Agenda item

The Board is asked to consider the attached report on the Council’s Financial Strategy and agree any comments it wishes to be fed back to Cabinet on this subject.

The report before Members outlined the context within which the 2016/17 budget was being set and identified the Council’s overall policy direction, statutory duties and financial strategy.

The Council’s budget needed to reflect the level of funding allocated to it by the Government. Cabinet had received reports in November and December 2015 that provided an update on developments at the national level and the consequential impact on local government funding and set out information on the financial position within Havering.

The November report also set out the Council’s long term financial strategy to manage the implications of funding reductions and cost pressures over the next three years. It contained specific proposals to bridge the funding gap for the next two years, but left a funding gap of £2.4m in 2018/19 which required further steps to be taken in order to close that gap.

A further report had been made to Cabinet on 20 January 2016 which updated Members on the Local Government Financial Settlement, the impact on the proposed financial strategy for the coming financial year and the latest in year financial monitor. The report advised Cabinet that the three year funding gap had increased from £2.4m to £12.5m including £5.6m relating to 2016/17. The draft strategy recommended in the report included a range of additional measures which were intended to bridge the gap for 2016/17. Further reports would be made to Cabinet during the course of 2016/17 to consider the options for bridging the gap for the financial year 2017/18 and beyond.

The current position was that there would be an increase in the Havering element of the Council Tax of 1.99% plus a 2.00% precept for Adult Social Care.

In addition to the report members received a presentation from the Deputy Chief Executive which detailed the Government’s settlement and the demand impacts this would have on Havering’s budget strategy.

The presentation detailed the authority’s position pre and post settlement.

Due to changes in apportionment, Havering faced a reduction of over 96% to its Revenue Support Grant (RSG) by 2019/20 leaving a funding of 1.38m by 2019/20.

The presentation showed that Havering was one of the biggest losers in outer London in terms of percentage of RSG funding and that compared to neighbouring authorities had suffered the second largest funding cut.

Havering had seen a significant reduction in funding due to new methodology that had been introduced which penalised authorities that had a high taxbase and or council tax rather than those that were reliant on central government funding.

As part of the Government’s spending powers, it was assumed that councils would grow their taxbase by the same rate as previous years, increase council tax by 1.75% each year and introduce the Adult Social Care precept by 2% each year over the current parliament.

Members were advised that the overall picture was similar to what had been planned for, as it had been assumed that RSG funding would be lost, however, the savings were significantly front loaded particularly in 2016/17 and little time had been given to allow for the identification of savings. This had meant that additional savings had had to be identified that had not required the need for consultation.

The presentation detailed the savings that had been identified and what impact they would have on service level provision.

Members were advised that a combination of a core council tax increase, Adult Social Care precept and a reduction in GLA funding would result in an overall increase in council tax increase of 1.96% which was lower than the originally planned 1.99% increase.

Members noted that officers would continue to identify additional savings throughout the year.

Following the presentation Members sought and received clarification on several items of the presentation from the Deputy Chief Executive. However, Members had no specific comments regarding the budget strategy and its demand impacts that they wished to put before Cabinet at its meeting on 10 February 2016.