Medium Term Financial Strategy & 2018/19 Draft General Fund Revenue Budget

Transcription

1 EXE Medium Term Financial Strategy & 2018/19 Draft General Fund Revenue Budget EXECUTIVE MEMBER: LEAD OFFICER: REPORT AUTHOR: Mike Starkie, Elected Mayor Fiona Rooney, Director of Commercial and Corporate Resources (and Section 151 Officer) Fiona Rooney, Director of Commercial and Corporate Resources (and Section 151 Officer) WHY HAS THE REPORT COME TO THE EXECUTIVE? This report forms part of the Budget & Policy Framework within an Elected Mayor authority. The Executive is receiving this information to consider and endorse the Elected Mayor s 2018/19 Draft Revenue Budget and Medium Term Financial Strategy projections up to 2020/21. RECOMMENDATIONS The Executive is recommended to: a) Note the key messages from the Autumn Budget 2017 and note that, wherever possible, any implications have been built into the Council s refreshed Medium Term Financial Strategy for (Section 2 refers); b) Keep under consideration the acceptance of the capital receipts flexibility for 2018/19 to assist in the setting up of any new commercial activities, subject to the availability of capital receipts over and above those required to fund the existing Capital Programme (Section 3 refers); c) Note the key points of the 2018/19 Provisional Local Government Finance Settlement, and in particular the impacts on Copeland Borough Council (Section 4 refers); d) Agree the Financial Strategy Principles as set out in paragraphs 5.1 and 5.2 which are applied to the MTFS Projections and 2018/19 Draft Budget Proposals (Section 5 refers);

2 e) Note the assumptions and outstanding information and that all outstanding externally driven information should be available ahead of the Council meeting on 20 February 2018 (Section 5 refers); f) Agree the proposals for 2018/19 Fees and Charges set out in Appendix A to the report (Section 5 refers); g) Endorse the Elected Mayor s draft Medium Term Financial Strategy and the 2018/19 Draft General Fund Revenue Budget Proposals that will inform final proposals to Council in February 2018 (Section 5 refers); h) Note the key milestones in the approach to proposing the Authority s Net Budget Requirement and Council Tax Requirement for 2018/19 (Section 6 refers); and i) Note the Initial Statement of the Responsible Financial Officer (Section 151 Officer) (Section 7 refers). 1. INTRODUCTION / PROCESS 1.1 On 25 February 2016, Council approved the Corporate Strategy which set out the authority s Ambitions and Strategic Outcomes over a fouryear period. The Medium Term Financial Strategy and Capital Plan were also approved which set down, in financial terms, how the Corporate Strategy would be resourced. Two years on, the Executive has carried out a review and refresh of the Corporate Strategy and Medium Term Financial Plan and the draft revenue proposals for 2018/19 are set down in this report. The projections in the Medium Term Financial Strategy have been refreshed to reflect the announcements made in the Chancellor s Autumn Budget 2017 and the 2018/19 Provisional Local Government Finance Settlement. To comply with required practice, the Corporate Strategy and therefore the Medium Term Financial Strategy have both been extended to 2020/21 to cover the next three years. 1.2 Executive should note that the figures contained in this report are subject to change and a list of assumptions and outstanding information are included in Section 5 for information. 1.3 Overview and Scrutiny Committee will meet on 16 January 2018 to consider the Executive s draft proposals. Any recommendations will be reported to Executive on 30 January 2018 and Council on 7 February 2018 alongside responses from the Executive and the full suite of reports included as Agenda Items 7 to 11 inclusive at this Executive meeting.

3 1.4 Following the results of all budget consultation, consideration of any recommendations from the Overview and Scrutiny Committee, and further updating of these draft proposals as more information becomes available, the Elected Mayor s final budget proposals will be presented to Council for formal approval on 20 February AUTUMN BUDGET The Chancellor of the Exchequer presented his Autumn Budget, his second Budget of 2017, to the House of Commons on 22 November This section of the report provides an overview of the announcement, with emphasis on areas relevant to the public sector, and, more specifically, local government. Announcements relevant to local government within Autumn Budget 2017 are summarised below. Government Spending 2.2 The Chancellor has announced that the government is producing this Budget against the background of preparing for exiting the European Union, and, to help ensure a smooth transition, they are setting aside an additional 3 billion for government. 2.3 The Chancellor also stated that the level of public sector net borrowing is now forecast to be 49.9bn in 2017/18, reduced from 58.3bn in the March Budget. However, the forecast for the last year of the current Spending Round is for borrowing of 34.7bn, compared to 21.4bn in the March Budget, and, by 2021/22, for 30.1bn, compared to 16.8bn. He stated that borrowing is still forecast at over 20bn in the first year of the next Parliament. 2.4 The Chancellor announced initiatives across a number of themes: Additional measures to boost productivity, including a 1.7 billion new Transforming Cities Fund through the NPIF, launched in 2016 to improve connectivity and support jobs across England s city regions; Measures to increase the numbers of new homes being built and access to homes for the young and first time buyers; and 2.8bn of additional funding for the NHS up to 2019/20, with 0.3bn in 2017/18, 1.6bn in 2018/19 and 0.9bn in 2019/20 and additional capital funding of 3.5bn.

4 Local Government 2.5 The Autumn Budget set out a number of measures with a direct impact on local government. These are outlined below. Business Rates 2.6 The government announced a number of changes to business rates. The main changes announced were: From April 2018, CPI will be used to uprate the multiplier for business rates, rather than RPI, bringing forward the change already announced from April 2020; The business rates revaluation cycle will switch from five years to three years following the next revaluation. This should mean that, following the planned 2022 revaluation, the next revaluation will be in 2025; He confirmed that the application for a further London business rates pilot will go ahead for 2018/19; and it was confirmed in the budget papers that In addition to the London pilot announced in the Budget, new pilots for 2018/19 will be announced following the Department for Communities and Local Government s (DCLG s) assessment of recent applications to its scheme ; and There will be an extension of one-year to the 1,000 discount to business rates bills for pubs with a rateable value of less than 100,000 to 2018/ The proposal to move to uprating the business rates multiplier by CPI from April 2018 should see a reduction in the rate of increase from 3.9% (September RPI) to 3.0% (CPI rate). However, this is still significantly higher than the 2017/18 increase of 0.8% and higher than the previous two years of 2.0% (which were as a result of a 2% cap). 2.8 The cost to the government of this change is reflected in the policy costings at 240m in 2018/19 and 530m in 2019/20. In the Budget papers, it states that Local government will be fully compensated for the loss of income as a result of these measures. Local authorities should therefore see the NNDR1 and NNDR3 forms determining a S31 grant that will offset the lower increase in revenues, in the same way that the lost revenues from the previous 2% caps are refunded. 2.9 This change should therefore be revenue neutral for local authorities for 2018/19 and 2019/20. However, it is likely that it will result in a lower Baseline Need/NNDR Baseline amount in 2020/21, which, if not compensated for, would reduce local authority resources by 0.5bn per annum.

5 Council tax 2.10 The Chancellor announced that, from April 2018, local authorities will be given the power to increase the council tax empty homes premium from 50% to 100%. Regions 2.11 The Chancellor announced a number of measures relating to the regions, including: The 1.7bn new Transforming Cities Fund, with funding identified up until 2021/22, to support intra-city transport links. This will target projects which drive productivity by improving connectivity, reducing congestion and utilising new mobility services and technology. Half will be allocated via competition for transport projects in cities and the other half will be allocated on a per capita basis to the six combined authorities with elected metro mayors. As a result, allocations will be 74m for Cambridgeshire and Peterborough, 243m for Greater Manchester, 134m for the Liverpool City Region, 80m for the West of England, 250m for the West Midlands and 59m for the Tees Valley; and New devolution deals for the North of the Tyne and a second deal for the West Midlands region. This is also accompanied by specific funding arrangements for the Tyne and Wear Metro, Redcar Steelworks, and to expand the economy between Cambridge and Oxford. Other measures announced 2.12 Housing. The government announced that it wishes to increase the numbers of new homes being built to 300,000 per annum by the middle of the 2020s. A wide breadth of measures were announced to support this objective and these include: Housing Investment: the government will provide 1.1bn for a new Land Assembly Fund; a further 2.7bn to the competitively allocated Housing Infrastructure Fund (HIF) in England and a further 630m through the NPIF to accelerate the building of homes on small, stalled sites, by funding onsite infrastructure and land remediation. The government has also agreed a housing deal with Oxfordshire, which has agreed to bring forward for adoption a joint statutory spatial plan and commit to a target of 100,000 homes in the county by 2031, in return for a package of government support over the next five years;

6 Housing Revenue Account: the government had announced that it will lift Housing Revenue Account borrowing caps for councils in areas of high affordability pressure, so they can build more council homes. Local authorities will be invited to bid for increases in their caps from 2019/20, up to a total of 1bn by the end of 2021/22. The government will monitor how authorities respond to this opportunity, and consider whether any further action is needed; Intervention: the government confirmed it has begun the formal process of considering intervention in 15 areas where the local authority has failed to put an up-to-date plan in place and that it will shortly activate powers that will enable it to direct local planning authorities to produce joint statutory plans and undertake an assessment of where they should be used; Community Infrastructure Levy: DCLG will launch a consultation with detailed proposals on reforms to the CIL; and Housing First pilots: the government will invest 28m in three Housing First pilots in Manchester, Liverpool and the West Midlands, to support rough sleepers with the most complex needs to turn their lives around The government has also announced: An extra 42m of Disabled Facilities Grant in 2017/18, taking funding available to 473m; An extra 45m for the Pothole Fund in 2017/18; A package of measures to support the continued roll out of Universal Credit; A national living wage of 7.83 from April The Executive is recommended to note the key messages from the Autumn Budget 2017 and note that, wherever possible, any implications have been built into the Council s refreshed Medium Term Financial Strategy for SPENDING REVIEW 2015 FLEXIBILITIES COPELAND BOROUGH COUNCIL 3.1 This section of the report updates the Executive on two flexibilities that were given by the government as part of Spending Review 2015, namely flexible use of capital receipts and the Multi-Year Settlement Offer (including the Efficiency Plan).

