MAYOR & CABINET

Report Title FINANCIAL SURVEY 2010/15

Key Decision Yes Item No. 5

Ward All

Contributors EXECUTIVE DIRECTOR for RESOURCES

Class Part 1 Date: 16 September 2009

1 PURPOSE

1.1 The purpose of this report is to set out the medium term financial strategy for the
Council over the next five years.

2 EXECUTIVE SUMMARY

2.1 The Financial Survey for 2010/15 sets out the Council’s medium term financial strategy.
The Survey reviews the Council’s overall financial position bringing together the outturn
for 2008/09, the forecast for the current financial year and considers prospects for
2010/11 to 2014/15. It is important to emphasise that the Survey is based on a whole
series of assumptions that will change once information, particularly from the
Government, is announced.

2.2 Although the Council starts from a sound base the prospects for the Council’s finances
from 2011/12 onwards are extremely difficult and uncertain for both capital and revenue
expenditure.

2.3 The Council has a committed Capital Programme of just over £350m over the three
years to March 2012. The Capital Programme for the period 2012-15 reflects a
significant reduction in the level of resources available compared to the previous three
years. Given the uncertainties in this estimate at this stage, it is not recommended that
capital resources are committed beyond March 2012, except where such projects are
self-financing.

2.4 After allowing for committed savings the Housing Revenue Account is projecting a
balanced position to March 2011. There is a requirement for savings of £1m in 2011/12
& thereafter the HRA is balanced. However, until details of the Government’s proposed
reform to the housing subsidy system are known, it is impossible to make meaningful
projections for the HRA from April 2011 onwards.

2.5 The Council is seeking revenue savings in 2010/11 of £8.8m which is equal to the
Government’s requirement that 4% pa efficiencies are made. The key determinant of
the scale of revenue savings that the Council will have to make over the period 2011/15
is the level of formula grant from the Government. There is uncertainty about the
severity of the reduction in formula grant that will occur. An optimistic, pessimistic and a
mid-range scenario are summarised below.
 Table 1 – Estimated Revenue Budget Savings 2010/15

2010/11 2011/12 2012/13 2013/14 2014/15

£m £m £m £m £m
Optimistic 12.2 12.2 12.3 12.2
Mid-Range 8.8 15.8 15.7 15.8 15.6
Pessimistic 18.5 18.3 18.1 17.9

2.6 Services funded from the Dedicated School Grant are likely to be treated slightly less
severely than for other Council services. However, once the forecast increase in pupil
numbers is allowed for, the mid-range forecast for the DSG is for reductions of some
£7.8m pa in 2011/12 before inflation, with higher savings figures thereafter.

2.7 The scale of the financial challenge facing the Council is likely to be of a greater
magnitude than any previously faced. To manage this situation will require the utmost
care and unremitting attention over the next few years.

3. RECOMMENDATION

3.1 That the Mayor endorses the Financial Survey 2010/15.

4. STRUCTURE OF THE REPORT

4.1 The Financial Survey 2010/15 is structured as follows:

1. Purpose
2. Executive Summary
3. Recommendation
4. Structure of the Report

STRATEGIC REVIEW
5. Policy Context
6. Introduction
7. Final Outturn 2008/09
8. Budget Summary 2009/10

MEDIUM TERM FINANCIAL STRATEGY

9. Capital Programme
10. Housing Revenue Account
11. Revenue Resources
12. Revenue Expenditure
13. Revenue Budget Process

OTHER BUDGET CONSIDERATIONS

14. Reserves and Balances
15. Area Based Grant
16. Participatory Budgeting
17. Total Place
18. Budget Risk Management
 SUMMARY AND IMPLICATIONS
19. Conclusion
20. Financial Implications
21. Legal Implications
22. Equalities Implications
23. Environmental Implications
24. Crime & Disorder Implications
25. Background Papers

STRATEGIC REVIEW

5. POLICY CONTEXT

5.1 The Council’s strategy and priorities drive the medium term financial planning process,
with changes in resource allocation determined in accordance with policies and
priorities. Shaping our future is Lewisham’s Sustainable Community Strategy. It
covers the period for 2008 to 2020 and sets out a vision for Lewisham and the priority
outcomes that organisations, communities and individuals can work towards to make
this vision a reality. The 6 Sustainable Community Priority outcomes, agreed with the
Lewisham Strategic Partnership and the Council’s 10 Corporate Priorities are set out
as follows:

Sustainable Community Strategy

• Ambitious and achieving: where people are inspired and supported to fulfil their
potential.
• Safer: where people feel safe and are able to live free from crime, anti-social
behaviour and abuse.
• Empowered and responsible: where people can be actively involved in their
local area and contribute to supportive communities.
• Clean, green and liveable: where people live in high quality housing and can
care for and enjoy their environment.
• Healthy, active and enjoyable: where people can actively participate in
maintaining and improving their health and well being.
• Dynamic and prosperous: where people are part of vibrant localities and town
centres well-connected to London and beyond.

Corporate Priorities
• Community Leadership and Empowerment: developing opportunities for the
active participation and engagement of people in the life of the community.
• Young people’s achievement and involvement: raising educational attainment
and improving facilities for young people through partnership working.
• Clean, green and liveable: improving environmental management, the
cleanliness and care for roads and pavements, and promoting a sustainable
environment.
• Safety, security and a visible presence: partnership working with the police
and others to further reduce crime levels and using Council powers to combat
anti-social behaviour.
• Strengthening the local economy: gaining resources to regenerate key
localities, strengthen employment skills and promote public transport.
 • Decent Homes for all: investment in social and affordable housing to achieve
the decent homes standard, tackle homelessness and supply key worker
housing.
• Protection of children: better safeguarding and joined up services for children
at risk.
• Caring for adults and older people: working with health services to support
older people and adults in need of care.
• Active, healthy citizens: leisure, sporting, learning and creative activities for
everyone.
• Inspiring efficiency, effectiveness and equity: ensuring efficiency and equity
in the delivery of excellent services to meet the needs of the community.

5.2 A key objective of the Financial Survey is to ensure that there are clear links between
the Council’s overall priorities and resource allocation decisions. Amongst the ways
this is achieved are:

• the continuous search for ongoing efficiencies within the Council to improve
services and provide value for money for residents;

• a policy analysis of how savings proposals will impact upon the Council’s 10 key
priorities; and

• the linkage between the Financial Survey and other key strategies and plans of
the Council. For example, strategies for Programme Management and Property,
Highways and Adult Social Care are underpinned by the resource allocations
made in the Survey.

5.3 The Council’s approach of having a policy led budget process, provides a firm
foundation from which to deliver our priorities, with a continuing emphasis on
efficiency. Through planning our resource requirements over a five year time horizon,
the Financial Survey is critical to supporting the Council’s delivery of its Corporate
Priorities.

6. INTRODUCTION

6.1 A Financial Survey has been produced in Lewisham every year since 1997. The
process continues to become more sophisticated each year as its importance to the
Council has become established. The Survey represents the start of the Council’s
formal budget process, which leads to the setting of the overall Budget each year.

6.2 The Financial Survey has sought to encourage prudent financial management across
the Council. Its five-year planning horizon represents good practice, as it enables
Members to take a strategic approach to the allocation of financial resources to service
priorities and to consider financial decisions over the longer term, including proposals
that will be expected to release efficiencies in future years.

6.3 The key objectives of the 2010/15 Financial Survey are to:
• plan the Council’s finances over a five year period to take account of both local
improvement priorities and national priorities;
• ensure that the Council’s corporate priorities continue to drive financial strategy
and resource allocation;
• ensure that adequate risk assessments of material items of capital and revenue
expenditure are undertaken, incorporating lessons learned from previous years;
 • assist the integration of business and financial planning processes;
• ensure that the plan takes account of: stakeholder and partner consultation;
external drivers; capital investment; budget risk assessments; and expected
developments in services;
• ensure that the Council’s medium term financial strategy is linked to other internal
strategies and plans; and
• ensure that the final agreed budget reflects all these considerations.
6.4 Building on the platform of the previous financial strategy, the Financial Survey
2010/15 provides more extensive integration of capital expenditure and the HRA and
further development of budget risk management issues. It also seeks to describe in
financial terms, some of the Council’s joint plans with partners and other stakeholders
for delivering services.

6.5 An assessment of the Council’s financial prospects from 2010, has been set out from
section 9 onwards. Prior to this, sections 7 and 8 of this report, provide a brief resume
of the recent financial past and present positions for the Capital Programme, Housing
Revenue Account and the General Fund Revenue Budget.

7. FINAL OUTTURN 2008/09

7.1 The Council’s accounts for 2008/09 are now closed and the pre-audited Statement of
Accounts was reviewed and approved by the Audit Panel at its meeting on 23 June
2009. The Chair of the Council signed the Statement of Accounts following approval
by full Council on 24 June 2009. This section of the report sets out the Council’s final
outturn for both capital and revenue budgets. It covers the following areas:
• Final Capital Outturn 2008/09
• Final Housing Revenue Account Outturn 2008/09
• Final General Fund Revenue Outturn 2008/09

Final Capital Outturn 2008/09

7.2 The overall final outturn for the 2008/09 Capital Programme is summarised below in
Table 2.

Table 2 – Final Capital Outturn 2008/09 Compared to Programme

Programme Revised Final Outturn Net Over- Over

Forecast achievement achievement
£m £m £m %
Directorates Capital 63.394 65.452 2.058 3.2
Programme
Lewisham Homes 10.565 11.181 0.616 5.8
Total 73.959 76.633 2.674 3.6

7.3 The Council’s overall Capital Outturn was £76.633m compared to revised Quarter 3
forecast of £73.959m. This represents an over-achievement of £2.674m or 3.6%.

