Budget 2012/13 and Medium Term Financial Plan 2012-16

1. Budget 2012/13and Medium Term Financial Plan 2012-16 Councillor Muhammed Butt Deputy Leader of the Council Budget & Finance Overview & Scrutiny 8th February 2012

2. On target to achieve budget for 2011/12 Challenging year with considerable service and financial risks 97.5% of planned £41.7m of savings ‘One Council’ savings achieved Strong financial disciplines applied rigorously throughout the year Reserves not usedto achieve target – end year reserves £10.080m 2011-12 – Forecast outturn

3. 2011/12 Forecast Outturn (Based on December 2011 figures)

4. Financial Pressures 2011/12 (1) • Children & Families - Social Care placements (£318k), Legal Costs (£131k net) and delay in closing Crawford Avenue (£190k) • Adult Social Care – Placement costs (£800k), Transitions (£280k net), frontline agency staff (£600k) and Brent Transport (£400k) offset by operational savings • Environment & Neighbourhoods - Delay in achieving Library savings (£250k) and metered parking offset other transport savings

5. Financial Pressures 2011/12 (2) • Regeneration & Major Repairs – Temporary accommodation (minus £250k net) • Corporate Services – Schools payroll losses (£250k), Procurement and Design Services • Central costs – Debt servicing costs (minus £384k) from lower interest rates and slower drawdown on Civic Centre

6. Europe expected to be in full recession; UK ‘on the edge’ with risk of double dip - Strong risk of Euro break-up Government borrowing up now over £1,000,000,000,000 OBR downgrade of growth forecasts for 2012/13 and 2013/14 – impact on public finances? Public sector pay restraint/pensions overhaul Rising unemployment for another 18 months Inflation peaked at 5.2% now 4.2% and falling Interest rates remain at 0.5% until end of 2014 or beyond House prices falling/flat in most of UK Economic situation

7. Settlement for Brent for 2012/13 • Further 7.4% reduction in grant - cumulative 19.3% cut over 2011/12 and 2012/13 • Business rates collected in England in 2012/13 (£23.1bn) exceed Formula Grant payable (£22.9bn) for the first time – excess used to fund Council Tax freeze grant

8. Real terms Formula Grant Loss - 2011/12 to 2016/17 (Effective grant – Business Rate retention in force from April 2013) Post CSR

9. Council Tax • Localism Act 2011 allows the government to determine levels of council tax increase above which local authorities are required to seek approval via a local referendum • For 2012/13 this has been set at 3.5% for London authorities • 2012/13 Council Tax Freeze grant equal to 2.5% increase in funding. • Brent - £2.575m receivable in 2012/13 only– propose acceptance • This funding is in addition to 4 year grant in 2011/12 – 2014/15 • This is NOT an excessive rise as defined in the Localism Act and thus is not subject to a referendum

10. Real terms Council Tax Loss - 2011/12 to 2015/16 (Assumes a static Council Tax base)

11. Brent Council Tax 2012/13 • 3rd year of Council Tax freeze • GLA Requirement to be added on – expect £306.72 not £309.82 – Decision on 9th February

12. Budget process • Proposals developed by the Executive, taking account of the advice of officers. • The key processes for doing this are as follows: • Borough Plan and updated medium term financial outlook considered by the Executive in July 2011; • Away-days involving both Executive and Corporate Management Team members considered key service and budget issues likely to affect the council in future years; • Development by officers, in consultation with relevant Lead Members, of budget proposals for individual service areas; • A process of external consultation with residents and businesses; • Consideration of matters raised by Overview & Scrutiny • Approval to the detailed budget proposals in the report and publication

13. The basis of our budget • Sustainable medium term plan which allow Council objectives and priorities to be met – not just a 1 year issues • Realistic spending totals year-on-year (no use of reserves) • Reserves maintained at agreed level • Maintain real value of Council Tax where possible • Investing for transformation • Commitment to efficiency • Control debt interest costs through judicious use of prudential borrowing

14. Budget Requirement 2012/13

15. Service Area Budgets 2012/13

16. Impact of the One Council Programme

17. Risk Assessed reserves = £12m 4½% of net budget requirement

18. Schools • Schools budget overspent by £5.7m at the end of 2010/11 and forecast £7.2m by end of 2011/12 • Principle issue is SEN/Statemented spending – Schools Forum have approved a plan to recover deficit by 2014/15 but relies on no further overspending in-between • School balances are £12m – 6th highest in London based on last CIPFA statistics • Flat-cash settlement for 2012/13 with £6,236 per pupil (compared with England average of £5,082) • Pupil premium up from £488 to £600 per disadvantaged pupil • Forum have asked for 15% reduction in centrally funded items – we do not propose to agree this.

19. HRA • From April 2012, new HRA self financing system is being implemented, under which HRA Subsidy will be abolished in return for a one-off redistribution of debt. The HRA budget for 2012/13 has therefore been compiled on the basis of this new framework • No cross subsidy permitted with General Fund • Average 7.14% Rent increase (RPI + ½% + ¼ of the way to target rent) • 2011/12 – overspend of £0.4m but HRA still £0.7m surplus balances ; Rent collection 99.6% • Optimised ALMO – new management agreement needed from September 2012 – focus on collaborative savings • 30 Year Business Plan being prepared for member approval in Spring.

20. Capital Programme

21. Capital Programme • Capital is not free money – it has long term consequences, particularly when budgets are falling

22. Medium Term outlook • Continued (increased?) pressure on public sector budgets – local government likely to bear the biggest strain • Indications of grant equivalent cuts of 5-8% in 2015/16 and a further 7-9% in 2016/17 • April 2013 – large number of changes implemented • Abolition of Formula Grant – introduction of Business Rate retention • Localisation of Council Tax Benefits with only 90% of current funding • Housing Benefit reforms bite / HB fraud transfers to DWP • Community Infrastructure Levy • Audit Commission replacement • Recruitment/Retention issues – 4 year pay freeze, increased pension costs, undervaluing of public sector workers, chaotic change

23. Medium Term Financial position • Savings based on Council Tax increases of 3.5%; 2.5%; 2,5% respectively – significantly higher if lower or nil rises • Allowance for pay inflation of 1% in 2013/14 and 2014/15 and 2% in 2015/16; No general allowance for non-pay inflation • Levies:Forecast to grow from £2.579m in 2012/13 to £2.803m in 2013/14, £3.043m in 2014/15 and £3.293m in 2015/16 • Freedom Pass/concessionary fares: £14.771m in 2012/13. Additional £1.360m (2013/14), £887k (2014/15) and £936k (2015/16) in forecast. • New Homes Bonus – growth of £1.4m per annum

24. Savings target over the spending review period (2011/12 to 2015/16) remains around £100m £41.7m savings largely on target for 2011/12 Considerable risks – cost pressures could be higher and savings make take longer to achieve than we think 2013 onwards – many changes in the funding regime, many as yet unspecified Savings on this scale are painful and energy & morale sapping Civic Centre and regeneration remain the key focal points Preserving our reserves is critical in a time of heightened risk Summary