Corporate Plan: Financial strategy
The financial strategy to support our Corporate Plan
The financial position faced by local authorities remains very tough. Funding cuts over a sustained period mean that we have a lot less money to invest in services now than we have in the past. So far, we have been able to manage this situation by reducing our spending by being more efficient and limiting the impact on the frontline services valued by our communities.
We don’t expect the financial position to get any better over the next five years, and we think that we will need to continue to make savings of at least £5 million each year for the foreseeable future. This is obviously going to limit what the council is able to do, and some very difficult decisions will need to be made about how we are actually going to make those savings. The council will have to carefully prioritise its resources as it will not be able to continue to fund all of the services currently provided to the same level.
Further financial pressures are likely to continue in areas such as social care and schools as well as the ongoing costs associated with staff, buildings and transport.
Despite the difficult situation we are faced with, this council has a very clear ambition to maintain the quality of its services and to address important issues raised by residents. We also want to continue to transform the quality of our school buildings, improve our roads and bridges and increase the stock of affordable housing in the county.
We think it is important to be clear about what delivering these ambitions might cost, how we might pay for them and what the implications for the council will be. The plan therefore sets out how much additional money we hope to invest in our priorities over the next five years in order to achieve our ambitions. It will not be easy to achieve and our Councillors will have some very difficult choices to make to match their ambitions with the additional investment required.
How much might this cost?
This Corporate Plan sets out our ambitious but deliverable priorities for the next five years. Some of these priorities will require significant capital investment, others revenue funding, and some may be delivered at no additional cost. We think we need to invest somewhere in the region of an additional £135 million pounds in our corporate priorities over the next five years, if we are to achieve all that we’d like.
This is a significant amount, and is in addition to any money we have already committed to those priority areas. The £135 million is also aspirational, and it is based on current assumptions about our financial position over the next five years. Should our situation change, we have controls and processes in place to enable us to review our financial strategy during the lifetime of the Corporate Plan.
Our current thoughts about what we might spend the additional money on are set out within the sections on each priority. Not all of our priorities will require significant capital funding, but some - particularly improving education, roads and housing - would not be possible without it. Other priorities, such as a safe and protected environment, may involve us doing things differently, or may require additional revenue funding.
To pay for the capital investment identified, we will need to commit revenue budget and cash to the priorities. In the current financial climate, this will mean there is less money available for areas not identified as priorities.
During 2017/18 we identified £1 million of our revenue budget to support new corporate priorities, but we must estimate that a further £1 million of the budget is required to fund the priorities identified. This will be difficult to achieve as the council’s total budget reduces.
What are the risks?
Affordability is the greatest risk and will be a key consideration when we assess each individual project contributing to the Plan. There are always risks attached to capital spending, but we understand those risks and have confidence the proposals are achievable. We also understand that there are risks if we do not invest in some of the priority areas.
If we don’t invest in our priorities our assets will deteriorate, services may not be able to improve, and we will spend more money to maintain existing standards. For example, without additional investment, we’d have to accept that the condition of our roads and bridges would deteriorate, school buildings will decline and we wouldn’t be able to improve the supply of social and other housing to meet the needs of local communities.
If we don’t invest in our priorities we will not realise our ambitions. Some of our ambitions require a lot of investment, whereas others may need to be given a greater priority or a different focus. Both approaches should deliver improvement, whether that be in educational provision, housing, a better natural environment, or through the way we connect and communicate with communities. We also believe that our ambition to invest £135 million in Denbighshire over the next five years will have a significant effect on the local economy. We will ensure maximum possible benefit for Denbighshire from this spending, for example, by working with those undertaking construction projects so as many local people as possible deliver the work.
How can we afford this?
Although £135 million is a large sum, the council would not have to provide all of this money itself. We expect that grants from the Welsh Government will be available to help fund the planned work to improve our schools and flood defences. We also plan to use income from housing rent to help fund new council housing.
In reality, we think that the council may have to contribute around £71 million of the £135 million. Some of this £71 million would be found from reserves and by selling assets. A proportion would be generated through prudential borrowing. The borrowing and any other revenue commitments will have to be met from revenue funding and so decisions will have to be made to commit revenue budgets to funding the priorities, meaning less will be available for other important areas.
We have experience of using prudential borrowing sensibly and carefully and we have used it successfully in the past to invest significant additional funding in our roads, schools and our housing stock. We have measures in place to ensure all individual capital investment decisions we take are based on robust business cases and that the overall debt financing position is carefully monitored and remains affordable and sustainable. Our revenue budget plans and processes are well established and will enable us to manage affordability.
Does everyone in the council support this approach?
The financial strategy outlined above has been developed with our Councillors. Choices will have to be made about how the council spends its money in a difficult funding climate. If circumstances change, and these plans become unaffordable, we have the flexibility to change our levels of spending accordingly.
As we implement these radical changes, the next five years will be an exciting but also a challenging time for the council. With these levels of additional investment, we must deliver drastic improvements. If we are successful - and we believe we will be - Denbighshire will be fit for the future, and continue to be one of the best places in the UK to live, learn, work and visit.