MAYOR & CABINET

Report Title FINANCIAL SURVEY 2010/15

Key Decision Yes Item No. 5

Ward All

Contributors EXECUTIVE DIRECTOR for RESOURCES

Class Part 1 Date: 16 September 2009

1 PURPOSE

1.1 The purpose of this report is to set out the medium term financial strategy for theCouncil over the next five years.

2 EXECUTIVE SUMMARY

2.1 The Financial Survey for 2010/15 sets out the Council’s medium term financial strategy.The Survey reviews the Council’s overall financial position bringing together the outturnfor 2008/09, the forecast for the current financial year and considers prospects for2010/11 to 2014/15. It is important to emphasise that the Survey is based on a wholeseries of assumptions that will change once information, particularly from theGovernment, is announced.

2.2 Although the Council starts from a sound base the prospects for the Council’s financesfrom 2011/12 onwards are extremely difficult and uncertain for both capital and revenueexpenditure.

2.3 The Council has a committed Capital Programme of just over £350m over the threeyears to March 2012. The Capital Programme for the period 2012-15 reflects asignificant reduction in the level of resources available compared to the previous threeyears. Given the uncertainties in this estimate at this stage, it is not recommended thatcapital resources are committed beyond March 2012, except where such projects areself-financing.

2.4 After allowing for committed savings the Housing Revenue Account is projecting abalanced position to March 2011. There is a requirement for savings of £1m in 2011/12& thereafter the HRA is balanced. However, until details of the Government’s proposedreform to the housing subsidy system are known, it is impossible to make meaningfulprojections for the HRA from April 2011 onwards.

2.5 The Council is seeking revenue savings in 2010/11 of £8.8m which is equal to theGovernment’s requirement that 4% pa efficiencies are made. The key determinant ofthe scale of revenue savings that the Council will have to make over the period 2011/15is the level of formula grant from the Government. There is uncertainty about theseverity of the reduction in formula grant that will occur. An optimistic, pessimistic and amid-range scenario are summarised below.

Table 1 – Estimated Revenue Budget Savings 2010/15

2010/11£m

2011/12£m

2012/13£m

2013/14£m

2014/15£m

OptimisticMid-RangePessimistic

8.812.215.818.5

12.215.718.3

12.3 15.818.1

12.2 15.617.9

2.6 Services funded from the Dedicated School Grant are likely to be treated slightly lessseverely than for other Council services. However, once the forecast increase in pupilnumbers is allowed for, the mid-range forecast for the DSG is for reductions of some£7.8m pa in 2011/12 before inflation, with higher savings figures thereafter.

2.7 The scale of the financial challenge facing the Council is likely to be of a greatermagnitude than any previously faced. To manage this situation will require the utmostcare and unremitting attention over the next few years.

3. RECOMMENDATION

3.1 That the Mayor endorses the Financial Survey 2010/15.

4. STRUCTURE OF THE REPORT

4.1 The Financial Survey 2010/15 is structured as follows:

1. Purpose2. Executive Summary3. Recommendation4. Structure of the Report

STRATEGIC REVIEW

5. Policy Context6. Introduction7. Final Outturn 2008/098. Budget Summary 2009/10

MEDIUM TERM FINANCIAL STRATEGY

9. Capital Programme10. Housing Revenue Account11. Revenue Resources12. Revenue Expenditure13. Revenue Budget Process

OTHER BUDGET CONSIDERATIONS

14. Reserves and Balances15. Area Based Grant16. Participatory Budgeting17. Total Place18. Budget Risk Management

SUMMARY AND IMPLICATIONS

19. Conclusion20. Financial Implications21. Legal Implications22. Equalities Implications23. Environmental Implications24. Crime & Disorder Implications25. Background Papers

STRATEGIC REVIEW

5. POLICY CONTEXT

5.1 The Council’s strategy and priorities drive the medium term financial planning process,with changes in resource allocation determined in accordance with policies andpriorities. Shaping our future is Lewisham’s Sustainable Community Strategy. Itcovers the period for 2008 to 2020 and sets out a vision for Lewisham and the priorityoutcomes that organisations, communities and individuals can work towards to makethis vision a reality. The 6 Sustainable Community Priority outcomes, agreed with theLewisham Strategic Partnership and the Council’s 10 Corporate Priorities are set outas follows:

Sustainable Community Strategy

• Ambitious and achieving: where people are inspired and supported to fulfil theirpotential.

• Safer: where people feel safe and are able to live free from crime, anti-socialbehaviour and abuse.

• Empowered and responsible: where people can be actively involved in theirlocal area and contribute to supportive communities.

• Clean, green and liveable: where people live in high quality housing and cancare for and enjoy their environment.

• Healthy, active and enjoyable: where people can actively participate inmaintaining and improving their health and well being.

• Dynamic and prosperous: where people are part of vibrant localities and towncentres well-connected to London and beyond.

Corporate Priorities

• Community Leadership and Empowerment: developing opportunities for theactive participation and engagement of people in the life of the community.

• Young people’s achievement and involvement: raising educational attainmentand improving facilities for young people through partnership working.

• Clean, green and liveable: improving environmental management, thecleanliness and care for roads and pavements, and promoting a sustainableenvironment.

• Safety, security and a visible presence: partnership working with the policeand others to further reduce crime levels and using Council powers to combatanti-social behaviour.

• Strengthening the local economy: gaining resources to regenerate keylocalities, strengthen employment skills and promote public transport.

• Decent Homes for all: investment in social and affordable housing to achievethe decent homes standard, tackle homelessness and supply key workerhousing.

• Protection of children: better safeguarding and joined up services for childrenat risk.

• Caring for adults and older people: working with health services to supportolder people and adults in need of care.

• Active, healthy citizens: leisure, sporting, learning and creative activities foreveryone.

• Inspiring efficiency, effectiveness and equity: ensuring efficiency and equityin the delivery of excellent services to meet the needs of the community.

5.2 A key objective of the Financial Survey is to ensure that there are clear links betweenthe Council’s overall priorities and resource allocation decisions. Amongst the waysthis is achieved are:

• the continuous search for ongoing efficiencies within the Council to improveservices and provide value for money for residents;

• a policy analysis of how savings proposals will impact upon the Council’s 10 keypriorities; and

• the linkage between the Financial Survey and other key strategies and plans ofthe Council. For example, strategies for Programme Management and Property,Highways and Adult Social Care are underpinned by the resource allocationsmade in the Survey.

5.3 The Council’s approach of having a policy led budget process, provides a firmfoundation from which to deliver our priorities, with a continuing emphasis onefficiency. Through planning our resource requirements over a five year time horizon,the Financial Survey is critical to supporting the Council’s delivery of its CorporatePriorities.

6. INTRODUCTION

6.1 A Financial Survey has been produced in Lewisham every year since 1997. Theprocess continues to become more sophisticated each year as its importance to theCouncil has become established. The Survey represents the start of the Council’sformal budget process, which leads to the setting of the overall Budget each year.

6.2 The Financial Survey has sought to encourage prudent financial management acrossthe Council. Its five-year planning horizon represents good practice, as it enablesMembers to take a strategic approach to the allocation of financial resources to servicepriorities and to consider financial decisions over the longer term, including proposalsthat will be expected to release efficiencies in future years.

6.3 The key objectives of the 2010/15 Financial Survey are to:

• plan the Council’s finances over a five year period to take account of both localimprovement priorities and national priorities;

• ensure that the Council’s corporate priorities continue to drive financial strategyand resource allocation;

• ensure that adequate risk assessments of material items of capital and revenueexpenditure are undertaken, incorporating lessons learned from previous years;

• assist the integration of business and financial planning processes;

• ensure that the plan takes account of: stakeholder and partner consultation;external drivers; capital investment; budget risk assessments; and expecteddevelopments in services;

• ensure that the Council’s medium term financial strategy is linked to other internalstrategies and plans; and

• ensure that the final agreed budget reflects all these considerations.

6.4 Building on the platform of the previous financial strategy, the Financial Survey2010/15 provides more extensive integration of capital expenditure and the HRA andfurther development of budget risk management issues. It also seeks to describe infinancial terms, some of the Council’s joint plans with partners and other stakeholdersfor delivering services.

6.5 An assessment of the Council’s financial prospects from 2010, has been set out fromsection 9 onwards. Prior to this, sections 7 and 8 of this report, provide a brief resumeof the recent financial past and present positions for the Capital Programme, HousingRevenue Account and the General Fund Revenue Budget.

7. FINAL OUTTURN 2008/09

7.1 The Council’s accounts for 2008/09 are now closed and the pre-audited Statement ofAccounts was reviewed and approved by the Audit Panel at its meeting on 23 June2009. The Chair of the Council signed the Statement of Accounts following approvalby full Council on 24 June 2009. This section of the report sets out the Council’s finaloutturn for both capital and revenue budgets. It covers the following areas:

• Final Capital Outturn 2008/09

• Final Housing Revenue Account Outturn 2008/09

• Final General Fund Revenue Outturn 2008/09

Final Capital Outturn 2008/09

7.2 The overall final outturn for the 2008/09 Capital Programme is summarised below inTable 2.

Table 2 – Final Capital Outturn 2008/09 Compared to Programme

Programme RevisedForecast

Final Outturn Net Over-achievement

Overachievement

£m £m £m %Directorates CapitalProgramme

63.394 65.452 2.058 3.2

Lewisham Homes 10.565 11.181 0.616 5.8

Total 73.959 76.633 2.674 3.6

7.3 The Council’s overall Capital Outturn was £76.633m compared to revised Quarter 3forecast of £73.959m. This represents an over-achievement of £2.674m or 3.6%.

7.4 Members should note that this over-achievement of 3.6% in 2008/09 does notrepresent an overspend against the approved Capital Programme. It means an earliercompletion of planned spend than forecast and does not change the overall resourcesavailable to support the Programme.

7.5 Table 2 shows that outturn for the Directorates’ Capital Programme was £65.452mcompared to the revised Quarter 3 forecast of £63.394m, a net over-achievement of£2.058m or 3.2%.

