Agenda item

Revenue and Capital Budget 2016/17 to 2020/21 and Treasury Management Strategy

This report is for County Council to approve:

1.   the draft revenue and capital budgets for the five year period 2016-21, which is collectively known as the council’s Medium Term Financial Plan (MTFP); and

2.   the level of the council tax precept for 2016/17; and

3.   the revised treasury management strategy, including the borrowing and operation limits (prudential indicators) for 2016/21; the policy for the provision of the repayment of debt (minimum revenue provision (MRP)) and the treasury management policy.

The information in the report is based on the Provisional Local Government Finance Settlement (Provisional Settlement) with final figures not expected till early February 2016. There has been considerable ‘shock’ in the Provisional Settlement figures over those that were reasonably expected. This is due to late Government changes, which means that while the Council is able to present a balanced budget for 2016/17, this does assume full delivery of significant savings, use of a significant level of reserves, use of capital receipts and provision of transitional relief from Government to compensate for the degree of ‘shock’ in the Provisional Settlement. The same applies for 2017/18. Without the assumed transitional relief, the Council is not able to present a sustainable budget and even with this, requires an unprecedented programme of transformation to balance future years.

Additionally, the best available information on service price rises and demographic demand have been reflected in the service cash limits, but there is inherent uncertainty in these, given the changes in national and local circumstances.



The Chairman said that the papers for this item were included in the agenda and the supplementary report of the Cabinet circulated last week. She asked Members to note that the recommendations before them today, numbered (1) to (21) were set out in the Council agenda papers. These included a reference to Annex 3, which set out the Council Tax requirements.


She said that the debate on the Budget would be conducted in accordance with the County Council’s Standing Orders.


The Leader presented the Report of the Cabinet on the Revenue and Capital Budget 2016/17 to 2020/21, the Council Tax Requirement for 2016/17 and the Treasury Management Strategy and made a statement in support of the proposed budget.  A copy of the Leader’s statement is attached as Appendix B.


The Director of Finance presented her report to Council. A copy of her statement is attached as Appendix C.


Each of the Minority Group Leaders (Mr Harrison, Mrs Watson and Mr Johnson, who announced that Mrs Windsor would speak on his behalf) were invited to speak on the budget proposals.


Key points made by Mr Harrison were:


·         That inflation was about 1% and therefore an increase of 3.99% on the council tax would be difficult for those residents on low incomes.

·         The ’shock’ of the Provisional Settlement Figures and the level of transitional funding.

·         The reduction of the Revenue Support Grant, which would disappear completely by 2018/19.

·         Concern that a Conservative Government continued to favour northern counties, even though Surrey had an increasing population and huge demand for school places.

·         The reduction in grants would affect services, plus the need for the Council to use substantial reserves to balance the budget.

·         There would be a need to implement service transformation on an unprecedented scale.

·         There had been a lack of opportunity for Scrutiny Boards to examine the proposed savings and make further proposals.

·         Concern that the Adult Social Care budget would continue to be overspent.

·         Surrey residents would be angry about the proposed level of increase in council tax.

·         There should be a further review of fees, charges and other non ring-fenced grants.

·         Other suggestions for review were:  staffing numbers and management teams, pensions, use of agency staff and the cost of empty care beds (PFI contract).


Key points made by Mrs Watson were:


·         Support for the increase proposed to the council tax, including the Adult Social Care element but opposition to the budget.

·         The Adult Social Care budget was repeatedly overspent and therefore the additional funding would be a lifeline.

·         Concern about the level of funding for other vital services such as Youth Services, Buses, Road Safety and Drainage.

·         That operational changes at Community Recycling Centres could result in increased fly tipping.

·         More funding was urgently needed to improve Surrey’s footways and wetspots.

·         Suggestions for areas to review included: (i) reducing the Communications Budget, (ii) discontinuing Surrey Matters, (iii) reviewing the use of agency staff, (iv) eliminating Cabinet Associate posts, (v) stop investing in property outside Surrey, (vi) considering energy efficiency options for Surrey’s buildings.

·           The importance of Value for Money and protecting services for Surrey residents.


Key points made by Mrs Windsor were:


·           That the motion agreed by the Council in December 2015 in relation to the Conservative Government listening to Local Government, was rather pre-mature because 10 days later, the Provisional Settlement was announced and was significantly worse than had been expected.

