Budget submission 2007/08

Report: 8
Date: 20 July 2006
By: Treasurer and Commissioner

Summary

This report summarises the Mayor’s budget guidance issued for the 2007/08 – 2009/10 budget and business plans and outlines the steps being taken to draw up the interim information and final budget submission for consideration and approval.

A. Recommendations

That members

1. Note the Mayor’s budget guidance for the period 2007/08 – 2009/10 and the implications for the MPA budget.

B. Supporting information

Mayor’s budget guidance

1. The Mayor’s budget guidance for 2007/08 was issued on 5 July 2006, together with a letter from the Mayor to the Chair of the Authority. A copy of the budget guidance together with a copy of an accompanying letter to the Chair of the Authority is enclosed for members as Appendix 1. It is also available on the website.

2. The Mayor has now set out his key strategic aims to use the budget development process to do more to:

• Mitigate the effects of and adapt to climate change
• Deliver the London 2012 Olympic Games and Paralympic Games effectively, maximising the economic, social, health and environmental benefits of the Games to London and Londoners
• Ensure GLA Group services are provided by a workforce that reflects the diversity of London
• Ensure effective counter terrorism operations and capacity to respond to major catastrophic events
• Reduce crime and fear of crime
• Improve skills and employment opportunities of Londoners to meet the specific needs of London’s economy and reduce worklessness
• increase London’s housing supply, including affordable housing, focusing on the Thames Gateway.

It is noted that these aims and objectives are not generally GLA or functional body specific: each member of the GLA Group is expected to make important contributions to the majority of them in carrying out their statutory functions of providing services to London.

3. The 2007/08 process has been refined from last year consisting of the following:

• Budget guidance issued by the Mayor revised throughout the process in the light of emerging issues
• Budget development by functional bodies and GLA
• Interim information from the functional bodies to the GLA by end September
• Preliminary draft proposals issued by the Mayor for consultation with each of the functional bodies and the Assembly at the beginning of November
• A formal response to the proposals at the end of November accompanied by detailed budget and business plans covering at least a three year period and which must be consistent with the Mayor’s budget guidance and preliminary proposals
• Mayor’s formal draft budget proposals considered, prepared and issued for consultation in mid December; and
• Scrutiny by the Assembly’s Budget Committee throughout the process

The process leading up to the receipt of budget submissions in November is changed from last year. Interim information is required by the end of September, and comprehensive business plans are expected to be available towards the end of November.

4. The policy issues specified to be addressed are set out in Appendix B of the Mayor’s guidance. For the MPA, these focus on the Public Service Agreements (PSAs) set by the Government for Police and Crime and Disorder Reduction Partnerships. These are:

• PSA1 – to reduce crime by 20% by 2007/08
• PSA2 – to reassure the public, reducing fear of crime and anti-social behaviour, and building confidence in the Criminal Justice System (CJS) without compromising fairness
• PSA3 – to bring 1.25 million offences to justice in 2007/08
• PSA4 – to reduce the harm caused by illegal drugs including substantially increasing the number of drug misusing offenders entering treatment through the CJS

5. The budget guidance gives particular emphasis to three issues, sustainable development, equalities and health. Before budget proposals are issued for consultation in December, it is intended that the Mayor should be adequately informed of how sustainable development will be delivered, the approach to taking it forward in terms of service plans, targets and programmes, and of any material budget and resource issues. In addition, budget guidance gives particular emphasis to the other two cross cutting themes of the GLA – equalities (which has been the subject of a separate budget process over the past five years) and health and in particular tackling health inequalities. The Mayor accepts that better integration might not be achieved by 30 September, and it is recognised that at that stage members of the GLA Group might not have sustainable development fully integrated within the draft “main budget” documentation. Also the sustainable development dimension and its relevant documentation might consist of separate sustainable development, environmental, equalities and health promotion elements. However, by the time formal budget and business plans are available (end November), it is expected that business plans should specifically address how sustainable development is being achieved and delivered, using appropriate appendices, if necessary, to cover these matters fully.

6. Greater emphasis is placed again this year on the budget being presented as a corporate business plan. The published documents must:

• Cover at least the period to 2009-10
• Set out what is planned to be achieved in high level terms over that period, specifying profiled deliverables and defining measures to assess progress and impact
• Highlight in high level terms plans to mitigate and adapt to climate change, and demonstrate the importance of sustainable development, equalities and diversity and health to the organisation
• Include updated budget estimates and borrowing and capital spending plans covering the plan period (these can either be integrated into the business plans, or be in the form of separate accompanying documents).

