736
Martin Butler Group Manager Budgets and Financial Planning on
020 8314 6539
Adam Barrett Group Manager Capital and Treasury on
020 8314 7182
Nigel Mascarenhas Team Leader Capital and Treasury on
020 8314 9299
Adam Barrett Group Manager Capital and Treasury on
020 8314 7182
Robert Weyman Acting Head of Strategic Development
on 020-8314 6401.
Matthew Drake Acting Capital Programme Manager on
MAYOR AND CABINET
Report Title APPOINTMENT TO THE ADOPTION AND PERMANENCE PANEL
Key Decision Item No. 11
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.
To appoint Councillor Nash to serve on the Adoption and
Permanence Panel for the remainder of the municipal year.
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.
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.
If there are any queries on this report, please contact Mike Brown,
Head of Committee Business, extension 48824.