The Waverley Web fears it may be watching “Your Waverley’s” death throes. Oh dear – does that mean we may have to go too?

Just in case you were unaware folks – the Government wants to “help” our local authorities  become “more self sufficient.”

In short  it is withdrawing some, and then all, its funding!

So to “help it” prepare for the evil day and help”  plan services – the ones that are left – and “strengthen financial management and efficiency” and “make use of its reserves” (you know the money it has in the Bank) it wants to give “Your Waverley” a four year “funding settlement.”

Phew we hear you say, that’s alright then … isn’t it?

No, actually it isn’t ! Because “Your Waverley” is between a very big rock and a very hard place! If they don’t take the settlement now – they lose the chance. And… it could be worse,  in other words the Government says,  “take it or leave it.”

If they take it?  This is what it gets:

If the council takes the four year option – it has  “certainty”  of losing Government money year on year until it gets nothing in 2018/19 and then gets minus £814,000 in 2019/20.

If it doesn’t accept – then quite simply the only way is DOWN!

How much further down do you go than down? Answers on a postcard please !

All a bit hard to swallow for a council that once received many millions in its annual grant from  Government!

And… it gets worse because it is unlikely to get more than a smidgen of the business rates it has been promised.  Why? Because the Government intends to distribute what Waverley and other SE Local authorities collect around the rest of the country.

And only moments before the Corporate Overview & Scrutiny Committee debated the lamentable situation – one councillor asked if the rumour was true that Waverley was telling the public if they wanted a home – go to the private sector – or go North.

Well they may be right – is  that where the money is going?

Or is the Government seeking  more radical steps? Perhaps it wants council to merge with neighbouring authorities – to save waste –  maximise efficiency – and perhaps consider stopping their unaffordable Final Salary Pension Schemes?

This is what the Council Report said:

Ah,  not to worry there is the New Homes Bonus? Isn’t there going to be a whole lot of new homes in the borough – almost 10,000 and counting? Could this be the reason? 

How did councillors  react?  With incredulity – one said it was “Iniquitous, that Waverley would lose income that would be spent further afield, this was totally wrong and  should be resisted at all costs!”  

A council officer said : “We do not know where will find £3m over the next four years.” and warned:  “there were  no magic bullets!”  

What message would the committee be sending to The Executive?  “Waverley has a difficult nettle to grasp.” And…

The report goes on to say:

The offer made by the Government, as part of the Spending Review, is to any council that wished to take up a four year funding settlement up to 2019/20. The purpose of this offer is to help local authorities prepare for the move to a more self- sufficient resource base by 2020. The multi-year settlements are intended to provide more funding certainty and stability for the sector that would enable more proactive planning of service delivery. The Government expects these multi-year settlements to be used to “strengthen financial management and efficiency, including maximising value in arrangements with suppliers and making strategic use of reserves in the interests of residents”.

2. A copy of the conditions from the Secretary of State is attached at Annexe 1 of this report. In theory this offer is fixed, however, this does not mean that other changes may not arise outside of this offer. It is not clear what the impact would be of not accepting this offer and it is unlikely that this would become clear at least until December 2016, at which point the 4 year offer will no longer be available. On balance it is being recommended to accept the offer as it provides an element of certainty and is difficult to see authorities who choose not to accept the offer benefiting as a result. In fact, they could suffer a disproportionately high share of any further reductions.
3. The Budget report agreed by Council in February 2016 incorporates the funding provided within the four year settlement offer. If this offer is accepted, it provides greater certainty as the funding received will not be less than outlined in the final settlement and should not be subject to the yearly process determining the local government finance settlement. The following table sets out the Revenue Support Grant (RSG).*Indicative – subject to confirmation from Government pending decision on timing of business rate funding reform.
4. In order to take up the four year funding settlement for the period 2016/17 to 2019/20, an Efficiency Plan must be prepared and published by 14 October 2016. This offer relates to the RSG funding incorporated within the MTFS for the 4 year period 2016/17 to 2019/20 and ensures that it will remain uncharged “barring exceptional circumstances and subject to the normal statutory consultation process for the local government finance settlement.
   1. 4.1  If the four year offer is not accepted the RSG funding would be subject to the existing yearly process for determining the local government finance settlement. Allocations could be subject to additional reductions dependent on the fiscal climate and the need to make further savings to reduce the deficit.
   2. 4.2  There are only two options available to the Executive. The first option is to approve the Efficiency Plan and accept the Settlement offer and thereby provide a degree of certainty over the level of funding up to an including 2019/20. Alternatively, the Executive could decide not to accept the government 4 year offer and wait to find out the financial impact of this decision, accepting that at this point there will be no ability to switch back and accept the 4 year offer.
5. To accept the four year offer, an Efficiency Plan has been prepared and is included within Annexe 2. No guidance has been issued from Government for the production of these plans but it must cover the full 4 year period and be open and transparent about the benefits this will bring to both the council and the community. Further, the Government does not expect this document to be a significant burden on councils but rather a drawing together of existing corporate plans and strategies, and this has been the approach adopted to produce this Efficiency Plan.

6. Business Rates

The Government has announced that it intends to move to a position where all business rates collected will be retained by the local government sector. This does not mean that each local authority will keep all of the business rates it collects and it has been confirmed that the system of tariffs and top ups will continue to enable the Government to redistribute business rates collected between local authorities nationally.

The current position or Waverley is that it collects £35million of business rates each year and retains approximately £2million. The Government is consulting on its detailed proposals which are due to be implemented in 2019/20. Based on early indications, it is estimated that Waverley’s position will not improve. Key risks around business rates are:

•   How appeals will be treated
•   How much business rates growth will be retained
•   When and how frequently the whole system will be reset.Officers will report to Members as the Government’s review develops.

7. New Homes Bonus (NHB)

Earlier in 2016, the Government launched a review and consultation on the future of New Homes Bonus. The outcome of this review was due to be published in July but the Government delayed it to the autumn. Waverley will receive £2.2m of NHB in 2016/17 and with significant house growth projected this is a very important source of funding for the Council. Officers will report to members when the Government’s proposals are known and the impact has been assessed.

Conclusion

8. If this proposal is approved, the Council will write to the Secretary of State for Communities and Local Government to accept the 4 year settlement and publish the Council’s Efficiency Plan. Where appropriate, consultation will be carried out for individual proposals by the relevant service.

Recommendation

Corporate Overview & Scrutiny Committee is invited to consider the proposal that Waverley accepts the four year funding settlement for the period 2016/17 to 2019/20 on the terms set out in the report, and agree any comments to be passed to the Executive.

The Government will offer any council that wishes to take it up a four-year funding settlement to 2019-20. This includes:

•   Common Council of the City of London
•   London borough councils
•   district councils
•   county councils
•   Council of the Isles of Scilly
•   Greater London Authority
•   metropolitan county fire and rescue authorities
•   combined fire and rescue authorities.The Government is making a clear commitment to provide minimum allocations for each year of the Spending Review period, should councils choose to accept the offer and if they have published an efficiency plan.What the offer includesgive them control over an additional £13 billion of tax that they collect.

• To ensure that the reforms are fiscally neutral local government will need to take on extra responsibilities and functions. DCLG and the Local Government Association will soon be publishing a series of discussion papers which will inform this and other areas of the reform debate.The new burdens doctrine operates outside the settlement, so accepting this offer will not impact on any new burden payments agreed over the course of the four years.The Government will also need to take account of future events such as the transfer of functions to local government, transfers of responsibility for functions between local authorities, mergers between authorities and any other unforeseen events. However, barring exceptional circumstances and subject to the normal statutory consultation process for the local government finance settlement, the Government expects these to be the amounts presented to Parliament each year.