7.4 Members should note that this over-achievement of 3.6% in 2008/09 does not
represent an overspend against the approved Capital Programme. It means an earlier
completion of planned spend than forecast and does not change the overall resources
available to support the Programme.
7.5 Table 2 shows that outturn for the Directorates’ Capital Programme was £65.452m
compared to the revised Quarter 3 forecast of £63.394m, a net over-achievement of
£2.058m or 3.2%.

7.6 Lewisham Homes Capital Outturn was £11.181m compared to the revised Quarter 3
forecast of £10.565m. This represents an over-achievement of £0.616m or 5.8%.

Final Housing Revenue Account Outturn 2008/09

7.7 The Housing Revenue Account (HRA) reported a surplus of £326k in 2008/09. This
surplus has been caused by small underspends on Repairs and Maintenance,
additional rental and service charge income due to the slippage in the stock transfer
process and additional leaseholder income.

7.8 Lewisham Homes declared a surplus of £981k on its activities for 2008/09.

Final General Fund Revenue Outturn 2008/09

7.9 The final revenue outturn on Directorate budgets for the General Fund is an overall
overspend of £302k. A summary of the outturn position across Directorate budgets
has been set out in Table 3.

Table 3 – Final Directorate Revenue Outturn Summary for 2008/09

DIRECTORATE 2008/09 2008/09 2008/09 2008/09

Net Net Final Budget Budget
Revenue Revenue Variance Variance
Budget Outturn

£’000 £’000 £’000 %

Children & Young People 55,760 54,806 (954) -1.7%
Community Services 92,448 92,172 (276) -0.3%
Customer Services 40,061 40,619 558 1.4%
Regeneration 17,556 18,968 1,412 8.0%
Resources 29,257 28,819 (438) -1.5%
Total Directorate Budgets 235,082 235,384 302 0.1%

7.10 The overall Directorate overspend of £0.302m (0.1% of the net revenue budget)
compares to the projection of an overspend of £54k as reported in the Budget Report
2009/10 (Mayor & Cabinet 11th February 2009). The increased overspend of £248k
has been caused by larger overspends in the Customer Services and Regeneration
Directorates, partly offset by larger underspends in the Children & Young People,
Community Services and Resources Directorates. It should be noted that there still
remains some significant pressures in services, such as Children’s Placements, Bed
and Breakfast and Transport. Officers are continuing to monitor these areas closely
throughout the 2009/10 financial year.

7.11 Overall, the Council’s finances at 31 March 2009 were sound. The Capital Programme
marginally over-achieved its plans and the HRA was in a small surplus. Although there
remain some concerns about certain services overall Directorates outturn was within
0.1% of the total budget.
8. BUDGET SUMMARY 2009/10

Capital Monitoring

8.1 On 11 February 2009, the Mayor & Cabinet agreed a Capital Programme for the three
year period 2009/12. On 15 July 2009, the Mayor & Cabinet considered the 1st Quarter
Capital Programme monitoring report which showed that at the end of June some 10%
of the approved programme had been spent.

8.2 At the same meeting the Mayor decided to allocate additional resources to a number
of programmes. After these decisions the 2009/12 Programme amounted to
£356.737m with available resources of £356.802m. This represents a level of under-
programming across all these years amounting to £65k.

HRA monitoring

8.3 The current forecast on the HRA for 2009/10 as at June 2009 is for a balanced
account by year end. There are current pressures on energy and rent/service charge
collection, but this is being mitigated by use of reserves and revenue working balances
held for that purpose. Repairs & Maintenance is expected to spend to budget.

Revenue Monitoring

8.4 The Council’s revenue budget for 2009/10 was agreed by full Council on 2 March
2009. The budget requirement was set at £268.251m. This excludes funding for
schools, which since April 2006, has been provided by way of the Dedicated Schools
Grant (DSG). Lewisham’s final DSG allocation for 2009/10 is £178.216m.

8.5 Officers will undertake regular revenue budget monitoring throughout 2009/10. The
first revenue budget monitoring report was based on returns to the end of May 2009,
and was presented to Mayor & Cabinet on 15 July 2009. This revenue monitoring
report presented a projected year-end overspend of £2.336m. The overspend reported
is mainly due to budget pressures in Children’s Social Care, Environment, Planning
and Economic Development and Transport Divisions.

8.6 Overall, the Council has continued its tight management of the Capital Programme
and the HRA. However, there are concerns on the forecast revenue overspend for
2009/10.

MEDIUM TERM FINANCIAL STRATEGY

9. CAPITAL PROGRAMME

9.1 The Capital Programme is a financial expression of the Council’s priorities for
investment. It has strategic links to the Council’s Community Strategy, and the
Corporate Plan. The Asset Management Strategy sets out the Council’s approach to
the assets required to deliver excellent services to local people and this also
influences the content of the Capital Programme.

Committed Capital Resources and Schemes 2009 - 12

9.2 The estimated resources available, the forecast spend and the under programming
within the 2009/12 Committed Capital Programme are set out in Table 4. This is the
capital programme position following the decisions taken by the Mayor on 15 July
2009.
 Table 4 – Resources & Forecasts

2009/10 2010/11 2011/12 Total

Resource Type
£’000’s £’000’s £’000s £’000’s
Supported Borrowing 12,997 11,046 3,000 27,043
Unsupported Borrowing 1,144 800 0 1,944
Capital Receipts 15,344 24,138 15,684 55,166
Grants 36,254 76,876 137,818 250,948
Revenue 2,777 12,268 6,656 21,701
ALL RESOURCES 68,516 125,128 163,158 356,802
FORECASTS (67,416) (125,128) (164,193) (356,737)
(OVER)/UNDER
1,100 0 (1,035) 65
PROGRAMME

9.3 Borrowing levels are those notified to the Council by the Government in December
2008 and will be updated later this calendar year. Unsupported borrowing relates to
prudential borrowing for the Council’s vehicle replacement programme and
investment in highways.

9.4 Capital receipt assumptions are based on the current asset disposal programme. The
generally available capital receipts forecast to support the programme were re-profiled
in Quarter 1 based on the forecast date of disposal and the risk of the disposal being
completed. It should also be noted that for the purposes of sound capital programme
management and prudency, Right to Buy receipts have been disregarded. The
balance of receipts arise from other asset disposals including stock transfers and
those to Registered Social Landlords as part of wider regeneration schemes. Other
resources include Capital grants (mainly the housing Major Repairs Allowance (MRA))
and contributions from revenue.

9.5 As part of the decisions taken on 15 July 2009 based on the 1st Quarter Capital
Programme monitoring report, the Mayor decided to allocate additional resources to a
number of programmes: £6.7m to Lewisham Homes, £2.944m to Forest Hill pool,
£2.8m to Highways condition works, £258k to Enviroworks and to cashflow, within
2009/12, £4.399m for the Deptford Town Centre programme.

9.6 The Council’s Capital Programme includes a number of complex programmes

including, Building Schools for the Future (BSF), Primary capital programme,
Worksmart, Forest Hill pool, Loampit Vale development and pool and the
redevelopment of Deptford and Lewisham Town Centre programmes. These corporate
programmes are key priorities for the Council.

9.7 Since these decisions in July the key development in the 2009/12 Capital Programme
is the Primary Capital Programme. The growth in pupil numbers across the borough
will lead to a requirement for between 18.5 and 28 additional forms of entry by 2017.
In order to begin to accommodate this growth additional capital expenditure will need
to be incurred. The Government has responded to this issue with an additional Basic
Need safety Valve round of bidding for capital grant. However, there are major
problems with the methodology the DCSF has used for these bids. Overall, it is far
from clear that the likely share the Council might gain of the £200m proposed will be
sufficient to support the delivery of permanent additional places at the projected level
in Lewisham.
9.8 There are two important recent developments on Decent Homes. The original Decent
Homes funding commitment made by the Government totalled £145m based on
Lewisham Homes obtaining a two star rating from the Audit Commission’s inspection.
An updated stock condition survey has been undertaken by Lewisham Homes and the
stock numbers have increased to include the New Cross properties where there was
insufficient support in the ballot for a stock transfer. As a result the funding
requirements to meet the Decent Homes standard have increased. The Council,
together with Lewisham Homes, have started discussions with the HCA to increase
the Government’s funding contribution from £145m to £185m. However, in July 2009
the Housing Minister announced a proposal to defer payment of Decent Homes
funding until 2011/12 for those authorities that gained two star status. Discussions will
take place between the HCA, DCLG and London Councils to assist ALMOs to obtain
two star status and access funding. The resources and costs associated with this are
included in the above table as originally approved (in 2010/11 and 2011/12) but this
cash flow may require subsequent amendment.

9.9 A high level summary of the Committed Capital Programme is set out as Appendix A.

Capital Programme Prospects for 2012 - 15

9.10 The following table sets out assumptions for the level of resources likely to be
available to the Capital Programme in the period 2012-15.

Table 5 – Capital Programme Resources 2012/15

2012/13 2013/14 2014/15

Resource Type
£'000s £'000s £'000s Total £'000s
Supported Borrowing 0 0 0 0
Unsupported Borrowing 0 0 0 0
Capital Receipts 11,159 11,159 11,159 33,475
Grants 12,147 12,324 12,455 36,926
Revenue 0 0 0 0
ALL RESOURCES 20,972 24,649 24,780 70,401

9.11 The resources available to the programme between 2012-15 are very uncertain. It is
clear that public sector spending is likely to be severely constrained and borrowing
approvals are likely to be hit particularly hard. For these reasons no generic borrowing
assumptions have been included from 2012 onwards. If borrowing approvals are made
they will very likely be for specific named projects. Resources from the Major Repairs
Allowance have been assumed for this period, related to estimated stock levels,
although this will be impacted by the proposed changes to the housing subsidy
system. No General Fund revenue contribution is assumed.
9.12 The level of capital receipts assumed in the table (£11m per year) is based on known
sites likely to become available through to March 2015 with an even cash flow
assumed across the period. Given the uncertainties implied by the current property
market it is difficult to make reliable assessments of potential site values for a period
up to 5 years in the future.

9.13 The revenue position set out later in this report makes clear the forecast levels of
future savings required. Some of these are likely to have implications for the
management of assets including both investment requirements and potential
disposals.

9.14 The Council will continue to plan its Capital Programme on a 3 year cycle with a
revised programme being agreed each year, the 2009-12 Programme will be reviewed
in late 2009 and a new 2010-13 programme proposed in early 2010. At this stage, the
levels of resource uncertainty for the period 2012-15 are such that it would be
inappropriate to develop additional capital investment plans, except where they would
be self-financing.

Capital Programme Risks

9.15 The key Capital Programme risks outlined when the Budget Report was agreed in
February 2009 were:

• a prolonged and deep downturn in the housing market leading to delayed and/
or reduced capital receipts ;

• delayed completion and cost overruns to major schemes; and

• inability to recruit and retain suitably experienced project managers.

Since then, the major additional risk that has arisen is in the Primary Capital
Programme.

9.16 Although these risks applied to the 2009-12 Programme, little has changed to radically
adjust these assumptions looking through until 2015. The weakness of the housing
market remains the principal concern and officers will continue to take a prudent
approach to the assumptions on the generation of capital receipts. Capital receipts will
continue to be reviewed quarterly, projections updated and reported as part of the
regular update of the programme to Mayor & Cabinet.

9.17 In the construction sector inflation remains low with a relatively large number of
contractors tendering for a comparatively low level of work. Given the low levels of
construction activity further financial failures of contractors are likely and all major
contractors will be subject to an in depth financial appraisal. In the period through to
2015, assuming the property market improves, additional activity could feed through
into increased construction costs.

9.18 The Council’s Capital Programme includes a number of complex programmes such as
Building Schools for the Future and the Deptford Town Centre redevelopment, where
skilled programme and project management is required for successful delivery. The
Council’s approach has been to develop it’s internal capacity to deliver these
programmes and although this has been largely successful, it is at an early stage of
development and remains vulnerable to pressures across the market.
10. HOUSING REVENUE ACCOUNT

10.1 The Housing Revenue Account (HRA) is a statutory account which sets the Landlord
costs and income for the housing stock. It is a ring-fenced account that cannot be run
at a deficit.

10.2 The change in delivery of Lewisham’s housing management service is almost

complete following the stock options appraisal submitted in July 2005, which
recommended a mixed approach to improving the stock to meet the Government’s
Decent Homes Strategy. The approach involves some stock transfers, a refurbishment
through a Private Finance Initiative (PFI) and the establishment of an Arms Length
Management Organisation (ALMO).

10.3 The completed and expected dates of the various stock transfers are set out in Table 6.

Table 6 – Stock Transfer Timetable

Transfer Actual / Anticipated Date of Number of Tenanted

Transfer Units in Transfer

Lewisham Park 23 April 2007 161

Phoenix 3 December 2007 5,509
Grove Park 7 July 2008 1,090
Foreshore 4 August 2008 32
Orchard 26 January 2009 86
Lee 28 September 2009 474
Catford July 2010 532
Rushey Green July 2010 759
Forest Hill July 2010 1122
Excalibur September 2010 157

Housing Revenue Account Forecast

10.4 These changes have placed considerable challenges both on the HRA and General
Fund over the past few years particularly in relation to support costs. Therefore, the
HRA position has been considered alongside the General Fund. Once the remaining
stock transfers have taken place the HRA will have a smaller income both from rents
and subsidy whilst the pressure to incur expenditure will still be considerable. The
lower income base will reduce the ability to be flexible in incurring additional
expenditure. Furthermore, there is an increasing need to make sure the various
providers of services are carrying out the service to the right level, such as Repairs &
Maintenance.

2010/11 and Future Years Forecast

10.5 The HRA model is continually updated and refined, with changes agreed by all parties
including Lewisham Homes and estimates on budgetary provision given to managers
on a regular basis.

10.6 The current estimated cumulative deficit on the HRA for the period 2010/11 to 2014/15
is £2.461m. However, savings of £1.461m have already been identified for 2010/11
which would leave the 2010/11 HRA at a balanced account. If additional savings of
£1m are found for 2011/12 onwards, the HRA will be able to maintain a balanced
account into 2014/15.
10.7 The current forecasts assume no changes to the HRA subsidy regime. However, the
Department for Communities & Local Government (DCLG) issued a consultation paper
on 21 July 2009 on the review of Council Housing Finance, including abolishing the
current Subsidy System, with any changes to be implemented by 2012/13, if primary
legislation is required. The impact of any changes to the subsidy system will be
assessed when full details are announced by the DCLG and forecasts updated
accordingly. This assessment will include the impact on the General Fund, as well as
the HRA.

10.8 Lewisham Homes have been fully informed of current forecasts and pressures, and
have been provided with the latest HRA budget model. The Authority has carried out
an assessment of the R&M budget requirement, forecast average stock numbers and
subsidy receivable. The HRA strategy ensures that the R&M budget meets the subsidy
level. The Council and Lewisham Homes have reached agreement on the resources
allocated to Repairs & Maintenance and have put budgets in place to reflect this
agreement.

10.9 In addition, it was agreed that there should be no automatic inflationary increase to
Tenants and Leaseholders service charges, due to the nature of savings requirements
impacting on management overheads which are recharged out as part of the service
charges, and the need to realign budgets with actual income.

10.10 Management costs continue to be higher than allowances received through the
subsidy system. Efficiency savings of 4% on Management costs have been factored
into the 5 year forecasts.

10.11 The current HRA budget model assumes that savings will be achieved through
reduced costs once stock has transferred out of the HRA. One of the major pressures
which continues is to reduce the cost of support services provided to the HRA, via
Direct HRA charges and through Lewisham Homes’ fee. Whilst it is assumed that the
HRA will be charged less for some support costs, this will have a direct impact on the
General Fund if there cannot be a corresponding reduction in the actual costs of
providing the support function.

10.12 Where stock is subject to a transfer out of Council control, the Council assumes that
the new providers of the service will not choose to purchase services from the Council.
Therefore there will continue to be a need to seek reductions in costs in providing
support services. In addition to this, it is expected that support costs will be reduced as
part of the process in achieving efficiencies in the HRA. The General Fund Budget
Strategy allows for some of this impact

10.13 Lewisham Homes will also be reviewing its requirement for services from the Council
over the next few months and this will add to the efficiencies required in the General
Fund, particularly as they are likely to not require some of the services. Currently,
Lewisham Homes’ management fee includes £3.7m for services provided by the
Council.

10.14 The 2010/11 financial year will be the 10th year of the Government’s Rent
Restructuring Programme. The Council is obliged to set rents progressively closer to a
formula rent. Housing subsidy and rent rebate subsidy also reflect the movement to
the formula rent. The average weekly rent is currently £76.79 and at the present time
in the projections, it is estimated that rents will increase by 2.55% (£1.96 per week) to
£78.75.

10.15 It should be noted that the forecast rent rises, are based on the assumption that the
Government will not seek to increase the Guideline Rent in 2010/11 by 6.1%, as
 announced as part of the 2009/10 determination (current official policy). This was
announced when RPI inflation was high at 5%.

10.16 In March 2009, the Government announced their intention to reduce the 2009/10
Guideline increase to 3.1%, down from 6.2%. Local Authorities generally did reduce
their rent rises accordingly, as did the Council.

10.17 The rent increase forecast for 2010/11 is based on the assumption that RPI inflation
will be set to zero and Guideline Rent will increase by 3.3%, which is similar to the
2009/10 increase. This would equate to an actual rent rise in the region of 2.55%. Any
deviation to these forecasts will either increase or reduce the forecast deficit
accordingly.

Savings Proposals

10.18 The HRA strategy seeks to balance the budget up to 2014/15. Officers have previously
identified savings proposals of £1.461m which will go towards balancing the 2010/11
account.

10.19 Lewisham Homes have put forward a range of suggestions for savings which includes
reductions in support costs, Environment Recharges and further reductions in
Lewisham Homes management fee. These are currently being discussed with the
Authority.