·           That the Leader had fought successfully for additional transitional funding.

·           The Government was raising taxes by stealth and that the Council should continue to lobby the Treasury and Surrey MPs for additional funding.

·           The proposed council tax increase was inevitable and unavoidable.



Fifteen Members spoke on the Budget proposals and the following key points were made:


·         That as a direct result of the Leader of the Council lobbying Government, the Council’s budget now had an additional £48m, which would benefit for Surrey residents over the next two years.

·         Concern that Surrey would receive only £1.5m Better Care Fund Allocation in 2019/20.

·         The high cost of delivering services in the South East.

·         Congratulations to the Leader of the Council and everyone concerned in achieving some transitional relief for the next two financial years.

·         That residents should be made aware that 2% of the council tax increase was to fund Adult Social Care.

·         A request that some of the additional Adult Social Care funding be used to support the Mental Health Service.

·         Infrastructure needed to be funded through Local Government and not developers.

·         Despite obtaining the transitional funding, it would still be challenging to achieve / deliver a sustainable budget.

·         The transformational programme would need to deliver ‘real’ transformation.

·         Increased demand for Adult Social Care and Children Services had resulted in budget pressures but unit costs had been driven downwards.

·         Scrutiny Boards were denied any meaningful data so have been unable to suggest savings.

·         Today’s budget only gave headline figures, there were no detailed service budgets.

·         The Resident Association / Independent Group would consider ways to improve the scrutiny process for the 2017 budget.

·         The additional transitional funding was insufficient to cover the shortfall.

·         Equality Impact Assessments should be provided with the detailed budget proposals.

·         Surrey needs to be in a position to provide elderly residents with good care plans.

·         Funding should be prioritised to ensure that the improvements required in Children Services can be implemented.

·         Members should question the timing of budget information received from Central Government.

·         As the cost of fuel had fallen, could Members’ / officers’ mileage rates be reduced.

·         As there is a Conservative Government and Surrey County Council is a Conservative Council, the public may find it difficult to understand why the Council had not received a more favourable settlement.

·         Following today’s meeting, there would be opportunity for Scrutiny Boards to examine the detailed service budgets and to work with Cabinet constructively to suggest options for savings.



After the debate the Chairman called the recommendations, which included the council tax precept proposals, and a recorded vote was taken. 


The following Members voted for it:


Mr Barker, Mr Bennison, Ms Bowes, Mrs Bramhall, Mr Brett-Warburton,

Mr Chapman, Mrs Clack, Mrs Coleman, Mr Cosser, Mrs Curran, Mr Ellwood,

Mr T Evans, Mr Few, Mrs Frost, Mr Fuller, Mr Furey, Mr Gardner, Mr Goodman,

Mr Gosling, Dr Grant-Duff, Mr Gray, Mr Gulati, Mr Hall, Mrs Hammond, Mr Harmer, Miss Heath, Mrs Hicks, Mr Hodge, Mr Hussain, Mr Ivison, Mr Johnson, Mrs Kemeny, Mr Kemp, Mrs Lake, Mrs Lewis, Mrs Marks, Mr Martin, Mrs Mountain, Mr Munro, Mr Norman, Mr Persand, Mrs Ross-Tomlin, Mrs Saliagopoulos, Mr Samuels, Mr Skellett,

Mr Sydney, Mr Taylor, Ms Thomson, Mr Walsh, Mr Wilson, Mrs Windsor, Mr Witham, Mr Young and Mrs Young


And the following Members voted against it:


Mrs Barton, Mr Beckett, Mr Cooksey, Mr Essex, Mr Robert Evans, Mr Forster,

Mr Goodwin, Mr Harrison, Mr Hickman, Mr Jenkins, Mr Kington, Mr Mallett,

Mrs Mason, Mr Orrick, Mrs Searle, Mr Selleck, Mrs Watson and Mrs White.


54 Members voted for and 18 Members voted against the Budget recommendations. Therefore, it was:



That the following important features of the revenue and capital budget be noted:

1.       The Director of Finance’s statutory report says the budget for 2016/17 is only sustainable and robust if the council uses substantial reserves and capital receipts from the sale of assets, and crucially, receives significant transitional relief while an unprecedented scale of service transformation is developed and delivered going forwards, as set out in Annex 1 of the submitted report.

