014/2013 – Budget and Precept – 08 February 2013

Executive Summary and recommendation:

Summary of information for 2013/14

• The Police and Crime Commissioner (the Commissioner) is required to determine the council tax requirement for 2013/14, calculate the band D council tax and issue the precept to the Billing Authorities by 1 March.
• The Police Grant Settlement for 2013/14 reduced formula grant to local policing bodies by 1.6% on a like for like basis compared with 2012/13. The former Neighbourhood Policing Fund specific grant of £3.2m was rolled into general police grant in 2013/14. A number of funding streams relating to crime, drugs and community safety were amalgamated into one Community Safety Fund for use by the Commissioner. North Yorkshire’s allocation is £0.630m for 2013/14.
• The Council Tax Freeze Grant for 2011/12 (£1.532m) will continue to be paid in each year of the current spending review period. The grant of £1.844m paid for the freeze in 2012/13 dropped out in 2013/14 as anticipated. A further grant is available to those Commissioners who decide to freeze the council tax again in 2013/14. This is equivalent to a 1% increase in council tax (£0.618m) and would be paid in 2013/14 and 2014/15.
• The report reflects the changes introduced as a result of the localisation of council tax support, which impacts upon the taxbase and involves receipt of new specific government grant funding of £5.728m.
  Details of the assumptions made in formulating the revenue budget for 2013/14 and the investment included within the Capital and Revenue Development Programme are included in the report.
• The budget is balanced for 2013/14 but there are forecast budget gaps in future years.
• The Commissioner, after due consideration, submitted a proposal to the Police and Crime Panel for a precept in 2013/14 which retains the council tax at Band D at £204.55, unchanged since 2010/11.
• The Panel has issued a report setting out its support for the Commissioner’s proposal and one recommendation for the Commissioner’s consideration – available pdf icon here. here. [45kb] (Opens in a new window)
• The Commissioner’s formal response to that report is here.

Police and Crime Commissioner decision:

That the recommendations at paragraph 10 of the following report be approved.

Signature Date 08 February 2013
Title Police & Crime Commissioner for North Yorkshire

POLICE AND CRIME COMMISSIONER FOR NORTH YORKSHIRE

REVENUE AND CAPITAL BUDGET 2013/14

1. PURPOSE OF REPORT AND RECOMMENDATIONS
   1. This report provides the Police and Crime Commissioner for North Yorkshire (the Commissioner) with the relevant information to assist in determining the revenue budget, council tax requirement, council tax and capital programme for 2013/14.
   2. The Commissioner is requested to consider the report and determine for 2013/14 the:
      • Revenue Budget; and consequently the
      • Council Tax Requirement (Precept);
      • Council Tax;
      • Capital Programme; and
      • Level of Reserves.
   3. The Commissioner is also requested to approve the budget for the Office of Police and Crime Commissioner.
2. STATUTORY REQUIREMENTS
   1. The Commissioner is required by the Local Government Finance Act 1992 as amended by the Localism Act 2011 to set a Council Tax Requirement and issue a Precept for the following financial year prior to 1 March. In setting a Council Tax Requirement, the Commissioner must calculate and agree the aggregate of revenue expenditure, contingency provision and level of reserves.
   2. The Council Tax Requirement, which for the Commissioner is identical to the Precept, is calculated by deducting the sum of Police Grant and Department for Communities and Local Government (DCLG) Grant including any addition to or contribution from reserves and after taking account of any surplus of deficit on the Billing Authorities’ Collection Funds.
   3. The Precept may only be issued following the conclusion of the scrutiny process by the North Yorkshire Police and Crime Panel. The Commissioner was required under Schedule 5 to the Police Reform and Social Responsibility Act 2011 and associated regulations to notify the Police and Crime Panel of her proposed precept for 2013/14 by 1 February 2013.
   4. The Panel must review the proposed precept by 8 February and make a report to the Commissioner. The Panel has a right to veto the proposed precept if at least two thirds of the persons who are members of the Panel at the time when the decision is made vote in favour of making that decision.
   5. The Commissioner must have regard to and give the Panel a response to their report. Where no veto is exercised the Commissioner may issue the precept. If the Commissioner’s proposal is vetoed by the Panel, a revised proposal must be notified to the Panel by 15 February.
   6. The Panel must review the revised proposal and make a report to the Commissioner by 22 February. The Commissioner must respond to the report and issue her precept by 1 March.
   7. Rejection by the Panel of the revised precept does not prevent the Commissioner issuing it as her precept for the forthcoming financial year.
   8. The Local Government Act 2003 places a duty on the Commissioner’s Chief Finance Officer to make a report to her on the robustness of the estimates and the adequacy of the reserves, and this is included later in this paper.
3. REVENUE RESOURCES 2013/14
   1. The provisional police funding announcement for 2013/14 was made in a written ministerial statement on 19 December 2012. The Final Local Government Finance Settlement, including the police settlement, was announced on 4 February 2013, and contained some very minor amendments which have been incorporated into the figures presented
   2. This year’s budget setting and considerations for the Medium Term Financial Plan (MTFP) are again in the overall context of significant public sector, Home Office and police funding reductions. The implications of these funding reductions have been considered in detail during 2012. A comparison with 2012/13 on a like for like basis is shown below:

   Formula Funding	2012/13£m	2013/14£m
   Relative Needs	0.468	0.605
   Relative Resources	-4.963	-6.365
   Central Allocation	26.805	25.911
   Floor Damping	7.485	9.416
   Police Grant	43.866	46.286
   Total Formula Allocation	73.661	75.853
   Communities and Local Government	29.795	29.567
   Police Grant	43.866	46.286
   Neighbourhood Policing Fund	3.422	Included in HO
   Total Formula Grant	77.083	75.853
   Cash Decrease		1.230
   Percentage Decrease		1.6%

   1. The reduction in funding is in line with the original forecasts set out in the Government’s 2012 Spending Review. Additional reductions had been anticipated as a result of announcements made by the Chancellor but these have not been passed on by the Home Office for 2013/14, although no figures have been released for 2014/15. The damping methodology remains unchanged for 2013/14 and 2014/15.
   2. The police grant for 2013/14 includes the Neighbourhood Policing Fund which was paid as a specific grant in 2012/13, making the like for like reduction £1.23m or 1.6%.
   3. Population projections used in the police funding formula have been updated to incorporate 2011 Census data. As much of the formula is driven by population, changes can result in significant variations. The resident population for North Yorkshire has reduced by 0.6% in comparison with the national average increase of 2.1%. This reduces the raw formula allocation and as a result the amount gained through damping has increased from £7.5m to £9.4m.

   Other Grant Funding

   1. Other grants payable in 2013/14 include:
      • Community Safety Fund – drugs, crime and community safety funding streams amalgamated into a single Community Safety Fund for use by Commissioners. North Yorkshire’s allocation is £630k.
      • Capital Grant – unchanged from the Written Ministerial Statement of January 2012. North Yorkshire’s allocation is £995k.
      • Council Tax Support – this is a new specific grant paid directly to Commissioners to reflect the Government’s contribution to Council Tax Support. North Yorkshire’s allocation is £5.728m.
      • Council Tax Freeze Grant 2011/12 – continues to be paid for 2013/14 and 2014/15. North Yorkshire’s allocation is £1.532m.
   2. The Government has offered a further freeze grant for 2013/14, equivalent to a 1% increase in council tax and payable in 2013/14 and 2014/15. North Yorkshire’s indicative allocation is £618k.
   3. The Government’s excessiveness limit for 2013/14 has been set at 2%, other than for those local policing bodies in the bottom quartile of council tax, where the limit is £5 in cash terms. A 2% increase is estimated to raise £1.115m.

   Other Resources

   1. The Commissioner has been notified of monies due to or from the Billing Authorities’ Collection Funds. There will be an overall surplus of £109,606 to be carried to 2013/14 and this has been included in the figures presented.
   2. The taxbase, which represents the number of band D equivalent properties in the county, is notified to the Commissioner by the Billing Authorities. The taxbase will reduce in 2013/14 as a result of the changes made by government to the arrangements for Council Tax Benefit (CTB).
   3. CTB was previously a national scheme funded by the Department for Work and Pensions. In other words the benefit awarded in line with nationally set criteria was met by grant paid to the Billing Authorities, so that there was no impact on major precepting authorities of the benefit awarded, which reduces the amount of council tax income collected. Billing Authorities are now required to set their own local schemes, subject to protection of claimants of pensionable age and public consultation.
   4. The grant provided by government is also reducing by 10% as compared with 2012/13, and will no longer be paid exclusively to the Billing Authorities. The Commissioner will from 2013/14 receive a specific grant reflecting the government’s contribution to council tax support. The overall impact will depend upon the local schemes implemented by the Billing Authorities.
   5. The taxbase notified to the Commissioner for 2013/14 is 273,898.46 as compared with the 2012/13 figure of 300,574.91. This is broken down as follows:
      

      	Band D Equivalents
      Craven District Council	20,767.79
      Hambleton District Council	33,441.87
      Harrogate Borough Counci	58,047.34
      Richmondshire District Council	18,177.12
      Ryedale District Council	19,299.39
      Scarborough Borough Council	35,395.80
      Selby District Council	27,823.66
      York City Council	60,945.49
      Total Tax Base	273,898.46

   6. Transitional grants to support the introduction of the new arrangements were announced by government in Autumn 2012, provided they local schemes met a number of defined criteria. These transitional grants will be claimed by the Billing Authorities, with a proportion payable to the Commissioner. These are also included within the budget figures.

Revenue Budget Proposals for 2013/14

1. 1. The budget proposal is set out at Appendix One and includes the following key assumptions:
      • Maintaining operational frontline policing capacity as far as possible
      • A pay award of 1% for police officers and police staff, effective from 1 September 2013
      • The impact of agreed Winsor 1 recommendations, but nothing as yet for Winsor 2
      • General price increases of 2.5% with larger increases in specific areas (e.g. utilities and fuel 5%)
      • Inflation of 2.5% on fees and receivables
      • A revenue contribution to capital of £3.2m
      • The establishment of a Community Fund for use by the Commissioner
      • Retaining the planned phased reduction in police officer numbers to 1,330 by 1 April 2015
   2. The Commissioner’s Police and Crime Plan includes a number of deliverables which have also been factored into the Medium Term Financial Plan (MTFP), based upon six goals, namely to:
      • Reduce harm
      • Put people first
      • Deliver more with less
      • Ensure that we are “fit for the future”
      • Drive justice
      • Police UK
   3. North Yorkshire Police has a track record of prudent budgeting and effective resource management as evidenced by the £13.8m saved since 2010. These savings have been realised through reshaping service delivery and reconfiguring support services and as a result the budget is balanced in 2013/14 based on the assumptions set out above.
   4. Work will continue on delivering more with less, to ensure that operational frontline capacity is maintained as far as possible, maximum value and efficiency is achieved across the organisation and cost effectiveness and economies of scale are enhanced.
   5. The budget for the Office of the Police and Crime Commissioner is set out at Appendix Five.
2. Capital and Revenue Development Programme (CRDP)
   1. The capital and revenue development programme is included at Appendix Two and reflects the Commissioner’s commitment to actively invest in the estate and information technology to deliver a sustainable future that is accessible, cost effective and responsive to the changing needs of users and the workforce, aiming to be as energy efficient as possible.
   2. Deliverables over the period of the plan include a new “northern base” to replace Newby Wiske Hall, combined with a new custody suite for the northern part of the police force area and flexible, modern accommodation for operational and support functions.
   3. The plan is based on an average level of capital investment of £11.4m per annum over the six years from 2012/13 to 2017/18. Resourcing of the plan is set out in detail at Appendix Three and summarised below.
      

      CRDP Financing	£’000
      Home Office Capital Grant	6,455
      Capital Receipts	9,227
      RCCO Reserve	16,941
      Major Capital Reserve	16,095
      Estates Strategy Reserve	11,217
      Prudential Borrowing	6,800
      Revenue Reserves	1,849
      Total Financing	68,584

   4. Contributions to and utilisation of the earmarked reserves shown above are detailed at Appendix Four. The MTFP makes provision for the contribution to reserves and the revenue consequences of prudential borrowing, which is currently anticipated in 2016/17 and 2017/18.
   5. The Prudential Code for Capital Finance in Local Authorities published by the Chartered Institute of Public Finance and Accountancy sets out a number of indicators which must be used to demonstrate that capital investments plans are affordable, prudent and sustainable. These indicators will be included within the report to the Commissioner on the Treasury Management Strategy for 2013/14.
3. Medium Term Financial Plan
   1. One of the key requirements of the Prudential Code is that the Commissioner takes a longer term view of the spending pressures facing the organisation in setting and approving the budget and council tax for the following financial year. A summary of the five year revenue forecast is provided below, with a more detailed breakdown at Appendix One. This demonstrates the estimated level of budget gap to be met by savings in future years.
      

