The March 2017 Budget and its impact on education

The Government’s Budget is one of those announcements where people take a sharp intake of breath in anticipation of the pain it will inflict. We all know those who smoke and drink will from the announcement pay more.

So how will this Budget affect education and children’s social care? The Chancellor has announced a one-off fund of £320m will be made for the creation of 140 new free schools, 30 of which form part of the 500 already pledged to be created by 2020. These new free schools could in areas where they are not need, whereas this money could be better spent on improving/expanding existing schools that are in dire need of money.

This announcement of new schools is where the Government introduces its plan for expanding Grammar School or providing new Grammar Schools – or as they should be called selective education (which does not actually improve outcomes, especially for the most vulnerable or on Free School Meals).

Another worry is the Government has also said that free school transport will be extended to all children who receive free school meals and who attend a selective school. Yet they have not said if this extra costs will be met by the Government. I expect, in reality, it will be the local authority who will have to find the money to pay for this. How will this work? What happens if the nearest selective school is many miles away and is not their nearest designated school? That impacts on Admission as well as Home to School Policy

There will be a £216m investment to rebuild and refurbish existing schools. Seems a lot of money, but it is not; as to put it in perspective and show how little it will really mean for schools, Cornwall has a  school maintenance backlog that tops over £90m because of historic under-funding. So £216m million is not going to go far split between England and Wales’ local authorities.

In an interesting move, and what  could potentially be a good idea, the Government has provided an extra £500m for vocational and technical education, as an alternative to A-levels (T-levels). This is in a bid to train more skilled workers and boost the economy. However, this is not a new idea and has been around under a different name.

Maintenance loans will be made available for students pursuing technical education at
higher levels. Though there are no real details on how this will be run.

There is news for tax-free childcare for children under 12 providing up to £2,000 a year for each child: and from September 2017 the free childcare offer will double from 15 to 30 hours a week for working families with 3 and 4 year olds worth up to £5,000 for each child. The latter has already been announced and was subject to a campaign in Cornwall to change the funding amounts.

Yet there was no news on the Governments Funding Formula….

The Chancellors Budget, and its impact on Cornwall

The dust has settled on the Chancellors Budget announcements on Wednesday. As always, there are a lot of headlines and little detail when it is announced. We know Local Government was not directly targeted this time around, which is welcomed.

We also know Cornwall got a few things from the Budget which I blogged about HERE. The Hall for Cornwall also received £2m in the announcements. But what else was in that Budget?

Small businesses have been given a welcoming hand with the Government intending to permanently double the Small Business Rate Relief from 50% to 100% the threshold will also be raised to £15,000. Those businesses with a rateable value of £12,000 (around 600,000 nationally) will pay no business rates from April 2017. There will be a tapered relief on properties with a rateable value between £12,000 and £15,000.

The Government will also increase the threshold for the standard business rates multiplier to a rateable value of £51,000 (currently £18,000). And from 2020 the annual business rates uprating will switch from RPI to the lower CPI.

Whilst very good news for those small businesses, all of these measures will have the impact of reducing local authority funding as we move towards the 100% Business Rate Retention system. The Government has ‘indicated’ that it will compensate for losses as a result of changes announced in the budget, although the detail of that promise is yet to be determined. This does worry me, as with the reduction of our core grant from government, the business rates were set to replace that grant.

Those in the lower wage spectrum, the personal tax allowance will rise to £11,000 from he current £10,600 in April 2016. It will be increased further to £11,500 in April 2017. The higher rate threshold will increase from £42,385 to £43,000 this year and then to £45,000 in April 2017.

The main rate of Corporation tax will be cut to from 20% to 17% in April 2020. Commercial property stamp duty will be reformed from midnight Wednesday in the same way that residential stamp duty was previously changed.

We will pay more for our insurances with a rise – from 1st October 2016 – of 0.5%, from 9.5% to 10%, with the additional proceeds being diverted to flood relief programmes. This tax was already increased last year, from 6% to 9.5%. Flood defence spending will be increased by £700m as a result of this measure.

Those owning a car will not face a hike in fuel prices as the expected rise in fuel duty will be frozen,

Those liking a tipple or two duty on beer, cider and whisky will be frozen. Sadly, wine and other alcohol will see duties rise in line with inflation from 21st March 2016. Smokers will pay more duty on tobacco and has been increased from 6pm Wednesday.

The government is setting out how £50m from the Pothole Action Fund will be allocated across England in 2016-17. It said this allow local authorities to fill nearly a million potholes. £8m is being allocated to the South West. The South West is a big geographical area, so I expect Cornwall’s share will be a few hundred thousand, rather than millions.

A package of £115m will support those who are homeless and to reduce rough sleeping. This will pay for 2,000 places to live for those who need to move from emergency hostels and refuges, along with other homelessness prevention schemes.

The government will launch the Starter Homes Land Fund prospectus today. This prospectus invites Local Authorities to access the £1.2bn of funding to remediate brownfield land to deliver Starter Homes.

The budget also announced £19m funding for community-led housing schemes in areas most impacted by holiday homes, using Stamp Duty Land Tax revenue raised from the higher rates for purchases of additional properties.

From April 2017, 4,000 Armed Forces veterans will be able to keep payments from their war pensions rather than using them to pay for social care.

And there you have it, a simple (I hope) interpretation of the Budget. Thanks to the finance people for looking into the detail to make sure there were no hidden surprises!

I have left out a few items, like the Sugar Tax for another blog.

 

 

 

 

Cornwall Council, its reserves and why it needs them

When it comes to setting a budget the issue of reserves comes up. It is used as a political football between the political groups at Cornwall Council and even the PM entered the foray by saying Cornwall Council is sitting on £200m worth of reserves, yet is cutting services.

A face value, it does seem an awful lot of money sitting in the bank. However, face value is not the full story as I will explain.

Cornwall Council currently spend over £1bn each year delivering services for people in Cornwall.  The range of services provided by the Council is staggering and includes: caring for vulnerable adults and children, maintaining Cornwall’s schools, repairing our roads, providing fire and rescue services and supporting the local economy to create jobs.

The Council receives funding for these activities through a mixture of government grants, business rates, council tax and, where appropriate, from fees and charges.

It is no secret that Cornwall Council has since 2010 faced considerable financial challenges as a result of Government’s programme of austerity. From to 2010 to 2013 the Council has to save a staggering £170m. This was painful, but then the Government hit the Council (and other LA’s throughout the land) a further £196m worth of cuts. This is on top of increased demand.

The Council has, and rightly so set aside money in reserves.  Reserves are an essential part of good financial management, enabling the Council to cope with unforeseen circumstances and spread the cost of paying our bills.

Around £40m of our reserves are actually held on behalf of partners and schools, which means the Council is not allowed to use them.  Others are “earmarked” for specific purposes.  These include paying for future building projects, such as new schools or roads, settling outstanding insurance claims or meeting redundancy costs for any further restructuring of the authority.

These are all costs the Council knows we will need to meet in the future and setting money aside now means we will not need to find it all at once when we need to pay it.  This is particularly the case with our Private Finance Initiatives (PFI), where the Council puts money away to fund the long-term costs of maintaining and refurbishing our PFI schools and fire stations. We currently hold £118m in earmarked reserves, £74m of which is for PFI.

This means we hold just £41m of un-allocated money within our General Fund reserve – less than 5% of our annual spend.  These are the only usable reserves which the Council can call on in a sudden and unforeseen emergency such as flooding. Of course, all the money we hold in reserves originally came from you, the taxpayer and it is important that we maintain the right level of reserves: too little and we will not be able to manage financial shocks and sustained financial challenges; too much and we will fail to make best use of our resources in the delivery of key services.

How much a Council should hold in reserves, there is no set formula for deciding what level of reserves is appropriate. Councillors are responsible for ensuring we have a sensible level of reserves.  It is clear that there are still some tough times ahead, but because of the money we have set aside in reserves, the Council is well positioned to face the financial challenges.

I hope this makes sense?

Cornwall Council’s Cabinet decides its budget for the next four-years

The November meeting of Cornwall Council’s Cabinet met to discuss the Council’s budget for not only next year, but for the next four years too. As I have said before, you cannot lose one-third of the Council’s budget – £196m – and it not affect services. The budget for the next four-years has taken around 5 months to put together and has been a very difficult task due to the sheer scale of having to deal with such a huge reduction.

Before I go on let’s be clear on the reason Cornwall Council – like so many other council’s across the land – are having to set budgets like we are is because of the brutality of the Government’s cuts to council funding. As I said before, how would you deal with having to lose one-third of you household or business income?

It has been a very difficult task with a lot of difficult choices, some too difficult and have not been included. No-one in the Cabinet or the Directors wants to set this difficult budget. But we have to. As to delay or not tackle the issue of less money will result in more money having to be found later. That would result in more service cuts. Even though the Cabinet had to find massive savings, we still wanted to protect certain areas. These areas are services to the vulnerable, roads and the bus network. Even though these areas have been protected, they have not escaped reductions or cuts.

The Cabinet have put together this budget, but all councillors have had the ability to give their views on the budget by means of the PAC process, or put in simpler terms a series of committee meetings. The public too have had their chance to have a say by a series of public consultations. The report on the budget and the business plan is available HERE.

During yesterday’s debate, each Cabinet Member talked about their individual portfolios and the impact this budget will have on their portfolio. Children’s Services will have a 23% reduction in cash terms. This will result in a whole host of reductions or changes to how services are provided. It is hard to list them all in this blog post, but clicking on this LINK and scrolling down to CSF will show you the impact this budget will have on Children’s Services.

After each Cabinet Member had their say, it was the turn of the backbenchers to give their views. These views ranged from against the budget to what choice do we have and but support.  After those who wanted to say something did,  a vote was taken by the Cabinet who unanimously approved the budget. This is not the end of the process, as even though the Cabinet approved the budget, it is the full membership of the Council who have the final say. This debate will take place on the 25th November. It is only at this meeting and vote will we know if we have a four-year budget.

The reality of Cornwall Council’s Budget for 2015

It is no secret Cornwall Council is facing a large hole in its funding due to the reduction in funding from Government, increase demand and little scope to raise revenue via taxation. In total, the Council has to find roughly £196m in savings. Out of this total, around £40m has already been factored in from previous budget savings, which leaves £156m to find. To put it perspective that if you run a business or a household, the savings you need to make would be equal to one-third of your household / business income. Just think for a moment if you had to do this.

budget1

With such a large savings target to find and on top of the £170m savings found between 2010/14, the way Cornwall Council operates and delivers services will change. The previous savings in 2010/14 protected frontline services with little impact. However, this time frontline services will not escape and will be affected by the budget reductions. No-one wants to do this, but there is little choice open to the Council. We have  sought to protect services that we feel important. These include services to the most vulnerable, transport and roads. Even though these areas are protected, they will still see some reduction.

The draft  budget proposals included corporate savings and efficiencies of £64m (41%) this will include jobs and buildings. The Council has already heavily reduced it office space over the last four years from over 180 buildings to around 80, and the plan is to reduce this again by roughly half. The painful bit will see roughly £52m (33%) taken out of front line services. A further £27m (18%) will come from income and commercialisation of services. However, a sting in the tail is £13m in savings still needs to be found for the budget to add up. This is made up of areas not yet identified and the Council not receiving as much income from the Better Care Fund.

The draft budget has factored in a 1.97% Council Tax rise. This will equate to a 48p per week rise on a Band D property. Cornwall Council (or any other primary LA) cannot raise Council Tax above 2% (not even a inflationary rise) without the need of a public referendum. To hold a referendum it would cost the Council roughly £1m. This figure is based on the vote being a single vote and not held at the same time as another election.

Lets say a referendum was held and a raise was supported. A 6% raise would bring in an extra £9.068m. Now this would still mean there would be a reduction in services, but these reductions could be a lot less painful if more funding would come in. There is a feeling within the Council that a referendum could be held at the same time as next years general election. This would make the referendum a lot cheaper. The downside to this would mean most if not all of the political parties would campaign against this. Though in my view, we should still ask the question of should we raise Council Tax higher than 2%. Whether a Council Tax referendum is held or not will be up to the Councillors who would vote on holding a referendum or not, and this vote has yet to take place.

As this is a draft budget and nothing will be voted upon till November, the Cabinet and the Council are holding a series of public events to hear what the public think of the proposals and give their views on any other area which could be taken into account. If you want to attend one of these events, click HERE to find the nearest event to you. For Porthleven, Helston and the Lizard, this meeting will take place on Tuesday 28th October at Helston Community College, starting at 6pm.

