Each year the council consults with key stakeholders as part of the budget-setting process. This includes local businesses. This paper sets out the background to the budget and rehearses the key issues which the council faces. An appendix provides a summary of the council’s current revenue budget service by service and its current capital programme.
There are a series of questions to answer in each section of the paper. When you have read the information you will be able to contact the council with any comments. Details of how to do this are at the end of the paper.
First things first
The council’s revenue budget is the council’s spending plan for the next 12 months – the day to day running costs of council services.
It also has a financial plan which sets preliminary budgets for the next three years, and a capital programme for investment in buildings, infrastructure and other assets.
Revenue budget
This includes the costs of:
- Employing teachers, adult social and childcare professionals and other council employees
- Running council buildings (schools, day centres, libraries, offices)
- Providing vehicles and equipment that services need
- Making payments to suppliers for goods and services provided.
As a rule of thumb, two-thirds of the budget pays for the council workforce and one third is spent on buying goods and services from the private and voluntary sector (such as care in residential homes, highway maintenance and waste disposal).
- The council can spend up to the total of:
- What it gets from government (grant and redistributed business rate)
- What it raises from council tax
- What it raises from charges (leisure facilities, car parking etc)
- Plus any savings it might have (reserves or balances)
Public spending cuts 2011/15
The General Election in May brought a significant change to the financial planning landscape. The grant settlement for 2010/11 gave North Lincolnshire a four per cent increase in revenue grant and an agreed level of funding for capital investment. The new administration made the unprecedented decision to re-open the settlement and the council had to make £4m of cuts from its original plans for the year, a reduction in the revenue budgets of all services and a £1.2m cut in the highways programme.
In the Emergency Budget in June 2010 the Government then set out its plans to take £81bn out of public spending over the next four years. It confirmed these plans in the October Spending Review and allocated cuts between government departments and other parts of the public sector.
This matters for local government because nearly three-quarters of its funding comes as grant from Government, the balance from council tax. Local government grant faces some of the largest cuts, while other areas of public spending, such as the NHS are protected. For council s as a whole this means:
- A 26 per cent real-terms cut in general revenue grant by 2014/15
- A cash freeze on school funding per pupil, which is separate from revenue grant
- With a modest new pupil premium for disadvantaged children
- Some additional funding for social care from the NHS, and
- A 45 per cent reduction in capital funding for building and infrastructure.
The Government also offered a council tax freeze grant, equal to a 2.5 per cent increase in council tax for those authorities that make no increase in 2011/12. The prospect of government capping higher rises makes it likely that councils will freeze council tax for one year. Taken together this sets a limit on resources for 2011/12 and because of the scale of grant cuts means reduced spending on services is unavoidable.
What this means for North Lincolnshire Council
Before the election the council anticipated a freeze in government grant and set its spending plans accordingly. It has been working since the summer to find savings of £20m over four years; against a projected increase in spending to allow for price inflation and demand for services. As the resource figures in the table show the settlement was worse than expected, with cuts of over £25m.
The cuts reflect the decision of the new coalition government to pursue a more rapid reduction in the public sector deficit. General grant has been cut by an average 9.9 per cent in 2011/12 (NLC 11.6 per cent) and 7.7 per cent (8.2 per cent NLC) in 2012/13. A further 4.9 per cent reduction is forecast in 2013/14 and again in 2014/15.
| |
Year |
| 2011/12 |
2012/13 |
2013/14 |
2014/15 |
|
£m |
£m |
£m |
£m |
|
Spending |
142.9 |
145.1 |
148.7 |
152.5 |
|
Resources* |
130.4 |
127.5 |
127.0 |
126.8 |
|
Gap |
12.5 |
17.6 |
21.7 |
25.7 |
*Grant plus council tax.
The council put in place an immediate freeze on recruitment. Management structures have been reviewed; opportunities to run operations more efficiently have been identified; and methods and levels of service provision are being reviewed. The council recognises that while trying to maintain and improve the services which the public want, reductions in its workforce are unavoidable.
Each one per cent increase or reduction in council tax is worth £660k. In previous years government has intervened to cap increases of more than five per cent a year. The plan figures assume 2.5 per cent council tax freeze grant in 2011/12 and three per cent council tax in every other year.
The council has £6.8m in general reserves which it can use temporarily to support service spending. But once used reserves need to be replenished in the subsequent year. It also has £5.2m in the Revenue Account Support Reserve which has been set aside to fund one-off investments or projects.
The questions
In the context the significant budget cuts:
- Are there services in which you would wish to make extra investment?
- Are there services which you would want to protect?
- Which services would you be prepared to cut?
- At what level would you set the council tax?
Capital programme
The council has a separate programme of capital investment. It covers the building or improvement of assets such as schools, roads, and other council-run facilities. Grants to other organisations and individuals for capital purposes are also included such as grants for community centres/village halls or for housing improvement. The programme is for a five year period as capital investment requires a longer lead time and construction typically covers more than one financial year.
The council has to fund this capital expenditure in certain ways. These are:
- Grants from government or its agencies, or contributions from the private or voluntary sector (65 per cent)
- Borrowing and capital receipts from the sale of council assets (35 per cent).
It has a duty to set an affordable limit to borrowing and to keep this under review. The number and value of schemes which are needed to improve or maintain services generally exceed the resources available and the council prioritises its spending each February.
The current programme for 2010/15 totals £208 million. The ‘Rough analysis of council spending’ shows how this is distributed between services, with the largest investment in schools, roads and leisure facilities.
Spending cuts
Government capital expenditure will be substantially scaled back over the four year period compared to current investment levels. It will also be refocused on infrastructure projects which will bring maximum economic benefit. For local government there is a reduction of 45 per cent in government grant for investment. In the schools’ programme the reduction is 60 per cent.
The scope to increase the council’s own funding of capital investment is limited:
- Increased borrowing has to be paid for from reduced revenue budgets
- Capital receipts from the sale of surplus assets are still depressed because of the recession
The questions
- Are there services in which you would like to make additional capital investment?
- Which capital investment would you protect?
- Which capital investment would you be prepared to cut?
How to contact us
The council welcomes your comments. If you would like to contact us please use the following e-mail address: steve.cowlbeck@northlincs.gov.uk.
To enable your comments to feed into the budget making process, please respond by 13 February 2011.
More information: