Agenda item

As part of the Council's development of the budget for 2018/19, the overview and Scrutiny Panels were reviewing the draft budget. The Director and the Finance Managers from Directorate of Economy and Infrastructure were present, along with the Cabinet Members with Responsibility for Communities, Environment, Highways, and for Economy and Infrastructure.

A presentation had been circulated, which included key headlines from the Budget Report, key (capital) investments, and transformation reforms for Economy and Environment (E&E) – reforms included reforms to save £3.6m included review of expenditure and income budgets across Environmental and Infrastructure Services, to include Waste Services and street lighting.

However the Panel Chairman pointed out that most of the presentation information related to the overall budget for the Council, and the Panel wanted to look specifically at budget detail for Economy and Environmental (E&E) Services. The Chairman had been expecting to see budget detail for 2018/19 alongside figures for 2017/18, to enable comparison. A final version of the Budget Book extract including figures for both capital and revenue budgets and staff would be available for February Cabinet and Council – the Director of E&I advised that very little would have changed in the final version, however the Panel was disappointed that this detail would not be subject to scrutiny.

Officers obtained more detailed information for the Panel to refer to during discussion.

Examining the presentation and figures, one area which surprised the Panel was the £5m reduction in the Highways Maintenance budget. It was explained that this was subject to an accounting adjustment, through conversion of highways revenue maintenance costs from revenue to capital budget; there was no reduction in actual spend.

The Panel explored further how this worked, and were advised that the low interest rate of 2%+ made borrowing very cheap and value for money. Capitalisation was for a specific period of four years which would then be re-evaluated. Eventually debt service costs would mount, however models would change over the years and this method was seen as a way of dealing with cost pressures for this period of time. The Director gave the analogy of a home owner having the roof tiled; this had long-term effects and so could be added to the mortgage.

Although the Panel members could understand the rationale behind this as many of the roads and pavements re-tarmacked would last up to 30 years, they sought further clarification about the public perception of this approach, since the Budget Book figures gave the impression that the Highways Maintenance budget had been reduced by £5m, when people wanted the Council to spend more on highways. The Director clarified that only certain items could be capitalised in this way and that the Budget was not being reduced, nor the proposal concealed. The Panel considered it was important that this was communicated.

The Panel referred to the Capital Programme 2017/18 to 2020/21 for the Economy and Infrastructure Directorate included in the agenda papers and the Director was asked to give an update on the areas of variance which had been subject to discussion at the Panel's November meeting.

In Archives and Archaeology Services, work continued to ensure staff were aligned to the functions of the service. In relation to the high accommodation costs from The Hive, as a PFI financed building, the Director had made sure that a service would not be burdened with these costs and therefore this was now displayed separately.

For County Enterprises (a service which employed people with disabilities), the aim was to attract external work and try to balance the budget with a sensitive approach. Costings had been accepted as sitting with the E&I Directorate, with more therefore built into the budget for 2018/19 to accommodate this.

The waste contract was mid-negotiation but the Director was confident that the 2018/19 budget would be achieved. The Director explained how the building of this important council asset was financed using Council money as part of a 'virtual bank'. He agreed that the contract had to be value for money, and would be subject to ongoing scrutiny.

Regarding Scientific Services, there was no change in Place Partnership's decision to cancel the asbestos removal contract which Panel members had been upset to learn about at their November meeting. As a consequence the department had now downsized accordingly and the budget figures reflected this.

Trading Standards used reserves the previous year to deal with restructuring and the new budget reflected this.

In response to a query, it was explained that the jump in expenditure from £472,000 to £330,000 for Trading Standards was related to a Public Health grant for smoking and alcohol prevention, which was allocated to certain services as part of finalising the budget

In response to a query, the Director confirmed that new street lighting column bulbs should be LED, rather than yellow lights and that the programme of replacement was reaching completion. The £4m investment in street lighting referred to in the presentation as part of capital investment of an extra £37.5m to maintain roads and grow the economy, was to address columns at risk of falling, which also presented an opportunity to install LEDs.

In view of reduced costs from LEDs, a Panel member asked whether any analysis had been done to look at the feasibility of replacing lamps with LEDs and leaving them on, which would also address public perceptions about increased crime? However the Director advised that the payback period was too long to be financially viable. It was possible to send the contractor to address individual issues highlighted by councillors.

It was agreed that an update on street lighting would be added to the Panel's work programme.

In response to a query, the Panel was advised that the reserve figure of £450,000 for Economic Development related to a Government grant.

Regarding inflation increases, the Finance Manager confirmed that the budget figures incorporated a provisional pay award of 1%, and would be updated with the confirmed 2% figure. Roughly 3% had been applied to waste services and 14.1% to public transport. Increases had been applied to around 60% of contracts however not all would be up for renewal this year.

The figures for Business Administration incorporated the remaining £300,000 small amount, in order to balance the budget for 2018/19 within the cash limits set.

A Panel member asked whether the Council could consider maximising the 'virtual bank' approach used with the waste plant PFI project, in making loans available to businesses which could generate more income from economic development?

The Director referred to examples such as the Worcester 6 business project and Malvern Science Park, however the role of lender/developer/financer could be an issue for a Local Authority, and it was therefore important to distinguish between projects and those which were of benefit to the public.

The Chairman thanked everyone for their contribution.  The comments about the budget proposals would be collated for submission to the Overview and Scrutiny Performance Board and then to the Cabinet for consideration at its February meeting.