There were no apologies for absence.

There were no disclosures of interest.

The minutes of the meeting held on 27 September 2010 were submitted and signed.

The Head of Strategic Finance presented his report on the Comprehensive Spending Review, 20th October 2010 and explained that Watford Borough Council's funding was comprised roughly of 50% from Central Government and 50% from Council Tax revenues.

The Head of Strategic Finance advised that there would be a reduction in Government funding of between 26% and 28% over the following four years. He pointed out that District Councils' funding would in effect be reduced by at least 30% as their funding did not include the Support Grant which provided an additional £1 billion for social care.

The Head of Strategic Finance noted that the Medium Term Financial Strategy (MTFS) currently included yearly reductions which would equate to 10% on the previous year's budget producing a cumulative reduction of 27% over three years. The MTFS had not allowed for an additional grant were Council Tax to be ‘frozen'. He advised that in this case an additional grant to the council of £200,000 would be received as ‘compensation' at least for the next year and possibly for the three succeeding years—but that needed to be confirmed. He affirmed that the MTFS was still very relevant and close to the reality of what would be required over the following four years.

He reminded the Panel that, as there was £2.4 million available in reserves, the Council had a degree of ‘leeway' and could make the savings at its own pace during that four year period.

Replying to the suggestion of a Member, the Head of Strategic Finance advised that the full use of reserves was not a viable option but that reserves could help to cover immediate difficulties. He added that options for the use of reserves would depend on the final RSG settlement to be announced in December.

One Member expressed the view that the use of reserves was not a sustainable option. He advised that reserves should not be used to support the core budget but should be used for one-off or time-limited expenditure.

The meeting then considered the Revised Medium Term Financial Strategy (MTFS) in detail.

A Member noted that for 2011/12, there would be Government funding available in order that councils could refrain from increasing Council Tax, (see above). The Member considered that this would compel the Council to ‘freeze' this source of revenue and that it risked giving residents the impression that this would be the case in succeeding years. He suggested that the MTFS should include increases in Council Tax consistent with policy at or just below inflation. He advised, and the Panel agreed, that this should be a recommendation to Cabinet.

The Chair agreed that residents would be displeased were Council Tax to be increased when they had assumed that this would not occur. He advised that the exact wording should be checked in order that residents should not be given the impression that Council Tax levels were either permanently fixed or could be decided by succeeding administrations. He suggested that this be a recommendation to Cabinet.

One Member noted that the MTFS was speculative as it was not possible to predict future levels of inflation.

Another Member suggested that it would be wise to show some level of inflation in the costs and that this would have an impact. He advised that a zero based increase in Council Tax should not be assumed for ever and a day.

Replying to another Member, the Head of Strategic Finance advised on pay increments. He explained that following the pay and grading exercise in 2009, some members of staff had progressed to the next grade, entering at the bottom of the scale. Yearly increments were thus assured. In addition, those staff who were paid less than £21,000 could receive an annual £250.00 pay award and this has been included within the MTFS at this time.

With regard to utility costs, he advised that there would be a probable15% increase during 2011/2012. He reminded members that the proposed V.A.T. increase would be reflected within the national inflation figure but was immaterial to local authorities as it could be recovered. To some extent, therefore, inflation statistics would be over stated.

A Member noted that Housing Benefit subsidy was only included for one year and asked why this was so.

The Head of Strategic Finance said that the level of provision for claw back for the 2010/2011 had been reduced by £180,000 but that this could not be repeated in 2011/2012 and base estimates needed to be increased accordingly...

In reply to a Member, the Head of Strategic Finance noted that the proposed ceiling to be placed on Housing Benefit would be likely to result in an influx of people to those authorities surrounding inner London and could put pressure on Watford's budget for homelessness.

The Head of Strategic Finance advised that the MTFS would be reviewed for Budget Panel and Cabinet in December and would provide options around future levels of Council Tax.

The Panel received a report of the Head of Strategic Finance and noted that savings of £3.8 million were needed over a three to four year period. This figure could be reduced were Council Tax to be increased. Proposals on how this could be achieved would be recommended to Cabinet on 13 December 2010. Recommendations on how savings could be achieved were being formulated by officers and would subsequently be considered by Budget Panel and Cabinet in December.

The Head of Strategic Finance suggested that the Panel could help shape these proposals by considering how service efficiencies should be made.

The Panel discussed savings made through the Shared Services initiative.

The Executive Director advised that consideration had been given to possible savings in certain areas and that data would be available in December 2010.

The Panel discussed the implications of reducing the standards in services across the Borough.

The Executive Director advised that reductions would have different outcomes for each area of service. She noted that it was important to prioritise those services which were most important for the community as a whole. Some would remain as ‘gold' standards but some would inevitably reduce to ‘silver' or, in some cases, ‘bronze'.

The Chair noted that all service areas could make some savings but that a £3.8 million saving would seriously impact on services across the Borough.

One Member suggested that all Heads of Service provide data on how their service could operate more efficiently.

The Head of Strategic Finance advised that this would be an opportunity for the Panel to indicate what they hoped officers would look at in terms of savings.