Paper B

PAPER B
Purpose: For Decision
Committee
EXECUTIVE
Date
THURSDAY, 13 OCTOBER 2016
Title
MEDIUM TERM FINANCIAL STRATEGY 2016/17 to

2020/21 AND EFFICIENCY PLAN
Report to
LEADER
AND
EXECUTIVE
MEMBER
RESOURCES, ORGANISATIONAL CHANGE
CHILDREN'S SERVICES
FOR
AND
EXECUTIVE SUMMARY
1.
These are unprecedented times in the history of Local Government funding.

The global economic downturn and subsequent recovery has had a significant
detrimental effect on the public finances nationally and the Government has
responded by attempting to stimulate economic growth but at the same time
reducing public spending and therefore funding to Local Authorities.
2.
Reduced funding and increased costs in essential care Services, which

consume the largest proportion of the Council's controllable spend (58%), has
required the Council to make over 60m in savings over the past 5 years.
Looking forward across the next 4 Year period, a further 24m of savings
through either service reduction, income generation or improved funding will
be required in order to balance the budget over the medium term.
3.
The financial challenge is the single biggest risk to sustainable public services
on the Island. Accordingly, the Council needs to resolutely maximise the
deployment of the resources that it does have (Revenue, Capital, Property
and Staff) towards driving additional income / funding and cost savings to
secure Council Services for the future.
4.
The Medium Term Financial Strategy proposed for approval sets the Council's
Savings Requirements for both the current year and the next financial year as
well as forecasting indicative Savings Requirements for a further 3 years into
the future to 2020/21. Accompanying these savings requirements is a
detailed financial plan to respond to the financial challenge plus proposals to
strengthen the Council's financial framework in order to support its delivery.
B-1
5.
The Medium Term Financial Strategy and underpinning Financial Framework

have been designed as a cohesive package of measures rather than a menu
of options. In summary terms it aims to:
Reduce the overall quantum of savings required over the short and
medium term - to "buy time" to allow the opportunity for growth in the
economy to take effect and for the Government's "Fairer Funding" review
to be implemented
"Smooth out" the required savings such that the incidence of "front
loading" of the savings is minimised to enable the Council to maximise
its operational capacity to implement initiatives at pace which are aimed
at increasing income / funding and reducing costs
Improve the overall financial resilience of the Council by removing non

deliverable approved savings from the budget and seeking to rebuild
General Reserves over the medium term
Ensure that funding is available to enable, or "pump prime" Spend to

Save (Revenue) and Invest to Save (Capital) schemes through the
creation of a new Transformation Reserve
Maximise the Capital Resources available to the Council and exploit

opportunities for Prudential Borrowing where they are underpinned by
strong business cases for Capital Investment; recognising that the
targeted use of the Capital Programme can stimulate economic
regeneration, jobs and housing with consequent positive effects on
Council funding as well as reduce costs
Target the other resources and assets of the Council (e.g. Property,
Land, IT and Staff) towards regeneration and transformational change to
public services
Embed a Financial Framework that:
Promotes longer term financial planning
Encourages responsible spending
Improves financial decision making
Better aligns the responsibility for the delivery of services with the
financial accountability for those services and improves the
financial discipline of the Council
B-2
6.
The key measures within the Strategy to meet these aims include the
following:
(i)
A re-phasing of the Council's debt financing obligations with an

associated saving commencing at 2.0m per annum
(ii)
A "Debt Repayment Holiday" for 5 and a half years amounting to

between 7m and 8m per annum
(iii)
Reduction in the Savings Requirement for the current year to 8.7m

(compared to the currently approved savings requirement of 12.8m)
(iv)
An overall reduction in the Savings Requirement over the 4 Year period

2016/17 to 2019/20 of 6.5m but with a significant reduction in the
current financial year and next financial year.
(v)
Make permanent the decisions taken by Council on the 20 July 2016

relating to the appointment of a Director of Regeneration and related
support staff (i.e. extending it beyond the current 2 year approval)
(vi)
Make permanent the proposal to remove the 3m saving to the

Council's Operating Model (i.e. extending it beyond the current 2 year
approval)
(vii)
A series of other Budget Adjustments for non deliverable / speculative

savings targets Creation a 1m Transformation Reserve
(viii)
Maximisation of Capital Resources by:
(ix)
Keeping the ASDA receipt intact at 17.5m, making it available

for future capital investment
Removing all ring-fencing of capital funding where possible in

order that the prioritisation of Capital Investment can take place
unhindered in accordance with the Strategy
Initiating a review of all currently approved but contractually

uncommitted Capital Schemes which are relying on non ringfenced capital funding (as defined by regulation) are withdrawn
from the Capital Programme and the associated funding pooled
and considered alongside all other competing priorities for
Capital Investment as part of the forthcoming budget process
Exploiting opportunities for Prudential Borrowing where the

associated Capital Investment is underpinned by strong
business cases
Builds General Balances beyond the minimum level from 2019/20

onwards
B-3
7.
It is also proposed that the Council accepts the Governments 4 Year Funding
Settlement Offer. Whilst, the offer relates to just 20% (falling to 13% over the
period of the 4 Year period) of the Council's overall funding base, it is still a
meaningful proportion. The alternative would be to accept annual funding
settlements which are likely to be more exposed to a reduction. In order to
take advantage of the Offer, the Council must publish an Efficiency Plan by 14
October 2016. This is attached at Appendix 3 and makes clear that the Plan,
in itself, does not guarantee that both the cost pressures facing the Council
and funding reductions from Government can be achieved through
efficiencies alone without significant detriment to service provision.
8.
Approval of the proposed new Medium Term Financial Strategy with its
associated Savings Requirements, the underpinning Financial Framework
and the Efficiency Plan will provide the Council with the direction necessary to
maximise the opportunity to meet the financial challenge that it faces as well
as putting the Council's Budget on a sound footing for the future.
ECONOMIC AND FINANCIAL CONTEXT

9.
detrimental effect on the public finances nationally. The overall welfare bill
increased at the same time as tax revenues fell causing the national debt to
rise from 0.5 trillion in 2008 to 1.5 trillion or 85% of Gross Domestic Product
(GDP) currently.
10.
Part of the response from Central Government has been to reduce spending
(and funding) across the public sector. Over the past 5 years (since 2011/12),
the Isle of Wight Council has faced Government funding reductions of 35m
as well as having to accommodate other inflationary and unavoidable cost
pressures.
11.
Taken together, the funding reductions and other financial pressures (mainly
relating to inflation, the effects of an ageing population on care services and
the increased requirements for the safeguarding of vulnerable children), the
Council has had to make overall savings over the 5 years of over 60m. In
context, this represents circa 32% of the Council's controllable spending.
12.
Historically Children's Services and Adult Social Services have received

significant protection from savings. Importantly, these Portfolios account for
58% of the Council's total controllable budget from which savings can be
made. With further savings over the 5 year period 2016/17 to 2020/21
forecast to be in the order of 33m (a further 25% of the Councils
Controllable spend), the scale is such that the Council will no longer be able
to afford the same levels of protection that has been provided in the past.
Furthermore, a financial strategy that does not place sufficient emphasis on
growing the income and funding base 1 of the Council will inevitably require
very significant savings across all services with the incidence falling
disproportionately on discretionary services.
1 The funding base comprises Business Rates, Council Tax and Government Grant
B-4
EXISTING MEDIUM TERM FINANCIAL STRATEGY

13.
14.
The Council's existing Medium Term Financial Strategy was approved in

February 2016. This was described as follows:
Direct the resources available to the council to meeting the councils

statutory duties, achieving the vision and the outcomes required under
the Corporate Plan priorities.
Move much further to being an enabling council rather than a provider

of services by developing different delivery models and an overall
affordable council operating model that supports this approach
Work in partnership to deliver outcomes for the island that the council
can no longer afford to do by itself and to enable the opportunities of
the social capital of the Island to be fully utilised
Implement a programme of organisational change and service redesign
Target savings where possible to non-direct service delivery costs
Increase income and develop income generation opportunities
To maintain effective budgetary control in order to keep within overall

budget each year and preserve available reserves to aid the budget
strategy and manage savings with long lead in times
Manage expectations and recognise that there is not the capacity,

capability or financial resources in the council to deliver what is
currently expected
Understand that by setting out priorities and resource allocation that

inevitably decisions will have to be made to stop and reduce services
that are of a less priority and unaffordable
This strategy was designed to make progress against the forecast savings
requirement of 35.2m over the 4 year period 2016/17 to 2019/20 as set out
below and exhausting the Council's available Reserves by the end of 2017/18.
Financial
Year
2016/17
2017/18
2018/19
2019/20
Underlying
Budget
Deficit
m
Annual
Savings
Requirement
m
Total
Savings
Requirement
m
16.8
26.3
31.4
35.2
12.8
12.5
6.1
3.8
12.8
25.3
31.4
35.2
B-5
15.
16.
Whilst this strategy was approved relatively recently and many of its features
will endure through any financial strategy, the Administration have undertaken
a comprehensive review of the current strategy with the intent of the following:
Extending the overall planning horizon from a 2 year strategy to a 5

year strategy
A much stronger emphasis on creating a prosperous and sustainable

Island community built on the pillars of regeneration, growth and
productivity, which in turn will have a positive impact on the Council's
funding base as well as reducing the need for Council services
Become a more entrepreneurial and commercial Council as a means to

generate income and avoid service reductions
A stronger drive to Public Service Transformation in order to improve

services and outcomes for service users as well as reducing duplication
and cost
Addressing the unique Island Factors of, self sufficiency, premium

pricing and dislocation, which permeate through the whole financial
system for the Council and impact on the costs of providing local
authority services
Improving the overall financial resilience of the Council over the

medium term
A new Medium Term Financial Strategy is proposed as part of this report and
described in later sections.
MEDIUM TERM FINANCIAL STRATEGY 2016/17 TO 2020/21

