Pay online
Forms
Waste collections
Meetings & agenda
Compliment or complain
Planning Applications
Publications
Clubs & Groups
The General Fund Revenue Account is charged with any expenditure incurred on delivering the Council’s services or meeting its day to day expenses that are not covered by legislation relating to the Housing Revenue Account, or can not be treated as capital expenditure. The majority of Thanet’s expenditure (86%) is charged here.
This expenditure is funded from income that the Council raises through charging for goods and services (except if it relates to council houses or is capital) plus grants and Council Tax.
The Council has a fees and charges policy that establishes the corporate principles for charging for services provided by the Council. The three key principles are:
Application of these principles and associated guidelines aims to ensure that the Council’s fees and charges are set within a framework of value for money management; whereby financial, performance, access and equity are considered fully and appropriately and decisions taken represent a transparent and balanced approach.
Historically the Council has been very successful at attracting external funding and this success continues. External funding is potentially a very important source of income to the Council, but funding conditions need to be carefully considered to ensure that they are compatible with the aims and objectives of the Council. The Council therefore has an external funding protocol to standardise the process relating to external funding to ensure consistency and clarity and to protect the Council from unidentified risks. The protocol has improved processes over external funding streams by:
The General Fund Budget Strategy
Fundamental to the development of the budget and three year Medium Term Financial Plan is an overarching Budget Strategy, the objective of which is a safe and sustainable budget that will deliver the policies and aspirations of the Council over the medium term. The strategy, which underpins the General Fund financial plan, is as follows:
The Council’s Revenue Budget Strategy is:
These principles will enable the development of a budget that is sufficient to meet the Council’s ongoing day to day business activities as well as progress its priorities as contained within the Corporate Plan. Such clear linkages between financial and business planning are the cornerstone of robust budget management practices.
The budget for 2010/11 and the four years that follow is developed by building onto the existing budget provision the anticipated increases for inflationary increases and budgetary growth that is needed for service developments plus Corporate Plan commitments; after which planned savings, growth in income and the use of reserves are reflected. This all has to be done so as to keep the resulting increase in income from Council Tax to a minimum.
The key budget assumptions used in the budget for 2010/11 and the following four years are shown in Table 4 below:
Table 4
Budget Assumptions
Budget Type
Assumption
Inflation on expenditure
With CPI at a low of 1.1% as at September 2009 and the ‘all items retail price index’ at negative 1.4%, growth for price increases has been based on a projected 1% inflate. A projected slow recovery of the inflation index has been factored in at a rate of 1%, 2%, 2% and 3% for the following years 2011/12 through to 2014/15.
Contractual inflation
Contracts have been inflated based on the specified inflation indices in the contract.
Property rental income
These estimates have been based on projections from the property portfolio, reflecting actual scheduled rent reviews.
Fees and charges
The majority of the fees and charges have been increased by 2%. There are some exceptions: some fees and charges are governed by statute e.g. planning fees; the land charge service is required to break even over a three year period and the fees are set to achieve this; car parking charges have been kept at the 2008/09 level until 2012/13 after which they have been increased at an average of 20%..
Employee budgets
These have been budgeted to increase by 1% for the first three years (but with the award date set at 1 October in the first two years, rather than the traditional April), followed by 2% for each year afterwards, reflecting the view that the rate of inflation will have begun to return to pre-recession levels in around 4 to 5 years.
An increase of 1% on the national insurance rate has been factored in from April 2011.
A vacancy level of 3% of the employee budget has been assumed based on historically achieved levels after offsetting the cost of incremental progression.
Pensions
The next actuarial valuation is due in 2010. The latest budget monitoring position for 2009/10 reflects an underspend against the existing budget provision for pensions. It is therefore proposed to set this aside in 2009/10 and future underspends in 2010/11 to meet any increase in the first instance, pending the outcome of the valuation in 2010. No growth has therefore been built in for pensions at this time, as this will be reviewed for the 2011/12 budget.
