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Medium Term Financial Strategy 200809 to 201213

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Medium Term Financial Strategy 200809 to 201213 Powered By Docstoc
					Medium Term Financial Strategy

        2008/09 to 2012/13




           Update July 2007

 Building a bigger, better, brighter Corby
                  Medium Term Financial Strategy – 2008/09 to 2012/13

Contents                                                                 Page

Introduction and Purpose                                                    2
Summary of Financial Projections                                            2
Link to One Corby, “Performance Matters”, Service Plans and Strategies     2-3
Overall Strategic Approach                                                  3
Capital Programmes
       Council Resources                                                     4
       Revenue Impact of Capital Expenditure                                 4
       Partnership Resources                                                 4
       Section 106 Contributions                                             5
       Identification and Prioritisation of Bids                             5
       Civic Hub and Parklands Gateway                                     5-6
       Swimming Pool                                                         6
       Decent Homes and Housing Improvements                                 6
       Housing Regeneration                                                  6
       Projected Programme                                                   6
General Fund Revenue
       Overall Projections and Balances                                      7
       Formula Grant                                                         7
       LABGI Grant                                                           8
       Council Tax                                                           8
       Interest Income                                                       8
       Commercial Rental Income                                              9
       Fees and Charges                                                      9
       Partnership Working                                                   9
       Impact of Growth                                                   9-10
       Base Budget Changes                                                  10
       Single Status                                                        10
       Service Development                                                  10
       Efficiency Savings                                                   10
Housing Revenue Account
       Rental Income                                                       11
       Sales and Demolitions                                               11
       Voids Management                                                    11
       Contribution to Government Pool – “Negative Subsidy”                11
       Expenditure and Efficiency                                          11
       HRA Projections and Balances                                        11
Efficiency Strategy                                                      12-14
Sensitivity, Risk Assessment and Levels of Reserves                      15-17
Integrated Business and Financial Planning                                 17
Appendix 1 – Capital Programme Projections                                 18
Appendix 2 – General Fund Revenue Projections                              19
Appendix 3 – Housing Revenue Account Projections                           20
Introduction and Purpose

This is the third annual update of the Medium Term Financial Strategy, originally agreed in
July 2004. It includes some significant changes in assumptions, to reflect our up to date
understanding and covers the five-year period from April 2008 to March 2013. It will continue
to be updated annually in the light of changing circumstances and developments. In
particular, the impact of the Comprehensive Spending Review and any future changes to the
Local Government funding system could have a significant impact, which cannot currently be
assessed. However, the key underlying strategic principles remain unchanged – maximising
service delivery whilst maintaining relatively low Council Tax and rent increases, and
maximising funding from external partners in order to secure value for money for the
residents of the Borough.

The purpose of this strategy is to agree a set of principles and projections that underpin the
annual budget process and ensure that the Council can achieve its ambitions for service
delivery and performance within the resources available. It covers General Fund Revenue,
the Housing Revenue Account and the Capital Programme.

This document starts by setting out the overall strategic approach and then provides detail
regarding the overall shape of budgets and key significant projects. The section relating to
the capital programme represents the Capital Strategy for the Council.

Summary of Financial Projections

Based on the assumptions set out in this strategy, the overall financial position is
manageable but challenging:
Capital Resources – The total capital programme for the current and subsequent five years is
around £99.9m. This is funded entirely by current and future capital receipts and grants. The
projected resources in hand by March 2013 are £2.6m, or around 2.6% of the total
programme. A provision of £0.25m has been included in order to fund any new schemes or
increases in current schemes. There is therefore no spare capacity within the programme,
given the risk-based target set out in the MTFS.

General Fund – the current projections, after allowing for significant efficiency savings over
the next three years, show a funding gap of £600k in 2010/11 once current reserves have
been fully utilised. It is anticipated that this gap can be funded by (Local Authority Business
Growth Incentive (LABGI) grant over the medium term (see later for details). Longer term
projections show an improving position, achieving balance with scope for service
development growth from 2014/15.

Housing Revenue Account – based on current projections regarding the scale of negative
subsidy increases, and even allowing for the achievement of targeted reductions in void
levels and efficiency savings, additional savings are required in the medium term. The level
of further savings required is £180k in 2009/10, £270k in 2010/11 and £340k in 2011/12. This
is essentially due to the gap between total expenditure assumed in the calculation of
negative subsidy and current levels within the Council.

Link to One Corby, “Performance Matters”, Service Plans and Strategies
Corby continues to be an ambitious and aspirational Council, working to clearly defined,
widely shared objectives and priorities at the corporate and service level. Our ambition is to
double the population of Corby by 2030, with a complementary increase in jobs, prosperity
and the quality of local public services. The One Corby Corporate Plan sets out actions and
targets under four key themes.
•   Regeneration


                                                2
•   Community
•   Environment
•   Leadership

The Corporate Plan is supported by individual service plans. These include stretching but
achievable targets for all Best Value Performance Indicators (BVPIs), which are monitored
on a monthly basis by the Strategic Management Team and the Overview and Scrutiny
Panel. It is recognised that the BVPIs only measure a part of the outcomes that support the
achievement of our ambition. Progress against our key pledges for the year is also monitored
under the banner of “Signals of Success”.

The priorities set out in the One Corby plan and the “Performance Matters” performance
targets are the key drivers for the individual service plans developed within each service
area. These plans form the basis of the Council’s revenue budget allocations and capital
investment. Where additional resources are required in order to deliver performance targets,
these have been identified and included in spending plans where necessary.

The Council is also playing a major part in the achievement and delivery of major regional,
sub-regional and national service improvement targets. Of special significance are the
Northamptonshire Local Area Agreement, the Milton Keynes/South Midlands Growth
Strategy and the Local Development Framework for North Northamptonshire. These link via
the Corby Local Strategic Partnership into the One Corby approach.