17.
on the Island. Accordingly the Council needs to resolutely maximise the
secure Services for the future.
18.
Whilst set within the Council's overall Corporate Plan, the Council's Medium
Term Financial Strategy requires its own particular focus. The Administration
propose that it be articulated through the following overall aim:
B-6
OVERALL AIM
"In year" expenditure matches "in year"
income over the medium term whilst
regenerating the Island Economy and
providing essential Value for Money
services for our Businesses and
Residents
19.
The proposed Strategy of the Administration has been developed to increase

the overall financial capacity so that it has the necessary operational capacity
to deliver the necessary initiatives and transformation that will yield financial
savings over the short, medium and longer term.
Medium Term Financial Strategy
20.
The Medium Term Financial Strategy should be set in the context of the
overall Local Government Finance system. Over the past 4 years, and
including the current year, the emphasis of the Local Government Funding
system has changed considerably. There are now clear financial incentives
for Local Authorities to promote business growth, increase the number of
homes and increase employment. This is illustrated by the following:
The Business Rates retention scheme allows the Council to retain circa
194,000 for every 1% increase in Business Rate growth. Equally, the
Council will lose 194,000 for every 1% decline in the Business Rate
base
Between "resets" 2 of the Local Government Funding methodology, the

Council retains all increases in Council Tax. For every 1% increase,
the Council will receive an additional 711,000
For every new home built, the Council is able to retain circa 1,267 p.a.
in New Homes Bonus grant for a period of 6 years 3
The risk of increased numbers of households requiring financial support

to pay their Council Tax (formerly Council Tax Benefit) falls on the
Council. The Council therefore will be worse off if caseloads increase
and better off if caseloads fall. The estimated value of the Council Tax
2 The next reset will take place in 2020 as part of the "Fairer Funding review"
3 Subject to a current consultation and expected to reduce to 4 years in order to achieve a savings of
593m nationally to redirect into the improved Better Care Fund
B-7
support for 2016/17 is 9.6m. Each 1% change therefore will represent

a cost / saving of 96,000.
It is important therefore that when the Council is developing policy and
strategy and making its decisions, particularly relating to the Capital
Programme, that it is cognisant of these financial incentives.
21.
The proposed Medium Term Financial Strategy is attached at Appendix 1. It

sets out a number of both generic plans and detailed activities within themes
across the short, medium and longer term.
22.
The strategy takes a holistic approach to the financial challenge facing the
Council, now forecast to be an overall deficit of 33m over the next 5 years
compared with the previous forecast of 35m over the next 4 years. It is very
deliberately targeted to provide short term viability whilst plans can be
implemented which will support longer term sustainability and therefore
maximise the opportunity to protect Council Services in the future.
23.
The overall approach is characterised by the following:
Reducing the overall quantum of savings required over the short and
medium term - to "buy time" to allow the opportunity for growth in the
economy to take effect and for the Government's "Fairer Funding"
review to be implemented, both of which are anticipated to improve the
Council's funding base
"Smooth out" the required savings such that the incidence of "front
loading" of the savings is minimised and therefore the Council
maximises its operational capacity to implement initiatives at pace
aimed at increasing income / funding and reducing costs
Improving the overall financial resilience of the Council by:
Adjusting the budget and budget forecast for savings targets that
are now considered undeliverable
Repairing the level of General Reserves over the medium term

to enable the Council to respond to opportunities that may arise
which require funding or to be sufficiently resilient to "financial
shocks" which would otherwise result in sharp and drastic cuts to
public services
Ensure that funding is available to enable, or "pump prime" Spend to

Save (Revenue) and Invest to Save (Capital) schemes and that
financial barriers to such opportunities are removed. Specifically, this
will involve setting funding aside in a new Transformation Reserve.
Maximise the Capital Resources available to the Council and exploit

opportunities for Prudential Borrowing where they are underpinned by
strong business cases for Capital Investment; recognising that the
targeted use of the Capital Programme can stimulate economic
regeneration, jobs and housing with consequent positive effects on
B-8
Council funding and reduced costs.

Also that targeted Capital
Investment can be used to transform Council Services in a way that
both improves service and reduces costs through better integration and
use of technology.
24.
Targeting the other resources and assets of the Council (e.g. Property,
Land, IT and Staff) towards regeneration and transformational change
to public services
Embed a Financial Framework that:
Better aligns responsibility for the delivery of services with the

The six themes, with some highlighted plans are summarised below:
SHORT TERM
Theme 1 - Create Financial and Operating Capacity to Transform
Re-profile debt repayment provision

Provide a 1m Transformation Reserve to "pump prime" future transformation
Invest in Regeneration team to lever additional capital funding
Maximise and re-prioritise Capital Resources for Invest to Save and Regeneration
Schemes to:
- Reduce cost
- Support jobs and business growth (increase Business Rates & Council Tax)
- Improve prosperity and reduce demand for Council Services
SHORT TERM
Theme 2 - Increasing Efficiency & Effectiveness
Forensic review of cost and income opportunities

Smart, lean and evidence based commissioning - providing for actual Need rather
than perceived Need or Want
Targeted Capital Investment - towards improving income / funding and reducing cost
Support the Voluntary Sector to provide appropriate Council Services
Policy driven fees and charging regime e.g. full cost recovery for non-essential
services
B-9
SHORT & MEDIUM TERM

Theme 3 - Entrepreneurial, Commercial and Collaborative Activities
(with managed risk)
Create a 100m Commercial Property Acquisition Fund aimed at maximising return

with managed risk
Invest via equity or debt in joint ventures where the Island has either a competitive
advantage or unique attraction
Investigate the creation of a tax efficient trading company structure founded on a
robust business case where the Council can provide Services at a profit and scale
Review the case for directly providing Social Housing and/or affordable Housing and
the alternative legal entities for delivery
Expand strategic partnerships with mainland Councils to fill skill shortages, improve
resilience or take advantage of lower cost service provision
SHORT & MEDIUM TERM

Theme 4 - Withdraw from or offer Minimal Provision for Low Impact
Services
Re-prioritise Service provision away from Low Impact Services by:

- Identifying low impact services through public consultation
- Identifying low impact services through evidence based research
SHORT & MEDIUM TERM

Theme 5 - Improving the Island Economy
Pursue the Solent Combined Authority Deal to secure a share of 30m p.a.
infrastructure funding to support productivity, new jobs, new housing and design skills
provision to meet current and new employers needs.
Pursue a 15m IOW Economic Growth Package through the Local Growth Deal 3 to
increase productivity and employment on the Island
Pursue the "One Public Estate" initiative to identify Public Sector sites suitable for
development
Strategic review of property assets aimed at providing sites for regeneration
Capital Investment prioritised towards economic growth (e.g. strategic transport
infrastructure, acquisition of regeneration sites and employment site viability)
Capital Investment targeted towards supporting unviable housing development sites
MEDIUM TERM & LONGER TERM

Theme 6 - Public Service Transformation
Establish an accommodation strategy for Adult Social Care aimed at matching need
with appropriate provision (e.g. including additional Extra Care Housing). Also to
ensure an appropriate mix of in house and private sector care provision to enhance
competition in the sector
Pursue Health and Social Care integration
Re-direct resources to preventative services to avoid greater costs downstream
Use technology and digital solutions to provide greater personal independence
Support improved choice for all people purchasing care
B - 10
Financial Framework
25.
To provide the maximum opportunity for the Financial Strategy to succeed, it

is important that it is underpinned by a process which promotes strong
financial planning, encourages responsible and targeted spending and is
backed by strong informed decisions and proper financial accountability.
26.
The proposed Medium Term Financial Strategy is proposed to be

underpinned by a framework as described below:
FINANCIAL FRAMEWORK
FINANCIAL
PLANNING
Medium Term Financial
Forecasting - refreshed
annually
Annual Capital Planning
process to provide
informed prioritisation
Consistent planning
horizons for Capital
Resources and Capital
Spending
No ring-fencing of revenue
and capital funding (except
where required by statute)
Prudential borrowing for
"Invest to Save" or "Invest
to Avoid Cost" only
27.
ACCOUNTABILITY
RESILIENCE
&
&
DECISION MAKING
RESPONSIVENESS
Revenue & Capital Budgets

allocated at Portfolio level
to align with Service
responsibility
Build General Reserves

over the medium term to
guard against risk of
"financial shocks" and
improve the ability to
respond to opportunities
Primary responsibility for

managing spend within
budget (Capital & Revenue) Create a separate
Transformation Reserve
rests with the relevant
with strict criteria
Executive Member
A relevant proportion of
Capital Resources "held
back" for contingent items
or potential match funding
opportunities to lever
additional funding
Many aspects of this framework are already in place. Adoption of the

Financial Framework in its entirety is, however, important to the success of
the Financial Strategy. Some of its features are worth expansion and are set
out below:
B - 11
Capital Programme Planning:

o
To maximise the resources available for Capital and ensure that

they are properly targeted as a means to support regeneration
activities and cost reduction schemes, ring-fencing must be
removed.
Ring-fencing regimes can lead to sub-optimal
decisions with capital resources not being considered against all
other competing priorities for investment and potential significant
opportunities being overlooked
Additionally, it is important that the Capital Planning process

takes place at a defined period (annually) so that all capital
resources can be considered against all competing priorities,
rather than ad hoc decision making which can have the effect of
capital schemes being approved at the expense of other
opportunities with better outcomes.
Mechanisms to accommodate very important capital investment

opportunities that may arise outside the annual Capital Planning
process are provided for either by Prudential Borrowing and
"holding back" capital resources
Transformation Reserve:
o
The establishment of a Transformation Reserve and a strategy

for its replenishment is a vitally important vehicle to enable
"Spend to Save" schemes. Often, transformation schemes
aimed at significant cost reduction will be of a scale and
complexity that require up front resources, especially if they are
to proceed at pace. A Transformation Reserve will provide a
mechanism to accommodate this and ensure that financial
obstacles to delivery are minimised
If the Transformation Reserve is to endure and continue to be a

vehicle to drive cost reduction, there will need to be a strategy
for its replenishment. A planned contribution from the Revenue
Budget would ordinarily be the mechanism for replenishment.
However, over the first 2 years of the new Financial Strategy the
Reserve may be sufficient but the need to minimise the savings
requirements is paramount. It is therefore proposed that, rather
than a planned replenishment from a contribution from the
Revenue Budget (which would require the savings to be
increased), any underspendings at year end (after approved
carry forwards) are transferred into the Reserve.
The Transformation Reserve is limited to 1m and without a

rationing based criteria for its use, it is likely that it will be oversubscribed and will not maximise the potential savings over time.
It is proposed therefore that the criteria for the use of the
Reserve are as follows:
B - 12
Any proposal must have a payback of 4 years or less (i.e.

the cumulative saving over 4 years must exceed the
amount drawn from the fund
The proposal is for non-recurrent spending and the

Reserve is not to be used as an on-going source of
funding
A proposal can be for:

-
A "Spend / Invest to Save" Scheme (Revenue or

Capital)
A "Spend to Avoid Cost" scheme (Revenue or

Capital)
A feasibility study where, after preliminary

investigations, it is likely to result in a significant
saving with at least a 4 year payback
One-off redundancy costs arising from proposed

savings, where other redundancy provisions are
not available or are exhausted
General Reserves:
o
28.
Over time, the Council as part of previous Budget Strategies has

drawn its General Reserves to near minimum levels. Whilst this
can be a useful short-term strategy to "smooth out" budget gaps,
it has the effect of leaving the Council exposed to "financial
shocks" which, in turn, could require the Council to make serious
reductions in service very quickly in order to maintain a
"Balanced Budget". Additionally, a lack of General Reserves will
also exclude the Council from being able to take advantage of
opportunities as they arise. The use of Reserves to minimum
levels can be a useful short term strategy to protect Services
whilst savings are implemented, it is proposed that from 2018/19
(or earlier if opportunities arise) the opportunity to re-build
General Reserves to a reasonable level above the minimum
should be pursued for the reasons set out.
It is proposed that the financial framework described above is approved as

part of the new Medium Term Financial Strategy.
Financial Review and New Medium Term Financial Forecast
29.
As part of the development of the new Medium Term Financial Strategy, the
financial parameters (or revised deficit) which the Strategy is intended to
deliver against has been comprehensively reviewed.
As previously
mentioned, this has been undertaken with the aim of:
B - 13
30.
a)
Extending the savings period
b)
Reducing the overall quantum of savings required over the short and
medium term
c)
"Smoothing out" the savings such that the "front loading" impact is
reduced in order to "buy time" for plans and initiatives to take effect
In considering a new Medium Term Financial Strategy for the Council the
following have been comprehensively reviewed:
The Council's Current Financial Standing - including reserves, other

assets such as land and property and the strength of the Council's
funding base 4
The key cost assumptions underpinning the original 35m Savings

Requirements of the Council such as inflation and demographic
pressures
The achievability of currently approved savings
Opportunities to increase the financial capacity of the Council, both

Revenue and Capital
The corresponding forecast deficit and the phasing of the associated

Savings Requirements
31.
It is clear from the review that to achieve 35m over 4 years which was "front
loaded" with 26m of those savings required in 2016/17 and 2017/18 (or 20%
of controllable spend) was an extremely challenging prospect for the Council
and would have required very significant reductions across all services
including both Children's Services and Adult Social Care. Furthermore, the
reductions were such that the staffing capacity to deliver the "Alternatives to
Cuts" such as efficiencies, transformational change and income generation
through innovation would also be part of those reductions and therefore
compromise the ability of the Strategy to succeed.
32.
The Council has reduced its level of General Reserves to close to the
minimum level required for an authority of its size and risk profile, and equally
it does not have a significant land and property base from which it could
realise additional funding. Whilst there will inevitably be some opportunities to
continue to rationalise the Council's asset base and potentially release assets
for regeneration, in the short-term the release of property and land is not a
realistic proposition to improve the financial capacity of the Council.
33.
A fundamental review of the cost assumptions contained within the Council's

forecasts (that were underpinning the original forecast deficit of 35m) has
been undertaken. These have been revised and now form part of a new
financial forecast that has been extended to cover the 5 year period 2016/17
to 2020/21.
B - 14
Creating Financial Capacity to enable Operational Capacity and drive

Transformation
34.
To respond to the financial challenge facing the Council, the broad focus has
been twofold:
(i)
Identify opportunities to reduce revenue costs in order to reduce the

previously approved savings and create the operational capacity to
implement savings initiatives
(ii)
Maximise the Capital Resources as a means to provide funding for

Invest to Save and Regeneration aimed at improving both the Island
Economy and the Council's funding base
35.
To be able to reduce the revenue savings requirements and "smooth out"

those savings at a reduced amount and over a longer period of time as
intended, attention has focussed on opportunities for re-profiling the sums that
the Council is required to set aside for the repayment of Debt.
36.
Providing for sums to be set aside for the repayment of debt, known as
"Minimum Revenue Provision (MRP), is an extremely technical area of Local
Authority Accounting. The statutory guidance prescribes that the Local
Authority needs to set aside a "prudent amount" and until recently, the Local
Government Sector has interpreted this as being restricted to the options
provided within the regulations as follows:
(i)
(ii)
(iii)
(iv)
(v)
The Regulatory method

The Capital Financing Requirement method
The Depreciation method
The Equal Instalment of Principle method
The Annuity Method
Within the regulations, each of the options above is described as appropriate

for different circumstances, with the intention to match the costs of debt
broadly with the benefits that are derived from the assets that the debt is
financing.
For example, the Equal Instalment of Principle method is
particularly appropriate for borrowing where the financial benefits accrue
evenly over the life of the asset acquired. Similarly, the Annuity Method is
more appropriate where the financial benefits are skewed towards the later
years of the asset's life.
37.
The Local Government Sector has recently started to challenge the

application of the "prudent amount" definition, seeking an approach that is
better designed to local circumstances and which does not necessarily take
an asset by asset approach or categorisation of asset approach to the setting
aside of sums for the repayment of Debt (i.e. MRP). Rather, that the approach
is one that considers all of the Assets of the Council in totality and considers
them also in the context of the maturity profile of the Council's debt. Any
approach adopted must be agreed in consultation with the Council's external
auditors.
B - 15
38.
The Council put the case to its external auditors that the Annuity Method
across all of its borrowings was the most appropriate method for the setting
aside of its Minimum Revenue Provision. This approach has the following
features:
(i)
It reduces the annual amount required to be set aside over the medium
term commencing with a 2.0m saving in 2016/17 and reducing to zero
by 2032/33 and then subsequently increasing by circa 150,000 per
annum but at a time where the value of the debt provision to be set
aside will have been significantly eroded by inflation
(ii)
By making the case for the Annuity Method, which means the Council
does not need to set aside sums at the current levels, the Council can
make the further case that it has set aside sums in the past, amounting
cumulatively to 39.6m that were in excess of what was required. On
that basis, the Council would wish to "prudently" release that
"overprovision" back to support the Council's overall Medium Term
Financial Strategy
39.
Discussions with the External Auditor have therefore, in the first instance,
focussed on justifying the "Annuity Method" as being a prudent approach for
the setting aside of funds for the repayment of debt. Once established and
accepted, the further discussion on how the 39.6m "overprovision" is
prudently released and available to support the Council's Medium Term
Financial Strategy was undertaken.
40.
The external auditors have accepted the Council's arguments that the Annuity
Method is a prudent approach across all of its debt obligations and that it
provides a good overall match between the timing of financial benefits derived
by the assets funded by borrowing and when the associated debt provision is
made. Furthermore, the external auditors have also accepted that reducing
the amount set aside for debt over the next 5 years of between 7m and 8m
is prudent in the context of the new Medium Term Financial Strategy
proposed. In any event, this is the maximum annual amount that can be
released over the coming years. The effect of this is to take a "debt
repayment holiday"
41.
This approach to the re-profiling of the Council's debt provisions and taking a
debt repayment holiday will necessarily leave the ASDA capital receipt intact
and therefore support the intent to also maximise the Council's Capital
resources. The decision taken by Full Council at its meeting of 20 July 2016
approved both the appointment of a Director of Regeneration and related
support staff at a total cost of 2m and delayed changes to the Operating
Model by 2 years at a total cost of 6m, in total amounting to 8m and to be
funded from the ASDA capital receipt. No change to the decision in itself is
proposed, but it is proposed to change the funding source and instead use the
MRP overprovision and the associated facility to take a Debt Repayment
holiday to fund those decisions. As a consequence, the ASDA capital receipt
will be left intact. Capital receipts can only be used to fund capital
expenditure or repay debt. Previously, the ASDA receipt was planned to be
used to repay debt, therefore releasing a revenue saving to fund the reinstatement of the Operating Model and the new Regeneration team. Since
B - 16
the proposal is now to take "debt repayment holiday", the receipt can no
longer be used to repay debt and create a revenue saving. It is therefore now
only available for Capital Investment.
42.
As described previously, the use of the Councils Capital Resources is a vital

component of the Council's Medium Term Financial Strategy as a means of
making cost savings and improving the Council's funding base. To maximise
the capital resources available and to ensure that those capital resources are
properly targeted towards the Council's new Medium Term Financial Strategy
the following are also proposed:
(i)
All contractually uncommitted capital schemes which are relying on non

ring-fenced funding are withdrawn from the Capital Programme and the
associated funding pooled with all other available capital resources to
enable a holistic view of refreshed Capital Investment priorities to be
taken, in the context of the new Medium Term Financial Strategy.
Given the extremity of the financial challenge facing the Council and
the need to maximise the quantum of Capital Resources to be directed
towards investments that will support that pursuit, this proposal will
provide the opportunity to re-assess previous priorities with current
priorities, allowing each to compete with each other for funding,
maximise the opportunity to make savings/increase the funding base
and ultimately protect public services
(ii)
Similarly, that the ASDA capital receipt be pooled with all other
available capital resources in order to maximise the capital resources
available for the reasons set out above
Revised Financial Forecast 2016/17 to 2020/21

