Decision details

To approve the council’s draft revenue and capital budgets for the five years 2016-21, collectively known as the council’s Medium Term Financial Plan (MTFP) ahead of the Chancellor of the Exchequer’s spending review statement on 25 November 2015 and the Local Government Settlement in December 2015

That the report be noted, including the following:

1.      That the Chancellor of the Exchequer will publish his Spending Review on 25 November 2015 and that financial planning assumptions may alter subsequently, meaning development of a formal draft budget is not sensible at this stage, as set out in paragraph 7 of the submitted report.

2.      The strategic financial challenge that the council faces, specifically:

o    the significant, growing and non-controllable demand for services delivered by county councils (in particular adult and children’s social care), as set out in paragraph 9 of the submitted report.

o    that the failure to fund, and therefore protect these services, will lead to very significant cost consequences on the health sector finance pressures, as set out in paragraph 10 of the submitted report.

o    that while County Councils in two-tier areas have the responsibility for delivering high demographic non-controllable demand services, they do not have the full range of options that are available to unitary local authorities to raise funding through other services (e.g. parking charges), as set out in paragraph 11 of the submitted report.

o    that County Councils are further disadvantaged by the Government’s apportionment ratios for allocating funds within the local government sector, as set out in paragraph 12 of the submitted report.

o    that County Councils have to, therefore, put greater reliance on Council Tax to fund services, as set out in paragraph 12 of the submitted report.

o    that Surrey County Council has one of the lowest government funding per head of all upper tier local authorities, as set out in paragraph 16 of the submitted report.

o    That Surrey County Council is particularly dependent on Council Tax to fund services, as a consequence of their low level of Government funding, as set out in paragraph 16 of the submitted report.

3.      The effectiveness of the strategic actions the Council has taken over recent years to manage the financial challenge be noted, in particular:

o   that the loss of Government grants since 2010/11 (£93m) is greater than the increase in Council Tax (£80m) over the same period, as set out in paragraph 17 of the submitted report.

o   the successful delivery of £329m of efficiencies since 2010/11 (forecast to rise to £396m by the end of 2015/16) through continual improvement in processes and significant transformational change, as set out in paragraph 19 of the submitted report.

o   that the level of efficiencies gained since 2010 effectively off-sets the increased service pressures over the same period (efficiencies total £396m and pressures total £382m between 2010/11 and 2015/16), as set out in paragraph 20 of the submitted report.

o   the improved efficiency across many key services, resulting in reduced unit costs, as set out in paragraph 20 of the submitted report.

4.      The consequences of the strategic actions taken:

o   that the current level of efficiencies is not sustainable and that, without additional funding, services will have to be cut , as set out in paragraph 21 of the submitted report.

o   that the combination of high level demand pressures and Government grant loss has led the council to, reluctantly, adopt the strategy of increasing Council Tax at just below referendum levels for the last four years in order to sustain services to residents of Surrey, as set out in paragraph 23 of the submitted report.

5.      The council’s overall preliminary financial position, in particular:

o   the high level of forecast revenue savings (£28.5m) still to be identified in order to set a balanced and sustainable budget for 2016/17, as set out in paragraph 31 of the submitted report.

o   that the capital programme exceeds that which is affordable in view of the revenue costs of the additional long term borrowing requirement, as set out in paragraph 36 of the submitted report.

o   the work that senior officers are progressing to identify further savings to enable a total package of savings can be brought forward for consideration by Scrutiny Boards, as set out in paragraph 32 of the submitted report. 

6.      That, at this point, the council is not clear how it will meet its duty to set a balanced budget and maintain an adequate level of reserves, as set out in paragraph 44 of the submitted report.

Reasons for Decisions:

In setting the MTFP (2015-20) in February 2015, the Council recommended this was reviewed and refreshed in July 2015. Following the refresh, the Cabinet requested a report be submitted to its November 2015 meeting which provided an update on financial prospects for the Council for the next MTFP (2016-21). This will ensure early transparency ahead of the Cabinet meeting on 2 February 2016 that will formally recommend the budget for 2016/17 to full County Council on 9 February 2016, and enable the Cabinet to:

·                give full consideration of strategic financial challenge faced by the Council and the potential consequences, and;

·                consider the views of Scrutiny Boards in relation to the budget changes required to deliver the savings the county council will need to make over the period 2016-21.

Cabinet advises the full County Council how best to meet the challenges the Council faces and these proposals will aim to ensure the Council continues to maintain its financial resilience and protect its long term financial position.

[The decision on this item may be called in by the Council Overview Board]