2.       The Council will require transitional funding from Government of £20m to balance the 2016/17 budget in respect of the late announcement of a change to the distribution of the Revenue Support Grant, and a further £37m in 2017/18.

3.       If the Council receives no transitional relief in the Final Settlement, the Leader will arrange an emergency Cabinet meeting to determine how to balance the 2016/17 budget. This is not expected to affect the council tax precept for 2016/17.

4.       It is expected that the Final Settlement will set out requirements for reporting use of the adult social care precept.

5.       At a date yet to be determined by Government, there will be an opportunity for the Council to accept the Government’s offer of a four year funding settlement as set out in paragraphs 15 to 19 of this report.

6.       The overall budget envelope laid out in Appendix 4, to the submitted report.

7.       That the Leader in conjunction with the Director of Finance will finalise budget proposals based on the Final Settlement, and up-date members of the County Council if the information is available ahead of the meeting or retrospectively if not available by that date.

That the following recommendations be approved:

8.       That the council tax requirement for 2016/17 be set at £618m, as set out in paragraph 3.4, Annex 3 to the submitted report.

9.       That the level of the general council tax be increased by 1.99%.

10.     That council tax be increased by a further 2% for the adult social care precept.

11.     That the County Council precept for band D council tax be set at £1,268.28, which represents a 3.99% up-lift.

12.     That the council tax for each category of dwelling to be as follows:


Valuation band





















13.     That the payment for each billing authority, including any balances on the collection fund, will be set out as follows:


Billing authority




Epsom & Ewell




Mole Valley


Reigate & Banstead






Surrey Heath










*This total includes the Council Tax Collection Fund balance.

Each billing authority’s payments to be made in ten equal instalments on the following dates, already agreed with relevant authorities:

20 April 2016

14 October 2016

24 May 2016

25 November 2016

24 June 2016

6 January 2017

29 July 2016

10 February 2017

9 September 2016

17 March 2017







14.     That the council tax rate set above be maintained after the Final Settlement.

15.     That the 2016/17 budget be supported by using £17.2m from reserves as set out in paragraph 72 of the submitted report.

16.     The requirement for the Chief Executive and the Director of Finance to continue their work to track and monitor existing MTFP efficiencies and to lead and oversee a Public Value Transformation programme of all service delivery to ensure the County Council’s revenue budget becomes sustainable and to develop robust plans for further savings and income generation opportunities for the remaining years of this MTFP.

17.     The set up of a Public Value Transformation (PVT) Fund of £30m to meet the revenue costs of a transformation programme, to be funded by capital receipts from asset sales.

18.     That the County Council’s £1,681m gross revenue expenditure budget for 2016/17 be approved.

19.     That the following capital programme be agreed:

·      To fund essential schemes over the five year period (schools and non-schools) to the value of £635m including ring-fenced grants;

·      To make adequate provision in the revenue budget to fund the revenue costs of the capital programme, including a borrowing requirement of £187m over the five years.

20.     That a robust business case be prepared (and taken to the Investment Panel for review) before committing expenditure for the use of:

·      the Public Value Transformation Fund,

·      all revenue ‘invest to save’ proposals, and

·      capital schemes.

Treasury Management and Borrowing:

21.     That the Treasury Management Strategy for 2016?21 be approved with immediate effect. This strategy includes:

·      the investment strategy for short term cash balances;

·      introducing three new investment categories: corporate bonds, covered bonds and pool investment property funds which will generate additional returns within controlled credit risk (paragraph 109 in the submitted report);

·      increasing the maximum term for high quality longer dated investments to two years for supranational institutions, local authorities, UK Government, corporate bonds and five years for covered bonds, earning additional interest income without compromising liquidity risk (paragraph 109 in the submitted report);

·      setting the maximum amount in respect of any one counterparty to £20m with the exception of money market funds which should remain at £25m (paragraph 109 in the submitted report);

·      the treasury management policy (Annex 2, Appendix 8 of the submitted report);

·      the prudential indicators (Annex 2, Appendix 9 of the submitted report);

·      the schedule of delegation (Annex 2, Appendix 11 of the submitted report);

·      the minimum revenue provision policy (Annex 2, Appendix 14 of the submitted report).

Supporting documents: