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 overview of the rate setting process for 2014/15 and the proposed high level guidance which will be issued to departments for the preparation of the 2014/15 departmental revenue estimates.

 

2       Key Issues

 

2.1     Table 1 below provides a summary of the rate setting process and the reporting / decision stages for the Strategic Policy and Resources Committee.

 

 

2.2     Investment Programme Commitment

 

         The investment programme commits the council to keeping any annual rate increase to the rate of inflation or below for the period up to 2014/15.

 

2.3     The current forecast rate for the Consumer Price Index (CPI) for 2014/15 is 2.4% and therefore in order to meet the investment programme target, the increase in the District Rate for 2014/15 cannot exceed 2.4%.

 

2.4     External Pressures on Departmental Budgets

 

         Superannuation: The NI Local Government Superannuation Pension Scheme (NILGOS) have indicated that the Employer Contribution Rate is likely to increase 20% to 21% for 2014/15. This will result in an uncontrollable cost increase for the council of £611k, representing a 0.47% increase in the District Rate.

 

2.5     Employee Pay Rise: In 2013/14 Local Government Employees received a pay increase of 1% which was the first pay rise in 4 years. The Chancellor of the Exchequer has decided to extend pay restraint into 2015-16 with a continued cap on public sector pay rises of 1%. A 1% pay rise in 2014/15 would equate to an uncontrollable cost for the council of £871k, representing a 0.67% increase in the District Rate for 2014/15. As in 2013/14, the pay rise element of the 2014/15 revenue estimates would be retained as a corporate budget and only transferred to departments budgets if a pay settlement is agreed.

 

2.6     Employee Increments: Staff who have not reached the final point of their salary scale, will be due an increment in 2014/15. The increments will mean an uncontrollable cost increase of £358k or a 0.28% increase in the District Rate for 2014/15.

 

2.7     Energy Costs: Energy costs are forecast to increase by 5% in 2014/15, with fuel costs for the Council’s fleet estimated to increase by 4% in the same period. This will mean an increase in energy and fuel costs of £531k in 2014/15, representing an increase of 0.41% on the District Rate. Work will continue on the energy stream of the council’s efficiency programme focusing on the management and procurement of energy for council assets, to reduce the impact of these cost increases.

 

2.8     Income Risk: Income from electricity generation at the North Foreshore is estimated to reduce by a further £300k during 2014/15, with a further £100k loss of income in other areas arising from the current economic environment. The reduction in income would total £400k and would represent a 0.31% increase on the district rate. Further work will be undertaken to test the income assumptions at service level as part of the estimates setting process

 

2.9     The total uncontrollable cost increase is forecast to be £2.77m and is detailed in Table One below.

 

2.10   This does not include potential growth proposals or the general inflationary impact on supplies and services. It is proposed that departments are requested to absorb the inflationary impact on supplies and services and that business cases will be required for any growth proposals.

 

Table 1

Uncontrollable Departmental Cost Increases 2014/15

(Excluding CPI Increase)

 

Description	Estimated Cost Increase	Impact on District Rate
Superannuation	£611k	0.47%
Pay Rise	£871k	0.67%
Pay Increments	£358k	0.28%
Energy & Fuel	£531k	0.41%
Income Risk	£400k	0.31%
Total Uncontrollable Costs (Excluding CPI Increase)	£2,771k	2.13%

 

 

 

 

 

 

 

 

 

 

 

2.11   Efficiency Programme

 

         The Council is committed to delivering £2m of efficiency savings for 2014/15 and these will support the delivery of a rates increase below the rate of inflation. A detailed report on the programme will be brought to the committee in September.

 

2.12   Rate Base of the City: The council receives 74% of its income from the District Rate and the sustainability of the rate base is therefore critical to the council’s financial position and future spending plans. An analysis of the 2012/13 rates outturn has been undertaken. A detailed report on the potential impact of the rates performance for 2012/13 on the forecast rates position for 2014/15 will be brought to the committee in September.

 

2.13   Capital Expenditure Plans

 

         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 programmed is financed through an annual budget and at the Strategic Policy and Resources Committee on 21 June 2013, it was agreed to increase this budget from 2014/15 to £13.37m through the transfer of £3.23m from the £6m annual Belfast Investment Fund budget. This transfer would finance the Olympia and Andersonstown Leisure Schemes without the requirement to increase the District Rate.

 

2.14   Belfast Investment Fund: This is used to finance investment package schemes for non council assets. The annual contribution to the Belfast Investment Fund for 2014/15 will be £2.77m and this will ensure that £20m of funding is available by 2015 in line with the Investment Programme commitment. There is therefore no requirement to increase the current level of contribution to the Belfast Investment Fund during 2014/15. 

 

2.15   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 2014/15.

 

2.16   Reserves

 

         The council’s current general reserves position is £13.3m and is therefore within the minimum reserve level of £10.1m agreed by the Strategic Policy and Resources Committee. A separate report to the committee will request an allocation of £1.15m from reserves to finance the non-recurrent cost elements of the Leisure Transformation Programme. If this is agreed reserves will still be at at an acceptable level and therefore there will be no requirement to increase the reserves through the District Rate in 2014/15.

 

3       Equality and Good Relations Implications

 

         There are no equality and good relations implications associated with this report.

 

4       Recommendations

 

         Members are requested to:

 

1.Note the contents of the report and that further updates on the development of the estimates, capital expenditure plans and the rate base position, will be provided to Members in line with the timetable provided at paragraph 2.1.

 

2.Agree that departments are requested to absorb the inflationary impact on supplies and services and that business cases will be required for any growth proposals.

 

3.Agree to consider reports on the efficiency programme and the rate base at the September meeting of the committee.”

 

            During the discussion in the matter, the Director of Finance and Resources reported that, subsequent to the report having been issued, he had received further information that the recalculated payment by the Council of the employers’ contribution to the Local Government Pension Fund would increase the uncontrolled departmental costs for 2014/15 by an estimated £900,000.

 

            After discussion, the Committee adopted the recommendations.