All other corporate and service based strategies will link back to this MTFS, i.e. service
developments will be achievable within the overall resource allocations set out in this
document.

Overall Strategic Approach

This strategy is underpinned by the following underlying principles, which remain unchanged
from previous years:

1. The Council will, within available resources, seek to maximise delivery of services and
   levels of performance and ensure that resources are targeted to meeting its objectives
   and priorities. It is recognised that delivering high quality services comes at a cost.
2. The burden falling on local taxpayers will be kept to a minimum, through ensuring that
   external funding is maximised.
3. Over the medium-term (five-year) period covered by this strategy, the Council will utilise
   its revenue and capital balances and only retain the prudent minimum amount necessary
   to cover unforeseen events.
4. Where requirement to undertake borrowing are identified, the costs and benefits of doing
   so will be assessed as required in line with CIPFA’s Prudential Code.
5. Services will be kept under constant review to ensure that they are delivered efficiently
   and effectively, and efficiency savings targets will be set.
6. Annual budgets will be robust and fully represent the cost of providing the levels of
   service and performance set out in the One Corby Corporate Plan and Service Plans.

The Council will continue to take an entrepreneurial approach to achieving its One Corby
priorities, working with the private sector to achieve common goals. Current examples
include the regeneration joint venture with Bee Bee Developments, “Creative Corby”, the
development of land at Cockerell Road with Quadrant Estates, and the partnership with MET
UK in addressing skills shortages in the Borough.



                                               3
Capital Programmes

Council Resources
The Council is currently debt free and has considerable resources in hand at the start of the
five-year planning period. In line with the agreed strategic principles, the Council has a very
substantial capital programme over the current and next five years (totalling £99.9m), which
utilises all but £2.6m of these resources by March 2013, as shown in Appendix 1. The vast
majority of this is allocated to specific schemes, although £0.25m is available to fund
increases or new schemes in 2007/08.

Through its Asset Management Plan, the Council identifies land and property that is no
longer required for service delivery and assesses the potential to generate a capital receipt.
The projected capital receipts assume disposal of all identified surplus assets, where
disposal represents Best Value. It is therefore reasonable to assume that beyond 2012/13 it
may be necessary to undertake prudential borrowing or identify other funding sources in
order to continue to invest in new assets. We will also look to invest in land where this
supports our longer-term strategic objectives.

Around 60% of capital receipts will continue to be through the disposal of land at Oakley Vale
for housing development. The projections represent a realistic assumption around disposal
values, being slightly lower than the value received from the last disposal. Given the growing
vitality of the housing market in Corby this might prove conservative. Other significant
receipts arise from the disposal of housing regeneration sites for re-development, as well as
the disposal of the former depot site off Cottingham Road. If residential land values continue
to increase at their current rate the Council will start to generate overage payments on the
development of the urban extension at Priors Hall.

Receipts from the sale of Council dwellings through the right-to-buy scheme are assumed to
reduce to 60 per annum for the period. This is consistent with Housing Revenue Account
assumptions. The pooling arrangements for these receipts (i.e. payment of 75% to Central
Government) means that the net amount available will decline to around £700k per year from
2008/09.

Revenue Impact of Capital Expenditure

The Local Government Act 2003 introduced the scope for the Council to borrow in line with
CIPFA’s Prudential Code. Whilst this code is predominantly related to the setting of prudent
and affordable limits for borrowing, we have regard to the principles in making capital
investment decisions. Whilst we have receipts in hand, these generate interest income that
can be used to support service delivery. We therefore recognise the revenue impact of
capital investment at the current rate of interest. We also have regard to potential savings,
income or additional costs arising from capital schemes. Assets are utilised to generate
revenue streams in support of service delivery wherever possible.

Partnership Resources

The Council recognises that it will never be able to meet all of the aspirations of the
community due to financial and other constraints. In order to make our own resources go
further, we seek to maximise partnership funding for the provision of capital assets. This
means that we will give consideration to funding through PFI/PPP where the scale of a
project warrants it. We also look for opportunities to gain funding through Lottery or other
avenues, as well as funding from national and European grant regimes, and from developer
contributions using section 106 agreements. Funding for the Civic Hub/Arts Centre,
associated public realm and parkland improvements includes a total of nearly £23m from
sources outside of the Council.


                                               4
Section 106 Contributions

As the Borough continues to grow, the contributions of developers to fund community assets
and additional service provision will be utilised in line with their agreed purpose. This source
of funding will become increasingly significant in terms of delivering infrastructure and new
facilities, but is not included within projections at this stage as the overall impact is cost
neutral.

Identification and Prioritisation of Bids

Potential capital projects are generated through the Council’s annual service planning
process, the Asset Management Plan, Best Value Reviews and any gaps in provision
identified through consultation with the public and other stakeholders. These projects will be
identified and assessed against a range of criteria, initially by the Asset Management Group.
Schemes will be put forward covering a five year period. As well as the actual capital costs
estimated in relation to the scheme, information is submitted by project lead officers on at
least the following:
•   any statutory requirements,

•   the contribution to the Council’s objectives,

•   the impact on the achievement of key performance targets, and

•   the net revenue costs or savings

Where a revenue impact has been assumed, this will be built into the revenue budget or the
projections for future years as appropriate.

A decision will be made as to which schemes should be subject to a more detailed option
appraisal prior to commencement. The need for an option appraisal is based on the scale of
the project and whether or not it is a significant one-off scheme. The option appraisal is done
on a matrix basis, with each potential option (including “do nothing”) assessed against the set
criteria.

Four projects, which contribute significantly to the achievement of the One Corby
regeneration and growth priorities, account for around 89% of the total expenditure over the
next six years and are described below.

