Spennymoor Budget 2018/19

Statement of the Town Mayor – Cllr Ian Machin.

 

This is the first budget for this Council.  I will introduce the budget by reviewing several areas, describing the history leading to our current position and the  issues looking forward.

Key considerations include:

  1. Balance Sheet, especially Reserves as a measure of liquidity
  2. Capital spend in the period since 2011-12, when the last Play Equipment and Town Hall Roof project were in play at a combined cost of some £750k.
  3. Reserves position and recommendations  after it has reduced by 50% since 2011-12
  4. Precept budget including key assumptions and proposals

Context for budget proposals in these areas:

  1. Capital spend, loans / repayment and Reserves.

Reserves equate to liquidity, or cash.  Funding for capital projects comes either via the precept ( Residents pay), from savings ( think Reserves) , grants ( someone else pays) or from borrowing ( pay later).

STC began 2011 with £1.2m in Reserves, took a loan of £300k for the Town Hall roof ( final cost £429k) and used Reserves to fund a £375k Play Equipment project completed in 2012-13.  Much of this play equipment is currently being removed.

Over the 6 years to April 2017, £2.0m was spent on capital, funded in part by £0.7k of loans, a £0.6m reduction in reserves , and a further £0.7m from precept.

Precept was increased in 2014 by 2.5%, and again in 2015 by 1.95%.  There were zero increases in 2016 and in 2017.

This Administration  inherited Reserves of £620k, half of what Reserves were previously.

This Administration inherited loans + interest of £625k, still to be repaid.  The annual loan charge,  paid from the precept,  is £78kpa until 2022 ( including £34k pa for some of the play equipment being removed now), reducing to £44kpa until 2026.  £78kpa is 6.6% of the precept.

This Administration inherited a £260k Play Equipment project.

  1. Reserves.  For transparency the Accountant’s report includes proposals on Reserves for 2017-18 and 2018-19.  Specific recommendations are below and form part of the Budget motion to follow.

 

Recommendations:

For 2017-18

2.1               Accrue the cost of the fences at STFC and Middlestone Moor football pitch

2.2               Purchase the disabled swing for Jubilee Park

2.3               Create a “large assets” earmarked Reserve, starting by providing £20k this year, and in future years, planning properly for future refurbishment, in line with recent IA recommendations, seeking to avoid another “Large Assets Refurbishment” project and £190k in fees.

2.4               Introduce quarterly reporting on Reserves, for openness and transparency, in line with improved Governance practices.

 

For 2018-19

2.5               Provide a further £20k contribution to the “large assets” earmarked Reserve

2.6               Create a “small assets” earmarked Reserve to provide for future, significant refurbishment and renewals identified at SMT regarding paths, fences, small cemetery buildings etc.  This will be done by “earmarking” Reserves of £284k identified in Accountant’s budget papers.

2.7               A “small asset” 3 year maintenance plan will be included in the next “Priorities schedule” brought to Members for approval.

2.8               Complete the inherited £260k Play Equipment project if possible, with a further spend of £139k in 2018-19, funded from Reserves.  This project was approved and started by the previous Administration  despite several factors requiring attention – the Tudhoe location was unknown, there was no mention of Watson Park, Windsor Avenue location required review, consultations are needed, equipment for disabled use was still to be confirmed etc.  This project is being regularly reported to STC and will reviewed by Internal Audit.  It would not meet the recommendations on “large projects” agreed unanimously at the November STC meeting.

2.9               The full engagement of SMT in budget discussions and “Small asset” planning will be expanded to include capital planning required for the Medium Term Finance Plan ( MTFP) and brought to Council via an open discussion at P&R meeting.

Reserves – We recognise and are concerned that after these actions, the General Reserve will be reduced to a level below the recommended level of 3 months outgoings.  This situation would have been worse if the “Large Assets Refurbishment” project had incurred the even higher costs estimated and anticipated, and a third loan to fund the current Play Equipment had been needed.