7 Flexible Use of Capital Receipts 3.2 As part of Spending Review 2015, the government announced that it would introduce flexibility for the period of the Spending Review for local authorities to use capital receipts from the sale of non-housing assets to fund the revenue costs of service reform and transformation. As part of the Provisional Local Government Finance Settlement on 17 December 2015, the government issued guidance on this flexibility. This guidance was accompanied by a letter sent to Chief Finance Officers outlining greater detail of the flexibility being provided to allow capital income to be treated as revenue income for this purpose. The final guidance was issued in March Local authorities will only be able to use capital receipts from the sale of property, plant and equipment received in the years in which this flexibility is offered. They may not use their existing stock of capital receipts to finance the revenue costs of reform. 3.4 The expenditure for which the flexibility can be applied should be the up-front costs that will generate future ongoing savings and/or transform service delivery to reduce costs or to improve the quality of service delivery in future years. The ongoing revenue costs of the new processes or arrangements cannot be classified as qualifying expenditure. 3.5 The key determining criteria to use when deciding whether expenditure can be funded by the new capital receipts flexibility is that it is forecast to generate ongoing savings to an authority, or several authorities, and/or to another public sector body s net service expenditure. 3.6 The government directs local authorities to the Codes of Practice issued by CIPFA including The Prudential Code for Capital Finance in Local Authorities and The Code of Practice on Local Authority Accounting. The government also states that authorities should have regard to the current edition of Treasury Management in Public Services: Code of Practice and Sectoral Guidance Notes by regulation 2 of the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 [SI 3146] and to the Local Authority Accounting Code as proper practices for preparing accounts under section 21(2) of the Act. The Guidance 3.7 The government believes that individual authorities and groups of authorities are best placed to decide which projects will be most effective for their areas and it is for individual local authorities to decide whether or not a project qualifies for the flexibility.

8 3.8 Although a list of types of project that would qualify for the flexible use of capital receipts is included in the guidance, the list is not meant to be prescriptive or exhaustive and individual authorities who have projects that will generate ongoing savings that are not included in the list provided in the guidance can apply the flexibility to fund those projects. 3.9 The list includes: Sharing back-office and administrative services with one or more other council or public sector bodies; Investment in service reform feasibility work, e.g. setting up pilot schemes; Collaboration between local authorities and central government departments to free up land for economic use; Funding the cost of service reconfiguration, restructuring or rationalisation (staff or non-staff), where this leads to ongoing efficiency savings or service transformation; Sharing Chief Executives, management teams or staffing structures; Driving a digital approach to the delivery of more efficient public services and how the public interacts with constituent authorities where possible; Aggregating procurement on common goods and services where possible, either as part of local arrangements or using Crown Commercial Services or regional procurement hubs or Professional Buying Organisations; Improving systems and processes to tackle fraud and corruption in line with the Local Government Fraud and Corruption Strategy this could include an element of staff training; Setting up commercial or alternative delivery models to deliver services more efficiently and bring in revenue (for example, through selling services to others); Integrating public facing services across two or more public sector bodies (for example children s social care, trading standards) to generate savings or to transform service delivery For each financial year, a local authority should ensure it prepares at least one Flexible Use of Capital Receipts Strategy before the start of the financial year to which it relates. This can be included as part of a local authority s Efficiency Strategy and should include: A list of each project that plans to make use of the capital receipts flexibility; The split of up front funding for each project between capital receipts and other sources;

9 A project by project cost benefit analysis to highlight the expected savings; How it will impact upon the local authority s Prudential Indicators for the forthcoming and future years; From 2017/18 and in each future year, it should contain details on projects approved in previous years, including a commentary on whether the planned savings or service transformation have been/are being realised in line with the initial cost/benefit analysis It is recommended that the Executive keeps under consideration the acceptance of this flexibility for 2018/19 to assist in the setting up of any new efficiency and/or commercial activities, subject to the availability of capital receipts over and above those required to fund the existing Capital Plan. The Multi-Year Settlement Offer 3.12 As part of Spending Review 2015, the Government stated that it would offer any council that wished to take it up a four year funding settlement to 2019/20. Councils would need to request this and have an Efficiency Plan in place At its meeting on 27 September 2016, the Council agreed to submit a request to accept the offer of a four-year funding settlement to the government. On 14 October 2016, the authority s submission was made, alongside the publication of the necessary Efficiency Plan. On 16 November 2016, the Mayor received formal confirmation that Copeland Borough Council was accepted for the multi-year settlement which covers Revenue Support Grant and Rural Delivery Grant The Executive should note that the confirmation letter does point out that The Government will also need to take account of future events such as the transfer of functions to local government, transfers of responsibilities between local authorities, mergers between authorities and any other unforeseen events. However, barring exceptional circumstances and subject to the normal statutory consultation process for the local government finance settlement, the Government expects these to be the amounts presented to Parliament each year /19 PROVISIONAL LOCAL GOVERNMENT FINANCE SETTLEMENT Introduction 4.1 On 19 December 2017, the Secretary of State for the Department for Communities and Local Government, Rt. Hon. Sajid Javid MP, made a statement

10 to Parliament on the provisional local government finance settlement for 2018/19. This section of the report highlights key issues of note and comparative information for Copeland Borough Council. Main Points 4.2 The 2016/17 local government finance settlement announced Core Spending Power figures for the period 2016/17 to 2019/20. These amounts were updated for the 2017/18 local government finance settlement. The main changes announced as part of the 2018/19 provisional local government finance settlement are set out below: Local Government Funding Reform - The government has published the consultation paper Fair funding review: a review of relative needs and resources, a technical consultation on relative need. The Secretary of State stated that the result of the review will be introduced in 2020/21. The Secretary of State also confirmed that there will be a business rates baseline reset in 2020/21 and, from 2020/21, business rates retention will be at 75% (with existing grants, including RSG and Public Health Grant incorporated into business rates retention). Council Tax There has been an increase to the referendum limit for Council Tax from 2% to 3% and this applies for 2018/19 and 2019/20 to reflect the level of inflation. Business Rates Pilots - I September 2017, the government invited authorities to bid for pilot status in 2018/19. Following a competitive process, the following 10 areas have been successful with their applications (alongside the expanded London Pilot): o o o o o o o o o o Berkshire Derbyshire Devon Gloucestershire Kent & Medway Leeds City Region Lincolnshire Solent Suffolk Surrey

11 New Homes Bonus - the 2018/19 allocations have been announced (previously these figures were only indicative based on previous years allocations). There have been no changes to the deadweight threshold (at 0.4%) or the eligibility of properties to qualify for the funding. Rural Services Delivery Grant The 2018/19 funding has been increased from 50m to 65m. Top Up/Tariff Adjustments A consultation will take place in Spring 2018 regarding the current 153m in negative RSG that remains in the 2019/20 funding allocations. Revaluation Within the business rates retention system, the NNDR baseline and top up/tariff amounts have been amended to reflect Revaluation The adjusted amounts are intended to make changes in Rateable Value revenue neutral for individual authorities; with changes to authorities NNDR Baseline (and therefore tariff/top up) being equal and opposite to the forecast change in the ability to raise business rates locally. Copeland Borough Council Key Figures 4.3 Copeland s Settlement Funding Assessment (SFA) is the revenue received in the form of Revenue Support Grant from central government, and a share of the business rates retained locally. Chart 1 below shows a cumulative reduction to Copeland of 17% to the end of the existing period of the 2015 Spending Review, ie 2020.

12 Chart 1: Copeland s Headline Settlement Funding Assessment Headline Settlement Funding Assessment Adjusted Settlement Funding Assessment for pilots a N/A Of which: Revenue Support Grant Baseline Funding Level Tariff / Top Up Adjustment b Change in headline SFA: Annual change Cumulative change 2017/ / / N/A N/A % -10.1% -7.6% -17.0% (a) Only applicable if your authority is part of a 100% business rate pilot. For these authorities, the SFA may be increased in 2018/19 to compensate it for a loss of any grants in addition to Revenue Support Grant. The adjustment has not yet been made for 2019/20. (b) The Tariff / Top Up Adjustment is an amount in 2019/20 which increases an authority's tariff or decreases its top up, as applicable. It is applied in cases where cuts to an authority's SFA cannot be achieved through further cuts to its Revenue Support Grant, as the latter has already fallen to zero (in the case of Adur, for example).

13 4.4 Chart 2 below continues to highlight the significant shift in funding from lower to upper tier services. Chart 2: Change in Headline SFA by class of Local Authority Authority group Copeland Unitaries without fire Metropolitan Districts Inner London Boroughs Outer London Boroughs Unitaries with fire Counties with fire Counties without fire Shire Districts Fire Authorities England Services Lower tier Upper tier Fire Change in SFA from previous year 2018/19-7.6% -7.1% -5.6% -4.8% -6.8% -7.5% -9.8% -10.0% 2019/20-7.9% -14.9% -21.7% -4.1% -10.1% -8.5% -6.5% -5.7% -8.3% -8.5% -10.8% -11.7% -2.4% -6.4% -7.6% Cumulative change between 2017/18 and 2019/ % -15.0% -11.7% -10.2% -14.5% -15.4% -19.5% -20.5% -6.4% -13.4%

14 4.5 Chart 3 below further illustrates the cumulative change in Settlement Funding Assessment by class of authority between 2017/18 and 2019/20. Chart 3: Cumulative Change in SFA by Class of Authority 4.6 Executive is recommended to note the key points of the 2018/19 Provisional Local Government Finance Settlement, and in particular the impacts on Copeland Borough Council MEDIUM TERM FINANCIAL STRATEGY (REFRESHED) Financial Strategy Principles 5.1 On 25 February 2016, the Council approved a new set of Financial Strategy Principles as part of setting the 2016/17 budget, to guide the development of the Council s financial plans and budgets over the four year period. It is proposed to retain these Principles intact for setting the 2018/19 Revenue Budget, Capital Plan and Treasury Management Strategy.

15 5.2 The financial environment that local government, and the public sector more generally, finds itself in, demands financial flexibility, financial and commercial awareness, effective risk management and the effective use of new technologies. The key principles to be applied for the MTFS are set out by Financial Theme below. Financial Principle 1: Revenue Budget Strategy Annual budget resources aligned and prioritised to meet Copeland s new Corporate Strategy A Reserves and Balances Policy in line with best practice that is reviewed on an annual basis General unearmarked reserves (general balances) retained at a level of at least 2 million at the end of each financial year, subject to a risk assessment as part of budget setting in each of the four years of the MTFS period Earmarked reserves established appropriately for known and quantifiable (future) liabilities and financial risks Strategic Reserve established to support the Delivering Differently Programme Secure vacancy savings but not to the detriment of delivering the Strategic Outcomes Endeavour to minimise staff redundancies Continue to carry out a detailed review of finances within the Council to ensure smart procurement maximises the use of every pound we spend of public money Deliver an energised Delivering Differently Programme with a focus on growth, customer and commercialisation Implementation of Service Reviews outcomes and continuation of Service Review Programme across all service units of the Council Where external funding is secured for a limited time period, any operational arrangements put in place must not assume that the fall-out of grant will be replaced by mainstream funding automatically Endeavour to maximise the opportunities of the Business Rate Retention Scheme, subject to government announcements Review debt recovery procedures to minimise the need to write-off of bad debts and to reduce the need to make provision for bad debt across council tax, business rates and sundry debt Annual review of the Local Council Tax Support Scheme Refresh the Discretionary Rate Relief Policy to support local circumstances and the current economic climate Ensure Welfare Reform implications are understood in a financial context

16 Where the Council acts as the accountable body, all associated costs will be recharged Financial Principle 2: Commercial & Income Generation Move towards becoming a financially self-sufficient Council by 2021 through an active commercial agenda and in line with the government s agenda of moving towards a self-sufficient local government Consider any appropriate trading opportunities supported by robust business plans and financial risk assessments and developed in the context of the wider Council MTFS Establish a trading company to develop the commercial opportunities for Copeland Encourage a climate where trading and charging powers of the authority are maximised Review the Income Generation Policy so that payments are made in advance of Council services being provided wherever possible Financial Principle 3: Council Tax Policy Provide value for money for the residents of Copeland through the efficient management of council tax collection Determine Council Tax levels that demonstrate prudence and retain stability in the Authority s finances (current assumption is a 1.95% increase for each year of the MTFS and this should be considered in the context of any capping limits set by the Government) Council tax collection managed to secure recurrent efficiencies in the Council s Collection Fund Financial Principle 4: Capital Investment Development of a rolling four-year Capital Investment Plan Supports the Council s ambitions in the new Corporate Strategy which will make Copeland a better place to live, work and visit through a comprehensive capital investment programme Strategic Asset Management Plan reviewed annually to maximise the potential to release assets surplus to requirements Prudential borrowing will be considered to support capital investment that will secure recurring revenue efficiencies or income

17 Financial Principle 5: Treasury Management Treasury Management Strategy to focus on delivering safe stewardship with suitable reward Strategic options devised, where the market allows, for managing the overall level of borrowing over the medium term Financial Principle 6: Risk Management Risk management embedded in all decision-making processes of the Council Budget resources aligned to mitigate any material financial risks to the Council, whether related to a strategic risk, operational risk or project risk 5.3 Executive is recommended to agree the Financial Strategy Principles as set out in paragraphs 5.1 and 5.2 above which are to be applied to the MTFS Projections and 2018/19 Draft General Fund Revenue Budget Medium Term Financial Strategy Projections and 2018/19 Draft General Fund Revenue Budget 5.4 The following paragraphs illustrate the key figures in the MTFS and provide explanations to the forecasts. 5.5 The Executive should note that there are still a number of assumptions and outstanding information to be finalised but this does not deter the Executive from considering these proposals at this time. The outstanding information is: 2018/19 Final Local Government Finance Settlement due end of January / beginning of February 2018; 2016/17 Statement of Accounts as yet unaudited the Draft Statement of Accounts was submitted to Grant Thornton, our External Auditor, on 10 November 2017; 2017/18 Budget Monitoring forecasts indicate we may possibly experience a 191k overspend at the year end, this has been built into reserves forecasts; Business Rate Pool whilst we were not chosen as a Pilot for 2018/19, the Cumbrian Pool has been approved, however assumptions need to be calculated before inclusion in these budget proposals; Business Rates (NNDR1) figures due to government by end of January 2018 so not yet concluded for this report; Some Specific grants are not yet confirmed by various government departments;

