CABINET Meeting date: 16th September 2010 From: Deputy Leader, Corporate Director – Resources, Corporate Director – Organisational Development BUDGET 2010/11: RESPONSE TO GRANT CHANGES PART A - RECOMMENDATION OF CABINET MEMBER 1.0 EXECUTIVE SUMMARY 1.1 Following the election of a new Government in May 2010, announcements have been made in respect of reductions in grants in 2010/11. This report sets out proposals to deliver those grant reductions. 1.2 In addition, a number of announcements have been made since that date as government departments determine the implications of new policy direction and in year departmental reductions. 1.3 In summary, reductions in grants identified to date are as follows: Revenue Capital £M £M Revenue - Area Based Grant Capital - Transport Capital Programme 1.710 Capital - Children’s Services Capital Programme 2.542 Total Grant Reductions to Date Total Revenue and Capital Reductions 1.4 3.678 3.678 4.252 7.930 Announcements have also been made in respect of withdrawing the funding for: The County’s Building Schools for the Future Programme, amounts to £62m Reductions of North West Development funding of £6m Changes to the transition arrangements for 16-19 Education and Training. Reductions in the Local Area Agreement performance award grant Local Public Sector Agreement Grant of 50%. 1.5 In formulating these proposals the Chairpersons of Local Committee and Scrutiny Management Board and Children’s and Young People and Environment Advisory Panels have been consulted. 1.6 In addition, the new Government’s emergency budget on 22nd June 2010 outlined broad targets to deliver reductions in spending by Government Departments of 25% over the coming years. The report sets out headlines from the emergency budget and outlines initial steps in terms of staff recruitment to prepare the Council for the pressures it will face in 2011/12 and beyond. 2.0 STRATEGIC PLANNING AND EQUALITY IMPLICATIONS 2.1 This report links to the Improving Performance theme of the Council Plan as effective management of financial resources is a prerequisite for making informed decisions when planning and delivering Council services. 2.2 Children’s Services have undertaken an Equality Impact Assessment on all of the above proposed savings and we are confident that they will have either no or minimal impact. The Impact Assessment also included the Rurality Dimension. 3.0 RECOMMENDATION Members are asked to: 3.1 Agree to make reductions to undertake the activities as set out in para 4.5 in respect of Area Based Grant reductions (totalling £3.678M) and Appendix B which sets out reductions in respect of Children’s Services Area Based Grants, which accounts for £3.124M of the ABG reduction. 3.2 Agree the deductions to the Children’s Services Capital Programme set out in Appendix C, totalling £2.542M and implications as set out in Appendix D. 3.3 Agree the breakdown of the Transport Capital Programme set out in Appendix E, and agree the proposed reductions in transport capital spending totalling £1.710M as set out in Appendix F 3.4 Note the implications of the other announcements received to date (Section 5). 3.5 Note the steps taken in the light of the emergency budget announcements. Stewart Young, Deputy Leader Part B – Advice of Corporate Director – Resources 4.0 BACKGROUND 4.1 The new government has made it clear that one of its most urgent priorities is to tackle the UK‟s structural budget deficit in order to restore confidence in the economy and support long term recovery. Interim Announcements 4.2 On 24th May, the Chancellor of the Exchequer announced the first step in tackling the deficit, setting out how the government intended to save over £6.2 billion from spending in 2010/11. Included in the savings were £1.2 billion to be delivered from local government. 4.3 On 10th June the Secretary of State for Communities and Local Government announced the detail of how the £1.2 billion revenue reductions would be allocated to local government. The reductions related to Cumbria arise from the Area Based Grant (ABG). The figures are set out below: (Revenue) Area Based Grant Reductions 2010/11 Supporting People Admin Road Safety revenue Home Office Services total Dept. for Education Total Total ABG reductions £m £m £m £m £m (0.246) (0.255) (0.053) (3.124) (3.678) 4.4 The ABG originated from a number of specific grants, before becoming a consolidated non ring fenced grant. It can be spent on any area that the Council determines, although there is pressure from individual government departments to spend it on the original specific grant areas. Cumbria has continued to use ABG to fund the original areas of the specific grants. Revenue Reductions 4.5 In summary the reductions and their impact is as follows: 4.5.1 Supporting People (£0.246m) this is a cut in the specific grant the purpose of which was to fund the administration and general management staff required to run the £10m of frontline Supporting People Grant. Cuts in this area had been anticipated and the Directorate had already been working towards alternative service provision / mainstreaming in this area. The Adults and Local Services Directorate have indicated that they will deal with the loss of this grant, £246k, by utilising the main Supporting People Grant of £10m. There will be no impact upon staff numbers. 