Interest rate
Interest on investments has been estimated at 1% for all years. Although interest rates are expected to increase significantly from 2012/13, as this is so volatile, it has been considered prudent to keep them at the lower level for 2010/11 and review this again for the 2011/12 budget in the light of what happens in over the course of the year.
Tax base
An increase year-on-year of 0.50% has been assumed based on increases in recent years
The paragraphs that follow show how the base budget for 2009/10 is built upon.
Realign and Recycle – The Council’s net budget requirement is developed largely using an incremental approach, starting with a review of the current year’s budget allocations. This may result in adjustments being made to transfer budget between headings to reflect changes to priorities. Such changes are all contained within the existing base budget and have no impact on the setting of Council Tax.
Despite the aim to keep budgetary growth to a minimum, there is always a need for growth for predicted increases in the cost of services as a result of inflationary increases, unavoidable commitments, new policy decisions and external pressures. Reductions in the budget for income receipts are also included within this category. Each of the different types of base budget pressure are discussed in turn below:
Employee Costs – A large proportion of the Council’s expenditure is on staff related costs (including salaries, national insurance and pension contributions), the majority of which relates directly to service delivery. For the purposes of presenting an illustrative model of the impact of the budget strategy contained within this MTFP, pay has been included at an average of 1% for the first three years (but with the award date set at 1 October in the first two years, rather than the traditional April), followed by 2% for each year thereafter, reflecting the view that the rate of inflation will have begun to return to pre-recession levels in around 4 to 5 years. The budget and MTFP also provides for other increases in employee related headings which have been estimated for including the impact of the 1% increase in employers’ National Insurance Contributions from April 2011.
Pensions – The decline in the global markets has had a material effect on the value of the Local Government Pension Fund assets, which in turn is expected to have a significant cost implication. This will be quantified at the next actuarial valuation due in 2010 (which will calculate employer contribution rates for 2011/12, 2012/13 and 2013/14). Based on the latest monitoring information, an underspend in existing budget provision for pensions has been identified. It is proposed to set this aside in 2009/10, with any future underspends in 2010/11, to meet any increase in the first instance, pending the outcome of the valuation in 2010.
Other Inflationary Increases – As a general rule the Council does not provide for price increases on goods and services, having instead to find ways to contain the increasing costs within existing budgets or negotiate a better price with its suppliers. Although it does reflect these in its growth figures, it later removes growth on discretionary price increases as part of its efficiency savings figure. The only budgetary growth for price increases that ends up being built into the budget is where it is unavoidable, such as where it is part of the terms of an existing contract or for supplies such as energy and fuel. Where provided for, contractual increases are derived from that specified in the contract.
Income Reductions – The recession has impacted on a number of income generating services for the Council, for example, planning fees, land charges, property rentals, green waste collection income and car parking. In the main part, these are self-financing services, where the charges are set based on full cost recovery. However, due to the downturn in demand, it is necessary to reduce these income budgets; however, wherever possible, they will be matched by an equivalent reduction in expenditure.
Service Improvements and New Demands – Despite the Council’s best endeavours to minimise budgetary growth, due to the demands of Government policies, new statute and other external influences, some growth is inevitable. Specific growth pressures have been identified where known.
Increase in Fees and Charges – The majority of fees and charges are increased in line with inflation (2%). However, the level of some fees and charges are set by statute (e.g. planning fees) and some services are required to set their fees to break even over a three year period (e.g. land charges), therefore the fees for these services will be increased accordingly. A considerable increase in parking fees was applied in 2008/09 and a decision was taken at this stage not to increase them further over the following three years. However, it is proposed to increase the charges from 2012/13 by an average of 20%. This has been reflected in this MTFP.
Other Growth – Given the pace of change it is likely that there will be pressures that arise between now and the next four years which can not currently be foreseen. As a result this MTFP assumes a figure of approximately £1m for as yet unidentified growth over the years 2011/12 to 2014/15. Any growth requirement above this level will need to be matched by savings in order to stay within the Council’s planned Council Tax increases.
The Corporate Plan represents the Council’s aims and aspirations for the continual improvement of its services and its commitments to community priorities. Ensuring that sufficient resources are available to deliver the Corporate Plan is a fundamental requirement of this Medium Term Financial Plan. Costs have been provided for future years based on draft plans and spending projections for a range of services and initiatives. These include extending CCTV coverage, developing activities for young people across the district and achieving improvements in cleaning standards.
All of the different sources of budgetary growth that are anticipated over the course of this medium term plan are summarised in Table 5.
Table 5
Budgetary Growth 2010 - 2015
2010/11
2011/12
2012/13
2013/14
2014/15
£’000
Employee costs
90.0
252.0
342.0
522.0
Unavoidable Prices
242.1
246.6
257.1
262.0
263.1
Discretionary Prices
243.4
248.3
253.3
258.3
263.5
Pension Increases
0.0
Service Delivery Pressures
2508.4
535.6
393.3
108.5
139.9
Increase in Fees and Charges
(61.0)
(62.2)
(269.4)
(68.8)
(70.2)
Corporate Plan Growth
230.0
Total Budgetary Growth
3252.9
1220.3
976.3
1082.0
1118.3
Increase in Budget Requirement
14.08%
5.15%
4.15%
4.69%
4.87%
With the credit crunch continuing to form the backdrop to the Council’s financial planning processes and the fact that many of the easier to achieve savings have already been taken in recent years, it is clear that the Council must review the services it delivers and the way that it delivers them. Substantial savings can be found in the following areas:
The above principles have been taken forward as part of the budget developments for 2010/11. Budget reductions of £2.4m, £1.38m, £1.46m, £1.19m and £1.16m for 2010/11 through to 2014/15 respectively (including removal of discretionary prices) have been identified in order to fund budgetary growth and to stay within the Government’s capping limits.
Staffing and staff related costs – The Council’s costs are heavily driven by staffing levels. As with most local government agencies, the majority of staff contracts are based on traditional office hours, even in areas where the workload demands more of an extended working day, such as evening and weekend working. It is proposed to take a close look at existing contracts to optimise the staff availability to the peaks and troughs of workload, taking care to ensure that any proposals do not breach equal pay or age discrimination legislation. A review will also be undertaken of staff travel expenses entitlement. In addition, it is proposed to merge functions where staff have similar skills to enable a reduction in staff numbers whilst maintaining resilience. Some minor revisions to the responsibilities of the senior managers have prevented the need to appoint to the vacant Deputy Chief Executive post. Given the tight financial constraints, the Council will continue to manage staff costs very carefully with an ongoing review of structures, especially when posts become vacant.
Whole Council Shared Service – The proposals for the whole council shared service should deliver savings through mass economies of scale across the East Kent councils, whilst enabling best practice to be shared across all four, and providing a structure that has an even greater resilience than currently. It is felt that a sum of between £2.5m and £3m could be achieved across the full breadth of council services that are expected to be transferred into the shared service vehicle in the fullness of time. It is expected that these savings will fall over the last three years of the MTFP.
Service Efficiencies and Reductions – The Council has been able to make a number of budget reductions as a result of further efficiency improvements. These include modernising the access points for visitor information centres; removing anti-virus scanning of e-mails; improving the rate of return of assets; reducing the cost of supporting members and reducing staff in fee-funded areas.
Increased Activity on Charged-for Services – It is anticipated that additional licence fee and land rental income will be generated from the London Array site over the next few years. Additional income from moorings of work boats is also projected.
Phasing of Savings – It is proposed that where feasible all of the savings actions will be implemented at the earliest opportunity to give the Council the best chance of stabilising its budget requirement as soon as possible. However, as many of the savings are expected to take a few years before a full year reduction is able to be budgeted for, some of the savings have been slipped to 2011/12. Where savings are generated ahead of when expected or are for sums greater than budgeted for, in line with previously agreed policies, they will be set aside to fund severance costs in the first instance, and then to re-populate the General Reserve and Invest to Save Reserve.
