Agenda item

(Cabinet Member with Special Responsibility Councillor Thomas)

 

Joint report of the Corporate Directors (Finance and Performance, and Regeneration) and the Head of Financial Services (Appendix D to follow)

(Cabinet Member with Special Responsibility Councillor Thomas)

 

The Corporate Director (Finance and Performance) and Head of Financial Services submitted a joint report updating Members on proposed changes to the Council’s strategic planning framework, to promote greater understanding of the linkages and co-ordination needed between the different elements, in order to deliver improvements in the Council’s management of resources.

 

In line with those aims, the report also sought to gain approval of an updated Corporate Property Strategy; approval of Cabinet’s future aims for Council Tax, for referral on to Council and approval of draft capital investment criteria and initial financing assumptions.

 

The options, options analysis, including risk assessment and officer preferred option and comments, were set out in the report as follows:

 

Council Tax Targets

 

The options regarding targets are basically to:

 

Retain the existing Council Tax target of no more than 4% for future years

Previous approved forecasts indicate that this would require net savings of around £1,053K and £1,302K to be identified for 2010/11 and 2011/12 respectively, although these will change as the budget develops.

 

Recommend an alternative Council Tax target increase for future years.

The level of any net savings requirement (and the associated risks) would depend on the tax level proposed.

 

The main risks attached to either option follow on from the information in the report and the ability of the Council to take decisions on matching service levels with the money available to fund them.  In addition, the reputation and public perception of the Council may be affected. The key risks can be summarised as follows:

 

·         Actual savings targets prove to be substantially different from those shown above, due to changes in financial projections.

·         Required savings targets can’t be met, without having an unacceptable impact on service delivery – either from the Council’s own viewpoint or from public perception.

·         Government / the public perceive the increase to be too high, resulting in capping action being taken against the Council and/or a negative impact on public relations and the Council’s reputation

·         Council tax targets are too low, resulting in them being unsustainable in the longer term, without having adverse effects on future service delivery and/or the Council’s financial standing and reputation.

 

The report highlights that there is significant scope for budget projections to change, as a result of both internal and external factors. To counter this, there will be further opportunities to review target increases during the forthcoming budget as more definite information becomes available on forecast spending.

 

With regard to capping, Government has demonstrated a firm commitment to using its capping powers – although this could be affected in future by the General Election.  Should Cabinet wish to support spending levels that result in a Council Tax increase much higher that the current MTFS target, then there are strong indications that the current Government is likely to challenge this course of action.  This may well result in the Council’s budget being capped – in such a situation it would be forced to cut spending / services in an unplanned way and it would incur rebilling costs.  Alternatively, if Cabinet wish to support a much lower increase, then future sustainability will become a major issue.  On balance it is felt that financial prospects will get worse, rather than better.

 

In terms of options, the impact on Council Tax payers is key.  Members should consider the balance between providing services that the local community needs and wants, against how much it is prepared to pay.  There will be reputational, operational and financial risks, opportunities and trade-offs attached to whichever option Cabinet chooses.

 

Capital Investment

 

With regard to future years’ investment principles and funding assumptions, options are basically:

 

·         to approve retention of existing capital investment criteria, as set out in Appendix C of the report, or

·         to determine alternative proposals.

 

In considering any alternative proposals, Cabinet would need to have regard to their proposed corporate priorities and the principles of the Prudential Code, namely prudence, affordability and sustainability.  Risks would depend very much on the nature of any alternatives put forward.

 

 

 

Strategic Planning Framework

 

In this regard, options are basically:

 

·         to support the framework proposals for the future, as outlined in the report, in particular in sections 3 to 5, and 7, or

·         to reject the proposed changes, and/or put forward alternatives or request further work to be done on specific aspects.

 

The rationale behind the proposals is outlined in the background of this report.  Members could choose simply not to change, but it is felt that this would not help corporate development of the Council, and could undermine attempts to improve the Council’s Use of Resources.  Other risks and implications would depend very much on the issues that Cabinet raise or any amendments put forward.  

 

Corporate Property Strategy

 

With regard to the Corporate Property Strategy, options are basically:

 

·         to approve the Strategy as set out in Appendix D of the report, or

·         to put forward amendments to the proposal and/or request further work to be done on specific aspects.