      	Budget Shortfall £000
      2013/14
      2014/15	4,637
      2015/16	7,327
      2016/17	11,097
      2017/18	14,084

   2. Forward planning is relatively more complex at present because of the levels of uncertainty surrounding future Government funding, particularly in the period following the current Spending Review, and the ongoing impact of council tax support localisation. There is therefore potential for a significant degree of variation to the forward projections presented above, which represent a worst case scenario. It is anticipated however that the minimum level of additional savings which will be required by 2016/17 will be in the order of £5m.
4. Level of Reserves
   1. An analysis of general and earmarked reserves is given at Appendix Four and the forecast closing balance at 31 March 2013 is shown below.
      

      	Opening Balance1 April 2012£000	Predicted movement in year £000	Forecast Closing Balance 31 March 2013 £000
      Capital Programme Reserves	16,318	5,833	22,151
      Revenue Programme Reserves	1,144	(530)	614
      Insurance Reserve	1,219	200	1,419
      Forecast Underspend		295	295
      Short Term Reserves	1,406	581	1,987
      General Reserve	8,773	199	8,972
      Total	28,860	6,578	35,438

   2. The prudent setting aside of adequate levels of reserves ensures the consistent delivery of required levels of policing should unexpected and unforeseen events occur during the year. This, together with the adoption of a sustainable funding strategy, should balance the MTFP and ensure a robust level of funding for the base budget and future investment.
   3. The Commissioner’s financial regulations set the level of general reserves at not less than 6% of the net revenue budget. This level is set to ensure that there are sufficient, but not excessive, unallocated funds available to withstand the cost of unforeseen events or circumstances without recourse to council tax payers.
   4. The levels of both earmarked and general reserves are reviewed during budget setting and closure of accounts. The levels set out above have been assessed as appropriate given the medium term forecasts of revenue and capital expenditure and the high levels of uncertainty surrounding future funding.
5. Precept Proposal
   1. The Commissioner has given due consideration to the revenue budget requirements for 2013/14, the Capital and Revenue Development Programme and the medium term position set out above, and has considered in particular
      • The goal of maintaining frontline operational capacity;
      • The impact on council taxpayers;
      • Future financial health, including the adequacy of reserves and balances;
      • The robustness of financial and organisational management processes in place;
      • Levels of demand and Force resilience;
      • Savings made to date and the capacity for future savings; and
      • Public views obtained during consultation.
   2. As a result of this consideration the Commissioner notified the Police and Crime Panel of her intention not to increase the council tax in 2013/14. This was based upon a clear desire not to unnecessarily add to the current financial pressure on council taxpayers. This decision means that the Commissioner will be eligible for the council tax freeze grant which will attract £1.2m of additional funding to North Yorkshire.
   3. The Police and Crime Panel met on 4 February 2013 to consider the Commissioner’s precept proposal and agreed to accept it. This is therefore the basis of the recommendations and statutory calculations set out later in the report.
6. Chief Finance Officer Report
   1. Section 25 of the Local Government Act 2003 requires that a report be made by the Responsible Financial Officer to the Commissioner when she is considering her budget and council tax. The report must deal with the robustness of estimates and the adequacy of reserves allowed for in the proposals.
   2. As the council tax is set before the year begins and may not be increased during the year the Commissioner must consider risks and uncertainties which might result in spending more than planned. These risks and uncertainties include
      • The delivery of the savings identified to balance the budget.
      • The global economic climate and in particular, levels of inflation, interest rates for investment, security of investments, availability and viability of competitive suppliers and so on.
      • A high degree of uncertainty surrounding future funding assumptions
      • Proposals for risk sharing in respect of the localisation of council tax benefit
      • Potential reduction in external funding from partners.
      • The impact of unforeseen events which would fall initially on general balances.
      • The need to meet new national standards and demands.
      • The impact of increasing mandation of national contracts.
      • Ongoing transfer of costs from the NPIA for key systems
   3. Allowance is made for these risks by:
      • Making prudent allowance in the estimates on each of the budget headings.
      • Ensuring that there are adequate reserves to draw on if the estimates turn out to be insufficient.
      • Robust financial management processes throughout the year to identify emerging spending pressures and manage them appropriately.
   4. The Chief Finance Officer is satisfied that the procedures adopted by the Financial Services Directorate are sufficiently robust to ensure that the financial data collected is accurate and forms a strong platform from which necessary estimates of future financial requirements and projections can be confidently made and ensures that monies set aside as specific reserves are adequate and not excessive.
   5. The estimates have been prepared by the Chief Accountant and qualified staff in the Financial Services Directorate, and reviewed by the Chief Officer Resources. They are based upon the continued delivery and achievement of the corporate change programme, which has been contributed to by all Directors and endorsed by Chief Officers.
   6. Known spending pressures have been identified and provided for within the base budget. Provision has been made for specific inflationary pressures on both pay and prices. Savings identified have been deducted from the budget and these have been phased in such a way that there is a justifiable expectation that they will be achieved, although the assumptions made are more significant than in previous spending review periods.
   7. Future investment in the estate and IT has been identified within the CDRP and adequate funding has been provided through a combination of capital grant, capital receipts, contributions from the revenue budget and prudential borrowing.
   8. There is no projected use of borrowing until 2016/17, although the MTFP assumes use of capital receipts of £9.2m which have the potential to be realised in slower time or at reduced amounts. The borrowing level can be adjusted at any time to reflect the actual level of receipts received.
   9. Current forecasts are for a balanced budget in 2013/14 but future years remain to be balanced and there is a high level of uncertainty surrounding the funding assumptions which can be made.
   10. The Chief Finance Officer concludes that the estimates for 2013/14 are robust and the level of reserves, as set out in section 7, is adequate.
7. RECOMMENDATIONS
   1. The Commissioner is requested to consider the report, having regard to the recommendations issued by the Police and Crime Panel and agree the following:
      1. That the budget be agreed as set out below
         