Presented below in Table 6 are the budget reductions that have been estimated for the medium term.
Table 6
Budgetary Reductions 2010 - 2015
Staff Related Savings
1696.5
697.9
199.6
26.0
10.5
Whole Council Shared Services
1000.0
910.0
890.0
Service Reductions and Efficiencies
465.6
295.6
9.5
Increased Activity
21.0
139.0
Removal of Discretionary Price Increases
Total Budgetary Reductions
2426.5
1380.8
1462.4
1194.3
1164.0
As a percentage of opening net budget
10.5%
5.8%
6.2%
5.2%
5.1%
Ordinarily, the budget and MTFP are used to set out expectations of future expenditure and income streams. However, there is considerable uncertainty in some areas that means predicting some budgets is not possible. For example, there is uncertainty regarding how quickly the recovery will be following the recession and what future interest rates are likely to be; there is also uncertainty around future possible restructures, shared services and whether the Council will need to undertake prudential borrowing due to lack of other capital funding. All these uncertainties will impact on future income streams, interest payable and receivable and pensions. This means that we can not predict with any confidence the likely budget adjustments that may be required to these budgets. It has been assumed that as a minimum any positive or negative budget impacts will offset each other, or more likely, will result in a surplus that could be contributed to reserves. To manage this, these volatile budgets will be controlled corporately, ringfenced and any variations reported back to members. It is hoped that these budgets can be predicted with more certainty in 2011.
The changes to the General Fund Revenue Account planned for in the medium term that are described earlier in this report reflect a number of changes to the Council’s permanent staffing establishment. These have been carefully considered, and have been, or are yet to be consulted on, to ensure that the staffing structures are able to support the service delivery plans for the next five years.
The result of the changes to the permanent staffing establishment by service that is anticipated over the course of the medium term is shown in Table 7.
Table 7
Planned Changes to the Permanent Staffing Establishment
Number of Full Time Equivalent Posts as at…
31/03/10
31/03/11
31/03/12
31/03/13
Environmental Services
257.91
260.77
Regeneration & Economic Development
95.13
95.77
Community Services
56.76
50.97
Chief Executive & Executive Support
6.54
4.54
Customer Services & Transformation
151.91
135.11
Finance & Corporate Services
68.81
75.53
Legal & Democratic Services
18.00
Total
655.06
640.69
The table above does not reflect changes in staff numbers following the implementation of shared services projects so these numbers are subject to change. It also does not reflect those posts that are grant funded, or seasonal, as the numbers of these are not easily known in advance as it is determined by the amount of funding available. Grant funded posts are regularly reviewed, and where a robust business case exists for the permanent provision of the service they provide the post is added to the permanent establishment through the additional base budget as part of the annual budget report. The funding for seasonal staff is treated as cash limited and its deployment will depend upon the particular need which may vary on a year to year basis depending upon the weather and other seasonal influences.
The Local Government Finance Act 1992 specifies that precepting authorities, such as Thanet District Council, must have regard to the level of reserves needed for estimated future expenditure when calculating the budget requirement. In order to comply with this requirement each year the Council reviews its level of reserves, taking account of the financial risks that could pose a threat to the Authority over the medium term. The largest risk facing the Council in the medium term, as identified in this risk assessment, is shared services failing. It is anticipated that there would be sufficient time to take alternative action to balance the budget if this were to happen and therefore it is considered appropriate to keep the optimal level of general reserves at 10% of the net revenue budget, as in the last MTFP, as this is felt to be a sufficient level of contingency.
The opening balance as at 1 April 2009 was £2.076m, which equates to only 9.16% of the 2009/10 Net Revenue Budget. This balance is expected to drop to £1.883m by 31 March 2011 due to anticipated severance costs of £193k - this is just 8.16%. Every effort will be made to replenish the General Reserve to the recommended level at the earliest opportunity from in-year underspends.