 

Again, risks and implications would depend very much on the issues that Cabinet raise or any amendments put forward.  Ultimately though, the Council needs to have a Strategy fit for purpose, which gives direction to help ensure that property management supports delivery of the Council’s objectives and helps achieve value for money.

 

Officer Preferred Option and Comments

 

There is no specific officer preferred option with regard to Council Tax levels.  That said, both the Chief Executive and the s151 Officer would advise against planning for a Council Tax increase much lower than 4% at this time, at least for 2010/11, if Members aim to continue to provide a wide range of services to the public and wish to avoid more potential for major service cuts in future years.  Conversely, they would advise against aiming for an increase of around 5% or above at this time as it would be subject to capping under existing criteria. 

 

Whatever Council Tax targets are in place, Members need to have supporting plans in place to achieve a balanced budget.

 

With regard to the other matters contained within this report, the Officer preferred option is to approve the various proposals as set out.  It is felt that these present good starting points for developing capital proposals, and for improving the Council’s strategic resource management planning for the future.

 

Cabinet referred to information circulated prior to the meeting in response to a question from Cabinet. The information showed the impact of a 4% increase in Council Tax on a Band D property, as follows:-

 

The current Band D charge for Lancaster City Council is £185.31. A 4% increase would see this rise to £192.72, an increase of £7.41 or approximately 14p per week. (This increase represents around 0.5% of the full Council Tax charge, including the County Council, etc.)

 

It was noted that a 0% increase would mean the Council would have to make additional savings of £321,000.

 

It was moved by Councillor Langhorn and seconded by Councillor Barry:-

 

“(1)      That the Council Tax target increase of no more than 4% should be retained for future years and be referred to Council.

 

(2)               That the draft capital funding principles and priorities as set out in Appendix C of the report be approved, and that they form the initial basis on which Cabinet develops its Capital Programme proposals for the five year period from 2010/11 onwards.

 

(3)               That it be noted that the Head of Financial Services intends to submit a capitalisation bid in connection with Icelandic investments, pending confirmation of the Council’s creditor status.

 

(4)               That Cabinet supports the outline proposals to improve the Council’s strategic planning framework for the future.

 

(5)               That Cabinet approves the Medium Term Corporate Property Strategy as set out at Appendix D of the report.”

 

By way of amendment to (1), Councillor Mace proposed and Councillor Thomas seconded:

 

"(1)      Mindful of the target set by the County Council for a zero % increase in Council Tax in 2010-11, the present level of inflation and the financial hardship faced by our residents, Cabinet proposes to Council an aspirational target of a 0% increase in the City Council's Council Tax in 2010-11, should it be the case that circumstances will allow this to be achieved without undue reduction in front-line services and that the Council Tax target increase of no more than 4% should be retained for subsequent years and be referred to Council."

 

2 Members (Councillors Mace and Thomas) voted in favour and 7 Members (Councillors Archer, Ashworth, Barry, Blamire, Bryning, Fletcher and Langhorn) voted against, whereupon the Chairman declared the amendment lost.

 

Members then voted:-

 

Resolved:

 

(7 Members (Councillors Archer, Ashworth, Barry, Blamire, Bryning, Fletcher and Langhorn) voted in favour and 2 Members (Councillors Mace and Thomas) abstained)

 

(1)               That the Council Tax target increase of no more than 4% should be retained for future years and be referred to Council.

 

(2)               That the draft capital funding principles and priorities as set out in Appendix C of the report be approved, and that they form the initial basis on which Cabinet develops its Capital Programme proposals for the five year period from 2010/11 onwards.

 

(3)               That it be noted that the Head of Financial Services intends to submit a capitalisation bid in connection with Icelandic investments, pending confirmation of the Council’s creditor status.

 

(4)               That Cabinet supports the outline proposals to improve the Council’s strategic planning framework for the future.

 

(5)               That Cabinet approves the Medium Term Corporate Property Strategy as set out at Appendix D of the report.

 

Officers responsible for effecting the decision:

 

Corporate Director (Finance and Resources)

Head of Financial Services

 

Reasons for making the decision:

 

The decisions allow the Council to respond positively to the challenging economic outlook, ensuring greater focus on key service areas and in delivering the necessary savings, including service reductions, to achieve Council Tax targets. This is a scenario facing many councils up and down the country.