4.5.2 Environment Road Safety (£0.255m) this is a partial cut in the £0.956m which the County administer on behalf of Cumbria Road Safety partnership, and equates to a 26.6% cut in total grant in this area. There have been under spends in this area in previous years, therefore there is potential to absorb some of this. The Council administers the grant on behalf of the partners, which include Police, Highways and Magistrates Courts. The staff impact will be felt by the Police Authority and relates to staffing of the Camera Vans and the Ticketing Office. The Courts use additional staff to manage the increase in ticketing. The aim of the grant is to reduce those killed and seriously injured on the roads. There is a positive relationship between safety camera activity and a reduction in the numbers of people killed and seriously injured. The Cumbria Road Safety Partnership strongly opposes any reduction in revenue expenditure. It is envisaged that the reduction in grant will impact on staffing resources within partner organisations and the number of road safety vans will decrease. 4.5.3 Home Office (£0.053m) This reduction is from the Safer and Stronger Communities Fund (SSCF) and will impact on Crime and Disorder Reduction Partnership and other countywide community safety activity, for example work with persistent offenders and people with drug and alcohol problems. 4.5.4 Children’s Services (£3.124M). The breakdown of the grants that comprise the Department for Education ABG is set out at Appendix A. The reduction announced by the Government has not been linked to any of the specific grant areas, only to the overall total. 4.5.5 Appendix B sets out the recommended areas where activity funded from ABG can be reduced and the impact this will have. Work to determine the full impact of these reductions across all activities is continuing. These areas have been colour coded to indicate the risk associated with the implementation or risk to delivery. The initial implications are that this could lead to a reduction in establishment of 7 posts. This will be dealt with using the Council‟s “Management of Change” policies, including the use of redeployment and, if necessary, redundancy. Children’s Services Capital Programme Reductions 4.5.6 The government have to date clawed back £2.542m capital funding for Children‟s Services projects. This comprises of 50% of the current year funding for the extended schools grant, harnessing technology grant and the youth capital fund. Additionally funding has been cut from the 14-19 Diploma service for IT expenditure. Details of all Children‟s Services capital projects including those with funding reductions are detailed in Appendix C of this report. Appendix D sets out the implications of these reductions. 4.5.7 In other Capital grant areas the current spending/commitment is being reviewed and likely to lead to further announcements over coming months. Transport Capital Programme Reductions 4.5.8 In addition to revenue reductions, capital reductions were announced, related to funding for transport: Transport (Capital) Grant Reduction 2010/11 Cumbria Integrated Transport Block Capital Detrunking PRN Network Funding Road Safety Capital Grant TOTAL REDUCTIONS £'m £'m £'m £'m £'m (1.300) (0.130) (0.070) (0.210) (1.710) 4.5.9 In addition to the above, it is important to note that the announcement specifically excludes “Department of Transport – Major Projects, Smaller Grants”. The aim is to move away from small bid based & reward grants that are expensive to administer. Local Authorities are awaiting confirmation of the impact of reductions totalling £10 million in respect of these grants. 4.5.10 Appendix E sets out the allocation of the Transport Capital Programme between different projects funded from government highways allocations. Works in relation to the Principal Roads schemes and Bridges and Structures, have this year been prioritised using a value management approach in line with the Highways Systems thinking work, as set out at County Council in February. 4.5.11 The proposal for meeting these reductions is also set out in Appendix E, with a commentary of the impact in Appendix F. The proposal allocates the reductions on a pro-rata basis, after allowing for the specific Road Safety grant, between the central Integrated Transport block and Local Committee Annual Package of Measures. Local Area Agreement Grant 4.5.12 In addition to those areas set out above, announcements were made in respect of reductions in Local Area Agreement (LAA) grant. The announcement set out that: Areas with LAAs that ran from 2006-2009 have already submitted their claims and these were paid in the last financial year. No further claims from these areas will be accepted but it is planned to pay 50% of the value of any targets likely to be achieved where data to support a claim was not available before Dec 2009. Areas with LAAs that ran from 2007-2010 should submit their claims as usual. It is planned to pay 50% of what‟s claimed and 50% of the value of any targets where data is not available but the target is likely to be achieved. There are a number of 2006-09 LPSA claims outstanding and these will be treated in the same way as the LAA areas. As this grant is claimed in two instalments, over the course of two financial years, the changes have sought to ensure that no area will receive less than they would have been expecting as a first instalment claim. 