It is your time to give your view. You can give you view by completing this online form HERE and the draft budget documentation is HERE

 

Cornwall Council’s Budget and £196 million to save

For the last few months, the Cabinet have been working on draft proposals for the 2015 till 2018/19 budget. The message has been clear from the Council in that it will have to find a huge amount of savings. The eye-watering amount of £196m will have to be found from the Council’s budget in the next four-years. This is on top of the £170m previously saved. I have said it before, and I will say it again, services provided by the Council will change, and in some cases stop.

your-budget-2014

A £196m is an awful lot of money to have to save, and a lot of work has already been done to reach this target. Some of the saving to date have been achieved by a new agreement with staff on pay and a large-scale restructuring of senior management. Even with these and other saving already taken into account, the Council still has to find a further £156m. The reason for the saving lays firmly at the feet of the Government. As they have cut the grants to the Council to the tune of £89m in cash terms. When you add in inflation, demographic changes and demand, you get the final saving figure.

However, the Council would not be in such a difficult position if the Government treated Cornwall the same as the average urban council. If Cornwall Council was treated equally, then the Council would receive and extra £48m per year. It still would require savings, but not at the level the Council is now facing.

In the past budget reduction have been delivered pro-rata across the directorates. This method of ‘salami slicing’ cannot continue as we cannot afford to cut equal chunks off every service.  This time the Cabinet with information and intelligence gathered have produced a set of priorities for this budget. These areas were seen an important and have been protected from the worst areas of cuts.

The priorities are:

  • Services to the most vulnerable in society
  • the public transport budget
  • road repairs and maintenance

Of course some of the proposals contained within the budget will not be popular. This is why since the launch of the draft budget yesterday, the Cabinet and the Council wants to hear your views and suggestions. The message is clear, we are listening.  There will be a series of 20 public events held for the public to give their views. You can even give your views via an online form HERE. This budget will also go through the full democratic process and nothing will be decided until the budget is debated and voted on in November.  Of course before you give your views and suggestions, you will want to read the draft budget. This can be found HERE.

In a break from ‘tradition’ all draft budget papers are public, there are no ‘pink papers’ (restricted) as everything is out in the open for the public, staff, and media to see. This is important, as this Cabinet has always prided itself on being open and transparent in its business and by putting all the documentation out in the public arena will also show the difficult task ahead.

It is now your turn to give your views….

Cornwall Council passes a budget with a 1.97%* rise in Council Tax

For the first time in nearly four years the Cornwall Council element of the Council Tax will rise. For those who do not know the Council Tax is made up of three elements – Cornwall Council, town and parish precepts and Devon and Cornwall Police precept.

For 2014/15 period for the Devon and Cornwall Police precept will rise £166.16 (1.99%) per year for a Band D property. For town and parish councils, the average increase will be £77.30 (10.86%) per year. Again on a Band D. The Cornwall Council element is 1,512.38 (1.97%) per year on a Band D.

When you add it all together, the increase for a Band D property for 2014/15 is £35.32 per year, or 67p per week. For the eagle-eyed readers, the actual increase is 2.39%*, but this includes all the elements of the Council Tax with two elements out of the control of Cornwall Council.

Some would argue to protect service, there should be a bigger rise. However, the Government has restricted primary LAs from rising their element of the Council Tax no more than 2%. Anything over, will require an expensive referendum. So in a true sense, the 2% max is a cap imposed by Government.

After a shorter than expected debate, and no alternative budget from the Tories, – though one was submitted, but then pulled by their Group Leader yesterday, or anyone else for the matter. A vote was taken, and the budget was passed 71 for, 35 against, with one absenstion.

Full budget documentation HERE

Council Tax set to rise by 1.97%

Yesterday, Cornwall Council’s Cabinet approved the budget for 2014/15. This is subject to the final approval of Full Council, who have the final say on the budget.  Contained within the overall budget, is a recommendation for a rise in Council Tax of 1.97%. This however, is only one possible increase in the Council Tax bill.  As the Council Tax bill is made up of three parts: Cornwall Council, the parish/town council precept and Devon and Cornwall Police. This will more than likely result in a higher increase in bills than 1.97%.

No-one likes to raise tax unnecessary, but in Cornwall Council’s case, it has little option. This is due to the stinging cuts to the Councils grant, and with the added restraint of a cap on the limit Council Tax can go up without a referendum. It is a bleak picture, as the Council is having to find £196m in savings on top of the £170m reduction in the last four years.

