Agenda item

To receive a briefing on effective scrutiny of local government finances and budget proposals.

The Committee received a briefing, set out in agenda pages 5 to 148, which gave an overview of the Council’s budget setting process, timelines and figures from the 2018/19 financial year.

Bob Watson, Lead Finance Specialist, stated that the Council’s budget was a financial representation of the Council’s strategy and priorities. He added that the budget was the way that the Council could facilitate providing its services to residents. Bob explained the difference between revenue (day to day expenditure, for example Officer salaries) and capital (capital asset creation and enhancement etc.) expenditure, and added that revenue could be used to contribute to the capital budget, but not vice versa. 

Bob stated that with revenue budget setting, it was important to work out what the Council could afford to provide, taking into account statutory services including refuse collection and providing a safe environment for adults and children. Graham Ebers, Deputy Chief Executive, highlighted that one of the key differences between a private company and a Local Authority was that a Local Authority has to provide a range of statutory services (from their revenue budget), which left them with mush less flexibility within their revenue budget. Graham added that there was, comparatively, much more room within a Local Authorities capital budget.

Bob Watson described the two forms of budget, incremental and zero based. Bob explained that an incremental budget adjusted the previous years’ budget for costs such as inflation, growth and efficiencies as well as for one off payments. He added that a zero based budget rebased the budget to meet the specific service needs. Bob stated that Wokingham Borough Council’s (WBC) planned approach was to use an incremental budget, of which 85% was used to provide statutory services. Bob stated that the service budgets belonged to service heads (for example, the Executive Member and Director of the relevant service) who delivered the frontline services to residents.

Bob outlined an approximate timetable for the budget setting process which read as follows:

May – Start to think about growth, efficiencies and income generation;

September - Staffing, fees & charges;

November – Non-staffing, finalise staffing and fees & charges;

December – Complete the medium term financial plan (MTFP), work out the Council Tax base and agree the draft settlement;

January – Finalise the MTFP, seek agreement from the relevant committees;

February – Final settlement, seek agreement at budget Council, Council tax set.

Bob outlined that fees and charges were set to:

·           Recover costs where possible;

·           Manage supply and demand;

·           Cover inflationary increases;

·           Cover some statutory/overrides.

Bob Watson explained the process for revenue monitoring was to send regular ‘hot off the press’ revenue monitoring updates to the Corporate Leadership Team (CLT) and the Joint Board for evaluation. Bob added that these meetings gave the opportunity to identify early warning signs within service budgets, such as overspend or underspend.

Rachel Burgess queried (with relation to agenda page 164) whether the general fund balance was indicative of issues within the overall sustainability of the Council’s finances. In response, Graham Ebers stated that the priority was to reduce the service budget variance as much as possible (for example, adult social care had been reduced from £1.5M to £500K from year start), however services such as children’s services were continuing to require more resources. He added that it was crucial to monitor in year variances so that these could be factored in to growth in the following years’ budget.

Rachel Burgess queried the sustainability of the MTFP, and why no inflationary costs were applied to School Block funding (referring to agenda page 121). In response, Graham Ebers stated that the Council was making progress to become more self-sufficient via generating income where possible, and to make early interventions a priority to address issues before they became more problematic. He added that the Council was continuing to make representations to Central Government regarding funding. With regards to the schools block query, Bob Watson stated that as more schools chose to become academies, the Council’s funding levels for schools would drop proportionately. Graham Ebers added that, on average, per pupil funding levels had increased 2.3% per year, however this could have resulted in a small negative real growth in funding due to the tough settlement that schools had received in recent years.

Shahid Younis asked how much of the business rates were retained by WBC, and what experiences the Council had with involving the public in the budget setting process. Grahame Ebers stated that WBC were due to keep £13M (from a total £60M) in business rates, which could be reduced to £6M kept by WBC with a negative rates grant applied by Central Government. Graham stated that WBC had previously ran budget engagement events with some degree of success, however these events tended to only attract a small number of residents (300 to 400 people). Graham added that engagement via online means had also been trialled, again with limited success. Graham stated that the views from residents were fed into the budget setting process, and that it was important to engage with residents to help educate and inform them about Local Authority finance.

Clive Jones queried whether there was provision for an increase in the schools block budget (with reference to agenda page 153). Graham Ebers stated that there were growing financial pressures within maintained schools such as the provision of special educational needs. He added that WBC needed to continue making representations to Central Government to highlight the escalating costs in these areas.

Clive Jones asked whether the budget had been adjusted due to the increased costs of future planning appeals. Graham Ebers stated that known specific events would be covered either by an earmarked reserve or by the general reserve. Clive stated that some other Councils involved their scrutiny Committees in the budget process during the autumn, and asked for the Officer’s views on this. Graham Ebers stated that different Local Authorities had different methods of preparing and reviewing their budget proposals. He added that there was a difference between sharing the process of budget setting and sharing the detail of the budget. Graham stated that WBC could look at how other Local Authorities involve their Committees in the budget setting process going forward.

Andy Croy queried why the budget estimates for the schools block budget (with reference to agenda page 121) was ‘flat lined’ beyond the next financial year. Bob Watson stated that the Department for Education (DFE) do not give forward notification beyond one year, and therefore WBC presumes no additional income from the DFE.

Rachel Burgess queried the lack of increase to council tax in 2012/13 and 2015/16, highlighting that there would be a loss in terms of compounding increases in future years. Graham Ebers stated that Central Government had implemented a Council Tax freeze grant in some previous years, which had allowed WBC not to increase Council Tax in those years.

Guy Grandison queried when the approximate values for the Council Tax base are prepared. Graham Ebers stated that the data (for example, the number of new builds) was collated in November or December and undergoes a statutory calculation.

The Committee discussed the process of budget scrutiny during the 2019/20 municipal yea. These suggestions included:

·           Asking the relevant Executive Members to attend the Committee to clarify budget areas and pressures;

·           Checking in-year whether the assumptions made within the MTFP were being met;

·           Evaluating the in-year process for budget setting.

RESOLVED That:

1)     Bob Watson and Graham Ebers be thanked for attending the meeting;

2)     the Committee consider a timeline for conducting a review of the 2020/21 budget setting process;

3)     Members of the Committee contact Democratic Services with any specific areas of the budget or budget setting process that they would be interested in scrutinising;

4)     budget Scrutiny be placed on the 2019/20 Committee work programme.