43.
As described, a review of opportunities to increase the financial capacity of

the Council in the short term in order to "smooth out" the necessary savings
requirements and provide time for longer term plans to take effect has been
completed. This, alongside a review of all of the cost assumptions contained
within that forecast has been undertaken and a new Medium Term Financial
Forecast completed. The Medium Term Financial Forecast has also been
rolled on" a further year to now cover the period 2016/17 to 2020/21.
44.
The previous Medium Term Forecast estimated that savings of 35m would
be required across the 4 year period 2016/17 to 2019/20, with 25.3m of
those savings required across this year and next year. The new Medium
Term Financial Forecast reduces that forecast to 33m but over a longer 5
year period. On a "like for like" basis, comparing similar time periods to
2019/20, the overall savings requirement has reduced by 6.5m.
45.
Importantly, the extent of "front loading" has been significantly reduced such
that 16.2m (a reduction of 9.1m) is now required across this year and next
year providing essential relief to enable "avoidance to cuts" measures such as
regeneration, entrepreneurial activities and longer term cost reduction
measures to take effect and be available to contribute towards savings
requirements downstream.
B - 17
46.
The Adjusted Budget for 2016/17 and new Medium Term Financial Forecast
is summarised below. This includes a proposed adjusted Budget for 2016/17
of 145,115,000 which:
Assumes that the Council will approve a change to the Council's MRP
Policy such that all debt incurred from 2008 Onwards will be provided
for using the Annuity Method with an associated saving commencing at
2.0m per annum
Accordingly, takes advantage of the "Debt Repayment Holiday"

amounting to between 7m and 8m per annum associated with
switching to the Annuity Method for providing for debt repayment
Reduces the Savings Requirement for the current year to 8.7m

(compared to the currently approved savings requirement of 12.8m)
Makes permanent the approved decision taken by Council on the 20

July 2016 to appoint of a Director of Regeneration and related support
staff (i.e. extending it beyond the current 2 year approval)
Makes permanent the approved decision taken by Council on the 20

July 2016 to remove the 3m saving to the Council's Operating Model
(i.e. extending it beyond the current 2 year approval)
Makes a series of other Budget Adjustments for non deliverable

speculative savings targets (described later in this section).
Creates a 1m Transformation Reserve
Starts to build General Reserves beyond the minimum level from

2019/20 onwards
B - 18
The Adjusted Budget 2016/17 and new Medium Term Financial forecast is
summarised below:
Adjusted Budget & New Medium Term Forecast to 2020/21

Financial Year
Adjusted
Budget
2016/17
m
Forecast
2017/18
Forecast
2018/19
Forecast
2019/20
Forecast
2020/21
Expenditure (before
savings)
153.8
166.2
170.9
177.8
183.5
Funding
147.4
145.9
146.9
150.3
154.3
6.4
20.3
24.0
27.5
29.2
(8.7)
(8.7)
(8.7)
(8.7)
(7.5)
(7.5)
(7.5)
(7.5)
(7.5)
(7.5)
(7.5)
(5.0)
(5.0)
In Year (Surplus) /
Deficit
Less: Proposed Savings Requirements

Saving - 2016/17
(8.7)
Saving - 2017/18
Saving - 2018/19
Saving - 2019/20
Saving - 2020/21
47.
(4.0)
Total Savings
(8.7)
(16.2)
(23.7)
(28.7)
(32.7)
(Surplus) / Deficit
After Savings
(2.3)
4.1
0.3
(1.2)
(3.5)
Based on the Adjusted Budget 2016/17 and new Medium Term Financial
Forecast including the proposed savings requirements for the current year to
2020/21, General Reserves will remain at or around minimum levels over
2017/18 and 2018/19 and start to recover thereafter as set out below.
General Reserves Forecast - 2016/17 to 2020/21

Financial Year
Current
Year
m
Forecast
2017/18
m
Forecast
2018/19
m
Forecast
2019/20
m
Forecast
2020/21
m
Opening Balance
7.3
9.6
5.5
5.2
6.4
In Year Surplus /
(Deficit) - see previous
2.3
(4.1)
(0.3)
(1.2)
3.5
9.6
5.5
5.2
6.4
9.9
table
Forecast Balance
B - 19
48.
Arising from the new Medium Term Financial Forecasts, the new Savings
Requirements are set out below and are recommended for approval by the
Council. The Savings Requirements themselves are constrained by the level
of the Council's General Reserves. General Reserves can be used to
contribute towards any deficit between in year expenditure and in year funding
but cannot fall below the 5m level. As previously mentioned, with a profile of
Savings Requirements as set out below, General Reserves will be at or
around the minimum level for 2017/18 and 2018/19 leaving no further scope
to reduce the level of required savings.
49.
The new Savings proposals are set out below alongside a comparison of the
original savings requirements. The Savings Requirements for the current
year and 2017/18 are firm proposals for approval whilst those for 2018/19
onwards are forecasts based on the new Medium Term Financial Forecast
which will be revised annually:
New Savings Requirements - 2016/17 to 2020/21

Financial
Year
Current
Year
m
2017/18
12.8
12.5
6.1
3.8
35.2
8.7
7.5
7.5
5.0
4.0
32.7
Change
(4.1)
(5.0)
1.4
1.2
(2.5)
Cumulative
Change
(4.1)
(9.1)
(7.7)
(6.5)
Original
Savings
Requirement
New
Savings
Requirement
50.
Forecast Forecast Forecast Total

2018/19 2019/20 2020/21
m
m
m
m
In arriving at the new Medium Term Financial Forecast it has also been
necessary to bring stability to both the Budget for 2016/17 and the forecast for
the following years to 2020/21. To achieve this, the following adjustments
have been made, recognising that these targets are either no longer
considered deliverable, are cost pressures outside the Councils control or are
not sufficiently certain at this stage to rely upon. It is proposed therefore that
these savings should no longer feature within the current budget or future
forecast:
B - 20
Proposed Budget Adjustment

Highways PFI Income
Concessionary Fares
Coroners
Income Savings Target
Contract Savings Target
Property Acquisitions Target
ASDA Interest Savings Target
Vacancy Management Cross
Savings
Total
2016/17
260,000
80,000
130,000
400,000
250,000
103,000
340,000
Cutting
Future Years
260,000
80,000
130,000
400,000
250,000
103,000
340,000
650,000
1,563,000
2,213,000
51.
In addition, the opportunity to reverse the proposed saving relating to

implementing the statutory minimum National Concessionary Travel Scheme
amounting to 100,000 is proposed by the Executive and to be replaced with
an additional saving of equivalent value relating to a reduction in debt interest
costs.
52.
The proposals described above will:

i.
Reduce the savings requirements previously approved by the Council

by 6.5m over the same period but significantly reduce the "front
loading" profile to enable more time for the proposals within the new
Medium Term Financial Strategy to take effect
ii.
Put the existing budget on a robust footing by removing non deliverable

savings and recurring cost pressures.
4 Year Local Government Settlement Offer & Efficiency Plan

53.
Local authorities have experienced the biggest proportionate reduction in

funding of all Government departments since 2010. The scale of reduction,
along with a degree of volatility around the phasing and timing of these
reductions to different authority types, can make it very difficult for authorities
to plan their spending priorities strategically. The need for effective medium
term planning has therefore never been greater.
54.
The Governments response to these concerns from local authorities and

contained within the Local Government Finance Settlement 2016 to 2017 has
been to offer a guaranteed minimum grant envelope, paid to councils for a 4
year period from April 2016. This, the Secretary of State said, should increase
local authority certainty and confidence and would be a key step towards
supporting councils to strengthen financial management and work
collaboratively with local partners when considering the way local services are
provided in future.
B - 21
55.
Further details became available in a letter from the Secretary of State dated
10th March 2016 clarifying the offer (see Appendix 2). In essence the
government has offered a guaranteed budget to every council which desires
one and which can demonstrate efficiency savings for 2016/17, and for every
year of the current parliament.
56.
The multi-year settlement offer relates to Revenue Support Grant, Transitional

Grant and Rural Services Delivery Grant allocations along with the top-ups to
the Council's Individual Authority Business Rates Baseline for each of the
three years to 2019/20 (note: the final year may be subject to
implementation of 100% business rates retention).
57.
Accepting the Governments offer of a multi-year settlement will guarantee the

following minimum levels of funding for these lines within the settlement as
follows:
Multi-Year Settlement
2017/18
2018/19
2019/20
Revenue Support Grant
19,170,000
12,720,000
8,550,000
Transitional Grant
Rural Services Delivery Grant
Top Up to Individual Authority