Civic Hub and Parklands Gateway

The Parklands Gateway project will regenerate a key area of the town centre and enhance
the associated woodland. This is a significant project, making a substantial contribution to the
regeneration of the Borough as well as improving customer service through the development
of a contact centre. The Civic Hub will also include a new library and arts centre. We will be
working with key partners, in particular North Northants Development Company and English
Partnerships, in the delivery of this scheme, with funding from Northamptonshire County
Council in relation to the Library. A bid for funding from the Office of the Deputy Prime
Minister via the Growth Areas Fund has resulted in an allocation of £9m. At this stage we
anticipate the contribution of Corby Borough Council being the use of our land and a
contribution to building costs and project management estimated at around £13m, out of a
total of £35.9m (including £2.5m in previous years). It is anticipated that the implementation
of a One Stop Shop and Contact Centre, initially in Grosvenor House, will eventually
generate efficiency savings of £100,000 per year following an initial settling in period.




                                                5
The occupation of parts of the Hub by both public sector partners and commercial outlets will
generate a rental stream, and this will partially offset the running costs of the building and
any subsidy to the Arts Centre. The General Fund revenue projections include a provision of
£250,000 per year from 2009/10 onwards as an estimation of the net revenue impact of the
Civic Hub/Arts Centre and Parklands Gateway. This estimate will be developed and refined
over time. The Council will be the owner of the whole of the Civic Hub. Completion is
scheduled to be in late 2009.

Swimming Pool

The capital programme includes the sum of £19.86m (including £0.76m in previous years) for
the provision of a new Swimming Pool with a 50m international pool, leisure pool and fitness
suite. A financial assessment of the options for managing the pool has been undertaken as
part of an overall options appraisal, and the Council will shortly make a final decision on
preferred management arrangements.

It is planned that the new Pool will open at the beginning of 2009. The net additional revenue
costs have been estimated and included in revenue projections at £250k for a full year, but
precise income generation levels will remain uncertain until the new facility is fully
operational.

Decent Homes and Housing Improvements

The Council has undertaken a full stock condition survey on all its residential properties in
order to assess the amount of investment needed to bring all of these up to Decent Homes
standard. On the basis of this, as well as tenant preferences, the Council took a decision to
retain control of the housing stock in February 2005. The Council can afford to bring all of its
homes up to the decency standard by December 2010, and continue to provide a choice of
kitchens and bathrooms, within the capital programme allocation for housing of £33.9m over
the six-year period. Given the decline in useable capital receipts from Right-to-Buy, this
expenditure will be partly funded from the Council’s other receipts in hand.

Housing Regeneration

Plans have been agreed for the clearance and demolition of parts of Lincoln Way in
Kingswood, Arran Way and Finland Way, Danesholme. Total expenditure is estimated at
£7.3m, including £5.1m already incurred in previous years. The cleared sites are anticipated
to generate receipts of £5.2m on disposal. These receipts will be re-assessed upon
completion of the first disposal on Kingswood in July 2007.

Projected Programme

The projected capital programme for 2007/08 and the following five years is set out in
Appendix 1, along with funding sources. The sections above describe major schemes that
together account for 89% of the total of £99.9m.




                                               6
General Fund Revenue

Overall Projections and Balances (to be updated once LABGI JR outcome known).

The projections in Appendix 2 show a potential funding gap of £600k in 2010/11 and
2011/12, with lower gaps in the subsequent years. This is based on the assumptions set out
below, and is largely due to the cumulative impact of reducing levels of Interest Income. This
is a relatively short-term issue – there is potential for budgetary growth in the period beyond
2012/13 once the Formula Grant is assumed to fully reflect the Borough’s population growth.

There is a strong possibility that the Local Authority Business Growth Incentive (LABGI)
scheme will continue in some form. Due to the significant business growth anticipated, this
will generate substantial income to the Council over the five-year period, sufficient to not only
balance the budget but also allow for funding of new services. This issue is described fully in
the relevant section below. It is not therefore necessary at this stage to take specific action to
address the funding gap, until the outcomes from the Comprehensive Spending Review and
the future of LABGI are known towards the end of 2007.

Balances will be retained at the level of £750k. This figure is based on the known risks and
sensitivities within the budget projections, as set out later.

Formula Grant

The final report from the review of local government function and finance by Sir Michael
Lyons was published in March 2007. This made a number of recommendations, but the initial
response from government suggests that there will not be any fundamental changes to the
funding regime in the short term.

In 2007/08, we received just under £5.6m in “Formula Grant” a “floor” increase of 2.3%. The
next settlement will cover the three years from 2008/09 through to 2010/11 and will reflect
the Comprehensive Spending Review (CSR07). The outcome of CSR07 will be known in the
autumn, but it is already certain that the overall level of funding available to local government
will be very tight.

Formula Grant is largely based on the estimated and projected population provided by the
Office of National Statistics (ONS). Proposed changes to the way in which these estimates
are made provide greater confidence that the population projections for Corby more closely
represent the impact of recent growth than has been the case in previous years. The
projections within the strategy assume that further growth will be reflected at a rate of 1,100
per year over the next three years. These projections are still prudent, assuming taxbase
growth (i.e. Band D equivalent properties) of 500 per year, based on housing completions at
680 per year.

Based on these assumptions, the increases in Formula Grant included in the projections are
3.6% in 2008/09, 3.2% in 2009/10 and 3.0% in 2010/11. Further increases in the period
beyond CSR07 are reflected, with a further acceleration in the rate of housing and population
growth.

In line with the previous strategy in relation to Council Tax increases, any shortfall in Formula
Grant may be covered by an increase above the baseline assumption of 3%. Each 1%
shortfall in Formula Grant would require a 2% additional increase in Council Tax.