4.5.13 Discussions had been ongoing with partner organisations about the use of these grants to improve Community Strategy outcomes going forward. Although no commitment had yet been made to use this grant, the implications of these reductions will thus be felt outside the Council in our partner organisations as much of this funding is used for joint working initiatives. Emergency Budget 4.5.14 The Chancellor‟s emergency budget on the 22nd June set out wide ranging provisions in relation to the economy, taxation, welfare, pensions, banking and energy and climate change. The key elements that impact upon the County relate to: Non-protected government departments will have an average of 25% deducted from their budgets over the next 4 years. Government will work with local authorities to freeze council Tax for one year in 2011/12 if authorities work to keep spending to a minimum. The terms under which authorities will be compensated for a commitment to freeze or reduce Council Tax will be outlined in “due course”. Public sector pay (central government) will be frozen for 2 years for anyone earning £21,000 or more. The 1.7m lowest paid workers will receive a flat £250 pay rise. The Comprehensive Spending Review will be presented on 20 October 2010. There will be no further reductions in capital spending totals above the 50% reduction announced in the previous government plans. 4.5.15 At this stage it is not clear how and to what extent the reductions in the spending totals for the government departments will feed through to Local Government, and thus to Cumbria. What is certain is that reductions are likely to impact significantly upon the resources available for the next and subsequent years. The Chancellor set out he would “challenge local government to consider fundamental changes in the way they provide vital services”. 5.0 Other Announcements North West Development Agency 5.1 Government has announced its intention to abolish the NWDA along with other Regional Development Agencies (RDA), and replace them with Local Enterprise Partnerships (LEPs). In parallel, the Government has reduced the RDA Single Programme budget in 2010/11 as part of national budget cuts, requiring the NWDA to find savings of £52m in year. Initially all uncommitted NWDA budgets were withdrawn with the estimated impact on the Council in year being a reduction of circa £6m, these are projects planned to be delivered via West Lakes Renaissance. NWDA have now advised that if sufficient savings above £52m are identified then sub regions may be able to negotiate the reintroduction of costs for key projects. 5.2 The NWDA also provides support to the Council for „core costs‟ totalling £2.2m, these are essentially for staffing with overhead costs such as accommodation planned to be charged to projects. The NWDA confirmed recently that the Core Cost budget will have to contain overhead costs in 2010/11 effectively giving rise to a £0.4m in year pressure. Finally the NWDA has confirmed that it will not provide a Core Cost budget in 2011/12. The information from Government about funds available for Economic Development beyond 2010/11 is changing constantly, what is clear is that the funds will be significantly less than in the current year. 5.3 The Environment Directorate management team has been working closely with the NWDA and has commenced a consultation period with staff to ensure the Council‟s financial exposure is managed. 5.4 The potential to develop a Local Enterprise Partnership (discussed elsewhere on today‟s Agenda) may provide an opportunity for the retention of economic development expertise and skills within the Council, subject to Council HR „Management of Change‟ policies. Building Schools for the Future 5.5 In June, the Government announced its decision to withdraw the Building Schools for the Future programme. The first tier to impact onto Cumbria would have provided access to funding of £62m to rebuild and renovate schools in the west of the County. 5.6 The Council had approved £1.0m of revenue and £1.0m of capital funding in 2010/11 to support the BSF programme and to date, revenue costs of £110,000 have been incurred. A further £155,000 had been agreed with schools to fund preparation for the Building Schools for the Future programme. Schools have been requested to provide details of how this funding has been committed. Including expenditure in previous years a total of £355,000 has been spent to the end of June excluding the amounts agreed with schools. 5.7 Any future use of resources no longer required for Building Schools for the Future, would need to be in accordance with the budget and policy framework and will be kept in the Council‟s central contingency until required. 16-19 Education and Training 5.8 On 20th July, the Secretary of State announced a simpler system for 16-19 Education and Training. In the announcement, the Secretary of State reaffirmed the strategic role of local authorities as champions of young people‟s learning - as well as for all education - and in particular their responsibilities for meeting the needs of young people by influencing and shaping learning provision through 14-19 partnerships and by identifying gaps, enabling new provision and developing the market. 