Budgeting for challenging times

The Royal Borough has a track record for prudent financial management. This approach will stand it in good stead as it faces a new decade at a time when central government's fiscal position is deteriorating and economic recovery remains uncertain.

In setting its budget for 2010-11, the Council was committed to ensuring that council tax in the Royal Borough was frozen. This means residents will pay the fourth lowest council tax in England for the fifth year running. Freezing it for the coming financial year means council tax is likely to be about six per cent lower in real terms than it was five years ago.

The Council has looked at how it can further reduce its spending and has identified savings of £9.5 million which it can achieve in the coming financial year.

This will be done through a variety of measures including freezing the pay of 800 senior staff and the allowances of its 54 Councillors. It launched the Smartest Council programme to identify more effective and efficient ways of working and plans to cut its management costs by 15 per cent, saving £1.5 million.

Still larger savings of more than £2 million a year will come in the longer term from moving more staff into Kensington Town Hall and closing rented offices. All these savings will be achieved without having a damaging impact on front line services.

Challenges can present opportunities and the Council has used the opportunity presented by the recession to revisit some of its large contracts and re-tender to save money. It has identified that further savings can be made by getting better deals from the utility providers. As a result it will reduce its street lighting electricity bill in the coming financial year by £200,000. It will make a further saving by agreeing new terms with contractors who maintain the borough's highways

But the financial challenges that the Council faces will continue for the foreseeable future.

The Government's formula grant is expected to rise by 1.5 per cent in 2010-11 (an increase worth £1.5 million), but there is a chance that it could be cut as central government seeks to reduce its debt. The future of other government grants for housing and schools hangs in the balance.

Coupled with these uncertainties the Council will face increased costs for specific services and charges, such as the Freedom Pass. A pension fund revaluation is due on the 31 March and it is possible that the Council will have to increase contributions to its fund starting in 2011-12.

The Council's finances remain in a strong position and with prudent planning and proper provision for both known and likely increases in future costs, the Council expects to maintain financial stability.

The resilience of the Council's financial position is in part due to its reserves, built up over a number of years, and to its effective risk management. Both are critical to realising the Council's aim of maintaining really good and responsive services over the medium to long term.

The Council's reserves enable it to:

plan capital investment with confidence
withstand short-term loss of income or extra spending, for instance because of a recession
fund the transitional costs of savings programmes and service improvements

In preparing for the 2010-11 budget, the Council consulted its Residents Panel, made up of 2,000 residents, on its proposals. Those who responded broadly supported either maintaining current levels of service spending or increasing service spending.

Most were prepared to pay higher charges for services to offset any council tax increase. However, 34 per cent of respondents said they would rather see cuts to local services than see council tax rise. In setting the budget the Council was confident that services could be safeguarded without an increase in council tax.

What do you think?

Email your comments or questions to rbckdirect@rbkc.gov.uk.