In addition to the General Reserve, a number of earmarked reserves exist, which are sums set aside for specific purposes. Essentially these allow funds to be saved over a number of years for large and often one-off items of expenditure, thereby smoothing the impact on Council Tax.
The earmarked reserves over the medium term are shown below. Where the exact demand on the reserve is not known sufficiently far enough in advance over the medium term no estimates are allowed for within the MTFP. This does not affect the ‘bottom line’ of the budget requirement, as neither the expenditure nor the equivalent amount of funding from the earmarked reserves are reflected.
The Earmarked Reserves that are being used in the medium term are:
All of the stages in developing the General Fund Revenue Budget that have been described above have been used to calculate the estimated budget requirement for 2010 – 2015 which are presented in summary in Table 8.
Table 8
The Medium Term General Fund Revenue Budget 2010 - 2015
Opening Revenue Budget
23108.7
23705.1
23544.4
23058.2
22945.8
Inflationary Increases
514.4
684.6
582.9
973.5
978.3
Growth
2738.5
Identified Savings
(2426.5)
(1380.8)
(1462.4)
(1194.3)
(1164.0)
Funding of Corporate Plan
(230.0)
Net Service Revenue Budget
22899.9
Contribution to Costs from Grant
(349.3)
(247.8)
(103.0)
(53.0)
Use of Earmarked Reserves
(300.0)
(42.0)
(40.0)
Net Revenue Budget Requirement
23055.8
22996.6
22913.2
22852.8
22806.9
Reduction in Budget Requirement
(1.62%)
0.26%
0.36%
0.20%
Formula Grant – In January 2008, the Government announced the first ever three-year settlement for Thanet District Council for its General Fund expenditure requirements. The settlement included amounts for activities that had previously been funded by way of a specific grant, and as a result appeared at first to be more generous than was actually the case. After taking account of this change in funding treatment, the actual growth in cash for this Council equated to an increase of 1.1% for each year of the three years. The indicative formula grant figure for 2010/11 announced in January 2008 was confirmed on 26 November 2009. The settlement does not provide figures for 2011/12 but the MTFP has assumed a reduction of 3% for that year based on the view from commentators that future settlements are likely to be extremely tight.
Area Based Grants – In addition to the Formula Grant, the Finance Settlement announced additional amounts that are paid as Area Based Grants. These include the Working Neighbourhood Fund, the Community Cohesion Grant and the Safer Stronger Communities Fund. These are provided to further the goals that are set out in the Local Area Agreement (LAA). The grants have been reflected within this medium term plan, shown as offset against an equivalent amount of expenditure, which will be used to deliver Thanet’s contribution to the financial plans of the LAA.
Specific Grants – Although the Government has stated its commitment to reduce the use of specific grants, preferring to either provide funding through the Formula Grant or on an area basis, for technical reasons a number of specific grants remain. Thanet receives a specific grant to provide funds to meet increased costs arising from the introduction of the national free bus scheme (The Concessionary Fares Scheme). It is likely that all of this grant will be required to meet the costs of delivering this new service. Concessionary fares, however, is expected to transfer to Kent County Council from 2011/12. Specific Grants are also received for services for the homeless and for administering the housing benefit and council tax payment and collection systems on behalf of Government. Where the level of grant has not yet been announced, it has been assumed to remain at the same level as 2009/10.
Aside from the grants from Central Government the Council receives a significant level of grant funding from other sources for a range of projects and initiatives. Some of the grants are ring-fenced, others are provided without limitation, although the Council always aims to ensure that the grant is used in the spirit in which it is provided. Each of the main grant funding streams which are expected to be received in the medium term are discussed below:
Housing and Planning Delivery Grant – This offers funding to enable local authorities to improve their planning and housing services and to introduce the many changes involved in the Government’s programme for the reform of planning services.