5.9 The new approach removes the requirement for regional planning groups and sub regional groups and a simplification of the funding process by switching to a system whereby providers are for the most part funded on the basis of their previous year‟s activity – or „lagged pupil funding‟. This will remove the need for detailed planning by either local authorities or the YPLA. 5.10 The YPLA will now directly fund general FE and Sixth Form Colleges and other providers for the 16-19 provision, rather than funds being directed through local authorities. Apprenticeships will however continue to be funded by the National Apprenticeship Service. 5.11 In practical terms this change will cut out the need for Local Authorities to fund and to hold financial audit and assurance functions for 16-19 and removes the need for local authorities to manage funding agreements with 16-19 providers. Local Authorities will however continue to fund maintained schools for their sixth form provision. 5.12 A number of staff transferred to the County Council from LSC in April. Funding for these staff was to be covered by a special purpose Grant. We await clarification as to whether the grant will continue. 6.0 RECRUITMENT AND VACANCY MANAGEMENT 6.1 Whilst the Council provides a wide variety of services through a number of different approaches, one of its key costs relates to staffing. There is already a corporate framework of Resourcing Management operating across each directorate, where vacant posts are reviewed and assessed by Corporate Directors and DMT‟s against service needs and budget implications. In addition to this the Councils policy on recruitment was changed in 2009 to only use external recruitment where internal recruitment methods have failed to attract the necessary candidate. These existing arrangements have been key to being able to deliver a balanced budget for 2009/10. 6.2 As announced at full Council in June, in light of the significant budgetary challenges the Authority is expected to be facing, further steps are now to be put into place to tighten the current arrangements and to move to only recruit new staff externally where the post/need is deemed to be essential. This will preserve the Council‟s ability to provide the services required and will properly protect the employment of existing staff, wherever possible, from the implications of budget restrictions such as workforce reductions and potential redundancy. 6.3 The management of change procedures are intended to provide a fair means of handling change that affects the County Council's workforce. In situations of restructure, reorganisation or redundancy, the Council would look in the first instance to redeploy employees into suitable alternative roles. Supporting the redeployment of employees at risk of redundancy will aim to retain talent and knowledge within the Council. All employees at risk of redundancy within the Council would automatically be placed onto the redeployment register at the earliest possible opportunity and the Council will work to ensure that all reasonable alternatives are exhausted prior to redundancy. 6.4 Furthermore, the Chief Executive with the Corporate Management Team in line with the Council‟s wishes will ensure that recruitment is made to essential posts only. 6.5 The first test that will have to be satisfied in every circumstance is whether the service could be provided in a different way and/or the duties could be carried out in different ways, before there is any consideration of recruitment. Options such as additional hours, acting-up arrangements, secondments, redeployment, banks/pools, workstart etc. are expected to have been considered and used to exhaustion in every circumstance. If external recruitment is deemed to be necessary then there will be a further consideration as to whether it will be on a fixed-term or a permanent basis. 6.6 Revised and new arrangements will also be put in place to help ensure that where necessary staff are developed and trained to be able to take on additional duties and/or cover vacant posts internally, for example through our existing redeployment procedure and/or acting up arrangements. This may require the re-allocation of existing training budgets and expenditure. The Council‟s Workforce Plan already advocates the need to develop a more flexible workforce – these new restrictions both illustrate the reason for this as well as give an opportunity to achieve this more extensively. 6.7 It is proposed that the recommended more rigorous approach to our existing resource management process – and the positive reasons for their introduction - is communicated to all staff and Trade Unions to provide further clarity in relation to the Council‟s approach to the implications of the budget restrictions. The matter will be scheduled as a key agenda item for the next Corporate JCG meeting with the Trade Unions, and work will be carried out with the communications team to help ensure all staff and managers are aware of the revised arrangements, and the reasons for their introduction. 7.0 RESOURCE AND VALUE FOR MONEY IMPLICATIONS 7.1 The resource and value for money considerations are set out in the body of the report. 