Agenda item

            The Director of Finance and Resources submitted for the Committee’s consideration the undernoted report:

“1.      Relevant Background Information

1.1    This report provides an update for Members on the development of the 2013/14 revenue estimates, in line with the summary of the rate setting process for 2013/14 outlined in Table 1 below.

2       Key Issues

2.1    The report is presented in the context of the commitment given by Members, as part of the Investment Programme, that the council would set a district rate at no more than the rate of inflation. The Consumer Prices Index (CPI) annual inflation stands at 2.7 per cent in October 2012, up from 2.2 per cent in September. CPI is forecast to be around 2% in 2013.

2.2    Departmental 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 2013/14 and the outcome is that an increase of £1,111,900 (0.86%) is required for 2013/14. This increase comprises of the net effect of the following factors:

Table 2: Departmental Increase

2.3    The following paragraphs provide further information on the departmental increase summarised above.

         An analysis of the £2.5m of uncontrollable costs, which departments will incur, is provided in Table 3 below. This includes provision of a central budget to cover the potential for a 1% pay rise.

Table 3: Uncontrollable Costs

2.4    In August 2012, it was reported to Committee that the efficiency programme would generate £2.0m of savings from the 2013/14 revenue estimates. As the result of ongoing work in this area, further savings of £117k have been identified meaning that departmental efficiencies totalling £2.1m have been taken out of departmental budgets. The efficiency savings mean that the net impact of the uncontrollable costs has been reduced £351,300.

         A summary of the efficiency savings by theme has been included as Table 4 below.

Table 4: 2013/14 Efficiency Savings by Theme

         Capital Expenditure Plans

2.6    Capital Programme: This is used to pay for enhancements to existing council assets or for the provision of new assets owned by the council. The capital programme is financed through an annual budget of £10.14m and this budget is sufficient to meet the £75m spending commitment included in the council’s investment programme.

2.7    A stagnant rate base, rising uncontrollable costs and the pressure to keep the District Rate at below inflation has implications for the future financing of capital investment. This means that efficiencies will be required not just to keep the District Rate at an acceptable level but also to finance capital investment. For example, £2m cash savings on revenue costs would lever an additional £20m of capital investment. Therefore any future significant capital investment proposals, such as the leisure estate, will require an element of self-financing through efficiencies.

2.8    Belfast Investment Fund – This is used to finance investment package schemes for non-council assets. As part of the rate setting process in 2012/13, the annual contribution to the fund was increased from £3m to £6m to ensure that £20m of Belfast Investment Programme funding is available by 2014/15. There is therefore no requirement to increase the current level of contribution to the Belfast City Investment Fund during 2013/14.

2.9    Local Investment Fund – This is used to fund neighbourhood capital projects for non-council assets. The £5m fund has been fully financed and there is therefore no requirement to make additional contributions through the District Rate during 2013/14.

2.10   Reserves – The council’s general reserves position at the year end is forecast to be at least £13.6m by the end of 2012/13. As this is above the minimum requirement of £10m, as set out in the council’s reserve strategy, there is no requirement to include an additional contribution to general reserves in the District Rate for 2013/14.

2.11   Rate Base – council officers are currently working with the Land and Property Services Agency (LPS) on the rates forecast Estimated Penny Product (EPP) for 2013/14. At this stage we are not in a position to provide an accurate figure but it is likely that the rate base will not be showing growth. Update reports on the rate base position will be provided to the Budget and Transformation Panel and the Strategic Policy and Resources Committee as work with LPS progresses.

         Scenarios

2.12   Scenario 1: This option summarises the current position of the revenue estimates prepared by departments and allows for a net increase in the revenue estimates of £1.1m which would represent a District Rate increase of 0.86%.

2.13   Scenario 2: This option takes into account the proposed allocation of the waste fund balance to specified reserves (as recommended in the separate Quarter 2 Financial Report being considered at this committee meeting), which would assist in reducing increases to departmental estimates. Further detailed work on the future waste costs has indicated that it may be possible to reduce the stepped increase in the waste fund contribution during 2013/14 and work is ongoing in this area. Departmental growth proposals will be also be subject to challenge. The combination of these initiatives could result in no increase to departmental budgets and hence a Nil increase in the District rate for 2013/14. 

3       Recommendations

3.1    The Committee is requested to:

(a)      note the contents of the report;

(b)     agree that the Strategic Policy and Resources Committee consider a detailed rates report  at its December meeting based on the two scenarios outlined in paragraphs 2.12 and 2.13 above.”

            The Committee adopted the recommendations.