                                                7
LABGI Grant

The Local Authority Business Growth Incentive Scheme (LABGI) provides a grant to the
Council as reward for increasing Business Rates income through business growth. It has
been in operation for three years and the last payment under the current scheme is due in
February 2008. One of the recommendations of the Lyons Review is the continuation of the
scheme in a simplified format and DCLG have indicated that they will consider this. A final
decision on the continuation of the scheme and its format is not expected until the autumn. At
this stage therefore no income is assumed.

In the event that the LABGI scheme continues, and given the anticipated new business
premises already under construction and going through planning, the Council can expect to
receive very substantial income through the scheme.

Given that the LABGI scheme may well be time-limited, and also given that the Borough will
be experiencing a period of very high business growth over the next few years, the grant
income will not be used to support ongoing expenditure. The strategic assumption is that any
LABGI income will fund two areas of expenditure.

•   As a first priority it will cover the medium-term funding gap in the General Fund
    projections, in order to avoid service reductions that could have a negative impact on
    One Corby priorities. The total cumulative funding gap to be covered is £1.72m (£1.07m
    if successful in current Judicial Review).

•   Secondly, it will be used to fund one-off or time-limited projects that support the
    achievement of One Corby priorities, particularly those that link to the continued
    regeneration and growth of the Borough.

The use of LABGI grant will be such that sufficient is retained to provide a phased reduction
in expenditure when it comes to an end.

Council Tax

Income from Council Tax amounts to just over £2.6m in 2007/08. This strategy assumes an
annual increase in Council Tax of 3%, which will enable us to achieve our strategic
objectives whilst maintaining a relatively low level of tax. Any increase above this level will be
considered and consulted upon where either:

•   The level of central government grant is less than projected, and/or,

•   There is public support for enhancing service levels, paid for through increased Council
    Tax.
The growth of Corby will generate an increase in taxbase and therefore Council Tax income.
The taxbase assumptions used for estimating this increase are as set out above.

Interest Income

The Council is currently generating significant levels of interest income on retained capital
receipts, with a budget for 2007/08 of £1m. This will decrease over the medium-term as
these receipts are utilised and potentially interest rates reduce from their current levels. The
budget for interest income will need to reduce to £0.55m in 2009/10 and to £0.35m in
2010/11. The “Interest Equalisation Reserve”, which was originally set up to smooth out
these increases, is assumed to be fully utilised for this purpose by the end of 2009/10.




                                                8
Commercial Rental Income

The Council currently generates round £1.2m through its commercial land, shops and
property holdings. The impact of rent reviews has been factored into the five-year
projections. There is an additional boost to income (£107k) from 2008/09 due to rent free
periods on sites at Steel Road coming to an end.

Council-owned land at Cockerell Road has been the subject of a development in partnership
with Quadrant Estates, as well as allowing for the development of an Enterprise Centre
funded by EMDA. The previous Medium Term Financial Strategy assumed an eventual
income stream of £500k per annum based on a significant retail provision. Planning
permission for this scale of retail development has been refused, although a smaller amount
may be acceptable. It is now likely that the Council will receive a capital receipt rather than
revenue income. In support of the revenue account, such receipt will be retained and
invested for the period of this Strategy in order to generate interest income.

Fees and Charges

Fees, charges and sales made directly to service users generate a total income of £2.9m.
Whilst some of these are set by central government, the bulk are under the control of the
Council, and even those set by government should be subject to inflationary increases. It is
therefore assumed that there is an average annual increase of 3% in 2008/09 and 2% per
annum thereafter.

The Council needs to take a strategic approach to fees and charges, in order to ensure that
they do not act as a bar to take up of services by those most in need. The Local Government
Act 2003 provides powers for the Council to charge for all discretionary services, on a cost
recovery basis. A review of fees and charges was undertaken during 2004, with the
outcomes of this review being used to inform the budget process in 2005/06.

The Council will continue to pursue all moneys due in line with the approved Debt Recovery
Policy and using the full resources of the Corporate Debt Recovery team. The improved
recovery of debts will help to underpin this financial strategy.

Partnership Working

The Council will work with partners to ensure the delivery of services. We will maximise the
opportunities for funding streams from outside sources. To support this, we continue to
maintain a Partnership Development Fund, from which the Council’s contribution to any
shared costs can be met. The criteria for use of this fund include the need for the proposed
service to clearly support the achievement of the Council’s objectives.

The Local Area Agreement (LAA) for Northamptonshire has been agreed, with budgets for
the County Council, all seven districts, PCT and Police, being aligned to the achievement of
shared objectives. The successful achievement of the targets agreed within the LAA will lead
to a reward grant in 2009/10 of up to £15m in total, an as yet unquantified share of this
coming to Corby Borough Council. The revenue projections currently only assume a grant of
£50k, which is the agreed minimum in order to repay the Council’s contribution to LAA
support costs in 2007/08 and 2008/09.

Impact of Growth

As well as having an impact on resources, as set out above, the growth in housing and
population will create a demand for increased levels of service. The only service area where
this creates a direct contractual increase in cost is in Streetscene services, and this has been



                                               9
allowed for in the projections. Developments such as the Civic Hub and replacement
swimming pool are designed to serve an increased population. Increase in demand for other
services will lead to incremental increases (e.g. additional member of staff) and these will be
funded from any provision for “service developments”.

Base Budget Changes

Allowances are made within the projections for estimated pay awards and general inflation,
and other known changes. Pay awards have been assumed at 3% per annum. General
inflation is allowed for in relation to specific goods and services at 3% in 2008/09 and falling
to 2% in subsequent years in line with Treasury targets. The revaluation of the Pension Fund
in March 2005 led to an increase in employer contributions, phased in over 3 years. No
allowance has been made for further increases beyond 2007/08, as it is assumed that
changes to the operation of the Fund and improved investment returns will stabilise the
contributions.

