Orkney Islands Council

Revenue Budget

2020/21

IMAGE: The cover displays the words “ORKNEY ISLANDS COUNCIL”, “REVENUE BUDGET”, and “2020/21”, together with the Orkney Islands Council coat of arms. The motto on the scroll beneath the crest reads “BOREAS DOMUS MARE AMICUS”.

Revenue Estimates

Contents

1 General Fund Budget Strategy & Assumptions

• Foreword by Head of Finance — 1
• Strategy and Assumptions — 7
• Approved Budget Calculation 2020/21 — 18
• Council Tax Calculation 2020/21 — 18
• Council Tax Comparison 2020/21 — 19
• Summary of Settlement Adjustments 2020/21 — 20
• Summary of Efficiency Savings 2020/21 — 21

2 Service Committee Budgets

• Service Committee Summary — 25
• Development and Infrastructure — 26
• Education, Leisure and Housing — 28
• Orkney Health and Care Partnership — 30
• Policy and Resources — 31
• Harbour Authority Sub-Committee — 32
• Asset Management Sub-Committee — 32
• Investments Sub-Committee — 33
• Pension Fund — 33

3 General Fund Service Budgets

• General Fund Summary — 37
• Central Administration — 46
• Education — 51
• Leisure Services — 58
• Social Care — 66
• Law, Order and Protective Services — 73
• Roads — 74
• Transportation — 79
• Operational Environmental Services — 82
• Environmental Health and Trading Standards — 86
• Other Housing — 88
• Economic Development — 92
• Planning — 95
• Other Services — 97
• Sources of Funding — 103

4 Housing Revenue Account

• Housing Revenue Account — 107

5 Harbour Accounts

• Scapa Flow Oil Port — 111
• Miscellaneous Piers and Harbours — 115

6 Orkney College

• Orkney College — 121

7 Corporate Holding Accounts

• Corporate Holding Accounts — 127

8 Strategic Reserve Fund

• Strategic Reserve Fund — 133

9 Pension Fund

• Pension Fund — 139

10 Glossary of Terms

• Glossary of Terms — 141

Foreword by Head of Finance

The Local Government Finance Act 1992 is the legislative basis for the current system of local taxation, namely Council Tax. The Council is required to set a balanced budget by the 11 March in the financial year preceding that for which it is set. The revenue budget for the financial year 2020/21, commencing 1 April 2020, was agreed on 3 March 2020 with the Council Tax Band D level being increased by 4.84% to £1,208.48.

The net revenue budget for 2020/21 stands at £86.465M.

The estimates have been prepared using the format of the Council’s financial ledger system, which reflects the standard classification of local authority income and expenditure as recommended by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authorities (Scotland) Accountancy Advisory Committee (LASAAC).

Each of the constituent elements of the 2020/21 budget total are shown to enable both reader and budget holder to quickly see what makes up the budget figure presented.

The budget figures given cover eleven separate datasets, ranging from Approved Budget 2019/20 through to Approved Budget 2020/21.

These eleven datasets or columns of information are split between two distinct groupings which cover the two financial years 2019/20 and 2020/21.

The details show the full year revenue costs of providing General Fund, Housing Revenue Account, Harbour Authority, Orkney College, Corporate Holding Accounts, Strategic Reserve Fund and the Pension Fund.

Delivering a balanced budget was only possible through the application of savings and efficiency measures totalling £1.023M applied across General Fund services. Contained within individual service budgets it has also been possible to accommodate £3.511M of additional service pressures which includes £2.813M inflation and £0.698M Settlement Adjustment detailed on page 20.

The Strategy and Assumptions on page 5 were agreed by Council on 3 March 2020. These include the Council Tax calculation and the allocation of approved service pressure and savings across General Fund Service Areas.

The Service Committee Budgets on page 23 provides a budget summary by service committee. This includes details of all General Fund and Non-General Fund services.

The General Fund Service Budgets on page 35 details the General Fund Revenue Estimates, beginning with a Service Committee Summary then Service Area Summary, which includes a summary by Service Function. More detailed Service Area budgets by Subjective Group then follow.

The Housing Revenue Account on page 105 deals with the Housing Revenue Account.

The Harbour Account on page 109 deals with the Harbour Accounts: Scapa Flow Oil Port and Miscellaneous Piers and Harbours.

The Orkney College on page 119 deals with the Orkney College Account.

The Corporate Holding Accounts on page 125 deal with the budgets for General Fund and Non-General Fund Repairs and Maintenance to properties, General Fund and Non-General Fund Ground Maintenance costs and Utilities, Insurance, Telephones, Photocopiers and Postages holding accounts.

The Strategic Reserve Fund on page 131 deals with the Strategic Reserve Fund.

The Pension Fund on page 137 deals with the Pension Fund Account.

A Glossary of Terms is provided at page 141.

Gareth Waterson
Head of Finance

April 2020

Definition of Key Terms

The following terms are used throughout the estimates with the undernoted definitions:

Definition of Key Terms (cont.)

Service Area

Specific area within a Service Committee, e.g. Social Care, Transportation, etc.

Service Function

Specific function within a Service Area, e.g. Childcare, Elderly Residential, etc.

Subjective Group

Expenditure and Income Grouping, e.g. Staff, Property, Fees & Charges etc.

Subjective Group (Expenditure)

Subjective Group (Income)

1 The Budget Strategy

Strategy and Assumptions

The Council has faced significant budget constraints in recent years that has required year on year savings; delivering savings of £13.568m between 2011/12 and 2019/20 as follows:

Independent economic commentary has reported that the revenue grant to local government was cut by around 7.5% in real terms between 2013/14 and 2018/19 and that the outlook is particularly challenging, with “unprotected” parts of the Scottish budget facing real terms cuts of 13–16% over the course of the Scottish parliament.

