Budget Report 2006-2007

Leader of the Council Cllr David Gillett

Presented to Full Council 1st March 2006

My Budget Speech this year is written under the shadow of great uncertainty over the future of Local Government and this authority. A White Paper is due to be published in the Summer which will probably contain proposals for a wholesale reconfiguration of Local Government. We don’t mind any sensible debate that can result in the improvement of services and value offered to the public but that debate must start from a basis of common sense and not arise from the pursuit of political ideology or motive.

The choice, when offered, will probably be between a county-wide unitary authority whereby everything would be controlled from Winchester with perhaps slimmed down borough council offices delivering locally as satellites or the borough would link up with one or more of our neighbours to form new unitary authorities. The word is that nothing will be forced upon us, in the same way that the Prime Minister promised that there would be public consultation prior to Police Forces being forced into amalgamations just like they have been in the North of England and Wales without any public consultation.

I am saddened and anxious. Saddened that with all the effort and pain we are going through to meet strict fiscal controls that yet more external interference is plaguing our efforts to keep our eyes on the ball to improve services and keep overheads to a manageable level. Anxious that once more everyone involved in local government are trying to do their best in a new atmosphere of uncertainty.

More and more we feel we have little control over our long term destiny. At one point the real test of democracy occurred at the ballot box, the future of this Borough could be affected by how the people voted, but that power is lessening annually as more power which affects the lives of our residents is controlled from the centre. The irony is that the Government are trying to raise the public’s involvement and interest in local democracy, their approach can best be described as tautology.

On the 5th December 2005 Phil Woolas MP, Minister of State for Local Government, said in reference to the future of local government finance "...Given the importance that we attach to stability and predictability of grant". While another part of the ODPM at the same time is making local government unstable and very unpredictable.

This is the atmosphere in which we are all battling to provide good affordable services to our beleaguered residents.

One way to counter the government’s current thoughts is through an increase in authority cross fertilisation. This is already happening at various levels and is already happening to a degree through the Local Area Agreement (LAA). The various partnership arrangements HBC have are working well and we are exploring ways to widen this work.

External partnerships and arrangements will feature more often on our radar, this development is unavoidable as we look closer at neighbouring authorities to pool our resources and skills. Back room amalgamations will be common place, they will have to be as it becomes more and more uneconomical for authorities to retain smaller units and the resources needed to support them. Local authorities cannot all be excellent at everything, this is where we need to support each other and share best practice and come up with more innovative ways of working.

One of the best recent examples of this joint working has been the work of the Partnership of Urban South Hampshire (PUSH). This is a unique partnership nationally and has been held up as a leading example of cross authority working, especially as there are different political colours involved, working jointly for the benefit of the sub region. So far the PUSH group has centred on areas of the Economy, Housing and Transport/Infrastructure and has produced the sub-regional strategy for feeding into the Regional Spatial Strategy which was signed off today by the Regional Assembly.

We are still looking at the focus of the sub-regional growth being centred on the two cities with Strategic Development areas being to the north east of Fareham and the east of Eastleigh. Havant will have its own share to deliver but we have negotiated the lowest housing growth in the sub-region with the exception of Gosport. The urban capacity study has been revisited and the priority for us will be brownfield and infilling sites. As I have stated previously - the whole tenet of the sub-regional strategy is that there will be no growth without infrastructure, this does not just mean roads or rail but all that is required to create sustainable communities.

At the heart of the strategy for the PUSH sub-region is the need for economic growth. A strong economy gives life to our communities without which they would perish. We are still running behind the south east region as a whole in terms of economic growth and the longer we leave taking positive action the further we will fall behind. There are three key issues which have been constraining economic growth within our borough, insufficient land allocations for new and expanding industry, issues around skills deficiencies and traditional manufacturing industries that have switched to overseas production.

Our Regeneration Strategy and the newly adopted Havant Borough District Wide Local Plan address these areas of deficiency through allowing new land releases to bring in newly emerging industries and comprehensive partnership arrangements for improving the skills base not just of our younger citizens but for all ages through life long learning programmes.

Already, there is increasing interest from the outside to invest in Havant. We currently have major developments progressing across the town and Liveability projects being delivered in every major centre. The new Havant Town Centre Development Framework is currently being consulted on and so far the response has been very encouraging. At the recent News Business Awards Havant businesses wiped the floor and we should be proud of all they do to raise our profile and the spin off for existing and new employment opportunities they provide. Companies such as Southern Electric affirming their desire to consolidate their base here underpins this growing and welcoming trend.

This is all good news but frustratingly we still have the highest unemployment across Hampshire at 2.7% equalled only by Portsmouth also at 2.7% and Southampton at 2.8%. It will take some years for the improving skills agenda to work into the system so we will still need a mix of employment types.

I used the word sustainability earlier and this brings one of the biggest challenges, we still have net out-commuting running at around 21% with approximately 11,381 travel to work journeys out of the borough each week day. The busiest commuting corridor is between us and Portsmouth; just under 6,000 Portsmouth residents work in our Borough and we have 12,643 residents working in Portsmouth. These are all unsustainable environmentally but we have to live in the real world. Our new policies are aimed at addressing this problem with the provision of new employment opportunities but obviously it is a problem we can never eliminate.

One infrastructure issue that still hangs over us as a hindrance for economic growth is the A3 bottleneck at Hindhead. On 1st December last there was a meeting between SEERA officers and the Department for Transport and the Highways Agency at which the issue was discussed at length. Funding of course is the key and various PFi options were considered but now seem to be dismissed by the Government. This leaves finance for the project to come from the Regional Funding Allocation.

The public inquiry on the tunnel ended in December with the report due out in the Spring but latest reports now indicate that the earliest date that work would commence is during 2009. Local MPs and Council Leaders are hoping to have a meeting with Alistair Darling, the Transport Minister, to press the case for bringing the start date forward.

All of these issues remind us just how much we are reliant on the sub-region and surrounding areas and I am grateful to those HBC officers who work in this field, much of which is unseen.

There is a huge frustration riding our backs at the moment. We are starting to see the first shoots of our economic aspirations breaking the surface, new optimism is starting to rise as economic activity is moving up a gear all around us but we sit here in the council chamber in the knowledge that we are taking decisions that will mean that some council employees will lose their jobs.

In deciding how these difficult choices are to be made we have used the Corporate Strategy and the council’s priorities of a Cleaner, Safer more Prosperous borough as the yard sticks. This is the first time we have really bitten the bullet to decide what we should slim down doing or cease altogether. The service reviews are only part way through and the remaining work will feed into the budgets for years two and three of the target set for Management Team.

In the past, to meet government savings requirements, we have salami sliced budgets across the authority in response to Best Value and the Gershon Report. This followed reorganisation which took place when our Managing Director joined us. The reviews we are currently and painfully working through is an entirely different process to that which has gone before.

Early last year we could see the financial sword of Damocles being raised above us and we took the very difficult but necessary decision to instruct Management Team to save 10% off our operating costs over 3 years. This was partly due to the knowledge that capping would be imposed and the fact that the public have had enough of high percentage Council Tax rises in addition to the unswerving knowledge that the government will be supporting us less and less year on year, in fact they have already announced a grant increase for 2007/8 of just 1.6%.

Assuming that basic costs such as salaries will increase somewhere between 2 and 3% and the already known increases in fuel of up to 22% and put aside cost increases of other services and supplies we rely on leaves one in no doubt that we will be up the creek without a paddle. This is why we are having to make such difficult decisions. Comparing our financial position with some of our sister authorities leaves us in no doubt that we are considerably the poorer relative.

There are three major reasons as to why we are in such a poor position. Since 1994 Government Grant has reduced by £1.6 million compared to the rate of inflation. Secondly, due to lack of foresight and insufficient vision over many years this council has seen fit to sell off assets to support capital programmes without re-investing the proceeds in income generating investments and Thirdly Council Tax increases of -3.4% in 1997/8 and -2.3% in 1998/9 have cost this council dearly. In fact had we been able to increase the Council Tax by the rate of inflation only in those two years we would now be better off to the tune of nearly £600,000 per annum.