Single Status

The ongoing impact of implementing the Single Status Agreement will not be known until the
exercise is completed in December 2007. Experience of other councils suggests that some
staff will go up and some will go down, with those going down being protected for a period.
The projections in Appendix 2 provide a broad estimate of the impact based on an average
net increase in pay budgets of around 3%. An ongoing increase in costs of £250k is included
from 2008/09.

Service Development

Service developments, i.e. growth in budget provision, will be linked clearly to One Corby
priorities and the achievement of the “Performance Matters” performance targets. Funding
for the increased net running costs associated with the Civic Hub, Parklands Gateway and
Swimming Pool will be prioritised. Given the current projections, funding for further service
developments can come from one of only four sources:

•   Through a reduction in the level of service in a non-priority area, or through efficiency
    savings in excess of those assumed.

•   Through an additional increase in Council Tax, following consultation with local
    taxpayers.

•   Via funding from LABGI of time-limited “projects” as described earlier.

•   From other external funding sources, e.g. Growth Areas Fund, Lottery, Planning Delivery
    Grant.

In some cases there will be a new or enhanced statutory requirement, for which an increase
in the amount of government funding through Formula Grant should be provided. The impact
on the projections attached to this strategy is therefore assumed to be neutral.

Efficiency Savings
The projections in Appendix 2 show an efficiency savings target of £250k for each of the next
three years. This is detailed in the “Efficiency Strategy” Section below.




                                               10
Housing Revenue Account

Rental Income

The projections for rental income assume an increase that is consistent with the rent
convergence policy, equivalent to an average of 5% per year. Any divergence from this
policy would impact on the central government subsidy received by the Council.

Sales and Demolitions

Rental income will be lost through ongoing Right-to-Buy sales, assumed to be 60 per year
through the period covered by this strategy. This is consistent with the assumptions used in
forecasting capital resources. In addition, allowance has been made for the impact of the
demolition of properties on Lincoln Way, Arran Way and Finland Way.

Voids Management

The action taken to reduce the level of voids is beginning to result in increased rental
income. The projections in Appendix 3 reflect a reduction in the average level of ongoing
“turnover” voids to 50 by March 2008.

Contributions to Government Pool - “Negative Subsidy”

The “negative subsidy” is calculated by central government based on a notional HRA. Due to
rent convergence this includes a rate of rental income increase greater than increases in
expenditure. The gap between notional income and expenditure therefore widens
significantly over the next few years, and negative subsidy is projected to more than double
to over £5m a year by 2012/13.

This is the most significant factor affecting the sustainability of the HRA. The final subsidy
position will not be known for certain until the draft determination is issued in early
November, and the final determination in late December. Projections will therefore be
reviewed following this determination.

Expenditure and Efficiency

As with the General Fund, inflation has been taken into account, along with other known
adjustments. Allowance is also made for the potential impact of single status in line with the
General Fund assumptions. The projections assume annual efficiency savings of £168k per
annum for the three years from 2008/09 to 20010/11. This is in line with the Efficiency
Strategy set out below.

HRA Projections and Balances

The five-year projections set out in Appendix 3 show that, in order to retain balances above
the prudent minimum of £750k, there is a need to make further ongoing savings of £180k in
2009/10, £270k in 2010/11 and £340k in 2011/12, a cumulative total of £790k or 5% of gross
expenditure . Options for achieving these savings will be brought forward as part of the
budget process, once the actual subsidy position is known.




                                               11
Efficiency Strategy 2008/09 to 2010/11 – Meeting the Challenge

Introduction and Context

This Efficiency Strategy forms an integral part of the Corby Borough Council’s Medium Term
Financial Strategy (MTFS). It provides a framework for the achievement of the savings
required over the next few years.

Significant efficiency savings have already been achieved over the last few years. In 2005/06
Corby achieved a higher level of ongoing savings as a proportion of budgets than any other
council in the country. Nevertheless there are significant factors that drive the need for
further gains to be made.

The Comprehensive Spending Review (CSR07) will be published in autumn 2007. This is
expected to set a very tight financial framework for local authority funding over the three-year
period covered by this strategy. The Chancellor of the Exchequer has already announced a
3% per annum target for cashable efficiencies. This equates to around £250k each year
based on net General Fund expenditure.

The MTFS demonstrates a need to make savings in order to support the funding of new
priority services such as the running costs of the 50m Swimming Pool and the new Civic
Hub. The reducing level of Interest Income as capital receipts are invested in the
regeneration of the Borough also has a significant impact. In the case of the Housing
Revenue Account (HRA), there is a need to make further efficiency savings in order to
maintain the viability of the ring-fenced account and deal with the ever-growing “negative
subsidy” payment to Central Government.

Finally, the CPA Use of Resources assessment requires the Council to demonstrate the
achievement of value for Money.

Targets – General Fund

The target set by the Treasury for cashable efficiency savings is expected to be 3% of the
General Fund Budget Requirement. This amounts to £250k per annum for each of the three
years from 2008/09 to 2010/11, a cumulative figure of £750k by the third year. This level of
savings is consistent with the amounts required to maintain ongoing financial viability given
the current medium term projections.

All service areas are expected to make efficiency savings, although some initiatives will be
corporately driven. Relevant gross expenditure budgets, adjusted to reflect items of
expenditure not applicable for efficiency savings, have been used as a basis for the
allocation of the overall target. On this basis the target of £250k per annum equates to 2%
per annum of relevant expenditure budgets, or 6% over three years.

The resultant targets for each Service Area are set out in the table below. These are a
minimum requirement, not a limit on the level of savings that can be achieved. All
opportunities to generate efficiency savings will be fully explored and taken forward wherever
the impact on service levels and performance can be kept to a minimum.




                                              12
 Service Area                                      2008/09 (£k)      Three-Years (£k)
 CMT/Assistant Chief Executive                               26                      78
 Financial Services                                          39                     116
 Legal and Democratic Services                               23                      69
 Customer First                                              28                      84
 Human Resources                                              4                      12
 Neighbourhood Pride (GF)                                    16                      47
 Environmental Quality                                       43                     128
 Culture & Leisure                                           56                     169
 Regeneration & Growth                                       17                      52
 Total                                                     252                      755


Target – Housing Revenue Account

The sustainability of the HRA is equally dependant on the achievement of efficiency savings.
In the absence of a separate Treasury target in relation to the HRA, the calculation has been
done on a basis consistent with that used for the General Fund.

This gives rise to a target for the HRA (Neighbourhood Pride) of £168k in 2008/09 and a
cumulative £505k by 2010/11.

What is Efficiency?

Cashable efficiency savings are essentially about getting the same level of service and
performance (or slightly more) for less money in real terms.

Whilst non-cashable savings, i.e. getting a higher level of service/performance for the same
cost, are also sought, the Treasury targets and the MTFS requirements can only be met
through cashable savings. Targets for performance improvement are monitored through
“Signals of Success” and “Performance Matters”.

This strategy is specifically about efficiency, not service reductions. As part of the MTFS and
budget process the Council will also separately identify mechanisms for shifting resources
from lower-priority services towards One Corby priorities.

Ways of Achieving Savings

Given the scale of the savings required over the next three years the Core Management
Team and Heads of Service will plan ahead and not look at each year’s target in isolation.

Benchmarking and external review and challenge will be used to develop understanding of
service costs relative to other Councils. Where this highlights a comparatively high cost, the
reasons for this will be explored and Service Areas will draw on best practice to bring costs
down.

There are a number of ways in which efficiency savings will be secured. Some of these will
be corporately driven, whilst others will be driven by the relevant Service Area:




                                              13
•   Procurement – securing lower prices through an effective corporate procurement
    process. The Council is part of a new Procurement Consortium with other
    Northamptonshire Districts/Boroughs, which will deliver reduced prices through bulk
    purchasing.
•   Use of Goods and Services – all services will minimise the use of goods and services
    and ensure that waste is minimised, e.g. through energy efficiency measures and
    reducing paper usage.
•   Shared Services – the Council will continue to evaluate the opportunities for delivering
    services jointly with neighbouring Councils.
•   Changing the Way Services are Delivered – as part of our Customer First Strategy, key
    business processes are being reviewed to ensure that they not only improve customer
    service and performance, but also reduce costs.
•   Utilising Technology – investing in new systems and the integration of existing systems
    will reduce manual processes and therefore staffing requirements.
•   Invest to Save – a fund is maintained to pay for additional expenditure up-front that leads
    to reduced ongoing costs.
•   Effective Asset Utilisation – the Council uses many assets (e.g. buildings, vehicles, ICT)
    in the delivery of services. Such usage will be kept under review to ensure that there is
    no over-provision of assets.
•   Increased Income Volumes – the usage of services that charge at the point of delivery
    will be increased through marketing and through the delivery of excellent services. This is
    distinct from the additional income generated through inflationary increases in charges.
•   Taking Opportunities as They Arise– where posts become vacant they will be reviewed to
    ensure that they require replacement. The achievement of efficiency savings requires
    reductions in staffing, but redundancy costs will be avoided wherever possible.

Roles in Achieving Efficiency

Members play a key role through providing challenge. The Lead Member (Leadership) is the
Member Efficiency Champion.

The Corporate Director (Resources) is the Officer Efficiency Champion, and will provide
support and guidance to service areas in benchmarking and efficiency reviews.

All Heads of Service and their management teams have a responsibility to achieve the
savings target for their Service Area as set out in this strategy.

All staff have a responsibility for ensuring the efficient and effective use of their time and the
resources allocated to them. They will also be encourages to make suggestions for more
efficient ways of working, formally through the Employee Suggestion Scheme and informally
through their line manager.

Monitoring the Achievement of Savings

The achievement of the savings targets set out in this strategy will be monitored through the
annual budget process. Budget setting reports will set out clearly the level of savings
achieved each year, and budgets will be monitored accordingly.

Containing expenditure within the (reduced) budget will be monitored through the regular
budget monitoring undertaken by the Head of Financial Services.


                                                14
Where significant efficiency projects involve the creation of detailed action plans, these will
be monitored by the relevant Corporate Director.

Sensitivity, Risk Assessment and Levels of Reserves

The five-year projections make a range of assumptions, and there are risks associated with
many of these. In overall terms the projections are realistic and prudent, therefore the risk of
needing to make unforeseen service cuts is minimised. The most significant risks and
sensitivities, the way in which these are mitigated, and the potential financial impact are set
out below. This includes the potential for a financial gain as well as a financial loss.

This analysis demonstrates that the most significant financial risks related to the Capital
Programme is securing receipts through disposals as planned, and ensuring that projects are
delivered within budget. In relation to revenue projections, most of the areas of uncertainty
have been realistically estimated and therefore the position is as likely to improve as it is to
deteriorate. The key financial risk relates to any failure in budgetary control. This will be
addressed through further improvements in the budgetary control framework and training for
relevant officers. In addition, the financial impact of failing to improve void management and
turnaround is significant for the HRA, and this will therefore continue to be a key area for
action.