Business Rates Baseline
12,550,000
12,800,000
13,180,000
Value of Guaranteed Funding
31,720,000
25,520,000
21,730,000
20.1%
15.7%
12.9%
Guaranteed Funding as Proportion

of Total Funding
58.
Specific statements made by the Secretary of State in relation to the four year
settlement include:
"Those councils that chose not to accept the offer, or do not qualify, will
be subject to the existing yearly process for determining the local
government finance settlement.
Allocations could be subject to additional reductions dependant on the
fiscal climate and the need to make further savings to reduce the deficit.
At present we do not expect any further multi-year settlements to be
offered over the course of the parliament."
59.
The offer of a four year settlement will help to provide greater certainty and
will help the planning framework of the Council. It is however, important to
recognise what is not within the scope of the settlement, it does not for
example include the following significant funding streams:
Education Services Grant

Public Health Grant
Housing Benefit & Council Tax Administration Grant
B - 22
Better Care Fund

New Homes Bonus
Business Rates Local Share (retained 50%)
60.
The DCLG will only consider expressions of interest in accepting the offer if a
link to a published efficiency plan is received by 5pm Friday 14th October
2016. The government has not issued detailed guidance regarding what these
plans should include although some outline guidance was included in the
letter reproduced at Appendix 2.
61.
In considering the multi-year settlement offer, the following key advantages

and disadvantages should be borne in mind:
Advantages
Disadvantages
Provides a degree of certainty over

funding levels for the next three years
Applies only to limited funding streams

within the settlement offer - excludes
other significant funding streams
Facilitates improved financial planning

over the period
Implied acceptance that reduced funding

over the period is achievable
Requirement for an efficiency plan
suggests a level of government control
over the Councils plans to meet the
identified funding gap
Funding is not fully guaranteed Government reserves the right to change
the settlement due to unforeseen
circumstances
62.
In addition the recent EU referendum result may have far reaching political
and economic ramifications which could have a material impact on the public
sector finances generally and consequently the settlement for local
government.
63.
The funding contained within the multi-year settlement offer, whilst significant,
represents a small but meaningful proportion of the total funding expected to
be available to the Council up to and including 2019/20. It is considered highly
unlikely that non-acceptance would lead to additional funding and there
remains a real risk of further funding reductions in the medium term should
the Council decide not to take up the government's offer. There remains the
concern that further funding reductions in the medium term could occur
following the EU referendum result and it is therefore recommended that the
offer of multi-year settlements from government is accepted.
64.
As mentioned, the offer of the 4 Year Settlement is conditional on the Council

publishing an Efficiency Plan by 5pm Friday 14th October 2016. The
proposed Efficiency Plan is attached at Appendix 3 and is recommended for
Approval. Importantly, the proposed Efficiency Plan makes clear that the
Plan, in itself, does not guarantee that both the cost pressures facing the
Council and funding reductions from Government can be achieved through
efficiencies alone without significant detriment to service provision.
B - 23
STRATEGIC CONTEXT
65.
The proposed Medium Term Financial Strategy is the key policy document
that sets the Council's financial parameters for the next 5 years and the
Council's financial direction. It is drawn from the Council's Corporate Plan
and has a strong "alternative to cuts" focus , concentrating heavily on
improving the Island economy as a means to stimulate growth generally,
reduce the dependency of residents on Council Services to enable service
reductions to be made but also to improve the Council's funding from
Business Rates and Council Tax. Importantly, the Strategy also seeks to
improve the commercialisation of the Council and support the transformation
of Public Services.
66.
The Efficiency Plan is largely a summary repetition of the Council's Medium

Term Financial Plan and is therefore linked strongly to the Council's Corporate
Plan.
CONSULTATION
67.
The proposals set out in this Strategy have been prepared in consultation with
the Executive and the wider members of the Independent Group.
68.
The external auditor has also been consulted and has cited the emergence of
this Strategy as the reason for providing the Council with an unqualified Value
for Money Conclusion for 2015/16. Should this strategy not be approved, the
external auditor is likely to change their opinion of whether the Council can
demonstrate the required financial capability and resilience to plan its finances
effectively to deliver services. An extract of the external auditor's report to the
Audit Committee on 26 September 2016 is referenced below for information
" The Councils current financial position and future financial outlook remains
highly challenging. Our review of the last iteration of its MTFP would lead us
to conclude that the Council was not able to plan finances effectively to
support the sustainable delivery of strategic priorities and maintain statutory
functions. We therefore would have qualified the value for money conclusion.
However, subsequent developments, and particularly the ability to reduce the
annual MRP charge and extend and more evenly profile pressures on the
revenue budget over the next five years, have given the Council more time to
implement changes to address the financial challenge. It is now essential that
this is done.
This is likely to require further difficult decisions on priorities and levels of
service provision to be taken, together with a change in the Councils focus
away from solely reducing cost and organisational capacity to thinking
differently about how financial change might be achieved through
regeneration and revenue growth, and how available capital funding can be
used to better support this."
B - 24
FINANCIAL / BUDGET IMPLICATIONS

69.
All of the financial implications arising from the recommendations are

contained within the body of the report.
LEGAL IMPLICATIONS
70.
The Council will need to set a lawful and balanced budget and Council Tax
level for 2017/18 by the statutory deadline. In developing any proposals the
necessary equality impact assessments and consultation processes will need
to be followed, and consultation responses will be taken into account before
any decisions are taken.
EQUALITY AND DIVERSITY

71.
The council has to comply with Section 149 of the Equality Act 2010. This
provides that decision makers must have due regard to the elimination of
discrimination, victimisation and harassment, advancing equalities, and
fostering good relations between different groups (race, disability, gender,
age, sexual orientation, gender reassignment, religion/belief and marriage/civil
partnership). An Equality Impact Assessment was carried out and considered
as part of the Budget Strategy in February 2016, in which various savings and
service reductions were considered. This Medium Term Strategy does not
propose any additional specific service reductions. Any further proposed
savings/service reductions will be subject to further Equality impact
assessments which will be completed as and when those decisions are
considered so that the decision taker can take into account and if necessary
mitigate the impacts as part of the decision making process..
PROPERTY IMPLICATIONS
72.
There are no specific property implications contained within this report but the
ability maximise resources available for Capital Investment is dependent in
part on the ability to dispose of surplus assets and generate capital receipts.
73.
To maximise the opportunity to Improve the Island Economy and reduce the
Council's costs, it will be important to complete a strategic review of assets in
order to:
Provide appropriate sites for regeneration

Identify underperforming assets to inform the rationalisation of the
estate
Identify opportunities for re-provisioning services into "low value" sites
and release higher value sites for regeneration or sale
OPTIONS
74.
The new Medium Term Financial Strategy, the reduced Savings Requirements
and associated recommendations are presented as a cohesive and
interrelated package of measures aimed at providing the maximum
opportunity to meet the financial challenge faced by the Council. To ensure
that the Council has a cohesive Financial Strategy the options are:
B - 25
(i)
Approve the recommended Medium Term Financial Strategy and

associated recommendations
(ii)
Reject the Medium Term Financial Strategy and associated

recommendations and request Officers to prepare an alternative
strategy
(iii)
Not accept the 4 Year Settlement to 2019/20 by Central Government

announced on 17 December 2015 and the accompanying Efficiency
Plan attached at Appendix 3
RISK MANAGEMENT
75.
on the Island. Accordingly the Council needs to resolutely maximise the
secure Council Services for the future. The approval of a Medium Term
Financial Strategy is crucial to providing structure and direction to achieving
the financial challenge in a way that is aligned with the Council's corporate
objectives and minimises cuts to essential services.
76.
The key risk is that the Council does not approve a cohesive Medium Term
Financial Strategy and that the process of achieving cost savings / additional
income/funding is disorderly with sub optimal decisions taken which lead to
greater than necessary cuts to essential services.
77.
Should the proposed Medium Term Financial Strategy not be approved,

Officers will need to work at pace with the Administration to prepare an
alternative Strategy that is acceptable to the Council.
EVALUATION
78.
The new Medium Term Financial Strategy is recommended for the following
reasons:
It is consistent with the Council's Corporate Plan but with a change of

emphasis
It reduces the overall quantum of savings required over the short and
medium term providing more time for "alternative to cuts" initiatives to
take effect and pending the Government's "Fairer Funding" review in
2019/20
To "Smooth out" the required savings such that the incidence of "front
loading" of the savings is minimised to enable the Council to maximise
its operational capacity to implement initiatives at pace aimed at
increasing income / funding and reducing costs
To improve the overall financial resilience of the Council

B - 26
To ensure that funding is available to enable, or "pump prime" Spend to

Save (Revenue) and Invest to Save (Capital) schemes
It maximises the Capital Resources available to the Council for

regeneration and invest to save purposes
It targets the other resources and assets of the Council (e.g. Property,
Land, IT and Staff) towards regeneration and transformational change
to public services
It embeds a Financial Framework to support the successful delivery of

the strategy that:
Better aligns responsibility for the delivery of services with the

RECOMMENDATION
79.
80.
It is recommended that the Executive approve the following:

(i)
Endorse the new Medium Term Financial Strategy and associated

recommendations proposed as part of this report
(ii)
Reverse the saving relating to implementing the statutory minimum

National Concessionary Travel Scheme amounting to 100,000 and
replace it with an additional saving of equivalent value relating to a
reduction in debt interest costs
It is recommended that the Council approve the following:

(i)
The Medium Term Financial Strategy attached at Appendix 1
(ii)
The Financial Framework described in paragraph 26 which includes:
(iii)
The removal of all revenue and capital ring-fencing (except

where required by statute)
The creation of a Transformation Reserve
The creation of a 1m Transformation Reserve to be used in

accordance with the criteria set out in paragraph 27
B - 27
(iv)
Any Revenue underspendings at year end (after approved carry

forwards) are transferred into the Transformation Reserve as a
mechanism to replenish the Reserve and ensure that it remains
available for future Spend to Save and Invest to Save initiatives
(v)
To re-build General Reserves to a reasonable level above the

minimum from 2018/19, or earlier if opportunities arise
(vi)
The Annuity Method as the methodology for setting aside a "prudent

amount" for the provision for debt repayment, known as the Minimum
Revenue Provision, from 2016/17 in order to secure savings
commencing at 2m per annum and provide the ability to release
39.6m of "overprovision" to support the Councils new Medium Term
Financial Strategy
(vii)
To take a "Debt Repayment holiday" for the next 5 years in order to

draw down on the "overprovision" for funding debt liabilities at sums
between 7m to 8m per annum with the consequent effect of leaving
intact the ASDA receipt of 17.5m
(viii)
All contractually uncommitted capital schemes which are relying on non

ring-fenced capital funding (as defined by regulation) are withdrawn
from the Capital Programme and the associated funding pooled and
considered alongside all other competing priorities for Capital
Investment as part of the forthcoming budget process, including the
ASDA Capital Receipt
(ix)
The Adjusted Budget for 2016/17 and Financial Forecasts for 2017/18
to 2020/21 as set out in paragraph 46 which includes the proposals set
out in paragraph 50 to ensure that the Budget for the current year and
forecasts for future years are robustly based
(x)
The appointment of a Director of Regeneration and related support

staff (currently approved for a 2 year period only) is made permanent
(xi)
The proposal to remove the 3m saving to the Council's Operating

Model (currently approved for a 2 year period only) is made permanent
(xii)
The new Savings Requirements as set out below and described in

paragraph 48
B - 28
New Savings Requirements - 2016/17 to 2020/21

Financial
Year
Original
Savings
Requirement
New
Savings
Requirement
Current
Year
m
2017/18
12.8
12.5
6.1
3.8
35.2
8.7
7.5
7.5
5.0
4.0
32.7
Forecast Forecast Forecast Total

2018/19 2019/20 2020/21
m
m
m
m
(xiii)
The acceptance of the 4 Year Settlement to 2019/20 by Central

Government announced on 17 December 2015
(xiv)
The Efficiency Plan attached at Appendix 3
APPENDICES ATTACHED
81.
The following appendices are attached:
Appendix 1 - Medium Term Financial Strategy 2016/17 to 2020/21
Appendix 2 - Letter from Secretary of State for the Department of

Communities & Local Government dated 10 March 2016 regarding
4Year Settlements and Efficiency Plans
Appendix 3 - Efficiency Plan
BACKGROUND PAPERS
82.
The following background papers have been relied upon in preparing this
report.
(i)
(ii)
The Council's current Medium Term Budget Strategy can be found at:
https://www.iwight.com/Meetings/committees/mod-council/24-216/Paper%20B.pdf
The Decisions of Full Council relating to the Operating Model can be
found at:
https://www.iwight.com/Meetings/committees/mod-council/20-716/agenda.pdf
Contact Point: Chris Ward, Director of Finance, 02392 834423

e-mail chris.ward@portsmouthcc.gov.uk
CHRIS WARD
Director of Finance
COUNCILLOR JONATHON BACON

Leader and Executive Member for Resources,
Organisational Change and Children's Services
B - 29
APPENDIX 1
OVERALL AIM
Residents
B - 30
Improve
Efficiency &
Effectiveness
Public Service
Transformation
(reduce costs
and improve
performance)
e.g. Forensic
Review
Entrepreneurial
and commercial
activities
Cut / Remove
Lowest Impact
Services
Short Term
Viability
Increase
Operational
and Financial
Capacity to
Transform
Demand for High

Value / High Cost
Services
Long Term
Sustainability
Use of Capital
Receipts for
Invest to
Save
Schemes
Reduce Debt
Servicing
Costs (MRP)
Reconfiguration
, Prevention
and Rationing
Cut / Remove
Lowest
Impact
Services
Improving the
Island
Economy (to
Demonstrate
the Case for
Fairer
Funding
raise prosperity and

increase the
funding base)
(to increase funding

base)
Strategic
Review of
Assets
(to support
economic growth
and funding base)
B - 31
Detailed Financial Strategy 2016/17 & Beyond

Strategy - Short Term Impacts
Creating
Financial
and
Operating
Capacity to
Transform
Increase
Income
and / or
Funding
Reduce sums set aside for Debt Repayment in the short and medium
term
Reduce
Costs
Manage
Current
&
Future
Demand
Increase Council Tax within the limits of the capping regime
Maximise the identification and collection of Business Rates due by

improving knowledge and intelligence of changes in Business
circumstances and therefore rateable values
Lobby Central Government for additional funding through the

Fairer Funding Review and other existing funding streams
Increase staff and business case funding for Island Regeneration

projects
Increase Adult Social Care staff to manage transformation
Create a 1m Transformation Reserve to fund Spend to Save

schemes
Re-instate ASDA Capital Receipt to provide funding for Invest to

Save schemes
Review existing Capital Programme for all contractually

uncommitted Capital Schemes and re-prioritise towards Invest to
Save / Regeneration
B - 32

Strategy - Short Term Impacts
Increasing
Efficiency &
Effectiveness
Forensic Review of Cost and Income Opportunities
Increase
Income
and / or
Funding
Reduce
Costs
Capital Investment targeted towards revenue savings
Capital Investment targeted towards avoiding future costs
Support the Voluntary Sector and Parish Councils to provide

appropriate Council Services
Smart and lean evidenced based commissioning (rationed criteria

and needs based) providing for actual Need rather than perceived
Need or Want
Review fees and charges to establish extent of full cost recovery

Review fees and charges to ensure alignment with policy objectives
and affordability e.g. Essential services to residents of limited
means are appropriately subsidised but valuable Services that users
can afford are charged at full cost.
Manage
Current
&
Future
Demand
B - 33

Strategy - Short Term & Medium Term Impacts
Withdraw
from or offer
minimal
provision of
low impact
services
Increase
Income
and / or
Funding
Reduce
Costs
Manage
Current
&
Future
Demand
Identify low impact services through public consultation
Identify low impact services through evidence based research
B - 34

Strategy Short & Medium Term Impacts
Entrepreneurial,
Commercial and
Collaborative
Activities (with
managed risk)
Increase
Income
and / or
Funding
Create a 100m Commercial Property Acquisition Fund with a

portfolio of assets of different size, across sectors and
geographies with strong covenants and in strategic growth
locations
Invest via equity or debt in joint ventures where the Island has
either a competitive advantage or unique attractiveness
Investigate the creation of a tax efficient trading company

structure founded on a robust business case where the Council
provides Services at a profit and at a scale to outweigh
associated taxation and additional overheads
Review the case for directly providing Social and/or

affordable Housing and the alternative legal entities for
delivery
Expand strategic partnerships with mainland Councils to fill

skill shortages or take advantage of lower cost service
provision
Reduce
Costs
Manage
Current
&
Future
Demand
B - 35

Strategy Medium & Longer Term Impacts
Improving
the Island
Economy
Increase
Income
and / or
Funding
Reduce
Costs
Manage
Current
&
Future
Demand
Pursue the Solent Combined Authority Deal to secure a share of 30m

p.a. infrastructure funding to support productivity, new jobs, new
housing and design skills provision to meet current and new employers
needs
Pursue a 15m IOW Economic Growth Package through the Local

Growth Deal 3 to increase productivity and employment on the Island
Pursue the One Public Estate initiative to identify Public Sector sites
suitable for Development
Capital Investment prioritised towards economic growth (e.g. strategic

transport infrastructure, acquisition of regeneration sites and
employment site viability)
Capital Investment targeted towards supporting unviable housing

development sites
Strategic review of property assets aimed at providing sites for

regeneration
B - 36

Strategy Medium & Longer Term Impacts
Public Service
Transformation
Increase
Income
and / or
Funding
Establish an accommodation strategy for Adult Social Care aimed at

matching need with appropriate provision including additional Extra
Care Housing. Also to ensure an appropriate mix of in house and
private sector care provision to enhance competition in the sector
Pursue the One Public Estate initiative aimed at co-locating
appropriate health and care services and releasing land and property
for alternative use
Reduce
Costs
Manage
Current
&
Future
Demand
Pursue Health and Social Care integration
Re-direct resources to preventative services to avoid greater costs

downstream including ordinary lives approaches for people with a
learning disability
Use technology and digital solutions to provide greater personal

independence for providing care
Support improved choice for all people purchasing care which

encourages competition, choice and fair pricing and is independent of
statutory control
B - 37
FINANCIAL FRAMEWORK
FINANCIAL PLANNING
Medium Term Financial Forecasting refreshed annually

Annual Capital Planning process to provide
informed prioritisation
Consistent planning horizons for Capital
Resources and Capital Spending
No ring-fencing of revenue and capital
funding (except where required by statute)
ACCOUNTABILITY
RESILIENCE
&
&
DECISION MAKING
RESPONSIVENESS
Revenue & Capital Budgets allocated at

Portfolio level to align with Service
responsibility
Primary responsibility for managing spend
within budget (Capital & Revenue) rests
with the relevant Executive Member
Build General Reserves over the medium

term to guard against risk of "financial
shocks" and improve the ability to respond
to opportunities
Create a separate Transformation Reserve
with strict criteria
A relevant proportion of Capital Resources
"held back" for contingent items or
potential match funding opportunities to
lever additional funding
Prudential borrowing for "Invest to Save" or

"Invest to Avoid Cost" only
B - 38
APPENDIX 2
B - 39
B - 40
B - 41
B - 42
APPENDIX 3
Isle of Wight Council

Efficiency Plan 2016/17 to 2019/20
1. Background
1.1.
In response to the Local Government Sector's request to Government for

increased funding certainty over the medium term, Government has made an
offer to all local authorities of a guaranteed minimum grant envelope to be
paid to councils for a four year period from April 2016. This is an important
step to enable Local Authorities to be able to make informed plans to meet the
further austerity measures announced by Government in the Comprehensive
Spending Review for the period to 2020.
1.2.
In return for funding certainty over the forthcoming period, Government

require Local Authorities to have an Efficiency Plan in place which describes
the way in which Local Authorities will approach the necessary savings
required arising from the 4 year Settlement.
1.3.
To take advantage of this offer, each authority is required to submit an

Efficiency Plan by 14th October 2016.
1.4.
This Efficiency Plan and the accompanying 4 year Settlement is important for
future financial and service planning although, in itself, does not guarantee
that both the cost pressures facing the Council and funding reductions from
Government can be achieved through efficiencies alone without significant
detriment to service provision.
2. Economic & Financial Context

2.1
detrimental effect on the public finances nationally. The overall welfare bill
increased at the same time as tax revenues fell causing the national debt to
rise from 0.5 trillion in 2008 to 1.5 trillion or 85% of Gross Domestic Product
(GDP) currently.
2.2
Part of the response from Central Government has been to reduce spending
(and funding) across the public sector. Over the past 5 years (since 2011/12),
the Isle of Wight Council has faced Government funding reductions of 35m
as well as having to accommodate other inflationary and unavoidable cost
pressures.
2.3
Taken together, the funding reductions and other financial pressures (mainly
relating to inflation, the effects of an ageing population on care services and
the increased requirements for the safeguarding of vulnerable children), the
Council has had to make overall savings over the 5 year of over 60m. In
context, this represents circa 32% of the Council's controllable spending.
B - 43
2.4
Historically Children's Services and Adult Social have received significant

protection from savings. Importantly, these Portfolios account for 58% of the
Council's total controllable budget from which savings can be made. With
further savings over this 5 year period 2016/17 to 2020/21 forecast to be
33m (a further 25% of the Councils Controllable spend), the scale is such
that the Council will no longer be able to afford the same levels of protection
that has been provided in the past. Furthermore, a financial strategy that
does not place sufficient emphasis on growing the income and funding base 5
of the Council will inevitably require very significant savings across all services
with the incidence falling disproportionately on discretionary services.
2.5
It remains a particularly challenging time for the Council, the future savings
required are significant and the risks to the delivery of savings are substantial.
Uncertainty remains over future cost pressures in the essential care services
as well as funding levels, particularly business rates. To deliver the scale of
the savings required and to maintain the Councils financial health, the Council
should regard the savings process as a continual one rather than a once a
year planning exercise. Correspondingly, the Council may need to receive
budget proposals more frequently throughout the year
2.6
The scale of future reductions announced in "Spending Review 2015"

highlights the need for continued and effective medium term planning.
Historically, uncertainty surrounding the phasing of reductions in central
government funding to local authorities has made it harder for councils to plan
strategically over the entire spending review period due to the short term
funding horizons traditionally announced within the Local Government
Finance Settlement each year.
2.7
The Council's rolling three year financial forecasts were comprehensively

reviewed in September 2016 incorporating the funding reductions announced
in "Spending Review 2015". The forecast budget deficit for the period 2016/17
to 2019/20 amounts to 27.5m as set out below.
New Medium Term Forecast 2016/17 to 2019/20

Financial Year
Current Year
m
Forecast
2017/18
m
Forecast
2018/19
m
Forecast
2019/20
m
Expenditure (before
savings)
153.8
166.2
170.9
177.8
Funding
147.4
145.9
146.9
150.3
6.4
20.3
24.0
27.5
In Year (Surplus) /
Deficit
B - 44
2.8
To effectively manage the impact of such a reduction, Council approved that

the required further savings, totalling 28.7m be smoothed out as follows:
Savings Requirements 2016/17 to 2019/20

Financial Year
Current
Year
m
Forecast
2018/19
m
Forecast
2019/20
m
Total
2017/18
m
Savings Requirement
8.7
7.5
7.5
5.0
28.7
Cumulative Savings
8.7
16.2
23.7
28.7
3.
Efficiency Plan Framework
3.1
The Efficiency Plan set out below includes five key themes:
Corporate Plan
Medium Term Financial Strategy to delivering efficiencies and revenue

savings to achieve 28.7m in savings over the remaining spending
review period 2016/17 to 2019/20
Partnership working
Capital Strategy (including Prudential Borrowing)
Financial Resilience and Managing Risk
4.
Corporate Plan
4.1.
The Isle of Wight Council has a clear vision for the Island and four key
priorities which support the vision, as set out below. There are a number of
outcomes (set out below) that the council and its partners aim to deliver which
are supported by a further set of delivery outcomes.
4.2.
The Council's Vision is to be:
"A great place to live, work and visit"

4.3.
Supporting that vision are the Council's Corporate priorities:
Supporting growth in the economy, making the Island a better place and
keeping it safe
Keeping children safe and improving their education
Protecting the most vulnerable with Health and Social Care, investing in
support, prevention and continuing care
Ensuring that all the resources available to the Island are used in the
most effective way in achieving the Islands priorities
B - 45
4.4 The common thread throughout the Council's Plans and strategies are themes
associated with supporting the Island economy, improving education,
safeguarding the vulnerable, transforming public services and cost effective
service delivery.
5.
Medium Term Financial Strategy
5.1. The Isle of Wight Council has a proven track record of delivering savings and
efficiencies.
In the five years to 2015/16 it has delivered savings totalling 52m,
Has implemented further efficiencies and savings totalling 8m in
2016/17
Is currently developing additional savings and efficiencies proposals
totalling 20m over the 3 year period to 2019/2020.
5.2.
The Council is therefore currently planning to have achieved savings and

efficiencies of 80m by the end of 2019/20.
5.3.
The Medium Term Financial Strategy sets out the high level financial
objectives that the Council wishes to fulfil and underpins the budget setting
process for the forthcoming year and over the strategy period.
5.4.
As the Council's high level financial planning tool, the strategy is reviewed and
updated at least annually and is regularly reviewed by the Management
Team.
5.5.
The Council also has the opportunity through its capital programme and
borrowing powers to invest both in the regeneration of the Island (to raise the
prosperity generally as well as improving the Council's financial position) and
cost reduction schemes for the Council itself.
5.6.
The Medium Term Financial Strategy, which seeks to achieve these

aspirations whilst delivering the necessary savings of 8.7m in 2016/17 and a
further 20m over the period 2017/18 to 2019/20 is presented in outline
below:
B - 46
OVERALL AIM
Residents
THEMES
SHORT TERM
Theme 1 - Create Financial and Operating Capacity to Transform
Theme 2 - Increasing Efficiency & Effectiveness
SHORT & MEDIUM TERM

Theme 3 - Entrepreneurial, Commercial and Collaborative
Activities (with managed risk)
Theme 4 - Withdraw from or offer Minimal Provision for Low
Impact Services
Theme 5 - Improving the Island Economy
MEDIUM & LONGER TERM

Theme 6 - Public Service Transformation
5.7.
The strategy has a strong "alternative to cuts" focus, concentrating heavily on

improving the Island economy as a means to stimulate growth generally,
B - 47
reduce the dependency of residents on Council Services to enable service

reductions to be made but also to improve the Council's funding from
Business Rates and Council Tax. Importantly, the strategy also seeks to
improve the commercialisation of the Council and support the transformation
of Public Services.
6. Partnership Working
6.1.
The Council embraces the benefits of Partnership working in terms of cost,

capacity and overall resilience. This results in better outcomes for service
users from:
Improved strategic planning and priority setting
Access to, and enhancement of, staff skills and experience
Better use of information and evidence
Sharing of costs and risks
6.2.
6.3.
The Council already experiences these benefits from a number of established

strategic partnerships and shared service arrangements along with the
sharing of senior staff between organisations. Examples of arrangements
already entered into by the Council include:
Partnership with Hampshire County Council for the provision of

Children's Services
Partnership with Hampshire Fire and Rescue Services for the provision
of those services on the Island
An arrangement with Portsmouth City Council to share the Section 151

Officer and provide Strategic Financial advice
Transfers of a number of community services to Parish Councils
The Council will continue to seek opportunities to extend current partnership

working with other public sector partners that provide innovative, efficient and
cost effective services to residents and visitors to the Island. Equally, it will
continue to work with partner agencies and businesses to promote and
facilitate economic growth.
7. Capital Strategy
7.1.
The Council also has the opportunity through its capital programme (and
borrowing powers) to support its Medium Term Financial Strategy by investing
in:
Regeneration of the Island (to raise prosperity generally as well as

improving the Council's financial position)
Schemes that can provide an income to the Council
Schemes that can reduce the cost base of the Council
B - 48
7.2.
The Council has adopted a Capital Strategy with a particular focus on the
continued delivery of essential services but with equal emphasis on meeting
the austerity and savings challenge facing the Council. The Capital Strategy
is a high level plan that sets out the Council's approach to capital investment
over the short, medium and long term. The Capital Strategy sets out the key
capital investment plans over the next ten years that are required to deliver
the Councils objectives as well as setting the financial framework and
planning process to support their delivery.
7.3.
The following categories of schemes are priorities for attracting capital

funding:
Category 1 -
Programmes of a recurring nature that are essential to

maintain operational effectiveness
Category 2 -
Specific schemes that:
Have a significant catalytic potential to unlock the

regeneration of the Island
Are significant in terms of the Council strategies that

they serve
Are significantly efficiency generating
If not implemented would cause severe disruption to

