Agenda item

            The Committee considered the undernoted report:

“1    Relevant Background Information

1.1Members will recall that the Strategic Policy and Resources Committee in April agreed the process for setting the rate as outlined in the chart below. The purpose of this report is to outline progress made against the agreed timetable and to discuss the key issues which will need to be considered as of the rate setting process.

2    Key Issues

2.1Departmental Estimates –This is the money required by departments to deliver services and typically covers expenditure on headings such as salaries, supplies and services. The departments have all completed their estimates for 2012/13 and the final outcome is that £713,000 less will be required than for 2011/12.

2.2This reduction is mainly due to two factors:

·        £2.3m efficiencies have been taken out of the budgets as agreed by the Strategic Policy and Resources Committee on 4 November 2011.

·        A pay rise has not been factored into the budgets for the third year running.

2.3The reduction in departmental estimates has been achieved despite significant financial pressures on departmental running costs including increased employers superannuation contributions, the impact of inflation (currently 5%) and the loss of external income in areas such as electricity generation at North Foreshore.

2.4Waste Plan – waste management costs are due to increase by some £3.7m in 2014/15 when the arc21 Residual Waste Contract commences. The council has been planning for this increase in cost through a gradual increase in the rate so to avoid a spike in the rate in 2014/15. For 2012/13, a stepped increase of £1m will be required.

2.5The net impact of the department estimates and the waste plan is that an additional £284,000 is required to cover revenue costs in 2012/13. This is the equivalent of a 0.22% increase in the rate.

2.6This provides Members with a one-off opportunity to dedicate any rate increase over and above 0.22% to capital investment and the delivery of the stimulus programme, if they so choose. 

2.7Capital Investment

·        Capital Programme – used to pay for enhancements or new assets owned by the council and paid for through a mixture of loans, grants, capital receipts and one-off payments. The current capital programme is financed through an annual budget of £10m .This budget is sufficient to meet the current capital spending plans of the council which will peak in 2015/16. 

·        City Investment Fund – used to finance investment package schemes for non-council assets and paid for through cash generated from the rates or capital receipts. Currently, £3m from rates go into the fund every year. By 2014/15 there will be £11m in the fund net of current commitments. The number of schemes which can be delivered as part of the stimulus package will be limited by the amount of cash in this fund.

·        Local Investment Fund – used to fund neighbourhood capital projects for non-council assets. There is £2.5m in the fund. There is an opportunity to add £2.5m to the fund over the next two years without increasing the rate.

2.8Reserves – are forecast to be at least £10.3m by the end of 2011/12. This is line with the council’s reserve strategy which requires general reserves to be at a minimum of £10m.

2.9Rate Base – Land and Property Services (LPS) have provided the council with their final forecast of what the rates will yield for next year. The advice is that there will be zero growth. Council officers have challenged the figures provided by LPS as far as is reasonably possible given the limited access we have to LPS data. 

2.10    Members should note that the forecast for the total rates collected in 2011/12 is a claw back of £1.54m. It has already been agreed that this will be paid using the in-year underspend. A further update on the 2011/12 position will be provided to the council on 19 December 2011.

      Summary

      The table summarises the rates position taking into account all the key factors already discussed. The 0.22% scenario shows the base line position without additional capital investment. The further three scenarios show the impact of a 1%, 2%, and 3% rate increase on additional capital investment. 

3    Recommendations

3.1In order to prepare the rates report for the 6^th January 2012 Strategic Policy and Resources Committee, Members are requested to agree the following:

1.     Officers prepare the department cash limits report based on a reduction of £713,000 as discussed in paragraph 2.1 above;

2.     A stepped increase of £1m for the waste plan as discussed in paragraph 2.4 above;

3.     Base rate calculations on zero growth in the Estimated Penny Product as discussed in paragraph 2.9 above; and

4.     Agree the capital investment element of the rate at the Strategic Policy and Resources meeting on 6 January 2012.”

            The Committee adopted the recommendations.