Agenda item
Minutes:
The Committee considered the undernoted report:
“1.0 Relevant Background Information
1.1 This report provides an update for Members and considers final options for the 2014/15 revenue estimates, in line with the summary of the rate setting process for 2014/15 outlined in figure 1 below.
2.0 Key Issues
2.1 At the meeting of the Strategic Policy and Resources Committee on the 22 November 2013, Members were advised that departments had completed their estimates for 2014/15 and that the outcome was than an increase of £1,295,800 (1%) would be required for 2014/15.
At the Committee it was agreed that officers should present a report to the Committee in December 2013 based on the delivery of a 0% rate. The setting of a zero rate would represent a reduction of 2.2% in real terms based on the current CPI rate. This would mean that for the first time the Council would have set a 0% district rate in two consecutive years.
2.2 Since the report to Committee in November 2013, the Financial Services Section has worked with departments to review the draft revenue estimates and growth proposals. This review took into account the decision of the Strategic Policy and Resources Committee in November 2013 in relation to the review of security and the previous decisions of the Committee to establish specified reserves and funds for local government reform and non recurring capital expenditure.
2.3 As a result of this work the following adjustments to the revenue estimates have been made which will enable a zero district rate to be set by the Council for 2014/15.
1. Estimated savings arising from the implementation of the review of security have been removed totalling £300k. The actual level of savings will depend on the preferred option agreed by Committee in early 2014. A verbal update will be provided to the Committee on 13 December on the outcome of the voluntary redundancy exercise.
2. The Council has been advised by the Department of Finance and Personnel on the 2 December 2013 of an increase in the de-rating grant for Belfast amounting to £159k.
3. The detailed work on the revenue estimates has been completed which has enabled a reduction of the estimates by £836k through the inclusion of additional income (£211k), removal of non-recurring expenditure requests (£88k), budgetary challenge (£255k) and re-alignment of planned maintenance budgets (£282k).
2.4 Taking account the above actions it would be possible for the Council to deliver a zero increase on the District Rate in 2014/15. The graph below shows the regional and district rates set over the past 15 years. For the period of 2011/12 – 2014/15 the council will have a record of district rates set below the level of inflation – 2.95%, 2.6%, 0% and 0%.
2.5 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 spending plans included in the council’s investment programme and therefore no increase to the capital financing budget is required for 2014/15.
2.6 Leisure Capital Transformation Financing: This will be used to pay the £38m for the first phase of Leisure capital investment in Olympia and Andersonstown.
The annual financing budget of £3.23m has been provided through the agreed transfer from the annual Belfast Investment Fund contribution meaning that no increase is required for 2014/15.
2.7 Belfast Investment Fund: This is used to finance investment package schemes for non-council assets. The current annual contribution to the fund of £2.77m will ensure that £20m of Belfast Investment Funding is available by 2014/15. There is therefore no requirement to increase the current level of contribution to the Belfast Investment Fund during 2014/15.
2.8 Local Investment Fund – This is used to fund non-council 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.
2.9 Reserves – The council’s general reserves position is forecast to be at least £13m by the end of 2013/14. Given the uncertainty surrounding the financial implications of local government reform and the new rate base it is believed that this level of reserves is appropriate.
2.10 Rate Base – The LPS have advised that there is likely to be marginal growth in Estimated Penny Product (EPP) for 2014/15.
2.11 Members will be aware that for the purposes of setting the District rate in 2012/13 and 2013/14, the Committee agreed that the EPP for both years should be kept at the 2011/12 level, given the difficult economic environment and the risk of decline in the rate base.
2.12 Officers have worked closely with the LPS to determine the risks associated with accepting a marginal growth forecast in the rate base in 2014/15. Given the current economic environment, ongoing rates appeals and the level of outstanding debt and write offs, the uncertainty around the new rate base and the impact of the non-domestic revaluation exercise in 2015 and the fluctuations in yearend rate settlements it is the view of the Director of Finance and Resources that it would be prudent to maintain the EPP at the 2013/14 level. This approach and recommendation has been validated by the Institute of Revenues Rating and Valuation (IRRV).
2.13 Members will be aware that the collection performance of LPS has been a matter of concern for the Council and for members of the Strategic Policy and Resources Committee for a number of years, especially when benchmarked against the performance of local authorities in England and Wales.
2.14 On the 1 December 2013, the Finance Minister, Simon Hamilton, announced that he has commissioned a review of the rate collection and the recovery processes. As part of the Minister’s reform agenda, the Department of Finance and Personnel will be carrying out a strategic assessment of rate collection and recovery with the assistance of external advice and expertise from Ernst & Young, who have experience in engaging with leading collection agencies in the public and private sector. This will be a short, focussed review which will be completed by the end of the year.
2.15 The following extract of the Minister’s statement should be of particular interest to the Committee
‘I want to benchmark what LPS does against the best in Britain because I want LPS to become the best. A reformed public sector providing its people with first rate public services needs a cutting edge rates collection agency. This review and its outcomes can assist us in achieving that aim of an innovative and reform orientated public sector as well as underpinning our efforts to deliver world class public services to the people of Northern Ireland.’
2.16 In summary, a zero rate for 2014/15 is deliverable in the context of:
1. Meeting the running costs of the organisation.
2. Delivering the financial commitments detailed in the investmentprogramme.
3. The Estimated Penny Product (rate base) remaining at the 2013/14 level.
3.0 Impact on Ratepayer
3.1 A rates bill in Belfast is made up of 56% Regional Rate and 44% District Rate. The Regional Rate, subject to Executive approval, is due to increase by 2.7%. If the Council sets a zero rate, this means the ratepayers total bill will increase by 1.49%. The table in Appendix A shows the monetary impact on average property types.
4.0 Recommendations
4.1 In order to prepare the rates report for the 10 January 2014 Strategic Policy and Resources Committee, Members are requested to agree the following:
1. Officers prepare the departmental cash limits report based on a zero district rate as discussed in Section 2 above.
2. Base rate calculations on zero growth in the Estimated Penny Product as discussed in paragraph 2.10 above.
3. That the report to the Committee in January 2014 includes a ‘Key Messages’ briefing prepared by the Head of Corporate Communications “
The Committee adopted the recommendations.