1

2014/15 Revenue Budget and Medium Term Financial Strategy

– Corporate Overview

Jane West – Executive Director of Finance & Corporate Governance

2

• Figures not known when producing Select Committee papers.

• Provisional figures circulated in July 2013.

• Current modelling assumes 2014/15 grant loss of £14m (10% cash – 12.5% real terms).

• 2013 Autumn Statement appears to have a neutral impact on 2014/15.

How much cash do we get from Central Government in 2014/15 (excluding DSG)

3

Local Business Rates Retention Scheme • 2014/15 is the second year of the business rates

retention scheme.

• The system is complex and has many moving parts.

• Final guidance not yet issued on how the scheme will operate in 2014/15.

• A major concern for LBHF is that £140m of rating appeals are outstanding. Some go back to 2005.

• £20m of appeals still relate to Westfield (average reduction 28%).

4

2014/15 – Initial Modelling£m £m

Start Up Funding Allocation (A)

120.0 Business Rates for LBHF Businesses (D)

193.0

Split of Start Up Funding:

Split of Baseline:

Revenue Support Grant (B)

65.0 Government (50%) (E) 96.5

Retained Business Rates (C )

55.0 GLA (20%) (F) 38.6

LBHF (30%) (G) 57.9Tariff Payable to

Government 3.0

Continued…

5

2014/15 – Initial Modelling Continued

£m £m £m £mTarget Forecast Loss Safety

Net

Business Rates for LBHF Businesses (D)

193.0 178.0 (15.0)

Split of Baseline:

Government (50%) (E) 96.5 89.0 (7.5)

GLA (20%) (F) 38.6 35.6 (3.0)LBHF (30%) (G) 57.9 53.4 (4.5) 4.0

6

Business Rates Retention – Concerns (1)

• Authorities gain 30% of collections in excess of the baseline (£193m in illustration) and bear 30% of any shortfall.

• Allowance for the impact of rateable value appeals means that LBHF is £15m short of the £193m target. The gross loss to LBHF is £4.5m (30% of £15m).

• A safety net applies that restricts the LBHF share of any loss to £4m per annum.

Continued….

7

• The actual level and timing of appeals is uncertain. By assuming LBHF will qualify for the safety net it has adopted a prudent position.

• Figures will need to take account of the recent announcement that the business rates multiplier will increase by 2%.

Business Rates Retention – Concerns (2)…Continued.

8

Savings Identified 2014/15 to 2016/17 (£M)

2014/15 2015/16 2016/170.0

5.0

10.0

15.0

20.0

25.0

30.0

18.2

25.727.7

9

Hammersmith and Fulham Budget Gap (£M)

2014/15 2015/16 2016/170.0

10.0

20.0

30.0

40.0

50.0

60.0

18.2

40.8

50.5

0

15.0 22.8

Budget Gap Before Identified SavingsBudget Gap after Identified Savings

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• Pay Inflation – 1% increase

• Price Inflation - Only where there are contract agreements

• Fees & Charges – Increased in line with RPI (3.3% August)

• Pension - Net saving of £0.357m in the Employers Contribution.

• Council Tax reduction of 3% in 2014/15

Budget Assumptions

11

Growth Proposals 2014/15 (£M)

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0.5

1.0

1.5

2.0

0.20.5

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1.5

0.5

1.4

12

Reasons for Budget Growth 2014/15 (£M)

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1.81.5

13

Identified Savings 2014/15 (£M) A

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1.0

2.0

3.0

4.0

5.0 4.7

2.8

1.1

0.1

2.4

0.8

2.7 2.7

0.9

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2014/15 MTFS Savings (£M)

Tri-Borough/Bi-Borough, £4M,

24%

Debt Reduction Strategy, £1M

7%

Staffing / Productiv-ity, £2M , 11%

Commission'g, £3M, 18%

Procurement/Market Testing,

£1M, 4%

Commercials'n /Income, £ 2M 11%

Transforming Busi-ness Portfolio, £1M,

5%

Reconfiguration/Rationalisation of

Services, £3M, 17%

People Transformation Portfolio, £0.5M, 3%

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Budget Risks/Balances/Earmarked Reserves

• 2014/15 Budget Risks - £14.6m

• General Balance – Budget provides for an increase from £18m to £19.1m.

• Earmarked Reserves at close of 2012/13 - £59m

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Council Debt 1996-2016 (£M)

1996 2004 2006 2010 2012 2013 2014 2015 2016

£142

£176

£169

£133

£99£79 £79

£68£48

17

Band D Council Tax – 2006/07 to 2014/15 (£)

2006 2007 2008 2009 2010 2011 2012 2013 2014

0

200

400

600

800

1000

1200

H&F

London Average

917890

863837

812 812782

758735.26

H&F London Average

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• The 2014/15 Band D charge of £735.16 is the lowest since 1999/2000.

• The Band D reduction from 2006/07 is £181.81

• The cash terms reduction from 2006/07 is 20%.

• The real terms reduction from 2006/07 is 39%.

Council Tax Reduction

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LBHF Efficiencies 2006/07 – 2016/17 (£M)

0.0

50.0

100.0

150.0

200.0

250.0

12.3 26.741.9

54.067.3

94.0116.7

138.9

157.1

179.7212.1

Year

Cu

mu

lati

ve

Va

lue

(£

ms

)

20

Impact of Local Government Finance Settlement and Other Changes

• Local Government Finance Settlement published 18th December.

• Net improvement in LBHF for 2014/15 of £1.1m.

• Main reason for increase is more New Homes Bonus Grant.

• Extra funding likely to be needed to meet cost increases for Concessionary Fares and review of Managed Services.

Finance & Corporate Services Estimates 2014-17

Jane West28th January 2014

FCS Approach to Finding Efficiencies• Further Tri and Bi borough working• Already in place for areas such as Treasury, Pensions, Insurance, Innovation &

Change, Design team, Legal, Social Fund and several Directors’ roles• Further integration planned for Legal, HR, ICT, Managed Services,

Procurement, Revenues & Benefits and Customer Services under the Tri-borough Corporate Review

• Greater use of self-service for external and internal customers, eg. Smart HR, WCFM and Managed Services internally; H&F Direct’s push on self service via the web and Post Office

• Transformational programmes to reduce costs, eg. Agilisys debt collection and tri borough business intelligence

FCS Efficiencies To Date• Between 2009/10 and 2013/14 FCS have

delivered savings of nearly £10m

• Further efficiencies of £2.4m planned for 2014/15

• A further £2m of efficiencies already identified for 2015/16

FCS 2014/15 Estimates (by %)

21%

9%

4%

2%9%

1%

5%15%

16%

19%FinanceHRIT & ProcurementCommunications, Policy & Per-formanceInnovation & ChangeExecutive ServicesH&F DirectActuarial Revaluation of Pension FundTri Borough (Managed Services)Transforming Business

FCS 2014/15 Estimates (by value)

DIVISION EFFICIENCY (£k)

Finance 510

HR 225

IT & Procurement 88

Communications, Policy & Performance 52

Innovation & Change 210

Executive Services 25

H&F Direct 110

Actuarial Revaluation of Pension Fund 357

Tri Borough (Managed Services) 379

Transforming Business 450

TOTAL 2,406

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QUESTIONS