The Council's settlement from the Scottish Government has now been confirmed in Finance Circular No 4/2020 at £78,182,000.

Accordingly, the General Fund revenue budget for financial year 2020/21 has been set at £86,464,800, an increase of £666,000 from that reported in February 2020. The changes are as follows:

Local Government had been assured, as part of the budget deal for 2019/20, that a three-year settlement for 2020/23 would be provided. The uncertainty from the UK’s departure from the European Union and a General Election in December 2019, followed by a delay in setting the UK budget, has however resulted in a rethink on the three-year settlement commitment, with a single year settlement for 2020/21. A key recommendation made in this report is, therefore, to also set a one-year budget for 2020/21 only, however a three-year maximum contribution from the Strategic Reserve Fund is proposed that should provide the necessary flexibility to accommodate the budget savings that will need to be delivered over the next three year period.

The Council received a share of £90 million that was allocated to local government as a late adjustment in the deal to secure parliamentary approval for the 2019/20 Scottish Government budget. This additional funding was placed in a General Fund contingency when setting the revenue budget for financial year 2019/20. This contingency has been applied as a funding source in the draft General Fund revenue budget for 2020/21, but it is also proposed that any further efficiency savings realised, or additional funding secured for 2020/21, that is not specific to government initiatives that must be funded, be retained in a General Fund contingency.

The Council's annual budget uplifts since 2011/12 have necessarily reflected the prudent approach taken to the budget, with annual budget uplifts set at less than the headline rate of inflation. This approach has resulted in all Council services having to find additional efficiency savings within their approved budgets to cover the impact of cost price increases. General Fund service overspends against budget in the financial year ended 31 March 2019 reflecting the pressure some services budgets are facing.

The low price of oil, which provided some respite in transport and property heating costs in financial years 2014/15 and 2015/16, rose quite steadily to peak at $73.93 in June 2018 before falling to $45.41 at December 2018. The price has risen again in January 2020 to $70.73 on 6 January 2020 amid fears of disruption to global oil supplies following US military action in the gulf. Economic commentators Capital Economics are not, however, projecting significant changes in the headline rate of inflation over the 2020 calendar year, as follows:

• Quarter 1: 1.9%
• Quarter 2: 1.4%
• Quarter 3: 1.5%
• Quarter 4: 1.6%

The implication for the Council is that, on current predictions, real terms increases in general revenue funding cannot be expected any time soon. The use of reserves to balance the budget must however only be a short term solution. There is therefore a continuing requirement to reduce the level of General Fund expenditure to bring it into line with the financial support received.

The Council has a General Fund balance which, at 1 April 2019, stood at £4,787,100 (1 April 2018 £5,032,100) and gives the Council a degree of protection over the longer term from potential risk due to unforeseen significant expenditure calls where insufficient revenue or capital budget provision may exist.

The Council currently holds various earmarked reserves within General Fund balances as part of its longer-term financial management strategy. These earmarked reserves, amounting to £8,383,400 at 1 April 2019, are held to meet specific commitments, specific purposes or for specific Council priorities.

The Council also has available a source of funding from its Strategic Reserve Fund. In setting the revenue budget for 2019 to 2020, a contribution of £6,050,000 of the interest that would be earned on the Strategic Reserve Fund was budgeted as a means of cushioning savings targets/requirements and to maintain and protect spending and services which might otherwise have been reduced or removed when setting the budget.

The recommended draw from the Strategic Reserve Fund for 2020/21 is £6,317,200 with a maximum draw from the Strategic Reserve Fund of £22,050,000 over the three years 2020/21 to 2022/23.

5 Council Tax

The Council Tax is based upon the capital value of domestic properties (as at 1 April 1991) which is determined by the Assessor. Once the capital value of properties is assessed, properties are allocated to one of eight bands.

An increase in Council Tax of 4.84% would give a Band D rate of £1,208.48 and will raise a total of £9,844,400. The increase in the number of Band D properties will contribute additional income of £78,600. The surcharge on empty properties is estimated to contribute £135,400 towards the total in 2020/21. An increase to the Scottish average would have raised a further £824,000.

An element of non-collection of Council Tax will inevitably occur and it is considered prudent to make a non-collection allowance of 1.0%, thereby reducing the Band D equivalent by 81 from 8,115 to 8,034. The allowance for non-collection applied when setting the 2019/20 Council Tax was also 1.0%. With a recommended 4.84% increase in the Band D Council Tax level to £1,208.48, the total amount of income expected to be generated through the Council Tax is £9,844,400.

6 Efficiency Savings for 2020/21

Services have submitted efficiency savings proposals totalling £755,200. Each of these savings proposals has been subject to challenge by the Senior Management Team and then further challenge by elected members.

The full range of efficiency savings options for 2020/21 is estimated to involve reduction in staffing numbers of approximately 5.5 full time equivalent posts. Of these posts 1.0 full time equivalent is vacant and 4.5 full time equivalent are occupied.

The efficiency savings above are in addition to the low risk budget savings for 2020/21 amounting to £267,600 that were recommended for approval by the Policy and Resources Committee on 26 November 2019, as follows:

• Chief Executive’s Service — £155,000.
• Corporate Services — £41,400.
• Development and Infrastructure — £30,200.
• Education, Leisure and Housing — £41,000.

It is proposed that £48,000 of the Crown Estate funding received in 2019/20 be applied to cover the cost of the following savings that would otherwise be taken in 2020/21:

• Road Closures for Events and Festivals — £5,000
• Winter Free 1 Hour Parking — £24,000
• Development and Marine Planning — £14,000
• Archaeology Workforce Planning — £5,000

Approved Budget Calculation 2020/21

Council Tax Calculation 2020/21

Council Tax Comparison 2020/21