         	2013/14£000
         Gross Expenditure	148,296
         Income	(9,165)
         Contribution to/(from) Reserves and Balances	891
         Total Budget 2013/14	140,022
         Funded by:
         Home Office Grant	46,286
         Department for Communities and Local Government Grant	29,567
         Council Tax Support Grant	5,728
         Council Tax Support Transitional Grant	156
         Council Tax Freeze Grant 2011/12	1,532
         Council Tax Freeze Grant 2013/14	618
         Total Government Funding	83,887
         Estimated Collection Fund Surplus	109
         Balance required from the Precept	56,026

      2. The Commissioner’s share of the estimated surpluses/deficits on Council Tax Collection Funds for 2012/13 for each of the Borough, District and Unitary Councils of £109,606 be applied to funding the Council Tax Requirement.
      3. That, pursuant to the provisions of the Local Government Finance Acts 1992 and 1999 and all other relevant statutory powers, the Commissioner’s Chief Finance Officer issues precepts in the necessary form to each of the Borough, District and Unitary Councils indicated in the appropriate column of the table below, requiring those authorities to make payments of the sum indicated in the preferred option selected by Members in eleven equal instalments and payments for the Commissioner’s share of the estimated surpluses or repayments in the case of deficits on the Council Tax Collection Funds for 2012/13, in two equal instalments on the agreed dates, of the sum indicated in the final column below:
         

         Borough/District/Unitary Councils	£	£
         	Precept	2012/13 (Surplus)/Deficit
         Craven District Council	4,248,051	(41,566.00)
         Hambleton District Council	6,840,535	36,330.00
         Harrogate Borough Council	11,873,583	0
         Richmondshire District Council	3,718,130	14,488
         Ryedale District Council	3,947,690	(106,030.00)
         Scarborough Borough Council	7,240,211	46,626.36
         Selby District Council	5,691,330	(59,454.16)
         York City Council	12,466,400	0
         Total	56,025,930	(109,605.80)

      4. That the amount of council tax calculated in accordance with the Local Government Finance Act 1992 to be payable in respect of each category of dwelling, be confirmed by the Commissioner in the table below:
         

         Valuation Band	Council Tax Proposed Levels £
         A	136.37
         B	159.09
         C	181.82
         D	204.55
         E	250.01
         F	295.46
         G	340.92
         H	409.10

      5. Approve the level of general reserves as set out in this report and at Appendix Four and note the predicted level, and use of, reserves in the medium term.
      6. Approve the initial 2013/14 Capital and Revenue Development Programme alongside the capital funding as set out in detail in Appendix Two of this report.
      7. Approve the budget breakdown as set out in Appendix One
      8. Approve the budget for the Office of Police and Crime Commissioner, as set out in Appendix Five

Appendices

• Appendix One Medium Term Financial Plan
• Appendix Two Capital and Revenue Development Programme
• Appendix Three CRDP Funding Forecast Summary
• Appendix Four Reserves Projections
• Appendix Five Budget for the Office of the Police and Crime Commissioner