7.6 Lewisham Homes Capital Outturn was £11.181m compared to the revised Quarter 3forecast of £10.565m. This represents an over-achievement of £0.616m or 5.8%.

Final Housing Revenue Account Outturn 2008/09

7.7 The Housing Revenue Account (HRA) reported a surplus of £326k in 2008/09. Thissurplus has been caused by small underspends on Repairs and Maintenance,additional rental and service charge income due to the slippage in the stock transferprocess and additional leaseholder income.

7.8 Lewisham Homes declared a surplus of £981k on its activities for 2008/09.

Final General Fund Revenue Outturn 2008/09

7.9 The final revenue outturn on Directorate budgets for the General Fund is an overalloverspend of £302k. A summary of the outturn position across Directorate budgetshas been set out in Table 3.

Table 3 – Final Directorate Revenue Outturn Summary for 2008/09

7.10 The overall Directorate overspend of £0.302m (0.1% of the net revenue budget)compares to the projection of an overspend of £54k as reported in the Budget Report2009/10 (Mayor & Cabinet 11th February 2009). The increased overspend of £248khas been caused by larger overspends in the Customer Services and RegenerationDirectorates, partly offset by larger underspends in the Children & Young People,Community Services and Resources Directorates. It should be noted that there stillremains some significant pressures in services, such as Children’s Placements, Bedand Breakfast and Transport. Officers are continuing to monitor these areas closelythroughout the 2009/10 financial year.

7.11 Overall, the Council’s finances at 31 March 2009 were sound. The Capital Programmemarginally over-achieved its plans and the HRA was in a small surplus. Although thereremain some concerns about certain services overall Directorates outturn was within0.1% of the total budget.

DIRECTORATE 2008/09NetRevenueBudget

2008/09Net FinalRevenueOutturn

2008/09BudgetVariance

2008/09BudgetVariance

£’000 £’000 £’000 %

Children & Young People 55,760 54,806 (954) -1.7%

Community Services 92,448 92,172 (276) -0.3%

Customer Services 40,061 40,619 558 1.4%

Regeneration 17,556 18,968 1,412 8.0%

Resources 29,257 28,819 (438) -1.5%

Total Directorate Budgets 235,082 235,384 302 0.1%

8. BUDGET SUMMARY 2009/10

Capital Monitoring

8.1 On 11 February 2009, the Mayor & Cabinet agreed a Capital Programme for the threeyear period 2009/12. On 15 July 2009, the Mayor & Cabinet considered the 1st QuarterCapital Programme monitoring report which showed that at the end of June some 10%of the approved programme had been spent.

8.2 At the same meeting the Mayor decided to allocate additional resources to a numberof programmes. After these decisions the 2009/12 Programme amounted to£356.737m with available resources of £356.802m. This represents a level of under-programming across all these years amounting to £65k.

HRA monitoring

8.3 The current forecast on the HRA for 2009/10 as at June 2009 is for a balancedaccount by year end. There are current pressures on energy and rent/service chargecollection, but this is being mitigated by use of reserves and revenue working balancesheld for that purpose. Repairs & Maintenance is expected to spend to budget.

Revenue Monitoring

8.4 The Council’s revenue budget for 2009/10 was agreed by full Council on 2 March2009. The budget requirement was set at £268.251m. This excludes funding forschools, which since April 2006, has been provided by way of the Dedicated SchoolsGrant (DSG). Lewisham’s final DSG allocation for 2009/10 is £178.216m.

8.5 Officers will undertake regular revenue budget monitoring throughout 2009/10. Thefirst revenue budget monitoring report was based on returns to the end of May 2009,and was presented to Mayor & Cabinet on 15 July 2009. This revenue monitoringreport presented a projected year-end overspend of £2.336m. The overspend reportedis mainly due to budget pressures in Children’s Social Care, Environment, Planningand Economic Development and Transport Divisions.

8.6 Overall, the Council has continued its tight management of the Capital Programmeand the HRA. However, there are concerns on the forecast revenue overspend for2009/10.

MEDIUM TERM FINANCIAL STRATEGY

9. CAPITAL PROGRAMME

9.1 The Capital Programme is a financial expression of the Council’s priorities forinvestment. It has strategic links to the Council’s Community Strategy, and theCorporate Plan. The Asset Management Strategy sets out the Council’s approach tothe assets required to deliver excellent services to local people and this alsoinfluences the content of the Capital Programme.

Committed Capital Resources and Schemes 2009 - 12

9.2 The estimated resources available, the forecast spend and the under programmingwithin the 2009/12 Committed Capital Programme are set out in Table 4. This is thecapital programme position following the decisions taken by the Mayor on 15 July2009.

Table 4 – Resources & Forecasts

Resource Type 2009/10£’000’s

2010/11£’000’s

2011/12£’000s

Total£’000’s

Supported Borrowing 12,997 11,046 3,000 27,043

Unsupported Borrowing 1,144 800 0 1,944

Capital Receipts 15,344 24,138 15,684 55,166

Grants 36,254 76,876 137,818 250,948

Revenue 2,777 12,268 6,656 21,701

ALL RESOURCES 68,516 125,128 163,158 356,802

FORECASTS (67,416) (125,128) (164,193) (356,737)

(OVER)/UNDERPROGRAMME 1,100 0 (1,035) 65

9.3 Borrowing levels are those notified to the Council by the Government in December2008 and will be updated later this calendar year. Unsupported borrowing relates toprudential borrowing for the Council’s vehicle replacement programme andinvestment in highways.

9.4 Capital receipt assumptions are based on the current asset disposal programme. Thegenerally available capital receipts forecast to support the programme were re-profiledin Quarter 1 based on the forecast date of disposal and the risk of the disposal beingcompleted. It should also be noted that for the purposes of sound capital programmemanagement and prudency, Right to Buy receipts have been disregarded. Thebalance of receipts arise from other asset disposals including stock transfers andthose to Registered Social Landlords as part of wider regeneration schemes. Otherresources include Capital grants (mainly the housing Major Repairs Allowance (MRA))and contributions from revenue.

9.5 As part of the decisions taken on 15 July 2009 based on the 1st Quarter CapitalProgramme monitoring report, the Mayor decided to allocate additional resources to anumber of programmes: £6.7m to Lewisham Homes, £2.944m to Forest Hill pool,£2.8m to Highways condition works, £258k to Enviroworks and to cashflow, within2009/12, £4.399m for the Deptford Town Centre programme.

9.6 The Council’s Capital Programme includes a number of complex programmesincluding, Building Schools for the Future (BSF), Primary capital programme,Worksmart, Forest Hill pool, Loampit Vale development and pool and theredevelopment of Deptford and Lewisham Town Centre programmes. These corporateprogrammes are key priorities for the Council.

9.7 Since these decisions in July the key development in the 2009/12 Capital Programmeis the Primary Capital Programme. The growth in pupil numbers across the boroughwill lead to a requirement for between 18.5 and 28 additional forms of entry by 2017.In order to begin to accommodate this growth additional capital expenditure will needto be incurred. The Government has responded to this issue with an additional BasicNeed safety Valve round of bidding for capital grant. However, there are majorproblems with the methodology the DCSF has used for these bids. Overall, it is farfrom clear that the likely share the Council might gain of the £200m proposed will besufficient to support the delivery of permanent additional places at the projected levelin Lewisham.

9.8 There are two important recent developments on Decent Homes. The original DecentHomes funding commitment made by the Government totalled £145m based onLewisham Homes obtaining a two star rating from the Audit Commission’s inspection.An updated stock condition survey has been undertaken by Lewisham Homes and thestock numbers have increased to include the New Cross properties where there wasinsufficient support in the ballot for a stock transfer. As a result the fundingrequirements to meet the Decent Homes standard have increased. The Council,together with Lewisham Homes, have started discussions with the HCA to increasethe Government’s funding contribution from £145m to £185m. However, in July 2009the Housing Minister announced a proposal to defer payment of Decent Homesfunding until 2011/12 for those authorities that gained two star status. Discussions willtake place between the HCA, DCLG and London Councils to assist ALMOs to obtaintwo star status and access funding. The resources and costs associated with this areincluded in the above table as originally approved (in 2010/11 and 2011/12) but thiscash flow may require subsequent amendment.

9.9 A high level summary of the Committed Capital Programme is set out as Appendix A.

Capital Programme Prospects for 2012 - 15

9.10 The following table sets out assumptions for the level of resources likely to beavailable to the Capital Programme in the period 2012-15.

Table 5 – Capital Programme Resources 2012/15

Resource Type 2012/13£'000s

2013/14£'000s

2014/15£'000s Total £'000s

Supported Borrowing 0 0 0 0

Unsupported Borrowing 0 0 0 0

Capital Receipts 11,159 11,159 11,159 33,475

Grants 12,147 12,324 12,455 36,926

Revenue 0 0 0 0

ALL RESOURCES 20,972 24,649 24,780 70,401

9.11 The resources available to the programme between 2012-15 are very uncertain. It isclear that public sector spending is likely to be severely constrained and borrowingapprovals are likely to be hit particularly hard. For these reasons no generic borrowingassumptions have been included from 2012 onwards. If borrowing approvals are madethey will very likely be for specific named projects. Resources from the Major RepairsAllowance have been assumed for this period, related to estimated stock levels,although this will be impacted by the proposed changes to the housing subsidysystem. No General Fund revenue contribution is assumed.

9.12 The level of capital receipts assumed in the table (£11m per year) is based on knownsites likely to become available through to March 2015 with an even cash flowassumed across the period. Given the uncertainties implied by the current propertymarket it is difficult to make reliable assessments of potential site values for a periodup to 5 years in the future.

9.13 The revenue position set out later in this report makes clear the forecast levels offuture savings required. Some of these are likely to have implications for themanagement of assets including both investment requirements and potentialdisposals.

9.14 The Council will continue to plan its Capital Programme on a 3 year cycle with arevised programme being agreed each year, the 2009-12 Programme will be reviewedin late 2009 and a new 2010-13 programme proposed in early 2010. At this stage, thelevels of resource uncertainty for the period 2012-15 are such that it would beinappropriate to develop additional capital investment plans, except where they wouldbe self-financing.

Capital Programme Risks

9.15 The key Capital Programme risks outlined when the Budget Report was agreed inFebruary 2009 were:

• a prolonged and deep downturn in the housing market leading to delayed and/or reduced capital receipts ;

• delayed completion and cost overruns to major schemes; and

• inability to recruit and retain suitably experienced project managers.

Since then, the major additional risk that has arisen is in the Primary CapitalProgramme.

9.16 Although these risks applied to the 2009-12 Programme, little has changed to radicallyadjust these assumptions looking through until 2015. The weakness of the housingmarket remains the principal concern and officers will continue to take a prudentapproach to the assumptions on the generation of capital receipts. Capital receipts willcontinue to be reviewed quarterly, projections updated and reported as part of theregular update of the programme to Mayor & Cabinet.

9.17 In the construction sector inflation remains low with a relatively large number ofcontractors tendering for a comparatively low level of work. Given the low levels ofconstruction activity further financial failures of contractors are likely and all majorcontractors will be subject to an in depth financial appraisal. In the period through to2015, assuming the property market improves, additional activity could feed throughinto increased construction costs.

9.18 The Council’s Capital Programme includes a number of complex programmes such asBuilding Schools for the Future and the Deptford Town Centre redevelopment, whereskilled programme and project management is required for successful delivery. TheCouncil’s approach has been to develop it’s internal capacity to deliver theseprogrammes and although this has been largely successful, it is at an early stage ofdevelopment and remains vulnerable to pressures across the market.

10. HOUSING REVENUE ACCOUNT

10.1 The Housing Revenue Account (HRA) is a statutory account which sets the Landlordcosts and income for the housing stock. It is a ring-fenced account that cannot be runat a deficit.

10.2 The change in delivery of Lewisham’s housing management service is almostcomplete following the stock options appraisal submitted in July 2005, whichrecommended a mixed approach to improving the stock to meet the Government’sDecent Homes Strategy. The approach involves some stock transfers, a refurbishmentthrough a Private Finance Initiative (PFI) and the establishment of an Arms LengthManagement Organisation (ALMO).

10.3 The completed and expected dates of the various stock transfers are set out in Table 6.

Table 6 – Stock Transfer Timetable

Transfer Actual / Anticipated Date ofTransfer

Number of TenantedUnits in Transfer

Lewisham Park 23 April 2007 161Phoenix 3 December 2007 5,509Grove Park 7 July 2008 1,090Foreshore 4 August 2008 32Orchard 26 January 2009 86Lee 28 September 2009 474Catford July 2010 532Rushey Green July 2010 759Forest Hill July 2010 1122Excalibur September 2010 157

Housing Revenue Account Forecast

10.4 These changes have placed considerable challenges both on the HRA and GeneralFund over the past few years particularly in relation to support costs. Therefore, theHRA position has been considered alongside the General Fund. Once the remainingstock transfers have taken place the HRA will have a smaller income both from rentsand subsidy whilst the pressure to incur expenditure will still be considerable. Thelower income base will reduce the ability to be flexible in incurring additionalexpenditure. Furthermore, there is an increasing need to make sure the variousproviders of services are carrying out the service to the right level, such as Repairs &Maintenance.

2010/11 and Future Years Forecast

10.5 The HRA model is continually updated and refined, with changes agreed by all partiesincluding Lewisham Homes and estimates on budgetary provision given to managerson a regular basis.

10.6 The current estimated cumulative deficit on the HRA for the period 2010/11 to 2014/15is £2.461m. However, savings of £1.461m have already been identified for 2010/11which would leave the 2010/11 HRA at a balanced account. If additional savings of£1m are found for 2011/12 onwards, the HRA will be able to maintain a balancedaccount into 2014/15.

10.7 The current forecasts assume no changes to the HRA subsidy regime. However, theDepartment for Communities & Local Government (DCLG) issued a consultation paperon 21 July 2009 on the review of Council Housing Finance, including abolishing thecurrent Subsidy System, with any changes to be implemented by 2012/13, if primarylegislation is required. The impact of any changes to the subsidy system will beassessed when full details are announced by the DCLG and forecasts updatedaccordingly. This assessment will include the impact on the General Fund, as well asthe HRA.

10.8 Lewisham Homes have been fully informed of current forecasts and pressures, andhave been provided with the latest HRA budget model. The Authority has carried outan assessment of the R&M budget requirement, forecast average stock numbers andsubsidy receivable. The HRA strategy ensures that the R&M budget meets the subsidylevel. The Council and Lewisham Homes have reached agreement on the resourcesallocated to Repairs & Maintenance and have put budgets in place to reflect thisagreement.

10.9 In addition, it was agreed that there should be no automatic inflationary increase toTenants and Leaseholders service charges, due to the nature of savings requirementsimpacting on management overheads which are recharged out as part of the servicecharges, and the need to realign budgets with actual income.

10.10 Management costs continue to be higher than allowances received through thesubsidy system. Efficiency savings of 4% on Management costs have been factoredinto the 5 year forecasts.

10.11 The current HRA budget model assumes that savings will be achieved throughreduced costs once stock has transferred out of the HRA. One of the major pressureswhich continues is to reduce the cost of support services provided to the HRA, viaDirect HRA charges and through Lewisham Homes’ fee. Whilst it is assumed that theHRA will be charged less for some support costs, this will have a direct impact on theGeneral Fund if there cannot be a corresponding reduction in the actual costs ofproviding the support function.

10.12 Where stock is subject to a transfer out of Council control, the Council assumes thatthe new providers of the service will not choose to purchase services from the Council.Therefore there will continue to be a need to seek reductions in costs in providingsupport services. In addition to this, it is expected that support costs will be reduced aspart of the process in achieving efficiencies in the HRA. The General Fund BudgetStrategy allows for some of this impact

10.13 Lewisham Homes will also be reviewing its requirement for services from the Councilover the next few months and this will add to the efficiencies required in the GeneralFund, particularly as they are likely to not require some of the services. Currently,Lewisham Homes’ management fee includes £3.7m for services provided by theCouncil.

10.14 The 2010/11 financial year will be the 10th year of the Government’s RentRestructuring Programme. The Council is obliged to set rents progressively closer to aformula rent. Housing subsidy and rent rebate subsidy also reflect the movement tothe formula rent. The average weekly rent is currently £76.79 and at the present timein the projections, it is estimated that rents will increase by 2.55% (£1.96 per week) to£78.75.

10.15 It should be noted that the forecast rent rises, are based on the assumption that theGovernment will not seek to increase the Guideline Rent in 2010/11 by 6.1%, as

announced as part of the 2009/10 determination (current official policy). This wasannounced when RPI inflation was high at 5%.

10.16 In March 2009, the Government announced their intention to reduce the 2009/10Guideline increase to 3.1%, down from 6.2%. Local Authorities generally did reducetheir rent rises accordingly, as did the Council.

10.17 The rent increase forecast for 2010/11 is based on the assumption that RPI inflationwill be set to zero and Guideline Rent will increase by 3.3%, which is similar to the2009/10 increase. This would equate to an actual rent rise in the region of 2.55%. Anydeviation to these forecasts will either increase or reduce the forecast deficitaccordingly.

Savings Proposals

10.18 The HRA strategy seeks to balance the budget up to 2014/15. Officers have previouslyidentified savings proposals of £1.461m which will go towards balancing the 2010/11account.

10.19 Lewisham Homes have put forward a range of suggestions for savings which includesreductions in support costs, Environment Recharges and further reductions inLewisham Homes management fee. These are currently being discussed with theAuthority.

10.20 The savings proposals will be developed over the coming months and will be updatedonce agreements have been reached and the 2010/11 Subsidy allowances have beenissued. The proposals for increases in rents and any increase in tenants servicecharges will need consultation with Tenants.

10.21 It should be noted that there is a potential impact of £1.247m in 2010/11 on theGeneral Fund from the savings proposals outlined above. It is felt that whilst arealignment with HRA budgets due to the transfer of stock may be appropriate, it willnot automatically enable a cost reduction programme in line with reduced budgets.Therefore, any shortfall will need to be borne by the General Fund. This is reflected inthe General Fund Revenue Budget strategy.

10.22 An update of the HRA Strategy, savings proposals, proposed rent & service chargeincreases and comments from consultation with tenant representatives will be reportedto Mayor & Cabinet in the Autumn. Mayor & Cabinet will make the final budgetdecisions in the new year.

Conclusion

10.23 The HRA position is balanced for 2010/11. There is an estimated shortfall of £1m in2011/12, thereafter no additional net savings are estimated to be required in the HRAfor the period to March 2015. As the 4% pa efficiency savings requirements remainsfor the HRA over the period 2010/15, this does give scope for some re-cycling ofresources to higher priority areas in 2010/12. Such proposals will be brought forwardin the Autumn. However, given the Government’s announcement on housing subsidy,no meaningful projections can be given beyond March 2012. Therefore, although notrequiring any net savings at the moment, once the details of the Government’sproposals are known this position will need to be thoroughly reviewed.

11. REVENUE RESOURCES

11.1 Approximately two-thirds of the Council’s annual income comes from GovernmentGrant, known as Formula Grant, with the balance from Council Tax. This section of thereport estimates how much Council Tax and Formula Grant Lewisham will haveavailable over 2010/15.

Council Tax

11.2 The Council Tax is made up of an amount for Lewisham’s services. The level is£1,042.11 for the Borough’s Band D equivalent properties for 2009/10, which makesup 77.1% of the overall bill. The remaining balance is represented by a precept fromthe Greater London Authority (GLA), which is £309.82 for 2009/10. Although theMayor of London has a duty to consult London Boroughs on his precept, the Council isunable to limit the GLA’s annual precept increase. The overall level of Council Tax forthe Borough’s Band D equivalent properties, including the GLA precept, is £1,351.93per annum.