The big question is how do we deal with the cuts and at the same time deal with a greater demand on our services? And for that question to be answered, we need the public to engage – and vice-versa – with the Council on how best we do that. This process of better engagement started this year, with more public consultation events than ever before, and by using different ways of engaging with people. Like You Choose. It is paramount we as a Cabinet and Council must build on this for the following years budget setting.

 

 

Cornwall, the Council and the Living Wage

Both nationally and locally in Cornwall there has been a lot of talk on the Living Wage. This is a wage rate set by The Centre for Social Policy at Loughborough University to ensure a basic by acceptable standard of living. It is currently set at £8.55 in London and £7.45 for the rest of the UK. This would pay someone working a 37 hour week a gross annual income of approximately £14,372.

The Living Wage is increasingly seen as an important policy tool in addressing the issue of low pay. In local government of over 400 councils in England and Wales, 82 are already paying or have committed to pay their employees the Living Wage. In addition all 32 councils in Scotland pay their employees the Living Wage. The question for the Council, is should Cornwall Council be a Living Wage employer? The short answer is yes; with the long answer more complex, as introducing the Living Wage will have an impact on other areas within the Council.

Currently, approximately 25% of the Council’s workforce is paid less than the Living Wage, the majority in schools. Or to put it more positively 75% are paid the Living Wage. I will give greater detail later.

First let’s look at Cornwall’s average earnings. This has increased from a little over £13,000 a year in 2004 to just over £17,000 in 2012. However, it would be a mistake to think that the whole of the Cornwall economy is low waged. Estimated analysis of 2010 Eurostat indicators show a wide divergence of average earnings linked to sector: from around £5800 p.a in ‘legal and accounting activities’ to £97,000 p.a in ‘scientific research and development’. Note that Eurostat data does not include Public Sector pay.

The Council has a good understanding of these pressures on individuals although they will inevitably vary in terms of household formation and pressures. Analysis by the Council’s Community Intelligence team indicates that average (band D) Council Tax costs, together with mortgage housing and utilities would require an annual income of £18,141 (not including food and clothing).

If we look at the wider Cornish Community, the figures on wages are far more worrying, as 20% of full-time resident workers earn less than £7.53 per hour (gross) and for part-time workers this is nearer 50%. This has an impact on welfare claims as 14.9% of the working age population in Cornwall receives DWP administered benefits (a ballpark cost of around £4m with Cornwall accounting for c1% of the national population) and 26.1% of households claim council tax or housing benefits (2012).

Getting back to Cornwall Council and the Living Wage; the council has 3131 contracts on the Council’s main pay structure paid less than the Living Wage. 2866 of these contracts are in Cornwall Council maintained schools (where the Council is the employer and has equal pay responsibilities). 265 of the contracts are non schools. 3131 represents approximately 25% of the work force. For me, as the Portfolio Holder for Children and Young People it is worrying that my portfolio is one of the biggest non-payers of the Living Wage. If there was a Living Wage the increase would have to be found from the Dedicated Schools Grant (DSG). However, I will be asking senior officers as to what can realistically be done to address the issue of low pay.

If Cornwall Council did decide to introduce the Living Wage, it would cost the Council £1.04m per year. This extra money would have to be found either by reductions in services, staffing levels or by Council Tax. Roughly raising Council Tax by 1% results in an extra £2m. The Government has capped Council Tax increases by 2% before a referendum is required. And as we all know, the Council is under extreme pressure with its budget with having to find £196m in saving in the next five years. So by introducing the Living Wage at the Council, it could have a far greater impact on the services the Council provides.

I will leave you with a question. If Cornwall Council were to introduce the Living Wage, should the Council insist that all contract with outside organisation and providers pay the Living Wage too? Note, that the RCHT not intending to implement the living wage and there has been no consultation with industry leaders in Cornwall.

*credit to Dawn and her team for much of the detailed information.

Cornwall Council releases its draft budget plans for 2014/15 to the public

The message has been clear, Cornwall Council is facing a difficult time in dealing with the reduction of funding and providing services. And now Cornwall Council has released its draft budget proposals after the PAC process has been completed. The PAC’s looking into each service area and made their recommendations.

The link to the information is HERE

Reading through this information will show there will be some difficult service re-alignments and in some cases complete cuts of services. This budget is just the tip of the proverbial iceberg of cuts, as in the next five years £196m will have to be found with up to £50m found in the 2015/16 period. Of course this could change, if there is a change of heart from the Government. Which if I was a betting man, I have more chance of picking the next three winners of the Grand National.

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