Ironically, Havant's share of Council Tax is relatively low. If council support the budget proposals from the Executive a Band D resident will pay £169.38 which equates to £3.26 per week which quite frankly is good value for the 200 different services we provide. Obviously, the average resident does not use all of these services but they all have refuse/recycling collections weekly, the streets swept, parks provided and play facilities for their children, overall I believe this is good value.

The chart on the following page shows how the proposed Council Tax is calculated and gives details of the charges levied by the Police, Fire and rescue and County Council. You will see from this that a Band D property will pay £1,253.07 in total, a weekly cost of £24.10. As I stated previously, Havant’s share of this is £3.26. The funding formula for government grant has changed, previously I had a grasp on it but please don’t ask me to explain how it is calculated now, I can’t keep up.

Follow this link to the Council Tax calculation chart.

The following table shows Reserves and Developers Contributions. The reserves are effectively our trading balances. Before anyone gets excited and thinks we are better off than we have been letting on let me explain that HBC collects Council Tax for all the precepting authorities and forwards it to them on a monthly basis. No matter how successful we are in collecting the money from our residents and businesses we still have to pay the others the amount they are expecting.

RESERVES AND DEVELOPERS CONTRIBUTIONS	31^st March2005 Actual	31^st March 2006Estimate	31^st March 2007Estimate

Revenue Reserves	£1,415,000	£1,400,000	£1,500,000
Insurance Reserve	£136,000	£180,000	£200,000
Capital Reserves and Receipts	£1,424,000	£3,000,000	£1,600,000
Contributions from Developers for specific purposes	£540,000	£720,000	£500,000
TOTAL RESERVES AT END OF YEAR	£3,515,000	£5,300,000	£3,800,000

Developer’s contributions are monies received under arrangements such as 106 agreements and are held pending commencement of the various works. The insurance reserve is held to settle small claims against the council. It is more cost effective for us to have a modest fund and settle claims directly than to have separate insurance the premiums for which would be prohibitive. This of course is separate from other insurances we hold for larger claims such as employers and public liability.

The following table gives a breakdown of how government grant has changed over the years. I have attempted to gain a better understanding of the huge variations year on year with the Head of Resources and it would seem that you cannot easily compare one year with another as different annual grants contain different components and have had varied formulas for calculating net grant.

For example the grant for 2006/7 appears to increase by 11.5%, if only that were the case. In fact this contains the grant to cover the cost of introducing concessionary travel which kicks in on April 1st. We have yet to understand exactly how that will affect our budget situation, as negotiations with bus operators over costs, which are being run on a county-wide basis, have not yet been completed. During the nineties some of the Council Tax level increases incorporated a component hangover from the Community Charge years which distort the statistics. Even this years increase in the budget column seems a large increase on 2005/6, despite our efforts to reign in our costs this higher figure reflects the increased turnover cost through the introduction of concessionary travel.

I will though make one point which is significant. Had we set Council Tax levels to the capping limits during the mid to late nineties we would be much better off now. I am led to believe that it was for political expediency but in the long run it ill served the borough.

Follow this link to the Government Grant chart

I would now like to briefly mention the Capital Programme. We have struggled for some time to deliver the long shopping list on the capital programme. The council’s own buildings estate needs constant investment and maintenance and the list of desirable projects across the borough to meet a whole host of aspirational and in some cases essential works only seems to lengthen.

We have the proceeds from the Potash development coming in soon and much of that is earmarked for essential maintenance work and the rest of it is over subscribed in the capital programme. However, I want us to revisit how the programme can be reviewed. Earlier I was critical of a lack of reinvesting our liquidated assets and tough though it will be we need to break the pattern of grasping all the capital we can for various pet projects. Churchill once said "many mistakes , no doubt we have made, for success is the result of making mistakes and learning from experience" we must NOT repeat the mistakes of the past. We have to look at innovative ways to generate real income from astutely invested capital.

Speaking of assets there has been much talk and speculation over the future of the Horizon Leisure Trust in recent months. There are several causes for this but one key issue has been a lack of communication, this lack has led to a breakdown in trust and understanding, this goes both ways. In recent weeks I have taken a direct approach by personally heading a new initiative of face to face meetings along with Councillor Briggs and senior representatives of the Trust.