11.3 The Government has ‘capped’ excessive increases in Council Tax in the past and hasstressed that it will continue to take action to limit increases. For 2009/10, a 5%increase in Council Tax was the effective threshold for ‘capping’. The Government hashinted that this threshold could reduce, forcing Councils to a maximum increase below5%.

11.4 In recommending Lewisham’s Council Tax increase at 2.5% for 2009/10, the Mayorhas for the fourth year in succession, continued his commitment and indicated that thiswould be the maximum annual increase in Council Tax for Lewisham for the whole ofthe current administration. It has therefore been assumed that for 2010/15, theincrease in the Council Tax for Lewisham’s services would continue to be no morethan 2.5% per annum.

11.5 Whilst this policy of maintaining an upper limit of Council Tax increase does offertaxpayers protection, it does limit the Council’s capacity to finance its services. AsLewisham has a relatively small tax base, limiting annual increases to 2.5%, meansthat the annual increase in Council Tax income is limited to just under £2.25m perannum over 2010/15.

11.6 If no Council Tax increase were made in one year the loss of income in the year wouldbe some £2.25m pa. However, it would also reduce the base Council Tax incomeforever which has a bigger cumulative impact. For example, if no Council Tax increasewere made in year one this would mean a loss of income by year five of £11.25m.Conversely, if the Council Tax were increased by say 5% in one year, the additionalrevenue in the year would be £2.25m but the cumulative effect by year five would be£11.25m.

11.7 In conclusion, if Council Tax were increased by 2.5% pa over 2010/15, the forecastedCouncil Tax income for Lewisham’s services over the medium term is as follows:

Table 7 – Forecast Council Tax Income for Lewisham’s Services 2010/15

2010/11 2011/12 2012/13 2013/14 2014/15Income £92.9m £95.2m £97.6m £100.0m £102.5m

% Increase 2.5% 2.5% 2.5% 2.5% 2.5%

Formula Grant 2009/11

11.8 Two-thirds of Lewisham Council’s net expenditure is supported by Formula Grant. It istherefore the most important influence over the level of income the Council will receivein future years. The Government is set to confirm the provisional formula grantincrease for 2010/11 with the announcement of the Local Government FinanceSettlement in early December 2009. The announcement for 2010/11 will represent thefinal year of a three year settlement.

11.9 The actual grant distribution for 2009/10 and provisional allocation for 2010/11 aresummarised in Table 7. No changes to the Council’s grant figures for 2010/11 areexpected. However, it would be possible for the Government to change the provisional2010/11 figures.

Table 8 – Local Government Finance Settlement

11.10 Each Local Authority in the country receives an amount of grant based on its relativeneeds and a sum which is allocated on a per capita basis. Then a sum is deductedbased on the relative resources of the area and overall this determines the ‘BasicGrant Entitlement’. From this amount, a sum is added to help pay for authorities whohave not received a minimum increase in grant, this is known as ‘Floor Damping’.

Formula Grant 2011/15

11.11 Members should note that the officers’ forecasts for Formula Grant for 2011/12onwards are highly speculative. There are no firm figures that have been announcedand no clear indication of when a Government would announce Formula Grant for2011/12 onwards. However, there is a broad consensus that local government will befacing real terms reductions in grant. The key issue is the scale of the real termsreductions.

11.12 Probably the most authoritative analysis made so far has come from the Institute ofFiscal Studies. They forecast that if health spending is protected, average annual realreductions across departmental expenditure limits of 10% over 2011/14 or 3.3% pa arenecessary. Based upon this analysis an optimistic, pessimistic and a mid-rangeforecast of Lewisham’s formula grant is made for 2011/15.

Lewisham’s Finance Settlement 2009/10 Actual £’000 2010/11 Assumed£’000

Relative Needs Amount 151,983 155,397

Central Allocation 48,164 49,416

Relative Resources Amount (29,063) (29,922)

Basic Grant Entitlement 171,084 174,891

Floor Damping 6,508 5,327

Final Grant Entitlement 177,592 180,218

% increase on prior year 1.75% 1.50%

Table 9 – Optimistic, Mid-Range & Pessimistic Forecasts of Formula Grant2011/15

Real Decrease2011/14 %

Real Decrease pa%

Cash Increase /Decrease pa %

Optimistic 4 -1.3 +1Mid-Range 10 -3.3 -1 Pessimistic 15 -5 -2.5

Table 10 – Forecast variations of grant levels of Lewisham’s Formula Grant2010/15

Grant 2010/11 2011/12 2012/13 2013/14 2014/15Optimistic £180.2m £182.0m £183.8m £185.6m £187.5m

Mid-Range £180.2m £178.4m £176.6m £174.8m £173.1m

Pessimistic £180.2m £175.7m £171.3m £167.0m £162.8m

11.13 Based on an assumed annual increase in Council Tax of 2.5% and a mid-rangescenario for Formula Grant above, the estimated overall level of resources available tosupport Lewisham’s revenue budget 2010/15 is set out below.

Table 11 – Resources available for 2010/15

2010/11 2011/12 2012/13 2013/14 2014/15ResourcesAvailable

£273.1m £273.6m £274.2m £274.8m £275.6.m

% Increase N/A 0.2% 0.2% 0.2% 0.3%

11.14 In conclusion, the overall level of resources likely to be available to the Council isforecast to increase overall in cash by just 0.2% per annum from 2010/11 to 2014/15.This increase is well below the Government’s annual inflation expectations over themedium term and takes no account of the additional pressures that will face theCouncil.

Dedicated Schools Grant

11.15 Lewisham has been allocated a Dedicated School Grant (DSG) of £178.216m in2009/10 and provisionally £192.881m in 2010/11. This represents a 4% per pupilincrease or a 8.2% cash increase above the 2009/10 allocation. These figures reflectlatest pupil numbers. There is of course some uncertainty about the scale of theincrease for 2010/11 until the DCSF confirms the allocation in the new year.

11.16 Like Formula Grant it is impossible to forecast with any accuracy the likely level ofDSG for 2011/12 onwards. Pupil numbers are set to increase by 5% pa in Lewishameach year until 2015. In the past the DSG has been increased to cover suchincreases. It is likely that the DSG will be treated less harshly than general localgovernment expenditure. Nevertheless, real terms reductions to the DSG must be themost likely scenario.

11.17 For illustrative purposes only, set out below is a Table which sets out optimistic,pessimistic and mid-range forecasts for the DSG. The optimistic scenario is based onincreases to the DSG allowing for the 5% increase in pupil numbers but otherwisefreezes the DSG in cash terms. The pessimistic forecast assumes there is no increasein DSG for the increase in pupil numbers. The mid-range scenario assumes that the

Government will deduct a 4% pa efficiency from the optimistic forecast (ie. A 1% pacash increase).

Table 12 – Optimistic, Mid-Range & Pessimistic Forecasts for DSG 2009/15

% CashIncrease

2009/10£m

2010/11£m

2011/12£m

2012/13£m

2013/14£m

2014/15£m

Optimistic +5 202.576 212.651 223.284 234.448Mid-Range +1 178.216 192.881 194.810 196.758 198.725 200.713Pessimistic 0 192.881 192.881 192.881 192.881

11.18 The scale of real terms reductions in the mid-range forecast, after allowing for the 5%increase in pupil numbers, equates to some £7.8m pa in 2011/12 and rising each yearthereafter. This figure also does not allow for inflation which would further increase thereal terms reductions.

11.19 Beyond the pressures described above arising from pupil numbers and inflation, theadditional key pressure to be faced by the DSG over the next few years is likely to bein Special Educational Needs. It is anticipated that a pressure of the order of £0.6m pawill arise as a result of the increase in volumes and complexity of SEN cases. This netadditional pressure is after allowing for the reduced costs resulting from fewerexpensive out of borough placements from implementing the SEN review. A furtherpressure is also likely in schools from implementing the Carbon ReductionCommitment. This is estimated at some £140k pa.

12. REVENUE EXPENDITURE

12.1 The Council is likely to have an increase in its overall level of resources significantlybelow its forecast inflation for 2010/15. The Council is also facing substantial costpressures above inflation to maintain the existing level of service provision. Thissection of the report sets out assumptions about inflation and then considers theCouncil’s significant budget pressures for additional expenditure.

Inflation and the wider economy

12.2 The Treasury continues to use the Consumer Prices Index (CPI) as its principalmeasure of inflation. CPI is similar to the previously used measure of inflation RPIX,but has a few fundamental differences, primarily much less weighting is given tohousing related costs in CPI than in RPIX. The Government target for the rate of CPIinflation is 2%.

12.3 The Chancellor of the Exchequer delivered his Budget Report statement on 22 April2009. At this time, the level of CPI inflation stood at 2.3% having steadily declined froma high of 5.2% in September 2008. There has since been a further decline to 1.8% inJune 2009. Although the latest CPI has inflation remaining at 1.8% the rate is forecastto further decline during 2009, and remain below target during 2010 before returningclose to target during 2011

12.4 For local authorities such as Lewisham, pay rises are the single largest inflationarycost we face. The 2008/09 pay negotiations were protracted, with the mattereventually being referred to an arbitration panel. This panel ruled that a further 0.30%should be paid, in addition to the original offer of 2.45%.

12.5 In July 2009, the Local Government Employers’ Side made a final offer for the 2009/10pay award of a 1.25% rise for the lowest paid workers who earn up to £13,700, and

1% for all other employees. This offer is currently being considered by the TradeUnions.

12.6 Despite an anticipated lower pay award and headline inflation, the 2010/11 BudgetStrategy assumes inflation of 2.5%. Although the most recent inflation report from theBank of England forecasts a slower increase in inflation over the next few years thanpreviously, headline inflation is still expected to rise to the target level of 2% in2011/12. Indeed, many observers still regard the medium term prospects for inflationto be higher, some significantly higher. Further, Council inflation has traditionally beenhigher than headline inflation, as pay awards have generally exceeded inflation.Accordingly, it is felt prudent to maintain the 2.5% inflation assumption for 2010/15.

12.7 Set out below in Table 10, is an estimate of the provision required to be made forinflation for 2010/15, based on the Council assuming pay and non-pay inflation of2.5% per annum from 2010/11.

Table 13 – Forecast Inflation for Lewisham Council’s services 2010/15

2010/11 2011/12 2012/13 2013/14 2014/15£6.2m £6.3m £6.3m £6.4m £6.4m

Budget Pressures

12.8 Set out below is a summary of the main on-going budget pressures1 the Council islikely to face over 2010/15 which are over and above the inflation assumptions foreach service. These have been identified from individual medium term financialstrategies developed by Directorates. Members should note that this list is by nomeans exhaustive, nor can it fully reflect the complexity and detail of each servicearea, particularly in the later years of the financial plan. It is also worth noting thatmany of the figures are inevitably guesstimates. Nevertheless, based on the pastsuccess in predicting in aggregate the scale of pressures, this modelling has provenvaluable. The following paragraphs provide a brief description of each pressure andincludes where appropriate, a risk assessment and/or sensitivity analysis.

Actuarial Valuation

12.9 Every three years an Actuarial Valuation of the Pension Fund has to take place to setthe level of the employer’s contribution rate. A valuation was carried out at 31 March2007 and this has assessed the fund as being 87% funded and set employer’scontribution rates until 31 March 2011. The Financial Survey makes provision forcertified increases in employer’s contribution rates of £0.5m per annum in 2009/10 and2010/11 and thereafter assumes increases of £1m pa. This estimated increasereflects the value of the Fund’s assets since the last valuation. Results from the 2010Actuarial Valuation will begin to become available in the Autumn of 2010 and at thatpoint the estimates for 2011/12 onwards can be reviewed.

Adult Social Care – Commissioning

12.10 Investment in the Adult Social Care budget was made in 2007/08 and 2008/09 torecognise the pressures facing the service. In line with national trends, services forAdult Social Care in Lewisham have experienced an increase in the number of clientsand price increases over recent years. This is partly due to the fact that: people are

1 The budget pressures that have been set out in this section of report exclude those services that are fundedfrom within the Dedicated Schools Grant. A separate section sets out the pressures on the DSG.

living longer; medical advances mean the life expectancy of young adults with severephysical and learning disabilities has increased; there is an ageing population; and thenumber of people requiring care is increasing, resulting in more expensive intensivecare packages to keep people in their own homes, if not placed in residentialestablishments. The costs of contracts with the independent and voluntary sector arealso outstripping assumed inflation. These factors are expected to continue to putpressure on Lewisham’s adult social care services.

12.11 In addition, from 1 April 2011, the Government’s expectation is that clients of adultsocial care departments will be offered a personalised budget which they can use topurchase the care they deem appropriate. This will have a significant effect on theCommunity Services Directorate. The financial impact of this cannot yet be calculated,but officers are proceeding on the basis that they should ensure that the new systemdoes not allocate out more resources in personalised budgets than is currently spenton care packages.

12.12 With forecast increases in the volume of clients and with above inflation increases inunit costs, additional provision for Adult Social Care is anticipated. It is likely that theservice will continue to face a number of risks.

Adult Social Care – Transitional Cases

12.13 For Adult Social Care – Transitional Cases, provision of £695k was provided as part ofthe budget in 2009/10. Additional net costs of £1m are estimated for 2010/11. Theseare costs of young people who were formerly funded by the Children & Young PeopleDirectorate, usually in high cost residential placements, who are transferring to adultbudgets on or after their 18th birthday. They include clients with a learning disabilityand with a mental health problem.

Census 2001

12.14 The Census and more specifically its population count informs the funding formula forLocal Government. As such, when the results of the next Census are published post2011 the impact on population policy and therefore funding is likely to be significant.Lewisham’s work in preparing for the Census has already commenced, howeverefforts must continue to ensure an accurate Census count is achieved to maximise thebenefits for Lewisham residents.

Climate Change and Carbon Reduction

12.15 Action on climate change and wider environmental issues are important priorities forthe Council. The cost of energy represents a significant financial pressure and the costof gas and electricity is expected to rise over the next few years. Lewisham hasstretching targets for reducing carbon emissions and has undertaken a range ofinitiatives to reduce energy consumption. However, more work is needed across theCouncil’s estate and services, and much of the activity that will reduce emissions andenergy bills requires an initial investment.

12.16 Lewisham’s Carbon Management Programme sets a new target of a 50% reduction inCO2 emissions from Council operations underpinned by a set of quantified projects.The Programme has been developed in partnership with the Carbon Trust throughtheir Local Authority Carbon Management scheme.

12.17 Lewisham’s Carbon Management Programme was endorsed at the 25 March Mayorand Cabinet meeting. The Programme has the potential for significant financialsavings through reduced energy costs, potentially up to £2.7m a year in 2015/16

compared to current spend on energy. It is however important to note that this forecastof potential financial savings ought not to be viewed as a cash releasing saving at thisstage. This is because: future costs of energy are unknown; the Programme includesa number of aspirational projects that are not yet funded and some of the savings arealready included in the Council's budget strategy and some are outside.

12.18 With effect from 1 April 2010 the Government will be introducing a carbon tradingscheme for medium-sized users of energy, including local authorities. Participants willhave to purchase allowances for their energy-related emissions, and will bereimbursed according to their relative position in a league table based on the extent towhich their emissions have been reduced relative to the performance of others withinthe scheme. The first sale of allowances will take place in April 2011 and revenueraised from this sale will be recycled to participants in October 2011. Localauthorities must purchase two years’ allowances in the first carbon purchase. ForLewisham this will cost around £617,000.

12.19 The Council would expect to receive a return on the allowances purchased, althoughthere will be a need to purchase further allowances in future years. At this stage thereis considerable uncertainty about the ongoing financial liabilities that could accrue as aresult of the scheme.

Collection Fund

12.20 The Collection Fund is a separate account into which is paid the amounts raised fromCouncil Tax and Business Rates. Any surplus or deficit on the Council Tax CollectionFund must be shared between Lewisham and the Greater London Authority (GLA) andbrought into the calculation of the Council Tax level.

12.21 In setting the budget for 2009/10, a small surplus for the Collection Fund of £49k wasassumed. In the light of the economic downturn, the position on Council Tax arrears isbeing carefully monitored. However, the Council has made an appropriate level ofprovision for uncollectable Council Tax.

Community Education Lewisham

12.22 The funding for Community Education Lewisham is provided by a Government grant.Currently this is paid by the Learning & Skills Council (LSC), but in 2010, the LSC willbe replaced by the Skills Funding Agency (SFA). The focus of the SFA will be primarilyaround further education and less around non-accredited work. The expectedreduction in non-accredited funding will require the Council to either reduce provisionin this area or to increase its contribution.

Concessionary Fares

12.23 The Department for Transport is currently considering the distribution of the 2010/11Concessionary Fares specific grant. The Department is looking at the increase in costsbetween 2007/08 and 2008/09 to determine the impact of the national concession. TheGovernment’s proposal to replicate the distribution of the increase in costs betweenthese two years would move significant resources away from London and wouldeffectively mean that cross borough travel on buses in London would not be fundedbut other parts of the country would receive funding regardless of where thepassenger resides. The suggested scale of the transfer is so great that it may put injeopardy parts of the concessionary fares scheme in London. For Lewisham, thepotential impact in any changes is in the region of £1.8m.

Corporate Property

12.24 The Regeneration budget contains the main corporate property costs associated withthe 170 buildings across the corporate estate. During 2008-09 this budget was undersignificant pressure as a result of the costs of meeting statutory maintenancestandards and the demand from response repairs. As a result the budget wasoverspent by £600k. In order to make a sustainable reduction in costs investment isrequired into a number of key operational buildings and a significant rationalisationmade of the remainder of the estate.

Development Control

12.25 The number of householder applications is down 15% on 2008/09, reflecting marketconditions. As a result, Development Control is forecast to achieve £400k less incomethan budgeted, being offset by savings in running costs of £120k. Staffing levels arebeing kept under constant review to see if further economies can be made, but at thisstage, the downturn in the economy has had a noticeable impact on the ability togenerate the level of budgeted income. These risks continue into 2010/11 and areclosely linked to the overall state of the economy.

Fair Employment

12.26 The GLA has continued in its move towards implementing Fair Employment clauses intheir contractual terms and conditions. To develop the Fair Employment Policy forLewisham, officers have over the last year, been investigating the implementation ofFair Employment Living Wage clauses into contracts, particularly for those serviceswhich traditionally pay low wages, albeit in accordance with Minimum Wagelegislation. The introduction of this policy in Lewisham is likely to require significantadditional investment from the Council. In addition, an EU directive on Agency Staffwhich is due to come into force from 2010/11 is likely to have a further substantialcost.

Formula Grant changes

12.27 Section 11 of the report set out the prospects for receipt of Formula Grant on theassumption that there would be no methodology changes. It could be argued that iflocal government is facing real terms reductions in grant, there would be little prospectof the Government deciding to change the distribution of grant between authorities.However, the Government is continuing to consider methodology changes.

12.28 An area of particular concern is the Area Cost Adjustment (ACA). The ACA isdesigned to adjust for the differences between local authorities in the costs of inputs(e.g. staff) which they require to provide services. The ACA makes up approximately20% of the amount of Lewisham’s formula grant. In determining ACA factors, localauthorities are grouped together to form ACA areas. This is to ensure that there issufficient wage evidence in each area to produce robust ACA factors. There arecurrently 4 ACA areas in London: the City of London, Inner London and East and WestOuter London. Lewisham is in the Inner London ACA area.

12.29 In the consultation paper for the three-year local government finance settlement2008/09-2010/11, which was published on 17 July 2007, proposals were put forwardwhich would have resulted in Lewisham losing it’s inner London ACA status. Thepotential loss of funding (before floor damping) would have been up to £20m perannum. Following consultation Ministers decided not to make changes to the ACAgeography for the period 2008/09-2010/11, but again the SWG is considering optionson changing the ACA. Council officers are monitoring the discussions at SWG and areworking with neighbouring boroughs who are similarly concerned.