Interest in accepting this offer will only be considered if a link to a published efficiency plan is received by 5pm Friday 14th October. We will provide confirmation of the offer shortly after the deadline.

Process for those who do not take up the offer

Those councils that chose not to accept the offer, or do not qualify, will be subject to the existing yearly process for determining the local government finance settlement.

Allocations could be subject to additional reductions dependant on the fiscal climate and the need to make further savings to reduce the deficit.

At present we do not expect any further multi-year settlements to be offered over the course of this parliament

Addressing the Gap

The Council faces a significant challenge in addressing its forecasted budget deficit over the next 4 years in an environment where there is significant uncertainty and increasing levels of risks. The Council will need to adopt a mixed approach to addressing the projected £2.7m budget shortfall on the General Fund over the 4 year period (see figure 1).

Purpose of Efficiency Plan

•   Provide a high level framework for addressing the projected budget shortfall in the medium term.
•   Demonstrate that sufficient resources will be available to meet Waverley’s objectives and priorities, particularly in the delivery of value for money.
•   Look ahead to the longer term to protect and help plan sustainable services within an extremely challenging external economic and funding environment.
•   Strengthen Waverley’s financial resilience and manage volatility and risk, including maintaining an adequate level of reserves.
•   Secure, maintain and develop Waverley’s capital assets consistent with the Asset Management Plan.
•   Anticipate financial pressures and identify potential ways to balance Waverley’s budget including through efficiency measures.The Council recognises that its ability to continue to deliver the full range of front line services will depend on its ability to generate new funding streams, manage costs and improve the way that the residents access services whilst supporting those that cannot help themselves.Managing Financial Risk and UncertaintyAs the Council’s funding becomes increasingly reliant on local sources and exposed to greater fluctuations, it is increasingly important to have appropriate strategies for managing any impact. The Council has identified the main areas of risk as:
  •   reducing business rates yield
  •   falling income from services from demand changes and other external barriers
  •   rising operational asset running costs
  •   rising demand and expectation of core services
  •   new and extended legal duties
  •   future of New Homes Bonus funding and business rates funding share

Annexe 2

To manage the impact of a reducing business rates yield, the Council has:

•   Agreed new staff structure in the revenues team to divert staff resources towards debt collection and enforcement
•   Worked with the District Valuer and partners to try and develop reliable forecasts of business rates valuation changes
•   Reviewed the benefits and risks of ‘pooling’ with neighbouring authorities and joined the pool in 2016/17.
•   Progressed WBC led schemes leading to growth in business rates yield including Brightwells.To address falling income from services, the Council will continue to:

•   Implement measures to improve collection and enforcement.
•   Review fee structures and tariffs to generate more income and ensureefficiency of collection.
•   Approach government individually and in partnership with others to seekchanges which frustrate income opportunities which currently require Council Tax payers to subsidise services which could be paid for by the ‘users’ of those services.To address uncertainty over the future of the New Homes Bonus and Government Funding the Council has:

•   Restricted use of NHB to within the revenue budget with the balance being used for invest to save and investment opportunities.
•   Set up an ‘Equalisation Fund’ to manage in year deficits and surpluses in funding to act as a buffer to deal with in year volatility to ensure that sudden changes in business rate yield can be managed without the need to make service reductionsKey Actions in Efficiency Plan
  •   Review the approach to budget reviews and the Foresight Efficiency Programme to ensure budgets deliver good value for money and are aligned to Corporate Plan priorities.
  •   Optimising return on cash surplus in times of low interest rates, balancing security, liquidity and return.
  •   Undertake a fundamental review of capital spending plans to ensure a sustainable Business case with affordable capital programmes.
  •   Utilise General Fund asset strategies including disposals and acquisitions including SANG where appropriate and establish a new Investment Advisory Board.
  •   Maximise invest to save opportunities to generate income, improve processes and/or make savings.
  •   Identify further efficiencies under the ‘Foresight’ Efficiency Plan including from reconfiguring IT systems procurement.
  •   Secure new funding opportunities t