8.0 CONSULTATION WITH SCRUTINY AND LOCAL COMMITTEE CHAIRS 8.1. In preparing the budget reduction proposals, the Chairpersons of the Local Committees were consulted on 29th July, and at its meeting of 16th August Scrutiny Management Board considered the grant reduction proposals. SMB referred the matter to the Scrutiny Advisory Boards for Environment and Economy and the Children and Young People for further consideration, draft minutes of these meetings are attached in Appendix G The comments of this consideration of the Children and Young People‟s Advisory Board will be reported verbally to this meeting. 9.0 LEGAL IMPLICATIONS 9.1 The Council has a number of statutory posts. There is a legal obligation upon the Council to ensure that any such posts are in place at all times and any decision to not replace a statutory post would likely place the Council in breach of the relevant legislation. The criteria developed to define what constitutes an essential post needs to ensure that statutory posts will be able to be filled. 9.2 Cuts in grants may have a knock on effect on the Council‟s ability to continue to fulfil its legal obligations contained in ongoing contracts. Corporate directors need to be alert to the impact that cuts may have on ongoing Council contracts attributable to their Directorate and manage the consequences accordingly (paragraph 2.5.4. of the Council Financial Regulations). 9.3 An appropriate period of public consultation should be allowed for by the Council before any cuts are implemented. 10.0 OPTIONS 10.1 Cabinet could agree to the proposed changes resulting from the reductions in grant. 10.2 Cabinet could amend the proposed changes. 11.0 CONCLUSION 11.1 The report sets out action to meet the in year reductions in grant arising from early government announcements, and steps to manage staff recruitment in the light of announcements made in the emergency budget on 22nd June and the potential impact on the Council next year. D. Wood Corporate Director - Resources Jim Savege Corporate Director Organisational Development August 2010 APPENDICES Appendix A: Area Base Grant - Department of Education Reductions Appendix B: Proposed Reductions Arising From Children's Services ABG Grant Appendix C: Children’s Services Capital Grant Reductions Appendix D: Impact of Children’s Services Capital Grant Reductions Appendix E: Options For Reductions Arising From Transport Capital Grant Reductions Appendix F: Impact Of Transport Grant Reduction Options Appendix G (i): Minutes from Leadership and Local Committee Chairs Group Appendix G (ii): Minutes from Scrutiny Management Board Meeting Appendix G (iii): Minutes from Environment and Economy Advisory Board Appendix G (iiii): Minutes from Children’s and Young People Advisory Board Electoral Division(s): Countywide Executive Decision Yes * Key Decision Yes * If a Key Decision, is the proposal published in the current Forward Plan? Yes Is the decision exempt from call-in on grounds of urgency? No* If exempt from call-in, has the agreement of the Chair of the relevant Overview and Scrutiny Committee been sought or obtained? Has this matter been considered by Overview and Scrutiny? If so, give details below. N/A* Yes Has an environmental or sustainability impact assessment been undertaken? N/A* Has an equality impact assessment been undertaken? N/A* PREVIOUS RELEVANT COUNCIL OR EXECUTIVE DECISIONS No previous relevant decisions CONSIDERATION BY OVERVIEW AND SCRUTINY Considered by Scrutiny Management Board (16th August 2010) Considered by Children and Young People Scrutiny Advisory Board (7th September 2010) Considered by Environment and Economy Scrutiny Board (informal meeting of 26 August 2010). BACKGROUND PAPERS None RESPONSIBLE CABINET MEMBER Stewart Young, Deputy Leader REPORT AUTHORS Diane Wood, Corporate Director Resources Kate McLaughlin-Flynn, Assistant Director - Finance Jim Savege, Corporate Director Organisational Development APPENDIX A AREA BASE GRANT: Department of Education Reductions AREA BASED GRANTS - DEPT for EDUCATION 2009/10 Grant Original 2010/11 Grant £000 £000 £000 School Development Grant (LA Retained Element) 2,225 2,225 Extended Schools - Start Up 2,035 837 Primary National Strategy : Central Co-ordination 296 296 Secondary National Strategy : Central Co-ordination 274 274 Secondary Behaviour and Attendance : Central Co-ordination 126 126 School Improvement Partners 333 333 Education Health Partners 153 153 School Travel Advisors 97 97 Choice Advisors 41 41 School Intervention 223 223 Flexible 14 to 19 Partnership Funding 151 149 48 48 General Duty on Sustainable Travel To School Extended Rights for Free Travel (and FCR allocation) Reduction 392 552 Connexions 4,218 4,136 Children's Fund 1,027 1,027 Positive Activities for Young People 586 761 Teenage Pregnancy Children's Social Care Workforce 290 121 290 119 Care Matters Revised 2010/11 Grant £000 346 394 Child Death Review Processes 49 51 Child Trust Fund (wef Nov 08) 10 12 13,040 12,143 -3,124 9,019 648 674 0 674 90 90 0 90 480 513 0 513 1,218 1,277 0 1,277 14,258 13,420 -3,124 10,296 TOTAL AREA BASE GRANT - DEPT FOR EDUCATION AREA BASED GRANTS - OTHER DEPARTMENTS CAMHS Substance Misuse Carers Grant Total Area Based Grants
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