18 Parish Precepts are required to set Band D equivalent council tax requirement due February 2018; and Police and Crime Commissioner and Cumbria County Council Precepts needed for formal council tax calculations. 5.6 The Executive is recommended to note the assumptions and outstanding information. It is intended that all outstanding externally driven information should be available for the Council meeting before the Council meeting on 20 February /19 to 2020/21 General Fund Summary 5.7 The following tables show the three year projections for the refreshed MTFS and the 2018/19 budget year. Table 1 illustrates the General Fund position forecast from 2018/19 to 2020/21. Executive should note that efficiencies and additional income totalling million are required to ensure delivery of balanced budgets in each of the two remaining years of the MTFS (2019/20 to 2020/21). Whilst plans are in place for the 2018/19 year and some of the savings for 2019/20 are identified, there remains 0.9 million to find over the life of the MTFS. Table 1: General Fund Summary Ref Element 2018/ / /21 '000s '000s '000s 1 General Fund Base Budget 9,110 8,663 8,060 2 Add: Pay, Price and Contract Inflation Add: Corporate Pressures Add: Service Pressures 273 (183) 10 5 Add: Service Investments 238 (13) 0 6 Add/Deduct: Income and Grants Add: Contingencies (50) Deduct: Efficiencies from Efficiency Plan (1,179) (741) (510) 9 Add/Deduct: Contributions to (+) / from (-) Reserves (369) (289) (77) 10 Total: General Fund Financial Plan 8,294 7,771 7, Total : Funded By 8,294 7,771 7, Gap Pay, Price and Contract Inflation 5.8 In line with the National Employers Offer, pay inflation has been assumed at 2% in each year with adjustments to reflect the Council decision on 5 December 2017 in relation to the Voluntary Living Wage. Price inflation has been frozen in budgets, saving in the region of 30k per year for the next three years. Contract

19 inflation is as per the contracts and has been fully reviewed and is reflected in these budget proposals. This includes the PFI contract for the Copeland Centre. Table 2: Pay, Price and Contract Inflation Ref Element 2018/ / /21 '000s '000s '000s 2 Pay, Price and Contract Inflation Pay Inflation Price Inflation Contract Inflation Total: Pay, Price and Contract Inflation Corporate Pressures 5.9 Corporate Pressures are assumed at zero across the plan period based on current analysis of the budget and the results of budget monitoring, which are caused by service-related pressures and investments (illustrated below). Table 3: Corporate Pressures Ref Element 2018/ / /21 '000s '000s '000s 3 Corporate Pressures Total: Corporate Pressures Service Pressures 5.10 As reflected in the 2017/18 budget monitoring reports, the profile for receiving rental and service charge income from the secured tenant for part of the Copeland Centre will not be received until part way through the 2018/19 financial year. The base budget has therefore been amended to reflect this change in timing to a part year effect for 2018/19, with the full year rent being receivable from 2019/20. The other addition is to reflect changes made to the Support Services Structures, following a review carried out and reported in December Table 4: Service Pressures Ref Element 2018/ / /21 '000s '000s '000s 4 Service Pressures Employee Increments Copeland Centre Income Phasing 188 (188) Support Services Review Amendments 76 Total: Service Pressures 273 (183) 10

20 Service Investments 5.11 Three major areas of new service investments are proposed in this budget, a social inclusion project around sharing capability will see 50k per annum invested; opening a Tourist Information Office in 2018 with investment of 75k in a full year; and revenue investment support for the implementation of the new ICT network to compliment the capital investment of 350k, totalling 150k in 2018/19 and 100k in each of the following two years after that. Table 5: Service Investments Ref Element 2018/ / /21 '000s '000s '000s 5 Service Investments Social Inclusion - Vulnerable Adults 50 Tourist Information Centre ICT - Revenue Support Costs for New Network Investments 150 (50) Total: Service Investments 238 (13) Income and Grants 5.12 Fees and charges income is included within the Efficiency Plan proposals in Table Grant reductions that have been notified to the Council will be included here, as yet we have not been aware of any for the 2018/19 year Rural Services Delivery Grant was confirmed as part of the multi-year settlement agreement. Table 6: Income and Grants Ref Element 2018/ / /21 '000s '000s '000s 6 Income and Grants Loss of recycling credits 81 Social Fund Rural Services Delivery Grant 9 (9) Total: Income and Grants

21 Contingencies 5.15 In 2017/18 the Council approved the introduction of a contingency budget into the core base budget to cover for any risks that are no longer covered by those earmarked reserves that the Council used to support the 2015/16 outturn position. The proposal here is to reduce the base from 100k to 50k as these risks lessen. Table 7: Contingencies Ref Element 2018/ / /21 '000s '000s '000s 7 Contingencies Contingency Provision (50) 0 Total: Contingencies (50) Efficiency Plan 5.16 This Table represents the efficiencies, income and commercial activities that will support improvement and delivery of the Council s core retained services. The figures have been amended to reflect actual performance during 2016/17 and a review of the 2017/18 figures with the relevant Director(s), including a budget realignment exercise that has taken place in conjunction with all budget managers during the year In relation to Fees and Charges, proposals are attached at Appendix A to this report for recommending approval to Council In relation to the Commercial Strategy, Executive will recall that a new target of 139k was introduced into the base budget for 2017/18. Having monitored progress against this target, this will be allocated to the relevant service areas who are achieving the targets as part of the quarter 3 and 4 budget monitoring process. The future year targets were 50k each year; these targets have now been subsumed in the Efficiency Plan against the service areas where delivery is expected The Waste savings relate to the new recycling programme that has already been approved by Executive and Council A vacancy factor of 2% has been proposed for the council as a whole. The risk assessment for the Council s balances has been adjusted to mitigate against this target in 2018/19 as we monitor achievement during the year.

22 Table 8: Efficiency Plan Ref Element 2018/ / /21 '000s '000s '000s 8 Efficiencies from Efficiency Plan Fees and Charges Policy (122) (122) (122) Parks and Open Spaces (30) Waste (365) Members' Allowances (52) (5) Budget Realignment 2017/18 (452) Vacancy Factor (157) Pensions Fund Savings from agreed upfront payment in 2017/18 (53) (67) Balance of Efficiencies/Income Generation to be found (500) (383) Total: Efficiencies from Efficiency Plan (1,179) (741) (510) Net Budget Requirement 5.21 Table 9 shows the Net Budget Requirement for the 2018/19 financial year It is not ideal to use unallocated general reserves to support the Net Budget Requirement on a regular basis. To allow transition and allow for the impact of not being admitted as a Business Rates Retention Pilot for 2018/19, it is being included for a further two years. This should not, however, detract the Executive and Council from determining additional efficiency and additional income solutions during 2018/19 to minimise the usage of this one-off reserve in the future. Table 9: Use of Reserves and Net Budget Requirement Ref Element 2018/ / /21 '000s '000s '000s 9 Net Expenditure on Services prior to Use of Reserves 8,663 8,060 7, Contribution to (+) / from (-) Reserves Earmarked Reserves in Total (Non-Recurring Spend) (77) (77) (77) General Fund Unallocated 2016/17 General Fund Unallocated 2017/18 General Fund Unallocated 2018/19 (292) General Fund Unallocated 2019/20 (212) General Fund Unallocated 2020/21 0 General Fund Balances (Risk-Based) Total: Contribution to (+) / from (-) Reserves (369) (289) (77) 11 CBC Net Budget Requirement 8,294 7,771 7,745

23 Funding 5.23 Table 10 illustrates how the above MTFS projections can be funded. The Council Tax forecasts assume an annual increase in the Copeland Borough Council element of the Council Tax of 1.95%. The Council has consulted on retaining the existing Local Council Tax Reduction Scheme and the figures below reflect retention of the current scheme which shall be the recommendation to Council from the Executive The current assumption is that the Council will be at the Business Rates Safety Net level across the three years of the MTFS, this has been extrapolated from a model developed and verified by external sources. However, once the Cumbrian Pool is confirmed and figures notified, this may increase the level of funding available to the Council which would help reduce the reliance on general unearmarked reserves. In addition, the government are proposing a 75% Business Rates Retention Scheme from Until modelling has been carried out for the Council, the MTFS figures are as stated. Table 10: Funding Ref Element 2018/ / /21 '000s '000s '000s 12 Funded By: Revenue Support Grant Business Rates (at safety net) 2,244 2,294 2,344 Other Grants New Homes Bonus PFI Grant Council Tax 4,152 4,234 4,314 Collection Fund Surplus Total: Funded By 8,294 7,771 7,745 Copeland Borough Council s Council Tax Level for 2018/ The impact of the 1.95% increase on Band D and Band B (highest number of properties in the borough) is detailed below in Table 11 below: Table 11: Council Tax Increase 2018/19 Band D currently per annum Annual increase Council Tax 3.87 Extra Cost per week 0.07 Extra Cost per instalment (12) 0.32

24 Band B currently per annum Annual increase Council Tax 3.01 Extra Cost per week 0.06 Extra Cost per instalment (12) The Executive is recommended to endorse the Elected Mayor s Draft Medium Term Financial Strategy and the 2018/19 Draft General Fund Revenue Budget that will inform final proposals to Council in February /19 TIMETABLE OF KEY MILESTONES 6.1 The key milestones for the Executive to note are highlighted in Table 12 below: Table 12: 2018/19 Timetable of Key Milestones Date(s) Event/Meeting Comments 1 November 2017 Overview and Scrutiny Budget Scrutiny Training Session (open to all Members) Annual training ahead of Elected Mayor s budget being published 20 November 2017 Overview and Scrutiny Committee Budget Consultation Recommendation from last year s process to involve Committee in design of budget consultation questions 22 November 2017 Autumn Budget 2017 Announcement made to inform global central government (including local government) forecasts 13 November 2017 to 18 December 2017; January 2018 From 7 February to 20 February 2018 Budget Consultation Survey; Events Alternative Budgets (if required) To ascertain views and feedback on the Elected Mayor s draft proposals to inform the final budget setting for 2018/19 Elected Members may ask questions in confidence of the Section 151 Officer to inform alternative budget proposals which must be signed off by

25 the Section 151 Officer and Monitoring Officer before submission to full Council on 20 February December 2017 Provisional Local Government Finance Settlement 2018/19 Informs the funding projections for at least 2018/19 and 2019/20 by authority 15 January 2018 Special Executive (Budget) To consider and agree draft proposals for 2018/19 16 January 2018 Overview and Scrutiny Committee Budget Scrutiny 23 & 25 January 2018 Business Rates Statutory Consultation Meeting(s) 24 January 2018 Audit and Governance Committee To consider Elected Mayor s draft proposals for 2018/19 Business Rates Consultations at Whitehaven and Millom To consider Treasury Management Strategy 30 January 2018 Special Executive (Budget) To consider feedback from OSC and Audit and Governance Committee 7 February 2018 Council To receive the Elected Mayor s budget proposals in line with the national Mayoral system of governance and to start the process of any alternative budgets February 2018 Budget Resolution Working Group (BRWG) If required, to look at any budget conflict resolution February 2018 Special Executive (Budget) To consider any responses to any Alternative Budgets (Notices of Objection) 20 February 2018 Council Consideration of the Elected

26 Early March 2018 Council Tax Setting Committee Mayor s final Corporate Strategy, MTFS, 2018/19 Budget Proposals To agree the council tax requirement formally to enable the council tax to be set (via delegation from full Council) 6.2 The Executive is recommended to note the key milestones in its approach to proposing the Authority s Net Budget Requirement and Council Tax Requirement for 2018/ INITIAL STATEMENT OF THE RESPONSIBLE FINANCIAL OFFICER (SECTION 151 OFFICER) 7.1 In accordance with the Local Government Act 2003, the Section 151 Officer is required to form a view on the robustness of the estimates used in setting the budget and the adequacy of reserves. In forming this view, the Section 151 Officer has placed reliance on information and records provided to her. 7.2 In relation to the robustness of estimates, the Section 151 Officer previously caveated this statement with a comment on the status of the 2015/16 Statement of Accounts which have since been signed off and no impact on the bottom line of the figures was reported. Whilst the 2016/17 Statement of Accounts is currently being audited, the Section 151 Officer is satisfied that arrangements are in place to mitigate this situation going forward and the information held for budgeting and reporting purposes is sound. 7.3 The Section 151 Officer has carried out a new risk assessment on the Reserves and Balances of the authority and this is included in a separate report on this agenda for Executive s consideration and approval. Based on approval of the report as presented, the Section 151 Officer is satisfied that the level of the Risk Based Reserve (Balances) is adequate and notes that the Unearmarked Reserve is reducing over the next year.

27 8. CONCLUSION 8.1 The Authority must set its Net Budget Requirement and Council Tax Requirement by 11 March each year. This report forms part of the process to ensure that legal requirement is met. 9. STATUTORY OFFICER COMMENTS 9.1 Monitoring Officer Comments: At this stage no legal issues arise. However this is a draft budget proposal for the Executive to consider. As the draft budget progresses, and more information emerges as set out in Section 5 of this report, it will be necessary to both refine and expand the emerging recommendations so that Council is able to put in place on the 20 February 2018, a budget for 2018/ S151 Officer Comments: Financial implications are contained within the body of the report and supporting appendices and working papers. 9.3 EIA Comments: In undertaking the process for setting its budget, the Council s aim will at all times be to secure compliance with its responsibilities under the Equality Act 2010 and in particular the public sector equality duty under that Act. The outcome of any decisions made following the budget engagement process, will be subject to further equality impact assessment. 9.4 Policy Framework Comments: The Council s Constitution sets down the Budget and Policy Framework Procedure Rules to be followed in budget setting. Appendices: Appendix A Proposed Increases in Fees and Charges 2018/19 List of Background Documents: Autumn Budget 2017, Published 22 November 2017 Multi Year Settlement Confirmation Letter, 16 November /19 Provisional Local Government Finance Settlement, Published 19 December 2017