It is clear that after providing for future, anticipated, identified asset refurbishments STC is no longer able to fund additional large projects without having to resort to another loan which would increase the Council’s cost base still further.

We now move on to the Precept Budget:

The time taken to complete the Internal Audits of the Large Assets Refurbishment project and Events, together with the late notification on staff pay by DCC, have delayed presentation of this budget.  The issues presented today, including any impact of staff pension costs arising from salary increases will be captured in an MTFP to be presented at a future STC meeting, along with an updated priorities schedule.

3.      Precept Budget key assumptions are captured in the budget papers issued by the Accountant.  They include:

3.1               Reduction in the LCTRS grant we receive from DCC.  In 2014-15 when introduced,  this grant was £154k, in 2017-18 it was £45k, in 2018-19 it is reduced to £8,104.

3.2               Salary increases reflect Central Government guidance of 50% of a 5.9% increase over 2 years, adding £30k in cost.  No increase in pension or National Insurance has been indicated yet or included.

3.3               Linked to recent audits and the Reserves position above, capital expenditure has been closely scrutinised,  limited as described and funded from Reserves.

3.4               The housing base upon which the precept is levied has increased by 3.2% for 2018-19.   ( average increase since 2013 is 3.1%pa). This increase dilutes the effect of any increase in STC spend. During recent years with the 1% pay cap, the precept cost base was reduced.  This is no longer the case with a 3% pay rise and higher inflation.

 

  1. Precept Budget Proposal ( attached to this note).

Per the Accountant’s report, a Precept increase of 2.52% is recommended.  It is recognised that this is lower than the current rate of inflation, and salary increases. It is lower than press indications of County Council and Police increases.  It is still an increase for residents – £5.25 pa for band D properties, 10p per band D property per week.

The process followed on the precept budget was to review manifesto promises,  agreed IA Audit recommendations, Public Consultation feedback, inflation projections and cost of living pressures for residents. Following SMT review and the first Accountant budget draft, every cost centre was reviewed to identify potential savings.  Ideas were collated, savings suggested and then reviewed. These were then discussed in detail with the Acting Town Clerk and Accountant and their views were captured. A proposed budget was then developed and re-reviewed with Acting Town Clerk and Accountant.  All Members have this summary.   It is in line with Budget Draft v1.2 from the Accountant.

The Precept proposal ( each line will be discussed in turn) reflects striking a balance between the reality of inflation and cost increases, the burden of loan repayment, improvements to make Spennymoor a better place to live, feedback from Residents at the Public Consultation, savings that are sustainable and the impact on Residents of actions proposed.

Residents input will be sought on this budget at the quarterly Public Participation meetings and by sharing details at the next bi-annual Public Consultation meetings.

Key points include:

–          Suffering a £37k reduction in grant from DCC – this grant has reduced from £154k in 2014, to £8,104 in 2018-19.

–          A £30k increase staff costs

–          Recognising the legal requirements of new Data Protection legislation impacting STC – £5k has been included to provide services

–          Maintaining key services and events prioritised in Public Consultation feedback including the first, small STC investment in the Cow Plantation

–          Planning and providing for future “large” and “small” asset refurbishment

–          Acting to improve processes within STC and make a provision regarding Toil, both as agreed at the November STC meeting Audit reports item

–          Acting in the “environment” and “maintenance” areas, based on resident requests, and manifesto promises. Having visited 8 Primary schools last week and this, and “care” locations, I’ve witnessed the problematic walking conditions first hand. The provision provides funds to test solutions.

–          Identifying specific savings where possible, timely and with minimal public impact,  to reduce cost in 2018-19 by £57k. We will introduce quarterly reporting of progress on identified savings

–          A commitment to investigate broader improvement options with the Town Clerk for inclusion in “Priorities” and MTFP proposals.

That concludes the detailed introduction.

For avoidance of doubt, the Budget motion includes all of the recommendations in points 2.1 to 2.9 and in 4 above that support the recommended Precept increase of 2.52%.

I hope that this Chamber can unanimously support all of these recommendations.

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