10.20 The savings proposals will be developed over the coming months and will be updated
once agreements have been reached and the 2010/11 Subsidy allowances have been
issued. The proposals for increases in rents and any increase in tenants service
charges will need consultation with Tenants.

10.21 It should be noted that there is a potential impact of £1.247m in 2010/11 on the
General Fund from the savings proposals outlined above. It is felt that whilst a
realignment with HRA budgets due to the transfer of stock may be appropriate, it will
not automatically enable a cost reduction programme in line with reduced budgets.
Therefore, any shortfall will need to be borne by the General Fund. This is reflected in
the General Fund Revenue Budget strategy.

10.22 An update of the HRA Strategy, savings proposals, proposed rent & service charge
increases and comments from consultation with tenant representatives will be reported
to Mayor & Cabinet in the Autumn. Mayor & Cabinet will make the final budget
decisions in the new year.

Conclusion

10.23 The HRA position is balanced for 2010/11. There is an estimated shortfall of £1m in
2011/12, thereafter no additional net savings are estimated to be required in the HRA
for the period to March 2015. As the 4% pa efficiency savings requirements remains
for the HRA over the period 2010/15, this does give scope for some re-cycling of
resources to higher priority areas in 2010/12. Such proposals will be brought forward
in the Autumn. However, given the Government’s announcement on housing subsidy,
no meaningful projections can be given beyond March 2012. Therefore, although not
requiring any net savings at the moment, once the details of the Government’s
proposals are known this position will need to be thoroughly reviewed.
11. REVENUE RESOURCES

11.1 Approximately two-thirds of the Council’s annual income comes from Government
Grant, known as Formula Grant, with the balance from Council Tax. This section of the
report estimates how much Council Tax and Formula Grant Lewisham will have
available over 2010/15.

Council Tax

11.2 The Council Tax is made up of an amount for Lewisham’s services. The level is
£1,042.11 for the Borough’s Band D equivalent properties for 2009/10, which makes
up 77.1% of the overall bill. The remaining balance is represented by a precept from
the Greater London Authority (GLA), which is £309.82 for 2009/10. Although the
Mayor of London has a duty to consult London Boroughs on his precept, the Council is
unable to limit the GLA’s annual precept increase. The overall level of Council Tax for
the Borough’s Band D equivalent properties, including the GLA precept, is £1,351.93
per annum.

11.3 The Government has ‘capped’ excessive increases in Council Tax in the past and has
stressed that it will continue to take action to limit increases. For 2009/10, a 5%
increase in Council Tax was the effective threshold for ‘capping’. The Government has
hinted that this threshold could reduce, forcing Councils to a maximum increase below
5%.

11.4 In recommending Lewisham’s Council Tax increase at 2.5% for 2009/10, the Mayor
has for the fourth year in succession, continued his commitment and indicated that this
would be the maximum annual increase in Council Tax for Lewisham for the whole of
the current administration. It has therefore been assumed that for 2010/15, the
increase in the Council Tax for Lewisham’s services would continue to be no more
than 2.5% per annum.

11.5 Whilst this policy of maintaining an upper limit of Council Tax increase does offer
taxpayers protection, it does limit the Council’s capacity to finance its services. As
Lewisham has a relatively small tax base, limiting annual increases to 2.5%, means
that the annual increase in Council Tax income is limited to just under £2.25m per
annum over 2010/15.

11.6 If no Council Tax increase were made in one year the loss of income in the year would
be some £2.25m pa. However, it would also reduce the base Council Tax income
forever which has a bigger cumulative impact. For example, if no Council Tax increase
were made in year one this would mean a loss of income by year five of £11.25m.
Conversely, if the Council Tax were increased by say 5% in one year, the additional
revenue in the year would be £2.25m but the cumulative effect by year five would be
£11.25m.

11.7 In conclusion, if Council Tax were increased by 2.5% pa over 2010/15, the forecasted
Council Tax income for Lewisham’s services over the medium term is as follows:

Table 7 – Forecast Council Tax Income for Lewisham’s Services 2010/15

2010/11 2011/12 2012/13 2013/14 2014/15

Income £92.9m £95.2m £97.6m £100.0m £102.5m
% Increase 2.5% 2.5% 2.5% 2.5% 2.5%
 Formula Grant 2009/11

11.8 Two-thirds of Lewisham Council’s net expenditure is supported by Formula Grant. It is

therefore the most important influence over the level of income the Council will receive
in future years. The Government is set to confirm the provisional formula grant
increase for 2010/11 with the announcement of the Local Government Finance
Settlement in early December 2009. The announcement for 2010/11 will represent the
final year of a three year settlement.

11.9 The actual grant distribution for 2009/10 and provisional allocation for 2010/11 are
summarised in Table 7. No changes to the Council’s grant figures for 2010/11 are
expected. However, it would be possible for the Government to change the provisional
2010/11 figures.

Table 8 – Local Government Finance Settlement

Lewisham’s Finance Settlement 2009/10 Actual £’000 2010/11 Assumed

£’000
Relative Needs Amount 151,983 155,397
Central Allocation 48,164 49,416
Relative Resources Amount (29,063) (29,922)
Basic Grant Entitlement 171,084 174,891
Floor Damping 6,508 5,327
Final Grant Entitlement 177,592 180,218
% increase on prior year 1.75% 1.50%

11.10 Each Local Authority in the country receives an amount of grant based on its relative
needs and a sum which is allocated on a per capita basis. Then a sum is deducted
based on the relative resources of the area and overall this determines the ‘Basic
Grant Entitlement’. From this amount, a sum is added to help pay for authorities who
have not received a minimum increase in grant, this is known as ‘Floor Damping’.

Formula Grant 2011/15

11.11 Members should note that the officers’ forecasts for Formula Grant for 2011/12
onwards are highly speculative. There are no firm figures that have been announced
and no clear indication of when a Government would announce Formula Grant for
2011/12 onwards. However, there is a broad consensus that local government will be
facing real terms reductions in grant. The key issue is the scale of the real terms
reductions.

11.12 Probably the most authoritative analysis made so far has come from the Institute of
Fiscal Studies. They forecast that if health spending is protected, average annual real
reductions across departmental expenditure limits of 10% over 2011/14 or 3.3% pa are
necessary. Based upon this analysis an optimistic, pessimistic and a mid-range
forecast of Lewisham’s formula grant is made for 2011/15.
 Table 9 – Optimistic, Mid-Range & Pessimistic Forecasts of Formula Grant
2011/15

Real Decrease Real Decrease pa Cash Increase /

2011/14 % % Decrease pa %
Optimistic 4 -1.3 +1
Mid-Range 10 -3.3 -1
Pessimistic 15 -5 -2.5

Table 10 – Forecast variations of grant levels of Lewisham’s Formula Grant

2010/15

Grant 2010/11 2011/12 2012/13 2013/14 2014/15

Optimistic £180.2m £182.0m £183.8m £185.6m £187.5m
Mid-Range £180.2m £178.4m £176.6m £174.8m £173.1m
Pessimistic £180.2m £175.7m £171.3m £167.0m £162.8m

11.13 Based on an assumed annual increase in Council Tax of 2.5% and a mid-range
scenario for Formula Grant above, the estimated overall level of resources available to
support Lewisham’s revenue budget 2010/15 is set out below.

Table 11 – Resources available for 2010/15

2010/11 2011/12 2012/13 2013/14 2014/15

Resources £273.1m £273.6m £274.2m £274.8m £275.6.m
Available
% Increase N/A 0.2% 0.2% 0.2% 0.3%

11.14 In conclusion, the overall level of resources likely to be available to the Council is
forecast to increase overall in cash by just 0.2% per annum from 2010/11 to 2014/15.
This increase is well below the Government’s annual inflation expectations over the
medium term and takes no account of the additional pressures that will face the
Council.

Dedicated Schools Grant

11.15 Lewisham has been allocated a Dedicated School Grant (DSG) of £178.216m in
2009/10 and provisionally £192.881m in 2010/11. This represents a 4% per pupil
increase or a 8.2% cash increase above the 2009/10 allocation. These figures reflect
latest pupil numbers. There is of course some uncertainty about the scale of the
increase for 2010/11 until the DCSF confirms the allocation in the new year.

11.16 Like Formula Grant it is impossible to forecast with any accuracy the likely level of
DSG for 2011/12 onwards. Pupil numbers are set to increase by 5% pa in Lewisham
each year until 2015. In the past the DSG has been increased to cover such
increases. It is likely that the DSG will be treated less harshly than general local
government expenditure. Nevertheless, real terms reductions to the DSG must be the
most likely scenario.

11.17 For illustrative purposes only, set out below is a Table which sets out optimistic,
pessimistic and mid-range forecasts for the DSG. The optimistic scenario is based on
increases to the DSG allowing for the 5% increase in pupil numbers but otherwise
freezes the DSG in cash terms. The pessimistic forecast assumes there is no increase
in DSG for the increase in pupil numbers. The mid-range scenario assumes that the
 Government will deduct a 4% pa efficiency from the optimistic forecast (ie. A 1% pa
cash increase).