7. Interim budget information due by 29 September must include the following:

• A succinct overview describing the main business priorities and how the MPA/MPS plans to deliver on Mayoral priorities, including sustainable development priorities, over the three year period 2007-08 to 2009-10.
• Updated revenue and capital budget estimates covering three years 2007-08 to 2009-10 (and comparable forecasts for 2006-07) in the same format as that used in the Mayor’s published reports, proposed saving and efficiency plans, updated estimates of available reserves and any other financial information
• A summary of outstanding financial uncertainties and issues.

It is recognised that by the end of September each member of the GLA Group will not necessarily have an updated balanced plan that has been formally endorsed by the Authority. Furthermore estimates might only be high-level and subject to further consideration and refinement. Accordingly there might be concern if that information were to be widely disseminated and the Mayor has therefore accepted that the interim response should be supplied in the form of advice to the Mayor. It has been made explicit that the information sought in the guidance is requested in accordance with the provisions of sections 110 and 125 of the GLA Act 1999.

Budget Ceiling Guidance

8. The guidance in respect of the precept constraints are that the government has already stated that it expects average council tax increases in 2007-08 to be less than 5% and the Mayor does not wish to propose a consolidated budget that risks being capped and that budget plans should be prepared on the basis of an annual increase in net revenue expenditure of 3% a year over the 2006-07 amounts presented in the Mayor’s published budget. In addition the there is a requirement to advise the Mayor on what the Authority would propose to do if the increase in net revenue expenditure in 2007-08 over 2006-07 were to be 1% more or less.

Consultation

9. The Mayor has included a requirement to have dialogue with budget consultees to complement and prepare for his statutory responsibility for consultation. Each functional body should maintain a dialogue with, and provide key information to, key stakeholders before budget submissions are finalised in November. The main purpose of this dialogue is to obtain stakeholders views on policy priorities and options and communicate with stakeholders, so they are better prepared to respond to the Mayor’s formal budget consultation. The dialogue should focus on the services provided and the relative priorities of each service. The issue of the costs of these services would then be specifically addressed later in the process by the Mayor’s consultation; however, costs and the likely impact on the precept should be discussed as part of the dialogue.

10. In the week commencing 11 September, it is intended to send a letter to consultees with a statement of emerging priorities, together with a very high level assessment of resource implications, requesting responses by 9 October.

11. A preliminary assessment of responses will be made available to the joint MPA Finance/Planning and Performance Review Committee (PPRC) on 9 November.

12. Progress on development of the budget submission will be reviewed through the Mayor’s meetings with functional body members and chief officers; regular officer–level meetings, will support this.

13. The MPA has to deliver its budget submission by 27 November 2006. The Authority will need to approve the submission at its meeting on 29 November.

Financial implications of budget guidance

14. The budget guidance gives a clear expectation on the need to avoid council tax capping, with an indication of the average level of increase, which is acceptable to government but does not give any specific direction on the level of Government Grant to be assumed. Each member of the GLA group is to keep under review a best estimate of the level of grant support expected. GLA officers will examine these assumptions during the budget development process.

15. Work has already started on the new business-planning framework and this committee at its last meeting agreed an approach to dealing with the projected budget gap in 2007-08. The MPS will be reporting back to committee on 21 September on progress made.

16. The Mayor requested early information on budgets under his s110 &125 powers about summary budgets and other information. For completeness a copy of the information returned on 9 June is attached at Appendix 2. This information is consistent with the information this committee received at its last meeting on the ‘financial envelope’.

17. Applying the Mayor’s guideline of a 3% increase in net revenue expenditure (NRE) to his 2006-07 published NRE of £2,449.7M would give a 2007-08 NRE envelope of £2,524.5M. This is reasonably consistent with the NRE provided to the Mayor on 9 June which identified the NRE as £2,524.5M (after incorporating additional savings required to balance the budget of £116.1M). Every 1% variation from the 3% guideline would add/deduct £24.5M.

18. Part of the budget process will be a review of the reserve requirements. This committee has received at its last meeting an overview of the Authority’s reserves to 2010 and this will form the basis of identification of any resources available to assist the budget submission in due course.

Joint meetings of the Finance and PPR Committees

19. In order to take forward better joint working it is proposed that two joint meetings of the Finance and Planning Performance and Review Committees takes place on 21 September and 9 November.

C. Race and equality impact

1. The Mayor’s budget guidance gives particular emphasis to equalities issues and delivering on equalities is seen as a pre-requisite for achieving sustainability.

2. After final decisions on the Mayor’s budget for 2007-08, a review will be carried out of sustainability, equalities and health promotion performance. The intention is to produce an integrated review of budget and sustainable development across the GLA Group, which will integrate the previously separate budget, and sustainable development and budget and equalities processes.

D. Financial implications

The Medium Term Financial Plan and Budget will provide approval for expenditure and income during 2007/08 and future years.

E. Background papers

• Mayors Budget Guidance 2007/08

F. Contact details

Report author: Ken Hunt, Treasurer, MPA

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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