Service delivery
7.4.
In accordance with the Capital Strategy and Medium Term Financial Strategy
the Council will continue to prioritise those schemes that meet the Councils
statutory responsibilities and those that are most likely to drive cost reduction
for the Council and economic growth for the Island.
7.5.
The 2016/17 Local Government Finance Settlement confirmed that it would

allow councils the flexibility in 2016/17, 2017/18 and 2018/19 to use capital
receipts to fund revenue costs of service reform and transformation that
generates ongoing revenue savings in the delivery of public services.
7.6.
Whilst the Council welcomes the new flexibility in the use of capital receipts,
the Council has set aside some revenue funding for transformation schemes
within its Transformation Reserve and will seek to do so over the short to
medium term. This will enable capital receipts to continue to be used to fulfil
the Council's Capital Strategy to drive the economic growth of the Island and
"invest to save" schemes for the Council, but will continue to bear this
flexibility in mind as opportunities to generate savings are explored and
progressed.
7.7.
Prudential Borrowing is an important source of financing available to the

Council in meeting the savings challenge. To take advantage of this
borrowing, Local Authorities must comply with the Prudential Code for Capital
Finance. The key objective of the Prudential Code is to ensure that the capital
investment plans of local authorities are Affordable, Prudent and Sustainable.
The Prudential Code sets out a governance procedure for those matters as
follows:
B - 49
Affordability e.g. implications for Council Tax and Council housing rents
Prudence and Sustainability e.g. implications of external borrowing
Value for money e.g. options appraisal
Stewardship of assets e.g. asset management planning
Service objectives e.g. strategic planning for the authority
Practicality e.g. achievability of the forward plan
7.8.
The Council will continue to pay close regard to this governance procedure
when determining the most appropriate methodology of capital financing.
7.9.
Prudential Borrowing requires that the capital investment of the Council

remains within sustainable limits and that the revenue consequences,
including both debt financing and other revenue costs, are affordable over the
long term. In considering the affordability of its Capital plans, the Council will
consider all of the resources currently available to it and estimated for the
future, together with the totality of its capital plans, revenue income and
revenue expenditure forecasts for the forthcoming year and the following two
years as a minimum. The Council will also consider known significant
variations beyond this timeframe and pay due regard to risk and uncertainty.
8. Financial Resilience and Managing Risk

8.1.
In accordance with Best Practice, the level and nature of all revenue reserves
and balances are reviewed each year during the formulation of the revenue
budget and medium term financial forecast. The review identifies and
assesses all of the Council's potential financial risks over the forecast period
in order to determine the prudent level of minimum balances that should be
retained, based on the Councils risk profile. Each risk is considered alongside
the probability of it happening in arriving at the minimum level of balances.
8.2.
The outcome of the most recent review, considered by Council at its meeting
in February 2016, identified that a prudent minimum level of balances in
2016/17 should be 5m. Revenue balances as at 31st March 2017 are
forecast to be 9.6m. This amount is needed in order to retain funds which will
be used to smooth the phasing of savings required over the period of the
Medium Term Financial Forecast. Reserves are set to reduce to near
minimum levels for 2017/18 and 2018/19 as they are used to offset the scale
of the annual deficits between spending and funding. This will provide for a
more managed programme of savings, income generation and funding
improvement initiatives to be implemented.
8.3.
The Council is pursuing a number of initiatives that will rely temporarily on the
use of the Council's reserves generally in order to deliver them in a more cost
efficient way (i.e. as opposed to borrowing). In the current climate where
borrowing rates are significantly greater than investment rates, it makes
financial sense to utilise Reserves (that would otherwise be invested until
required) and defer any borrowing decisions to a later date as investment
B - 50
rates recover. Retaining Reserves is an important element in minimising the

overall cost of the Council's debt.
8.4.
In order to meet the challenging financial circumstances facing the Council it

has set in place a suite of Financial Regulations which encourages
responsible spending, removes financial barriers to the delivery of savings
and promotes medium term financial and service planning whilst providing
Services with good levels of financial autonomy.
8.5.
The Council also holds a number of Earmarked Reserves in order to:

i) Provide for future known liabilities such as the Highways PFI Reserve
ii) Provide for likely future liabilities including the Insurance & Risk
Reserve
iii) Provide for transformation and spend to save schemes though the
Transformation Reserve (see below)
8.6.
The Transformation Reserve was established to support transformational

activity to be utilised according to the following criteria:
Any proposal must have a payback of 4 years or less (i.e. the
cumulative saving over 4 years must exceed the amount drawn from
the fund
The proposal is for non-recurrent spending and the Reserve is not to
be used as an on-going source of funding
A proposal can be for:
-
A "Spend / Invest to Save" Scheme (Revenue or Capital)
A "Spend to Avoid Cost" scheme (Revenue or Capital)
A feasibility study where, after preliminary investigations, it is

likely to result in a significant saving with at least a 4 year
payback
One-off redundancy costs arising from proposed savings,

where other redundancy provisions are not available or are
exhausted
8.7.
Additionally, the Council makes central contingency provision within its annual
revenue budget for both costs of uncertain amount and/or uncertain timing as
well as provision for potential non achievement or delay in the implementation
of savings proposals.
9.
Summary
9.1.
By the end of 2016/17 the Council will have implemented revenue savings
totalling 60m. However, the Council continues to face a particularly
challenging financial climate, the future savings requirement totalling 20m
over the three financial years to 2019/20 is significant and the risks to the
B - 51
delivery of savings are substantial. Uncertainty remains over future cost

pressures in the essential care services as well as funding levels, particularly
in relation to Business Rates.
9.2.
The Efficiency Plan set out above summarises Council strategies, frameworks
and policies which form a co-ordinated and cohesive package of measures.
9.3.
The Corporate Plan sets the strategic context of how the Council plans to
shape the Island so that all residents have the opportunity to live the best lives
possible.
9.4.
The overarching Medium Term Financial Strategy sets out how available
revenue and capital resources are utilised with the stated aim that:
"In year" expenditure matches "in year" income over the medium term whilst
regenerating the Island Economy and providing essential Value for Money
services for our Businesses and Residents"
9.5
This Medium Term Financial Strategy is underpinned by a suite of Financial

Regulations which encourages responsible spending, removes financial
barriers to the delivery of savings and promotes medium term financial
planning whilst providing services with a good degree of financial flexibility
and autonomy.
9.5.
Financial resilience is assured through the identification and assessment of

potential financial risks over the forecast period and the establishment of
minimum levels of reserves based on that risk assessment as well as a
central contingency provision for known liabilities of unknown cost or timing. In
addition, the Council maintains Earmarked Reserves for some of its most
significant future liabilities. By the end of 2016/17 General Reserves are
forecast to exceed the assessed minimum level by 4.6m. This amount will be
used to smooth the phasing of savings and to provide a level of comfort
against future financial uncertainties.
B - 52

Paper B

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Paper B

Uploaded by

Copyright:

Available Formats

PAPER B

Purpose: For Decision

THURSDAY, 13 OCTOBER 2016

MEDIUM TERM FINANCIAL STRATEGY 2016/17 to

These are unprecedented times in the history of Local Government funding.

Reduced funding and increased costs in essential care Services, which

The Medium Term Financial Strategy and underpinning Financial Framework

Improve the overall financial resilience of the Council by removing non

Ensure that funding is available to enable, or "pump prime" Spend to

Maximise the Capital Resources available to the Council and exploit

Embed a Financial Framework that:

Promotes longer term financial planning

Encourages responsible spending

Improves financial decision making

A re-phasing of the Council's debt financing obligations with an

A "Debt Repayment Holiday" for 5 and a half years amounting to

Reduction in the Savings Requirement for the current year to 8.7m

An overall reduction in the Savings Requirement over the 4 Year period

Make permanent the decisions taken by Council on the 20 July 2016

Make permanent the proposal to remove the 3m saving to the

A series of other Budget Adjustments for non deliverable / speculative

Maximisation of Capital Resources by:

Keeping the ASDA receipt intact at 17.5m, making it available

Removing all ring-fencing of capital funding where possible in

Initiating a review of all currently approved but contractually

Exploiting opportunities for Prudential Borrowing where the

Builds General Balances beyond the minimum level from 2019/20

ECONOMIC AND FINANCIAL CONTEXT

Historically Children's Services and Adult Social Services have received

EXISTING MEDIUM TERM FINANCIAL STRATEGY

The Council's existing Medium Term Financial Strategy was approved in

Direct the resources available to the council to meeting the councils

Move much further to being an enabling council rather than a provider

Implement a programme of organisational change and service redesign

Target savings where possible to non-direct service delivery costs

Increase income and develop income generation opportunities

To maintain effective budgetary control in order to keep within overall

Manage expectations and recognise that there is not the capacity,

Understand that by setting out priorities and resource allocation that

Extending the overall planning horizon from a 2 year strategy to a 5

A much stronger emphasis on creating a prosperous and sustainable

Become a more entrepreneurial and commercial Council as a means to

A stronger drive to Public Service Transformation in order to improve

Addressing the unique Island Factors of, self sufficiency, premium

Improving the overall financial resilience of the Council over the

MEDIUM TERM FINANCIAL STRATEGY 2016/17 TO 2020/21

The proposed Strategy of the Administration has been developed to increase

Between "resets" 2 of the Local Government Funding methodology, the

The risk of increased numbers of households requiring financial support

support for 2016/17 is 9.6m. Each 1% change therefore will represent

The proposed Medium Term Financial Strategy is attached at Appendix 1. It

The overall approach is characterised by the following:

Improving the overall financial resilience of the Council by:

Repairing the level of General Reserves over the medium term

Ensure that funding is available to enable, or "pump prime" Spend to

Maximise the Capital Resources available to the Council and exploit

Council funding and reduced costs.

Embed a Financial Framework that:

Promotes longer term financial planning

Encourages responsible spending

Improves financial decision making

Better aligns responsibility for the delivery of services with the

Re-profile debt repayment provision

Forensic review of cost and income opportunities