Highways

12.30 Section 9 of the report sets out the additional investment of £2.8m to be made to theCouncil’s highways. However, the position after this investment is difficult. As there islikely to be very limited capital resources in the future for highways, an ongoing sourceof revenue to finance highways maintenance and investment will need to be identified.

Homeless Accommodation

12.31 The consequence of the Southwark judgement and how it should be applied is stillbeing assessed. The 16 and17 year olds in Homeless Accommodation will have to bereassessed under the looked after children criteria. There are about 50 of thesechildren. At this stage it is difficult to identify how many of this group will fall underLooked after Children and become the financial responsibility of Children’s Social Carerather than Housing. With one case costing around £50k, the impact could beconsiderable and be as much as a £1m. A number of London Boroughs are indicatingthe costs will be between £800k and £1m.

Housing Revenue Account

12.32 Section 10 of the report set out the prospects for the HRA over the next few years.Following the Government’s announcement of proposed changes to the housingsubsidy system there is great uncertainty about what this may mean for the HRA.There is also similar uncertainty about the potential impact on the General Fund ofthese changes to HRA.

12.33 Section 10 of the report also sets out the pressures on the General Fund arising fromthe reduction in support costs in the HRA. The General Fund Budget Strategy needsto allow for some of this impact in 2010/11 and subsequent years.

London Pensions Fund Authority (LPFA)

12.34 The valuation results of the London Pensions Fund Authority (LPFA) pensioner sub-Fund as at March 2007, showed a deficit of £210m with the funding level havingdeclined from 92% to 86% since 2004. The deficit could rise to £649m, a funding levelof 67%. The LPFA are consulting London Boroughs on proposals to close this gap. Ifan increase in the LPFA’s levy is enforced, Lewisham would be required to pay anadditional £897k in 2010/11. This sum could increase to annual additional amount of£1.174m by 2011/12.

Looked After Children

12.35 Following the Baby Peter case, there is great sensitivity nationally and locally onLooked After Children. This has already resulted in an increase in assessment activitywith the number of assessments completed within seven days falling. There arecurrently an extra 11 children being cared for in 2009/10. The number of contacts permonth is on average about 100 (9%) higher than the same time last year. It is difficultto predict whether this trend will continue over the coming months and when it willeventually plateau. In order to address these problems recruitment of social workershas increased. While the longer term cost is difficult to gauge, it is anticipated that theextra social workers will cost £300k and the extra placements another £600k in2010/11. The child population is expected to increase by 5% pa. If the number of LACincreased proportionately this would create a budget pressure of a further £1m.

Pupil Numbers

12.36 Currently, the Borough is seeing a growth in Pupils Numbers in schools. Most of thispressure falls to the Dedicated Schools Grant and is considered in that section of thisreport. However, there is some expenditure that under legislation cannot be charged tothe DSG but does vary with pupil numbers. This mainly effects the Special EducationalNeeds (SEN) Transport budget. The cost will always be difficult to predict until theactual routes are known and the capacity within the existing system examined. Theoverall yearly increase in all pupil numbers is averaging 5%, which equates to around1,500 pupils. Assuming this increase is proportionate to the number of SEN children,then it would mean an increase in the budget of £150k pa for the next five years.

Street Lighting PFI

12.37 A joint Street Lighting PFI scheme is being developed with the London Borough ofCroydon to completely replace all the old lamp column stock and thereafter maintainthat new stock. It is anticipated that the contract will commence during 2010/11 but ata higher cost than originally anticipated. Provision of some £0.3m for 2011/12 rising to£0.9m pa by 2013/14 has been provided for in previous Surveys and this will need tobe reviewed as the contract concludes.

Treasury Management

12.38 Section 9 sets out details of the Council’s Capital Programme. The revenue financingcosts of this programme are a significant commitment against revenue budgets. Aparticular difficulty is where effectively the Government gives no revenue support toapproved capital schemes as Lewisham is on the ‘grant floor’ (ie. There is noadditional formula grant for capital projects which the Government supports).

Worklessness

12.39 London has the highest proportion of its working age population who are not in paidwork than any other region of the country. Worklessness is a source of concern toCentral Government, the London Development Agency (LDA), the Mayor of Londonand to others working to promote the health of the London economy and the wellbeingof Londoners.

12.40 Tackling Worklessness in Lewisham is a key priority for the Council and resources willbe allocated over the medium term to build a successful labour programme thatprovides training and job creation opportunities for our local citizens.

Summary

12.41 The scale of pressures facing the Council is both uncertain yet is likely to besubstantial. Changes to funding streams that are set out above are unlikely to save theCouncil money. Demographic pressures will grow, yet Government resources to meetsuch increases will be scarcer. It is likely that there will be further ‘passporting’ of costpressures to local government. The 2010/11 Budget Strategy assumed net pressuresof some £7.5m. The picture for 2011/15 is that this will worsen to on average some£10m pa over the period.

13. REVENUE BUDGET PROCESS

13.1 The overall financial position facing the Council for 2010/11 and beyond, is difficult. Asavings target of £8.8m has already been set for 2010/11. Detailed savings options for

2010/11 will be considered by Members shortly. A 2010/11 budget timetable issummarised below at Table 14.

Table 14 – Key Dates Budget Timetable

Month Key Stage

September Mayor meets with party leaders to discuss the budget strategy

Public Accounts Select Committee & Mayor & Cabinet agree theFinancial Survey 2010/15

Overview & Scrutiny Business Panel considers revenue budgetsavings

October 2009 Public Accounts Select Committee considers revenue budgetsavings for 2010/11

November 2009 Mayor & Cabinet agrees budget savings for 2010/11

December 2009 Provisional Local Government Finance Settlement for 2010/11announced

January 2010 Final Local Government Finance Settlement for 2010/11announced

Greater London Authority sets Budget and Precept for 2010/11

Notification of Levies for 2010/11 i.e. Environment Agency, LeeValley Regional Park and London Pensions Fund Authority

Public Accounts Select Committee / Overview and Scrutinyconsiders the Budget and Council Tax for 2010/11

February 2010

Mayor & Cabinet agrees the Budget and Council Tax for 2010/11,including savings and pressures

March 2010 Council approves Budget and Council Tax for 2010/11

13.2 Set out in Table 15 is a summary of the prospects for 2010/15 based on the analysis inSections 11 and 12.

Table 15 – Estimated Revenue Budget Savings 2010/15

2010/11£m

2011/12£m

2012/13£m

2013/14£m

2014/15£m

OptimisticMid-RangePessimistic

8.812.215.818.5

12.215.718.3

12.315.818.1

12.215.617.9

13.3 The key way in which the Council will seek to make the scale of savings set out inTable 15 is through making efficiencies. However, this will require a re-configuration ofLewisham’s previous approach to delivering value for money. As a starting point to

consider how Lewisham will meet this challenge, Appendix B sets out the Efficiencyand Value for Money Strategy 2009/14.

OTHER BUDGET CONSIDERATIONS

14. RESERVES AND BALANCES

14.1 The Council continues to take a prudent approach towards financial planning.Balances and reserves have been maintained at a level which is considered adequateto meet future spending needs and pressures. As at 31 March 2009, the Council’s nonearmarked General Fund Balances stands at £11.236m, which is approximately 2.5%of Lewisham’s net budget (including Dedicated Schools Grant expenditure). It isplanned to maintain the Council’s General Fund Balances at this level. Schoolsbalances at 31 March 2009 were £8.28m

14.2 Some of the potential risks facing the Council for 2010/11 and future years which willneed to be resourced through earmarked reserves include:

• Property – to ensure that there are adequate resources for repairs andmaintenance costs for the Council’s buildings.

• Redundancy costs – potential once-off costs arising from the achievement of theCouncil’s efficiency savings targets.

• Information & Communication Technology (ICT) – future planned investment inthe Council’s ICT infrastructure.

• The Building Schools for the Future programme.

• Potential litigation risks.

15. AREA BASED GRANT

15.1 From 1 April 2008, the Local Area Agreement (LAA) grant was replaced by the AreaBased Grant (ABG). The ABG is a non-ring-fenced general grant, where no conditionson use are imposed as part of the grant determination, ensuring full local control overhow funding can be used. This now makes LAAs an integral part of the LocalGovernment Finance system which means that local authorities are free to use all ofthis non-ringfenced funding as it sees fit to support the delivery of local, regional andnational priorities in their areas.

15.2 Through creating the new non ring-fenced ABG, it is expected that this will minimisethe barriers to Lewisham using its previously earmarked resources to support localpriorities. This may mean that specific grants contained within ABG will not necessarilybe used for the purposes that the title of the grant suggests or they are currently usedfor.

15.3 Lewisham’s ABG allocation for 2009/10 is £18.517m. This excludes the SupportingPeople Grant which will not be rolled into ABG until 2010/11. The indicative grantallocations for 2010/11 is £35.808m. ABG is being treated in the same way as otherlocal authority expenditure (ie. A 4% pa efficiency is required and requests for carry-forward of ABG between years is subject to the Executive Director of Resources’approval).

16. PARTICIPATORY BUDGETING

16.1 Participatory budgeting is seen by the Department for Communities and LocalGovernment (DCLG) as an important way of engaging citizens and communities, and

enabling them to take an active role in influencing what happens in their local areas. Itis a key strand in the Government’s White Paper on Community Empowerment, whichwas published on 9th July 2008. Lewisham has been the location for an early pilot ofparticipatory budgeting, led by Voluntary Action Lewisham with Lewisham Council andinvolving over 50 individuals and local groups in Evelyn and Bellingham wards.

16.2 During 2009/10 it is expected that assemblies will use participatory budgetingelements to determine their Locality Fund spend. There are also a number ofassemblies using this process to determine Mayor's Fund spend. There is interestfrom a number of other service areas including Regeneration, Building Schools for thefuture and Lewisham Homes who are interested in using the participatory process togive citizens a greater say in service decisions and considerations.