Table 12 – Optimistic, Mid-Range & Pessimistic Forecasts for DSG 2009/15

% Cash 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Increase £m £m £m £m £m £m
Optimistic +5 202.576 212.651 223.284 234.448
Mid-Range +1 178.216 192.881 194.810 196.758 198.725 200.713
Pessimistic 0 192.881 192.881 192.881 192.881

11.18 The scale of real terms reductions in the mid-range forecast, after allowing for the 5%
increase in pupil numbers, equates to some £7.8m pa in 2011/12 and rising each year
thereafter. This figure also does not allow for inflation which would further increase the
real terms reductions.

11.19 Beyond the pressures described above arising from pupil numbers and inflation, the
additional key pressure to be faced by the DSG over the next few years is likely to be
in Special Educational Needs. It is anticipated that a pressure of the order of £0.6m pa
will arise as a result of the increase in volumes and complexity of SEN cases. This net
additional pressure is after allowing for the reduced costs resulting from fewer
expensive out of borough placements from implementing the SEN review. A further
pressure is also likely in schools from implementing the Carbon Reduction
Commitment. This is estimated at some £140k pa.

12. REVENUE EXPENDITURE

12.1 The Council is likely to have an increase in its overall level of resources significantly
below its forecast inflation for 2010/15. The Council is also facing substantial cost
pressures above inflation to maintain the existing level of service provision. This
section of the report sets out assumptions about inflation and then considers the
Council’s significant budget pressures for additional expenditure.

Inflation and the wider economy

12.2 The Treasury continues to use the Consumer Prices Index (CPI) as its principal
measure of inflation. CPI is similar to the previously used measure of inflation RPIX,
but has a few fundamental differences, primarily much less weighting is given to
housing related costs in CPI than in RPIX. The Government target for the rate of CPI
inflation is 2%.

12.3 The Chancellor of the Exchequer delivered his Budget Report statement on 22 April
2009. At this time, the level of CPI inflation stood at 2.3% having steadily declined from
a high of 5.2% in September 2008. There has since been a further decline to 1.8% in
June 2009. Although the latest CPI has inflation remaining at 1.8% the rate is forecast
to further decline during 2009, and remain below target during 2010 before returning
close to target during 2011

12.4 For local authorities such as Lewisham, pay rises are the single largest inflationary
cost we face. The 2008/09 pay negotiations were protracted, with the matter
eventually being referred to an arbitration panel. This panel ruled that a further 0.30%
should be paid, in addition to the original offer of 2.45%.

12.5 In July 2009, the Local Government Employers’ Side made a final offer for the 2009/10
pay award of a 1.25% rise for the lowest paid workers who earn up to £13,700, and
 1% for all other employees. This offer is currently being considered by the Trade
Unions.

12.6 Despite an anticipated lower pay award and headline inflation, the 2010/11 Budget
Strategy assumes inflation of 2.5%. Although the most recent inflation report from the
Bank of England forecasts a slower increase in inflation over the next few years than
previously, headline inflation is still expected to rise to the target level of 2% in
2011/12. Indeed, many observers still regard the medium term prospects for inflation
to be higher, some significantly higher. Further, Council inflation has traditionally been
higher than headline inflation, as pay awards have generally exceeded inflation.
Accordingly, it is felt prudent to maintain the 2.5% inflation assumption for 2010/15.

12.7 Set out below in Table 10, is an estimate of the provision required to be made for
inflation for 2010/15, based on the Council assuming pay and non-pay inflation of
2.5% per annum from 2010/11.

Table 13 – Forecast Inflation for Lewisham Council’s services 2010/15

2010/11 2011/12 2012/13 2013/14 2014/15

£6.2m £6.3m £6.3m £6.4m £6.4m

Budget Pressures

12.8 Set out below is a summary of the main on-going budget pressures1 the Council is
likely to face over 2010/15 which are over and above the inflation assumptions for
each service. These have been identified from individual medium term financial
strategies developed by Directorates. Members should note that this list is by no
means exhaustive, nor can it fully reflect the complexity and detail of each service
area, particularly in the later years of the financial plan. It is also worth noting that
many of the figures are inevitably guesstimates. Nevertheless, based on the past
success in predicting in aggregate the scale of pressures, this modelling has proven
valuable. The following paragraphs provide a brief description of each pressure and
includes where appropriate, a risk assessment and/or sensitivity analysis.

Actuarial Valuation

12.9 Every three years an Actuarial Valuation of the Pension Fund has to take place to set
the level of the employer’s contribution rate. A valuation was carried out at 31 March
2007 and this has assessed the fund as being 87% funded and set employer’s
contribution rates until 31 March 2011. The Financial Survey makes provision for
certified increases in employer’s contribution rates of £0.5m per annum in 2009/10 and
2010/11 and thereafter assumes increases of £1m pa. This estimated increase
reflects the value of the Fund’s assets since the last valuation. Results from the 2010
Actuarial Valuation will begin to become available in the Autumn of 2010 and at that
point the estimates for 2011/12 onwards can be reviewed.

Adult Social Care – Commissioning

12.10 Investment in the Adult Social Care budget was made in 2007/08 and 2008/09 to
recognise the pressures facing the service. In line with national trends, services for
Adult Social Care in Lewisham have experienced an increase in the number of clients
and price increases over recent years. This is partly due to the fact that: people are

1
The budget pressures that have been set out in this section of report exclude those services that are funded
from within the Dedicated Schools Grant. A separate section sets out the pressures on the DSG.
 living longer; medical advances mean the life expectancy of young adults with severe
physical and learning disabilities has increased; there is an ageing population; and the
number of people requiring care is increasing, resulting in more expensive intensive
care packages to keep people in their own homes, if not placed in residential
establishments. The costs of contracts with the independent and voluntary sector are
also outstripping assumed inflation. These factors are expected to continue to put
pressure on Lewisham’s adult social care services.

12.11 In addition, from 1 April 2011, the Government’s expectation is that clients of adult
social care departments will be offered a personalised budget which they can use to
purchase the care they deem appropriate. This will have a significant effect on the
Community Services Directorate. The financial impact of this cannot yet be calculated,
but officers are proceeding on the basis that they should ensure that the new system
does not allocate out more resources in personalised budgets than is currently spent
on care packages.

12.12 With forecast increases in the volume of clients and with above inflation increases in
unit costs, additional provision for Adult Social Care is anticipated. It is likely that the
service will continue to face a number of risks.

Adult Social Care – Transitional Cases

12.13 For Adult Social Care – Transitional Cases, provision of £695k was provided as part of
the budget in 2009/10. Additional net costs of £1m are estimated for 2010/11. These
are costs of young people who were formerly funded by the Children & Young People
Directorate, usually in high cost residential placements, who are transferring to adult
budgets on or after their 18th birthday. They include clients with a learning disability
and with a mental health problem.

Census 2001

12.14 The Census and more specifically its population count informs the funding formula for
Local Government. As such, when the results of the next Census are published post
2011 the impact on population policy and therefore funding is likely to be significant.
Lewisham’s work in preparing for the Census has already commenced, however
efforts must continue to ensure an accurate Census count is achieved to maximise the
benefits for Lewisham residents.

Climate Change and Carbon Reduction

12.15 Action on climate change and wider environmental issues are important priorities for
the Council. The cost of energy represents a significant financial pressure and the cost
of gas and electricity is expected to rise over the next few years. Lewisham has
stretching targets for reducing carbon emissions and has undertaken a range of
initiatives to reduce energy consumption. However, more work is needed across the
Council’s estate and services, and much of the activity that will reduce emissions and
energy bills requires an initial investment.

12.16 Lewisham’s Carbon Management Programme sets a new target of a 50% reduction in
CO2 emissions from Council operations underpinned by a set of quantified projects.
The Programme has been developed in partnership with the Carbon Trust through
their Local Authority Carbon Management scheme.

12.17 Lewisham’s Carbon Management Programme was endorsed at the 25 March Mayor
and Cabinet meeting. The Programme has the potential for significant financial
savings through reduced energy costs, potentially up to £2.7m a year in 2015/16
 compared to current spend on energy. It is however important to note that this forecast
of potential financial savings ought not to be viewed as a cash releasing saving at this
stage. This is because: future costs of energy are unknown; the Programme includes
a number of aspirational projects that are not yet funded and some of the savings are
already included in the Council's budget strategy and some are outside.

12.18 With effect from 1 April 2010 the Government will be introducing a carbon trading
scheme for medium-sized users of energy, including local authorities. Participants will
have to purchase allowances for their energy-related emissions, and will be
reimbursed according to their relative position in a league table based on the extent to
which their emissions have been reduced relative to the performance of others within
the scheme. The first sale of allowances will take place in April 2011 and revenue
raised from this sale will be recycled to participants in October 2011. Local
authorities must purchase two years’ allowances in the first carbon purchase. For
Lewisham this will cost around £617,000.

12.19 The Council would expect to receive a return on the allowances purchased, although
there will be a need to purchase further allowances in future years. At this stage there
is considerable uncertainty about the ongoing financial liabilities that could accrue as a
result of the scheme.

Collection Fund

12.20 The Collection Fund is a separate account into which is paid the amounts raised from
Council Tax and Business Rates. Any surplus or deficit on the Council Tax Collection
Fund must be shared between Lewisham and the Greater London Authority (GLA) and
brought into the calculation of the Council Tax level.