Risk/Sensitivity              Quantification                  Mitigation

Oakley Vale – Housing         Receipts included at around     Development brought forward
Growth not materialising      £50k per acre less than         as early as possible. Focus
                              previous sales. The impact      on regeneration and growth,
                              of an increase or decrease      including employment
                              of £50k per acre is around      opportunities.
                              +/-£0.83m

Other Receipts                Total assumed receipts of       Focus on regeneration and
                              £13.6m. A 5% variance in        growth, including
                              values would increase/          employment opportunities.
                              decrease the funding            Effective marketing of
                              available by £0.68m             specific CBC owned sites

Capital cost inflation        1% increase in estimated        Estimates include some
                              costs of total programme        contingency where
                              would add £0.99m                appropriate. Requires strong
                                                              project management for all
                                                              schemes.

Cockerell Road                Reduced income of £230k         Contract includes a time limit,
development does not          per annum from 2009/10.         beyond which land will return
proceed as planned                                            to CBC.

Formula Grant – Impact of     Reduction in grant of 1% =      Grant increases projected
Growth                        (£58k) loss, increase in        based on prudent estimate of
                              grant of 1% = £58k              population growth. CSR07
                              additional resources            will fix grant for first 3 years
                                                              of current MTFS



                                               15
Council Taxbase Growth     Each 100 additional/fewer       Focus on continued housing
                           band D properties equates       growth and ensuring
                           to increased/reduced            properties added to list as
                           Council Tax income of £17k      soon as complete

LABGI – growth in          No income beyond 2007/08        Encourage business growth
Business Rates income      currently assumed, pending      in line with regeneration
                           details of revised scheme (if   framework. Progress already
                           forthcoming)                    evident.

Fall in interest rates     Rate reduction of 0.25%         Secure investments at
                           would reduce income over 5      advantageous rates for
                           years by (£130k), increase      longer periods in line with
                           of 0.25% adds £130k             projected use of balances.

Single Status              Actual impact not known         Project managed through
                           until project completes in      Steering Group involving
                           March 2007. 3% increase in      Union representatives. There
                           salary costs based on           is a common understanding
                           experience. Each extra 1%       of funding constraints.
                           would add around £85k.

Local Area Agreement       CBC share of total reward       Formula for sharing rewards
Reward Grant               grant (£15m) in 2009/10         to be negotiated with
                           included at guaranteed          partners. Effective
                           £50k – may be higher.           performance management to
                                                           ensure targets achieved.

Net running costs/income   Projections currently include   Development of business
for new Swimming Pool      additional net running costs    cases for management costs.
and Civic Hub, Parklands   of £250k each per year from     Marketing of commercial
Gateway not yet fully      2009/10 and 2010/11             spaces.
quantified                 respectively.

Pension Fund               Next revaluation due as at      Improved investment
contributions              March 2007. An increase in      performance and proposed
                           employer’s contribution         scheme changes are
                           rates of 1% would add £70k      intended to stabilise
                           pa to GF, £40k pa to HRA        contribution rates.

HRA Negative Subsidy       5% decrease equates to          Improved models for forward
                           £125k, 5% increase would        planning through external
                           mean loss of (£125k).           expertise. Robust response
                                                           to consultation.

Void Management (HRA)      Target is average void level    Reduction in void turnaround
                           of 50 by March 2008. +/- 10     times remains a key priority.
                           properties equates to +/-
                           £30k per annum.

Efficiency savings not     Failure to achieve target by    Will result in need to make
achieved                   10% would cost (£25k) per       real service reductions,
                           year for General Fund and       therefore political and peer
                           (£17k) per year HRA             pressure.



                                            16
Failure in Budgetary          An overspend of 1% of           Enhanced reporting to CMT
Control                       gross expenditure would         and Committees. Budget
                              have impact of around           holder training and support.
                              (£180k) on GF and (£90k)        Balances held equivalent to
                              on HRA.                         4% of gross expenditure.


On the basis of the five-year projections and the risks and sensitivities quantified above, the
Corporate Director (Resources) has concluded that the minimum level of projected balances
should be as follows:

Capital – projected balance at the end of the five year period of £2.6m, sufficient to cover the
risks quantified above in relation to receipts and cost inflation (totalling £2.5m).

General Fund – balances in hand at the end of each year of £750k. All significant financial
decisions are referenced back to the MTFS and any impact on projected balances. In this
context, it is necessary to look at the risks that are completely outside of the Council's direct
control i.e. if Formula Grant is 1% lower for 3 years from 2008/09 (£174k), Taxbase growth is
1% lower over 5 years (£85k), Interest Rates are 0.25% lower over 5 year period (£130k)
and Pension Contributions are 1% higher over 5 yrs from 2008/09 (£350k). Balances at
£750k would just be sufficient to cover all of these risks occurring simultaneously, giving the
Council time to respond by adjusting budgets or increasing Council Tax income accordingly.

Housing Revenue Account - balances in hand at the end of each year of £750k. If the
negative subsidy were 5% higher for 3 years (£375k), void levels were higher by an average
of 10 properties over 5 years (£150k) and Pension Contributions are 1% higher over 5 yrs
from 2008/09 (£200k), then again balances are sufficient to provide time to take corrective
action.


Integrated Business and Financial Planning Timetable

The budget is a corporate statement of objectives and a plan of action for their
implementation. It provides the link between resources and service outputs and outcomes.
The planning process should be policy driven and focussed on outcomes over a medium-
term horizon. For the process to be a success requires corporate direction and the ownership
of all senior managers. It also requires Member commitment and involvement from an early
stage.

We will use the CPA, Best Value Reviews and benchmarking information to feed into the
service planning and budget process. We will look at Service Plans and budgets together in
order to identify where service delivery and performance does not match plans and the costs
associated with divergence.

A successful medium-term strategy requires that there is flexibility in the use of budgets to
ensure that managers can re-direct resources towards the achievement of service objectives
and targets. The financial rules support this.

A good carry-forward scheme is also required, in order to avoid the rush to spend money at
the end of the financial year in a way that is not targeted on priorities and the scheme
approved by Council in February 2004 meets the generally accepted best practice in this
respect. We therefore have the key building blocks in place.