17. TOTAL PLACE

17.1 Total Place aims to examine public spending and local leadership in thirteen pilotareas to identify how public agencies can collaborate more effectively to deliverimproved local services at a lower cost. The programme consists of two main phases:

• a ‘counting’ process that will map money flowing through the borough (fromcentral and local bodies) and make links between services, to identify wherepublic money might be spent more effectively; and

• a ‘culture’ process that will involve an examination of the organisational andpublic services culture across local public agencies (looking at ‘the way we dothings round here’) to determine how that helps or hinders what we arecollectively trying to be achieve.

17.2 The culture phase will be carried out in relation to four themes, which are listed below.Work has already begun on each theme, through project teams consisting ofrepresentatives of key partner organisations:

• Worklessness and unemployment;• Crime and offender management;• Commissioning of social care and health services for children and adults; and• Assets and energy.

17.3 The project teams will be expected to provide interim findings in mid-September, tofeed into the Government’s Pre-Budget Report. Final reports from each pilot area willbe expected in early 2010.

18. BUDGET RISK MANAGEMENT

18.1 A critical element of the Council’s medium term financial planning processes is toensure that the financial consequences of risk are adequately reflected in the Council’sfinances. The Council’s risk register sets out those strategic and corporate risks whichcould materialise, together with the key risk areas in service budgets and associatedmitigating measures. These include failure to contain expenditure within agreed cashlimits, not meeting the revenue budget savings target and under achievement ofincome, as well as more specific risks on certain budgets. The risks associated withcapital and revenue expenditure are set out particularly in Sections 9 to 12 of thisreport.

19. CONCLUSION

19.1 The Financial Survey for 2010/15 sets out the medium term financial strategy for theCouncil over the next five years. The scale of the financial challenge facing the Councilis likely to be of a greater magnitude than any previously faced. To manage thissituation will require the utmost care and unremitting attention over the next few years.

20. FINANCIAL IMPLICATIONS

20.1 The Financial Survey 2010/15 is concerned with the Council’s medium term financialstrategy and as such, the financial implications are contained within the body of thereport.

21. LEGAL IMPLICATIONS

21.1 The purpose of this report is to develop a medium term approach in support of betterservice and financial planning. Members are reminded that the legal requirements arecentred on annual budget production, and that indicative decisions made for futureyears are not binding.

21.2 The Local Government Act 2000 and subsequent regulations and guidance says that itis the responsibility of the full Council to set the Lewisham’s budget including all of itscomponents and any plan or strategy for the control of the Council’s capitalexpenditure. Regulations provide that it is for the Executive to have overallresponsibility for preparing the draft budget for submission to the full Council toconsider. Once the budget has been set, it is for the Mayor & Cabinet to makedecisions in accordance with the statutory policy framework and the budgetaryframework set by the Council.

22. EQUALITIES IMPLICATIONS

22.1 The Council’s budget is of primary importance as a means of delivering Lewisham’sobjectives. All revenue budget savings and resources allocation proposals areassessed in terms of their impact on service delivery and equalities implications.

23. ENVIRONMENTAL IMPLICATIONS

There are no environmental implications directly arising from this report.

24. CRIME AND DISORDER IMPLICATIONS

There are no crime and disorder implications directly arising from this report.

25. BACKGROUND PAPERS

Title of Document Date File Location Contact Officer

2009/14 Financial Survey 17 September 2008(M&C)

1st Floor, Town HallCorporate Resources

SelwynThompson

2009/10 Budget Report 11 February 2009(M&C)

1st Floor, Town HallCorporate Resources

SelwynThompson

2009/10 Budget Report –Update

25 February 2009(M&C)

1st Floor, Town HallCorporate Resources

SelwynThompson

For further information on this report please contact:

David Gallie, Head of Corporate Resources (020 8314 9223) orSelwyn Thompson, Group Manager, Budget Strategy (020 8314 6932)

APPENDIX ASummary of the Committed Capital Programme

Largest Projects / Programmes 2009-10 2010-11 2011-12 TotalBudget

£’000s £’000s £’000s £’000sPrimary Capital programme 572 17,586 5,442 23,600BSF D&B & Investment in BSF 926 13,709 2,477 17,112Deptford Town Centre Regeneration 4,407 7,560 2,527 14,494Forest Hill Pool 498 2,019 9,732 12,249Tidemill School (Replacement) (TCF) 2,896 4,869 1,684 9,449Other 2,826 2,144 2,310 7,280AMP & DDA Programmes 882 3,529 2,068 6,479Deptford Station 1,527 4,040 0 5,567Schools Minor Works Programme 2,245 1,714 641 4,600ICT - Technology & Transformation 4,203 347 0 4,550Worksmart 3,697 574 0 4,271Quality & Access for All Young Children -Capital Grant

1,580 1,532 0 3,112

Brockley PFI 2,000 1,000 0 3,000Pepys Environmental 1,463 1,148 250 2,861Borough Road Reconstruction &Resurfacing Works (Highways: SnowWorks)

2,681 119 0 2,800

New Cross NDC Programme 1,801 865 0 2,666Private Sector Grants 839 800 800 2,439Schools AMP 1,248 593 575 2,416Disabled Facilities Grant (DFG) 986 707 707 2,400TfL Programme 2,174 55 0 2,229Kender Estate - Site Assembly 1,665 463 0 2,128BSF - ICT 2,103 0 0 2,103Parklands: Ladywell Fields and theWaterlink Way

274 1,654 0 1,928

Highways BVR Programme 1,312 550 0 1,862Heathside & Lethbridge - PartnershipWorks

1,793 0 0 1,793

Rushey Green School (Replacement)(TCF)

1,571 84 0 1,655

SEN Strategy 63 1,492 0 1,555Kender New Build Grant: Phase 4 0 1,540 0 1,540Kender New Build Phase 3 South (NDC) 0 1,485 0 1,485ICT - Tech Refresh 402 500 500 1,402Housing Options/ Homelessness Group 450 412 400 1,262Cash Incentive Scheme 210 435 435 1,080Play Builder programme 444 423 0 867Primary Place expansion 370 491 0 861Schools Access Initiative Projects 367 367 0 734Loampit Vale - Development Site & Pool 379 95 245 719East London Line Extension 0 655 0 655

Largest Projects / Programmes 2009-10 2010-11 2011-12 TotalBudget

£’000s £’000s £’000s £’000sRecycling Service Improvements 489 60 0 549Manor House 490 40 0 530Extended Schools Capital 466 0 0 466Woodpecker Youth project 415 10 0 425Big Lottery for Play 316 3 0 319Parks Works - Envirowork Lewisham 258 0 0 258Directorates' Capital Programme Total 53,288 75,669 30,793 159,750

LH 2007/08 660 89 0 749

LH 2008/09 - 2010/11 0Decent Homes Programme 5,248 453 96 5,797Mechanical & Electrical Schemes 3,222 2,297 2,200 7,719Structural and Essential Schemes 2,212 1,012 397 3,621ICT & Offices 722 722 600 2,044LH Other 1,414 4,536 4,707 10,657Lewisham Homes 2 star spending 0 40,000 125,400 165,4002009/10 Chrysalis Decent HomesProgramme

650 350 0 1,000

Lewisham Homes Total 14,128 49,459 133,400 196,987

TOTAL CAPITAL PROGRAMME 67,416 125,128 164,193 356,737

APPENDIX B

Efficiency and Value for Money(VFM) Strategy 2009-2014

1. Purpose

The purpose of this efficiency strategy is to provide the guidance and framework forthe Council to continue to deliver more efficiencies in the use of resources whileensuring that we continue to provide high quality of services.

The strategy also sets out the Council’s approach to the efficiency agenda for thenext five years from 2009/10 to 2013/14.

2. Introduction and Definitions

The efficiency agenda is at the forefront of local government strategic managementand is a key part of the Government’s plans for public services for years ahead,particularly in the current economic climate.

The Efficiency & VfM Strategy also supports the Council’s Corporate Plan, inparticular that Lewisham continues to be effective in the use of resources to delivervalue for money services and long-term financial stability.

This strategy is now referred to as the Efficiency and Value for Money (VFM)Strategy because the Government (through CSR07) has changed the programmeethos to include VFM and the reporting of Efficiency to VFM National Indicator NI179.

This Efficiency and VFM strategy sets out our plan to ensure that the provision ofour services consistently offers the best value that can be delivered within ouravailable resources.

Definitions:

Efficiency is about productivity, it is a measure of how well an organisation uses itsresources. The organisation is efficient when it uses less resources (inputs) toproduce the same or more goods and services (outputs). ‘Cash releasingefficiencies’ are those efficiencies that reduce the level of resource required toachieve the same or better outputs, allowing resources to be redeployed.

Value for Money (VFM) is generally regarded as a measure of whether anorganisation is achieving the best value (outputs and/or outcomes) for theresources used (input). The determination of VFM is normally based on the “threeEs” – Economy, Efficiency and Effectiveness (“Equity” is now gaining popularity asa fourth element).

3. Background

Sir Peter Gershon’s review of the Public Sector in 2003 led to the GershonEfficiency programme for 2005/06 to 2007/08, the programme required localauthorities to deliver efficiency savings of 2.5% each year on a cumulative basis forthe three years ending in 2007/08. The Gershon Efficiency programme used the2004/05 budget year as the baseline.

The Government’s budget announcement (Budget 2007) set out the requirementsfor 3% annual cash releasing value for money gains from all parts of the publicsector over the CSR07. The new targets for efficiency savings were introducedthrough the 2007 Comprehensive Spending Review. In October 2007 theGovernment published Delivering value for money in local government: Meeting thechallenge of CSR07 setting out the plan as to how to meet the efficiency challengeduring the new spending review period.

The new efficiency agenda works from a baseline of 2007/08. Local Authoritieswere originally expected to achieve 3% cashable savings each year, on acumulative basis, for three years from 2008/09 to 2010/11 to yield a nationalsavings of £4.9 billion in 2010/11. The Government’s pre-budget report ofNovember 2008 and the Budget Report of April 2009 have changed the LocalAuthority’s efficiency savings target from 3% to 4%.