Through these meetings we have been able to gain considerable understanding of the issues and concerns and we are building bridges to create a positive and co-operative atmosphere. Havant Borough Council is fully supportive of Horizon Leisure Trust and we are very appreciative of the efforts and contribution the Trustees have put into the organisation for several years. We are mindful of their personal concerns and are taking steps to allay these.

Our residents need the sporting and leisure facilities Horizon provides and I can assure everyone that we will not take any precipitive action that will force closure of the centres. Horizon is a key partner in delivering the social wellbeing agenda which we are all committed to, but like the Council, it needs to ensure that what it delivers is value for money for the taxpayer.

The major challenge for both Horizon and HBC is how we will deliver good value and cost effective facilities in the 21st century. The council are currently reviewing our Leisure Strategy for the next 10 years and more. This covers all forms of leisure and sport and goes well beyond what we currently provide under the Horizon flag. The shape and method for delivering these aspirations is still being developed and we are looking at how we can fully engage with the public in this debate. They are our customers, they are our users and we need to ensure that our long term strategy reflects their views and will be fit for purpose and deliverable.

It is widely known that we have been considering the long term future of the civic site and work is underway behind the scenes to start this process. This work will consider the entire campus, which includes the Leisure Centre and car parks. It will be an exciting opportunity to consider redeveloping our leisure facilities and reassess the facilities needed for the civic offices. More members of the public go through the doors of the leisure centre than they do the civic offices and we will need to be totally open minded as to how we approach this work. Our target is for these changes to happen in 5 to 10 years time and by this time next year I hope the work will have moved on sufficiently for us all to be having a very inclusive debate. I am confident that the emerging Leisure Strategy will be able to inform that debate also.

During the next few years the face of this Borough will look very different. The key Liveability projects will have been delivered making tangible environmental improvements in several areas, the major redevelopments currently ongoing will be completed. Developments such as Solent Road, Potash Terrace, The Bus Station, the Langstone Garage Site, the Texaco site next to the multi story car park, the Proctor and Gamble site in addition there will be the commercial developments at the old depot site and Dunsbury Hill.

There is a real tangible shift out there. It is a shift in optimism, and we have actively set the cornerstone for a revitalised borough. We have been taking tough decisions, decisions that we know will not be popular. The most significant decision we have taken is the switch to Alternative Weekly Collections (AWC). We knew it would be difficult but we also knew we couldn’t avoid it. Having seen for a couple of years the dramas unfolding in the local press as neighbouring authorities were bludgeoned for introducing AWC the prospect of us going down the same road was challenging.

However, we were determined not to make the same mistakes as the others and spent quite a while visiting them and learning from them, ditching what was bad, and grasping what was good. In the event, the introduction went relatively smoothly with the number of formal complaints being unbelievably small at only a handful. I believe that our success has been down to the sheer professionalism of those staff involved and the sensible and logical way we went about it.

As we enter phase two we have already learnt from the few problems experienced during the roll out of phase one. We are changing a couple of aspects of the early communications and tightening up some procedures so I am confident that the level of service we will provide will exceed that of the first tranch. Our recycling figures are rapidly rising and we should hit our target of 34% by next year.

Members, these are both exciting and challenging times for all of us. There are uncertainties for individuals in this building which is bound to affect morale and we are grateful to those members of staff who have handled these difficulties with dignity and stoicism, those who will be leaving also include some who are taking early retirement and whatever the reason for moving on the council thanks you all sincerely and wishes you all the best in the future.

Colleagues, there are many other issues I could stand here and talk about all evening, there is so much going on around us that frankly I cannot mention it all. There is sadness, uncertainty and challenge, but we have to look forward and in looking forward we can see our efforts bearing fruit. Real positive change is in our grasp and we must hold firm to the course we have set during the last few years. This Borough is resourceful and resilient and the Council will do all it can to press home the opportunities and openings that present themselves as we all strive to make this an even better place to live, work and play.

Follow this link to the Hampshire comparison chart

Members, I commend this budget to you.

David Gillett

Leader of the Council 1st March 2006.

Havant Borough Council, Civic Centre Road, Havant, Hampshire PO9 2AX