12.21 In setting the budget for 2009/10, a small surplus for the Collection Fund of £49k was
assumed. In the light of the economic downturn, the position on Council Tax arrears is
being carefully monitored. However, the Council has made an appropriate level of
provision for uncollectable Council Tax.

Community Education Lewisham

12.22 The funding for Community Education Lewisham is provided by a Government grant.
Currently this is paid by the Learning & Skills Council (LSC), but in 2010, the LSC will
be replaced by the Skills Funding Agency (SFA). The focus of the SFA will be primarily
around further education and less around non-accredited work. The expected
reduction in non-accredited funding will require the Council to either reduce provision
in this area or to increase its contribution.

Concessionary Fares

12.23 The Department for Transport is currently considering the distribution of the 2010/11
Concessionary Fares specific grant. The Department is looking at the increase in costs
between 2007/08 and 2008/09 to determine the impact of the national concession. The
Government’s proposal to replicate the distribution of the increase in costs between
these two years would move significant resources away from London and would
effectively mean that cross borough travel on buses in London would not be funded
but other parts of the country would receive funding regardless of where the
passenger resides. The suggested scale of the transfer is so great that it may put in
jeopardy parts of the concessionary fares scheme in London. For Lewisham, the
potential impact in any changes is in the region of £1.8m.
 Corporate Property

12.24 The Regeneration budget contains the main corporate property costs associated with
the 170 buildings across the corporate estate. During 2008-09 this budget was under
significant pressure as a result of the costs of meeting statutory maintenance
standards and the demand from response repairs. As a result the budget was
overspent by £600k. In order to make a sustainable reduction in costs investment is
required into a number of key operational buildings and a significant rationalisation
made of the remainder of the estate.

Development Control

12.25 The number of householder applications is down 15% on 2008/09, reflecting market
conditions. As a result, Development Control is forecast to achieve £400k less income
than budgeted, being offset by savings in running costs of £120k. Staffing levels are
being kept under constant review to see if further economies can be made, but at this
stage, the downturn in the economy has had a noticeable impact on the ability to
generate the level of budgeted income. These risks continue into 2010/11 and are
closely linked to the overall state of the economy.

Fair Employment

12.26 The GLA has continued in its move towards implementing Fair Employment clauses in
their contractual terms and conditions. To develop the Fair Employment Policy for
Lewisham, officers have over the last year, been investigating the implementation of
Fair Employment Living Wage clauses into contracts, particularly for those services
which traditionally pay low wages, albeit in accordance with Minimum Wage
legislation. The introduction of this policy in Lewisham is likely to require significant
additional investment from the Council. In addition, an EU directive on Agency Staff
which is due to come into force from 2010/11 is likely to have a further substantial
cost.

Formula Grant changes

12.27 Section 11 of the report set out the prospects for receipt of Formula Grant on the
assumption that there would be no methodology changes. It could be argued that if
local government is facing real terms reductions in grant, there would be little prospect
of the Government deciding to change the distribution of grant between authorities.
However, the Government is continuing to consider methodology changes.

12.28 An area of particular concern is the Area Cost Adjustment (ACA). The ACA is
designed to adjust for the differences between local authorities in the costs of inputs
(e.g. staff) which they require to provide services. The ACA makes up approximately
20% of the amount of Lewisham’s formula grant. In determining ACA factors, local
authorities are grouped together to form ACA areas. This is to ensure that there is
sufficient wage evidence in each area to produce robust ACA factors. There are
currently 4 ACA areas in London: the City of London, Inner London and East and West
Outer London. Lewisham is in the Inner London ACA area.

12.29 In the consultation paper for the three-year local government finance settlement
2008/09-2010/11, which was published on 17 July 2007, proposals were put forward
which would have resulted in Lewisham losing it’s inner London ACA status. The
potential loss of funding (before floor damping) would have been up to £20m per
annum. Following consultation Ministers decided not to make changes to the ACA
geography for the period 2008/09-2010/11, but again the SWG is considering options
on changing the ACA. Council officers are monitoring the discussions at SWG and are
working with neighbouring boroughs who are similarly concerned.
 Highways

12.30 Section 9 of the report sets out the additional investment of £2.8m to be made to the
Council’s highways. However, the position after this investment is difficult. As there is
likely to be very limited capital resources in the future for highways, an ongoing source
of revenue to finance highways maintenance and investment will need to be identified.

Homeless Accommodation

12.31 The consequence of the Southwark judgement and how it should be applied is still
being assessed. The 16 and17 year olds in Homeless Accommodation will have to be
reassessed under the looked after children criteria. There are about 50 of these
children. At this stage it is difficult to identify how many of this group will fall under
Looked after Children and become the financial responsibility of Children’s Social Care
rather than Housing. With one case costing around £50k, the impact could be
considerable and be as much as a £1m. A number of London Boroughs are indicating
the costs will be between £800k and £1m.

Housing Revenue Account

12.32 Section 10 of the report set out the prospects for the HRA over the next few years.
Following the Government’s announcement of proposed changes to the housing
subsidy system there is great uncertainty about what this may mean for the HRA.
There is also similar uncertainty about the potential impact on the General Fund of
these changes to HRA.

12.33 Section 10 of the report also sets out the pressures on the General Fund arising from
the reduction in support costs in the HRA. The General Fund Budget Strategy needs
to allow for some of this impact in 2010/11 and subsequent years.

London Pensions Fund Authority (LPFA)

12.34 The valuation results of the London Pensions Fund Authority (LPFA) pensioner sub-
Fund as at March 2007, showed a deficit of £210m with the funding level having
declined from 92% to 86% since 2004. The deficit could rise to £649m, a funding level
of 67%. The LPFA are consulting London Boroughs on proposals to close this gap. If
an increase in the LPFA’s levy is enforced, Lewisham would be required to pay an
additional £897k in 2010/11. This sum could increase to annual additional amount of
£1.174m by 2011/12.

Looked After Children

12.35 Following the Baby Peter case, there is great sensitivity nationally and locally on
Looked After Children. This has already resulted in an increase in assessment activity
with the number of assessments completed within seven days falling. There are
currently an extra 11 children being cared for in 2009/10. The number of contacts per
month is on average about 100 (9%) higher than the same time last year. It is difficult
to predict whether this trend will continue over the coming months and when it will
eventually plateau. In order to address these problems recruitment of social workers
has increased. While the longer term cost is difficult to gauge, it is anticipated that the
extra social workers will cost £300k and the extra placements another £600k in
2010/11. The child population is expected to increase by 5% pa. If the number of LAC
increased proportionately this would create a budget pressure of a further £1m.
 Pupil Numbers

12.36 Currently, the Borough is seeing a growth in Pupils Numbers in schools. Most of this
pressure falls to the Dedicated Schools Grant and is considered in that section of this
report. However, there is some expenditure that under legislation cannot be charged to
the DSG but does vary with pupil numbers. This mainly effects the Special Educational
Needs (SEN) Transport budget. The cost will always be difficult to predict until the
actual routes are known and the capacity within the existing system examined. The
overall yearly increase in all pupil numbers is averaging 5%, which equates to around
1,500 pupils. Assuming this increase is proportionate to the number of SEN children,
then it would mean an increase in the budget of £150k pa for the next five years.

Street Lighting PFI

12.37 A joint Street Lighting PFI scheme is being developed with the London Borough of
Croydon to completely replace all the old lamp column stock and thereafter maintain
that new stock. It is anticipated that the contract will commence during 2010/11 but at
a higher cost than originally anticipated. Provision of some £0.3m for 2011/12 rising to
£0.9m pa by 2013/14 has been provided for in previous Surveys and this will need to
be reviewed as the contract concludes.

Treasury Management

12.38 Section 9 sets out details of the Council’s Capital Programme. The revenue financing
costs of this programme are a significant commitment against revenue budgets. A
particular difficulty is where effectively the Government gives no revenue support to
approved capital schemes as Lewisham is on the ‘grant floor’ (ie. There is no
additional formula grant for capital projects which the Government supports).

Worklessness

12.39 London has the highest proportion of its working age population who are not in paid
work than any other region of the country. Worklessness is a source of concern to
Central Government, the London Development Agency (LDA), the Mayor of London
and to others working to promote the health of the London economy and the wellbeing
of Londoners.

12.40 Tackling Worklessness in Lewisham is a key priority for the Council and resources will
be allocated over the medium term to build a successful labour programme that
provides training and job creation opportunities for our local citizens.

Summary

12.41 The scale of pressures facing the Council is both uncertain yet is likely to be
substantial. Changes to funding streams that are set out above are unlikely to save the
Council money. Demographic pressures will grow, yet Government resources to meet
such increases will be scarcer. It is likely that there will be further ‘passporting’ of cost
pressures to local government. The 2010/11 Budget Strategy assumed net pressures
of some £7.5m. The picture for 2011/15 is that this will worsen to on average some
£10m pa over the period.

13. REVENUE BUDGET PROCESS

13.1 The overall financial position facing the Council for 2010/11 and beyond, is difficult. A
savings target of £8.8m has already been set for 2010/11. Detailed savings options for
 2010/11 will be considered by Members shortly. A 2010/11 budget timetable is
summarised below at Table 14.