The data on the efficiency savings will be submitted to the DCLG as one of theNational Performance Indicators (NI 179): Forecast savings for the year in progressare collected in October while the actual savings achieved are collected in Julyfollowing the completion of the year.

4. Aims and Objectives

The aims and objectives of this strategy are:

• To provide the rationale for planning and reviewing efficiency/VFM in servicesand for meeting the Government’s requirements.

• To provide the basis for setting in motion efficiency/VFM projects and plannedimprovement reviews to deliver gains.

• To provide the framework for demonstrating efficiency/VFM in service delivery.

• To ensure that we continue to use our efficiency and VFM programme to helpto deliver low Council Tax increases (maximum annual increase of 2.5%) forour residents.

• To form the basis of formulating the annual Action Plan for achieving thetargets set for efficiency/VFM gains that are deliverable from 2009/10 to 2014.

5. The Efficiency Challenge – NI 179

5.1 CSR07 Route-Map for Delivery

The Local Government Value For Money Delivery Plan sets out a route-map formeeting the CSR07 efficiency challenge. The Plan builds on the key cross-cuttingefficiency work streams identified in the Local Government White Paper and setsout the expected actions to be taken at local level:

• Business process improvement• Collaboration• Smart procurement and use of competition• Better use of technology:• Asset management:

Lewisham concurs with the Government’s view that the new challenge of CSR07 todeliver the value for money that the communities want would require servicetransformation and innovation, hence the increasing role of service reviews andtransformation in our improvement plans.

5.1.2 National Improvement & Efficiency Strategy

A new National Improvement & Efficiency Strategy was published in January 2008by the DCLG and the LGA, the national framework is aimed at supporting stronglocal partnerships to deliver better public services. This strategy is ultimately aboutsupporting Councils, as community leaders, working with their local partners todeliver better outcomes, improve the quality of life in places and provide betterpublic services.

The national strategy also created the Regional Improvement and EfficiencyPartnerships (RIEP’s), the RIEP for London is Capital Ambition. The IDeA will offerpeer support and challenge where performance is recognised as poor. The role ofCapital Ambition is to act as the hub for all improvement and efficiency work inLondon, to support and challenge individual authorities and partnerships and deliverproducts for whole services.

Lewisham will continue to work closely with both Capital Ambition and the IDeA onimprovement and value for money matters.

5.2 Lewisham’s Efficiency Targets

As stated in paragraph 3 above, the national framework for measuring andmonitoring efficiency gains was changed in the Comprehensive Spending Review2007 (CSR07), this initially set a target for all public services to achieve at least 3%cash-releasing value for money gains per annum over the period 2008/09 to2010/11. The target was changed to 4% for the remaining two of the three yearefficiency period, the implication of that change is that our 3-year cumulativeefficiency target (as demonstrated below) increased from £19.395m to £23.7m, anincrease of £4.3m. The annual target for Lewisham was £6.465m at 3% and now£8.62m at 4%.

New 4%Target

Original 3%Target

Forecasted Cumulative Gains (£m)* 2008/09 6,465 6,465

Forecasted Cumulative Gains (£m)* 2009/10 15,085 12,930

Forecasted Cumulative Gains (£m)* 2010/11 23,705 19,395

* The figures quoted for efficiency gains above are marginally different from the figuresused for the General Fund Budget Strategy, as there are minor differences in the way theGovernment sets the NI179 figure from the actual calculation of efficiencies made by theCouncil.

6. Our Multi Year Efficiency Plan

The Council’s strong commitment to delivering efficiencies is long standing andunambiguous. Lewisham continues to embed efficiency and value for money at alllevels of the organisation. Efficiency remains at the core of our values and priorities,and the Council will continue to use our well established strategies and processes toincrease productivity and added value for our community. Our commitment is madeclear in the Council's crosscutting priority of "ensuring efficiency, effectiveness andequity in the delivery of excellent services to meet the needs of the community." It isalso important to note that, our commitment to efficiency is one that we share incommon with our partners.

In pursuance of our goals, a five-year efficiency programme is shown below

2009/10 2010/11 2011/12 2012/13 2013/14£8.62m £8.62m £15.5m £15.5m £15.5m

It is worthy of note that the current government efficiency agenda is planned forthree years only; from 2008/09 to 2010/11. The figures for later years are derivedfrom the mid-range forecast in the Financial Survey and at this stage are indicative.

6.1 The Delivery Framework – Our Efficiency Work Strands

Over the years, the Council has put in place and embedded a number of processesand projects for driving value for money and efficiencies. This efficiency strategysets out our plan to use the following work strands as the vehicles to deliver furtherefficiencies and value for money gains. This framework will be reviewed every yearto ensure that our annual action plans are realistic and adequate.

Currently, the Lewisham efficiency work strands are

Revenue Budget ProcessCustomer Service TransformationIncome GenerationModernisation of Adult Social CareProcurementWorksmart

Better use of TechnologyCross Cutting ServicesCollaboration – Partnership working

6.2 Description of the Work Strands

6.2.1 Revenue Budget Process

The revenue budget process supports and delivers efficiency and VFMimprovements. As part of the budget planning processes, service directorateswill continue to be asked to carry out structural and organisational reviews toidentify areas that could contribute a certain percentage (e.g. 4%) to theoverall efficiency target. These savings proposals are then taken to Membersfor consideration.

The process for identifying and proposing efficiency savings by DirectorateManagement Teams (DMTs) will normally include service priorities andpressures, organisational capacity, use of technology, service plans,performance management reports, partnership opportunities and legislativerequirements etc. in their considerations.

6.2.2 Customer Service Transformation

A key priority for the Council is to implement the Customer Services Strategy– “Lewisham puts people first; providing better access to better services”.

The Executive Directors for Customer Services and Resources are leading aprogramme of service reviews. These reviews emphasise customer focusand service improvement but which then link to the medium term budgetstrategy and the delivery of value for money.

A range of service transformation and efficiency reviews have beendeveloped and are programmed for 2009/10 to 2011/12 to support theCouncil’s budget strategy. Proposals to redesign services and end to endreviews of back office and support services will help deliver cash releasingefficiency savings.

Back office and support service efficiency reviews are being undertaken by acommunity of service re-design specialists, built up from across the Councilthrough the Council’s involvement in the Communities and Local Government(CLG) National Process Improvement Project (NPIP). The reviews are beingmanaged within the Managing Successful Programmes (MSP) framework.

6.2.4 Income Generation

A review of income generation has taken place and a draft CorporateCharging Policy has been written. The aim of the policy is to create astandardised approach to charging and establish an overarching set of

principles that formulate consistency in the application of concessions andsubsidies.

The review also looked at individual discretionary services to determine thepossibilities of generating further income either from, for example, offeringadditional services or applying alternative charging mechanisms to theservice.

However, in the light of the economic downturn, this review is being re-configured to ensure that an appropriate balance is taken between theoptimising income and the potential impact that would have on residents.

6.2.5 Modernisation of Adult Social Care

The Programme Director for Adult Social Care and Modernisation hasdeveloped a modernisation programme which will involve: first client contactvia Access Point; Occupational therapy / telecare assessment; full electronicworking for the care assessment process; and mergers of Care AssessmentTeams with further skill mix. This is part of the overall Customer ServicesTransformation programme and there are strong interdependencies betweenthis programme and the Customer Transformation Programme.

6.2.6 Procurement

As part of the Council’s Procurement Strategy a series of efficiencies will helpcontribute to the Budget Strategy of the next few years. These includesmarter procurement in: office stationery; travelling and hotels; consultants;post; vehicles; mobile phones and other miscellaneous items. The furtherenhancement of the procurement function across the Council will be a criticalelement in meeting the scale of efficiencies required to be made by theCouncil over the next few years.

6.2.7 Worksmart

Under the ‘Worksmart’ Programme a re-appraisal of the Council’srequirements for office accommodation has been made in the light of thechanges to work styles and the opportunity of increasing capacity of existingbuildings and disposing of redundant ones. A medium term strategy is beingpursued that will prolong the life of the Town Hall and invest in LaurenceHouse to increase capacity. This will enable less suitable buildings to bevacated with resultant efficiency savings. The changes to the managementand ownership of the housing stock also provide an opportunity to realign theuse of office accommodation.

6.2.8 Better Use of Technology

Lewisham has introduced a number of Information and CommunicationTechnology (ICT) projects to support and enhance and improve servicedelivery and are used by managers to deliver efficiency gains, some of themare:

• Customer Relationship Management (CRM) system to allow for bettercustomer information management and to improve delivery of customerservices.

• Council-wide data sharing and better data storage through the MicrosoftSharepoint system.

• Implementation of the new integrated HR/Payroll system.

• E-procurement systems to improve procurement process, financialcommitment and suppliers management

• Replacement of the SWIFT integrated system to improve ICT provisionsfor the Supporting People Services, Adult and Children’s Social CareServices.

6.2.9 Cross Cutting Services

In developing savings proposals for the 2010/11 budget it has been identifiedthat there would be value in developing a number of cross-cutting servicereviews. It is planned to bring these reviews forward to assist the delivery ofsavings proposals in later years.

6.2.10 Collaboration – Partnership Working

The Council has a strong record of partnership working and collaborationwith other external bodies. This is spring board for considering theopportunities for efficiency savings to be made across Lewisham, not justwithin the Council. The work being undertaken as one of the pilots for TotalPlace will be an important contributor to how such collaboration will be takenforward.

7. Organisation, Monitoring and Management

The Lewisham Efficiency Programme is led by the Chief Executive who reports toour elected Mayor.

The effective management and monitoring of the reviews, processes, projects andprogrammes are done through the activities of the following bodies.

The Lewisham’s Corporate Efficiency and VFM programme is managed andmonitored through the activities of the of the following Management groups.

Chief Executive’s Efficiency BoardExecutive Programme BoardEfficiency Programme Board

Various other projects and programme management teams have been created tomanage the implementation of specific efficiency streams e.g. Worksmart .