Conservation Grant - Heritage Lottery Funding of £30k is anticipated in 2010/11 for the costs of staff working on the Thanet Heritage Initiative.
East KentLocal Strategic Partnership – Canterbury City Council, Dover District Council and Shepway District Council each make an annual contribution of £25k to this Council towards the East Kent Local Strategic Partnership.
Kent County Council Interreg Customer Profiling– A sum of £20k is expected in 2010/11 to improve evidence based service planning and customer satisfaction with public services by understanding citizen needs, wants and motivations.
Medway Council Interreg Tudor House – Funding of £30k in 2010/11 towards improving Heritage and Maritime memories in Thanet.
SEEDA – Funding of £90k towards the core team and overheads of the Margate Renewal Partnership.
KentCounty Council – Funding from KCC of £30k towards the core team and overheads of the Margate Renewal Partnership.
English Heritage – the Margate Arts Culture Heritage is part of the Creative Margate 10 year vision and aims to develop new creative work studios in local conservation areas, artist led public realm improvements and animation, potentially leading to a new culture led Community Trust. Funding of £200k will be received in 2010/11, with a further £175k in 2011/12.
Migration Impact Fund – This offers £90k to fund a bi-lingual outreach worker to work closely with the Czech/Roma community.
Second Homes – Second Homes funding of £60k will be utilised in 2010/11 towards maximising the opportunities arising from the 2012 Olympics and to fund a transport study.
Interreg PATCH Funding – The Council will receive European revenue monies of approximately £260k towards works Maritime projects.
The main funding sources for the Council in the Medium Term are summarised in Table 9.
Table 9
Funding Sources for Thanet for 2008/09 to 2011/12
2008/09
2009/10
Formula Grant
13,021
13,163
13,310
Increase in Adjusted Formula Grant
142
147
0
% Increase in Adjusted Formula Grant
1.1%
Area Based Grants
Community Cohesion
72
133
205
Stronger Safer Communities
413
258
Working Neighbourhood Fund
1,003
1,599
1,614
-
Climate Change
23
Economic Assessment Duty
6
Specific Grants
Concessionary Fares
524
536
551
Homelessness
90
Housing & CTax Benefit Administration
1,746
1,835
1,769
Miscellaneous Revenue Grants
541
560
963
329
The Council sets its net budget requirement (after having taken account of increased income from charges and the use of reserves) which is then part funded from Government Grant and part from Council Taxes. The total amount that is needed to be raised by Council Taxes is known as the Precept. This is divided by the total number of equivalent Band D properties (the tax base) in order to calculate the individual Council Tax band amounts. For medium term planning purposes, the level of growth in the tax base has been assumed to be 0.5%, based on experience in the last 3 years.
The Council’s budget plans, grant predictions and the assumed Council Tax base give the projected levels of Council Tax increases which are shown overleaf in Table 10.
This shows that with the Council’s planned efforts to keep expenditure levels down, and optimise revenue receipts, despite the low level of financial support from Central Government, Council Tax increases are able to be reduced to 2.5% for each of the years covered by this MTFP.
Table 10
The Medium Term Revenue Funding Summary 2010 - 2015
Net Service Budget
Contributions from Grants
349.3
247.8
103.0
53.0
Transfer from Earmarked Reserves
300.0
42.0
40.0
Net Budget Requirement
Funded From:
13309.9
12910.6
12523.3
12147.6
11783.2
Precept
9795.0
10086.0
10390.0
10705.0
11024.0
Council Tax Base
46645
46878
47113
47348
47585
Band D Council Tax
£209.97
£215.19
£220.50
£226.08
£231.66
Increase in Band D Council Tax
£5.04
£5.22
£5.31
£5.58
% Increase in Band D Council Tax
2.46%
2.49%
2.47%
2.53%
Next: Housing Revenue Account
Back: Developing Financial Plans
Financial Services
E-mail:
accountancy@ thanet.gov.uk
Tel: 01843 577000