Table 14 – Key Dates Budget Timetable

Month Key Stage

September Mayor meets with party leaders to discuss the budget strategy
Public Accounts Select Committee & Mayor & Cabinet agree the
Financial Survey 2010/15
Overview & Scrutiny Business Panel considers revenue budget
savings
October 2009 Public Accounts Select Committee considers revenue budget
savings for 2010/11
November 2009 Mayor & Cabinet agrees budget savings for 2010/11
December 2009 Provisional Local Government Finance Settlement for 2010/11
announced

January 2010 Final Local Government Finance Settlement for 2010/11

announced
February 2010 Greater London Authority sets Budget and Precept for 2010/11
Notification of Levies for 2010/11 i.e. Environment Agency, Lee
Valley Regional Park and London Pensions Fund Authority
Public Accounts Select Committee / Overview and Scrutiny
considers the Budget and Council Tax for 2010/11
Mayor & Cabinet agrees the Budget and Council Tax for 2010/11,
including savings and pressures
March 2010 Council approves Budget and Council Tax for 2010/11

13.2 Set out in Table 15 is a summary of the prospects for 2010/15 based on the analysis in
Sections 11 and 12.

Table 15 – Estimated Revenue Budget Savings 2010/15

2010/11 2011/12 2012/13 2013/14 2014/15

£m £m £m £m £m
Optimistic 12.2 12.2 12.3 12.2
Mid-Range 8.8 15.8 15.7 15.8 15.6
Pessimistic 18.5 18.3 18.1 17.9

13.3 The key way in which the Council will seek to make the scale of savings set out in
Table 15 is through making efficiencies. However, this will require a re-configuration of
Lewisham’s previous approach to delivering value for money. As a starting point to
 consider how Lewisham will meet this challenge, Appendix B sets out the Efficiency
and Value for Money Strategy 2009/14.

OTHER BUDGET CONSIDERATIONS

14. RESERVES AND BALANCES

14.1 The Council continues to take a prudent approach towards financial planning.
Balances and reserves have been maintained at a level which is considered adequate
to meet future spending needs and pressures. As at 31 March 2009, the Council’s non
earmarked General Fund Balances stands at £11.236m, which is approximately 2.5%
of Lewisham’s net budget (including Dedicated Schools Grant expenditure). It is
planned to maintain the Council’s General Fund Balances at this level. Schools
balances at 31 March 2009 were £8.28m

14.2 Some of the potential risks facing the Council for 2010/11 and future years which will
need to be resourced through earmarked reserves include:

• Property – to ensure that there are adequate resources for repairs and
maintenance costs for the Council’s buildings.
• Redundancy costs – potential once-off costs arising from the achievement of the
Council’s efficiency savings targets.
• Information & Communication Technology (ICT) – future planned investment in
the Council’s ICT infrastructure.
• The Building Schools for the Future programme.
• Potential litigation risks.

15. AREA BASED GRANT

15.1 From 1 April 2008, the Local Area Agreement (LAA) grant was replaced by the Area
Based Grant (ABG). The ABG is a non-ring-fenced general grant, where no conditions
on use are imposed as part of the grant determination, ensuring full local control over
how funding can be used. This now makes LAAs an integral part of the Local
Government Finance system which means that local authorities are free to use all of
this non-ringfenced funding as it sees fit to support the delivery of local, regional and
national priorities in their areas.

15.2 Through creating the new non ring-fenced ABG, it is expected that this will minimise
the barriers to Lewisham using its previously earmarked resources to support local
priorities. This may mean that specific grants contained within ABG will not necessarily
be used for the purposes that the title of the grant suggests or they are currently used
for.

15.3 Lewisham’s ABG allocation for 2009/10 is £18.517m. This excludes the Supporting
People Grant which will not be rolled into ABG until 2010/11. The indicative grant
allocations for 2010/11 is £35.808m. ABG is being treated in the same way as other
local authority expenditure (ie. A 4% pa efficiency is required and requests for carry-
forward of ABG between years is subject to the Executive Director of Resources’
approval).

16. PARTICIPATORY BUDGETING

16.1 Participatory budgeting is seen by the Department for Communities and Local
Government (DCLG) as an important way of engaging citizens and communities, and
 enabling them to take an active role in influencing what happens in their local areas. It
is a key strand in the Government’s White Paper on Community Empowerment, which
was published on 9th July 2008. Lewisham has been the location for an early pilot of
participatory budgeting, led by Voluntary Action Lewisham with Lewisham Council and
involving over 50 individuals and local groups in Evelyn and Bellingham wards.

16.2 During 2009/10 it is expected that assemblies will use participatory budgeting
elements to determine their Locality Fund spend. There are also a number of
assemblies using this process to determine Mayor's Fund spend. There is interest
from a number of other service areas including Regeneration, Building Schools for the
future and Lewisham Homes who are interested in using the participatory process to
give citizens a greater say in service decisions and considerations.

17. TOTAL PLACE

17.1 Total Place aims to examine public spending and local leadership in thirteen pilot
areas to identify how public agencies can collaborate more effectively to deliver
improved local services at a lower cost. The programme consists of two main phases:

• a ‘counting’ process that will map money flowing through the borough (from
central and local bodies) and make links between services, to identify where
public money might be spent more effectively; and

• a ‘culture’ process that will involve an examination of the organisational and

public services culture across local public agencies (looking at ‘the way we do
things round here’) to determine how that helps or hinders what we are
collectively trying to be achieve.

17.2 The culture phase will be carried out in relation to four themes, which are listed below.
Work has already begun on each theme, through project teams consisting of
representatives of key partner organisations:

• Worklessness and unemployment;

• Crime and offender management;
• Commissioning of social care and health services for children and adults; and
• Assets and energy.

17.3 The project teams will be expected to provide interim findings in mid-September, to
feed into the Government’s Pre-Budget Report. Final reports from each pilot area will
be expected in early 2010.

18. BUDGET RISK MANAGEMENT

18.1 A critical element of the Council’s medium term financial planning processes is to
ensure that the financial consequences of risk are adequately reflected in the Council’s
finances. The Council’s risk register sets out those strategic and corporate risks which
could materialise, together with the key risk areas in service budgets and associated
mitigating measures. These include failure to contain expenditure within agreed cash
limits, not meeting the revenue budget savings target and under achievement of
income, as well as more specific risks on certain budgets. The risks associated with
capital and revenue expenditure are set out particularly in Sections 9 to 12 of this
report.
19. CONCLUSION

19.1 The Financial Survey for 2010/15 sets out the medium term financial strategy for the
Council over the next five years. The scale of the financial challenge facing the Council
is likely to be of a greater magnitude than any previously faced. To manage this
situation will require the utmost care and unremitting attention over the next few years.

20. FINANCIAL IMPLICATIONS

20.1 The Financial Survey 2010/15 is concerned with the Council’s medium term financial
strategy and as such, the financial implications are contained within the body of the
report.

21. LEGAL IMPLICATIONS

21.1 The purpose of this report is to develop a medium term approach in support of better
service and financial planning. Members are reminded that the legal requirements are
centred on annual budget production, and that indicative decisions made for future
years are not binding.

21.2 The Local Government Act 2000 and subsequent regulations and guidance says that it
is the responsibility of the full Council to set the Lewisham’s budget including all of its
components and any plan or strategy for the control of the Council’s capital
expenditure. Regulations provide that it is for the Executive to have overall
responsibility for preparing the draft budget for submission to the full Council to
consider. Once the budget has been set, it is for the Mayor & Cabinet to make
decisions in accordance with the statutory policy framework and the budgetary
framework set by the Council.

22. EQUALITIES IMPLICATIONS

22.1 The Council’s budget is of primary importance as a means of delivering Lewisham’s

objectives. All revenue budget savings and resources allocation proposals are
assessed in terms of their impact on service delivery and equalities implications.

23. ENVIRONMENTAL IMPLICATIONS

There are no environmental implications directly arising from this report.

24. CRIME AND DISORDER IMPLICATIONS

There are no crime and disorder implications directly arising from this report.

25. BACKGROUND PAPERS

Title of Document Date File Location Contact Officer

2009/14 Financial Survey 17 September 2008 1st Floor, Town Hall Selwyn
(M&C) Corporate Resources Thompson

2009/10 Budget Report 11 February 2009 1st Floor, Town Hall Selwyn
(M&C) Corporate Resources Thompson

2009/10 Budget Report – 25 February 2009 1st Floor, Town Hall Selwyn
Update (M&C) Corporate Resources Thompson
For further information on this report please contact:

David Gallie, Head of Corporate Resources (020 8314 9223) or

Selwyn Thompson, Group Manager, Budget Strategy (020 8314 6932)
APPENDIX A
Summary of the Committed Capital Programme