Paul Hymers, Corporate Director (Resources)



                                               17
                                                                                                  Appendix 1

Capital Programme - Five Year Financial Projections

                                          2007/08     2008/09    2009/10   2010/11   2011/12   2012/13     Total
                                            £000         £000       £000      £000     £000      £000      £000
Capital Programme
  Council Housing Improvements              7,883       7,000      6,476     4,500     4,000     4,000    33,859
  Civic Hub/Parklands Gateway               4,811      21,874      6,762         0         0         0    33,447
  Swimming Pool                             5,850      13,242          0         0         0         0    19,092
  Other Schemes                            10,466       1,040        645       630       350       350    13,481

  Total Programme                          29,010      43,156     13,883     5,130     4,350     4,350    99,879

Funded By
  Major Repairs Allowance                   3,095       3,106      3,069     3,104     3,138     3,172    18,684
  Grants & Contributions                    8,478      12,380        839       100       100       100    21,997

  Capital Receipts                         17,437      27,670      9,975     1,926     1,112     1,078    59,198

                                           29,010      43,156     13,883     5,130     4,350     4,350    99,879

Capital Receipts in Hand
  Receipts in hand at 1 April              22,454      20,826      7,704     3,525     3,250     2,916

  Right to Buy (Housing) - Net Receipts       690         717        719      745       772       799      4,442
  Oakley Vale & Other Receipts             15,119      13,832      5,077      906         6         0     34,939

  Financing Capital Programme             (17,437)    (27,670)   (9,975)   (1,926)   (1,112)   (1,078)   (59,198)

  Receipts in hand at 31 March             20,826       7,704      3,525     3,250     2,916     2,637




                                                          18
                                                                                     Appendix 2
General Fund - Five Year Financial Projections
                                                   2008/09    2009/10   2010/11   2011/12   2012/13
                                                     £000        £000      £000      £000      £000

Committee Base Budgets                               9,983     10,188    10,559    11,016    11,422

less Funded from Partnership Dev Fund                 (42)

Inflation:
    Pay Awards                                        264        272       280       288       297
    Price Inflation                                   195        134       137       140       142
    Fees & Charges (average increase)                 (88)       (60)      (62)      (63)      (64)
    Recharges to Other Accounts                       (56)       (58)      (60)      (62)      (64)
    Commercial Rental Income Increases                (30)       (30)      (31)      (32)      (33)

Demographic Growth (Streetscene)                         28       42        43        45          46

Removal of One-off Growth/Savings 2007/08             (82)      (100)

Known Future Years Changes:
  Housing Defects Grant                                106
  Borough Elections (Cyclical)                        (60)                            70       (70)
  Income from Steel Road Sites                       (107)
  Income from Cockerell Road                          (63)      (117)
  Pool - Net Additional Costs (From Jan 09)            140        110
  Civic Hub - Net Additional Costs (From Nov 09)                  100      150
  BPR Team Time Limited                                          (72)
  LPSA/LAA Reward Grant (One-off)                                (50)       50
  Interest Income Reductions                                      450      200        20          20
  Single Status - Estimated Impact                    250

Efficiency Savings                                   (250)      (250)     (250)

Net Committee Budgets for Year                      10,188     10,559    11,016    11,422    11,696

Depreciation Adjustment                            (1,090)    (1,090)   (1,090)   (1,090)   (1,090)

(Use of) General Fund Reserve                        (552)      (573)      (78)      (23)       (2)

Budget Requirement                                   8,546      8,896     9,848    10,309    10,604

Funded by:
Formula Grant                                        5,769      5,952     6,130     6,410     6,700
Council Tax Income                                   2,777      2,944     3,118     3,299     3,544

Current Funding Gap                                                        600       600       360

                                                     8,546      8,896     9,848    10,309    10,604

Percentage Change                                   4.45%      4.10%    10.70%     4.68%     2.86%

General Fund/Interest Equalisation Reserve b/fwd     1,984      1,432      859       781       758
(Use of)/Contrib. to General Fund Reserve            (552)      (573)      (78)      (23)       (2)
General Fund Reserve c/fwd                           1,432       859       781       758       756




                                                    19
                                                                                     Appendix 3
Housing Revenue Account - Five Year Financial Projections

                                         2008/09     2009/10   2010/11   2011/12   2012/13
                                           £000         £000      £000      £000      £000

Base Gross Expenditure                    15,104      15,954    16,362    16,806    17,372

Remove One-Off Growth 2007/08                (9)

Inflation:
    Pay Awards                              152         156       161       166       171
    Price Inflation                         110          76        77        79        80
    Central Support Recharges                33          34        35        36        37

Contributions to Government Pool            627         527       574       591       252
Major Repairs Allowance                      11         (37)       35        34        34

Efficiency Savings Target                  (168)       (168)     (168)

Additional Savings Required                            (180)     (270)     (340)

Single Status                                94

Estimated Gross Expenditure               15,954      16,362    16,806    17,372    17,946



Base Gross Income                         15,165      15,698    16,241    16,801    17,378

Inflation:
    Rental Income                           694         698       724       750       777
    Fees & Charges (average increase)        46          32        32        33        34

Reduced Income - 49th Week                 (296)
Lost Income - RTB Sales                    (178)       (187)     (196)     (206)     (217)
(Increase)/Reduction in Turnover Voids       267           0         0         0         0

Estimated Gross Income                    15,698      16,241    16,801    17,378    17,972



HRA Balance b/fwd                          1,131        875       755       750       756

Surplus/(Deficit) for year                 (256)       (121)       (5)        6        26

HRA Balance c/fwd                           875         755       750       756       782




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Description: Medium Term Financial Strategy 200809 to 201213