Total
Largest Projects / Programmes 2009-10 2010-11 2011-12
Budget
£’000s £’000s £’000s £’000s
Primary Capital programme 572 17,586 5,442 23,600
BSF D&B & Investment in BSF 926 13,709 2,477 17,112
Deptford Town Centre Regeneration 4,407 7,560 2,527 14,494
Forest Hill Pool 498 2,019 9,732 12,249
Tidemill School (Replacement) (TCF) 2,896 4,869 1,684 9,449
Other 2,826 2,144 2,310 7,280
AMP & DDA Programmes 882 3,529 2,068 6,479
Deptford Station 1,527 4,040 0 5,567
Schools Minor Works Programme 2,245 1,714 641 4,600
ICT - Technology & Transformation 4,203 347 0 4,550
Worksmart 3,697 574 0 4,271
Quality & Access for All Young Children -
1,580 1,532 0 3,112
Capital Grant
Brockley PFI 2,000 1,000 0 3,000
Pepys Environmental 1,463 1,148 250 2,861
Borough Road Reconstruction &
Resurfacing Works (Highways: Snow 2,681 119 0 2,800
Works)
New Cross NDC Programme 1,801 865 0 2,666
Private Sector Grants 839 800 800 2,439
Schools AMP 1,248 593 575 2,416
Disabled Facilities Grant (DFG) 986 707 707 2,400
TfL Programme 2,174 55 0 2,229
Kender Estate - Site Assembly 1,665 463 0 2,128
BSF - ICT 2,103 0 0 2,103
Parklands: Ladywell Fields and the
274 1,654 0 1,928
Waterlink Way
Highways BVR Programme 1,312 550 0 1,862
Heathside & Lethbridge - Partnership
1,793 0 0 1,793
Works
Rushey Green School (Replacement)
1,571 84 0 1,655
(TCF)
SEN Strategy 63 1,492 0 1,555
Kender New Build Grant: Phase 4 0 1,540 0 1,540
Kender New Build Phase 3 South (NDC) 0 1,485 0 1,485
ICT - Tech Refresh 402 500 500 1,402
Housing Options/ Homelessness Group 450 412 400 1,262
Cash Incentive Scheme 210 435 435 1,080
Play Builder programme 444 423 0 867
Primary Place expansion 370 491 0 861
Schools Access Initiative Projects 367 367 0 734
Loampit Vale - Development Site & Pool 379 95 245 719
East London Line Extension 0 655 0 655
 Total
Largest Projects / Programmes 2009-10 2010-11 2011-12
Budget
£’000s £’000s £’000s £’000s
Recycling Service Improvements 489 60 0 549
Manor House 490 40 0 530
Extended Schools Capital 466 0 0 466
Woodpecker Youth project 415 10 0 425
Big Lottery for Play 316 3 0 319
Parks Works - Envirowork Lewisham 258 0 0 258
Directorates' Capital Programme Total 53,288 75,669 30,793 159,750

LH 2007/08 660 89 0 749

LH 2008/09 - 2010/11 0
Decent Homes Programme 5,248 453 96 5,797
Mechanical & Electrical Schemes 3,222 2,297 2,200 7,719
Structural and Essential Schemes 2,212 1,012 397 3,621
ICT & Offices 722 722 600 2,044
LH Other 1,414 4,536 4,707 10,657
Lewisham Homes 2 star spending 0 40,000 125,400 165,400
2009/10 Chrysalis Decent Homes
650 350 0 1,000
Programme
Lewisham Homes Total 14,128 49,459 133,400 196,987
TOTAL CAPITAL PROGRAMME 67,416 125,128 164,193 356,737
 APPENDIX B

Efficiency and Value for Money

(VFM) Strategy 2009-2014

1. Purpose

The purpose of this efficiency strategy is to provide the guidance and framework for
the Council to continue to deliver more efficiencies in the use of resources while
ensuring that we continue to provide high quality of services.

The strategy also sets out the Council’s approach to the efficiency agenda for the
next five years from 2009/10 to 2013/14.

2. Introduction and Definitions

The efficiency agenda is at the forefront of local government strategic management

and is a key part of the Government’s plans for public services for years ahead,
particularly in the current economic climate.

The Efficiency & VfM Strategy also supports the Council’s Corporate Plan, in
particular that Lewisham continues to be effective in the use of resources to deliver
value for money services and long-term financial stability.

This strategy is now referred to as the Efficiency and Value for Money (VFM)
Strategy because the Government (through CSR07) has changed the programme
ethos to include VFM and the reporting of Efficiency to VFM National Indicator NI
179.

This Efficiency and VFM strategy sets out our plan to ensure that the provision of
our services consistently offers the best value that can be delivered within our
available resources.

Definitions:

Efficiency is about productivity, it is a measure of how well an organisation uses its

resources. The organisation is efficient when it uses less resources (inputs) to
produce the same or more goods and services (outputs). ‘Cash releasing
efficiencies’ are those efficiencies that reduce the level of resource required to
achieve the same or better outputs, allowing resources to be redeployed.

Value for Money (VFM) is generally regarded as a measure of whether an

organisation is achieving the best value (outputs and/or outcomes) for the
resources used (input). The determination of VFM is normally based on the “three
Es” – Economy, Efficiency and Effectiveness (“Equity” is now gaining popularity as
a fourth element).
3. Background

Sir Peter Gershon’s review of the Public Sector in 2003 led to the Gershon
Efficiency programme for 2005/06 to 2007/08, the programme required local
authorities to deliver efficiency savings of 2.5% each year on a cumulative basis for
the three years ending in 2007/08. The Gershon Efficiency programme used the
2004/05 budget year as the baseline.

The Government’s budget announcement (Budget 2007) set out the requirements
for 3% annual cash releasing value for money gains from all parts of the public
sector over the CSR07. The new targets for efficiency savings were introduced
through the 2007 Comprehensive Spending Review. In October 2007 the
Government published Delivering value for money in local government: Meeting the
challenge of CSR07 setting out the plan as to how to meet the efficiency challenge
during the new spending review period.

The new efficiency agenda works from a baseline of 2007/08. Local Authorities
were originally expected to achieve 3% cashable savings each year, on a
cumulative basis, for three years from 2008/09 to 2010/11 to yield a national
savings of £4.9 billion in 2010/11. The Government’s pre-budget report of
November 2008 and the Budget Report of April 2009 have changed the Local
Authority’s efficiency savings target from 3% to 4%.

The data on the efficiency savings will be submitted to the DCLG as one of the
National Performance Indicators (NI 179): Forecast savings for the year in progress
are collected in October while the actual savings achieved are collected in July
following the completion of the year.

4. Aims and Objectives

The aims and objectives of this strategy are:

• To provide the rationale for planning and reviewing efficiency/VFM in services

and for meeting the Government’s requirements.

• To provide the basis for setting in motion efficiency/VFM projects and planned
improvement reviews to deliver gains.

• To provide the framework for demonstrating efficiency/VFM in service delivery.

• To ensure that we continue to use our efficiency and VFM programme to help
to deliver low Council Tax increases (maximum annual increase of 2.5%) for
our residents.

• To form the basis of formulating the annual Action Plan for achieving the
targets set for efficiency/VFM gains that are deliverable from 2009/10 to 2014.

5. The Efficiency Challenge – NI 179

5.1 CSR07 Route-Map for Delivery

 The Local Government Value For Money Delivery Plan sets out a route-map for
meeting the CSR07 efficiency challenge. The Plan builds on the key cross-cutting
efficiency work streams identified in the Local Government White Paper and sets
out the expected actions to be taken at local level:

• Business process improvement

• Collaboration
• Smart procurement and use of competition
• Better use of technology:
• Asset management:

Lewisham concurs with the Government’s view that the new challenge of CSR07 to
deliver the value for money that the communities want would require service
transformation and innovation, hence the increasing role of service reviews and
transformation in our improvement plans.

5.1.2 National Improvement & Efficiency Strategy

A new National Improvement & Efficiency Strategy was published in January 2008
by the DCLG and the LGA, the national framework is aimed at supporting strong
local partnerships to deliver better public services. This strategy is ultimately about
supporting Councils, as community leaders, working with their local partners to
deliver better outcomes, improve the quality of life in places and provide better
public services.

The national strategy also created the Regional Improvement and Efficiency
Partnerships (RIEP’s), the RIEP for London is Capital Ambition. The IDeA will offer
peer support and challenge where performance is recognised as poor. The role of
Capital Ambition is to act as the hub for all improvement and efficiency work in
London, to support and challenge individual authorities and partnerships and deliver
products for whole services.

Lewisham will continue to work closely with both Capital Ambition and the IDeA on
improvement and value for money matters.

5.2 Lewisham’s Efficiency Targets

As stated in paragraph 3 above, the national framework for measuring and

monitoring efficiency gains was changed in the Comprehensive Spending Review
2007 (CSR07), this initially set a target for all public services to achieve at least 3%
cash-releasing value for money gains per annum over the period 2008/09 to
2010/11. The target was changed to 4% for the remaining two of the three year
efficiency period, the implication of that change is that our 3-year cumulative
efficiency target (as demonstrated below) increased from £19.395m to £23.7m, an
increase of £4.3m. The annual target for Lewisham was £6.465m at 3% and now
£8.62m at 4%.
 New 4% Original 3%
Target Target

Forecasted Cumulative Gains (£m)* 2008/09 6,465 6,465

Forecasted Cumulative Gains (£m)* 2009/10 15,085 12,930

Forecasted Cumulative Gains (£m)* 2010/11 23,705 19,395

* The figures quoted for efficiency gains above are marginally different from the figures
used for the General Fund Budget Strategy, as there are minor differences in the way the
Government sets the NI179 figure from the actual calculation of efficiencies made by the
Council.

6. Our Multi Year Efficiency Plan

The Council’s strong commitment to delivering efficiencies is long standing and

unambiguous. Lewisham continues to embed efficiency and value for money at all
levels of the organisation. Efficiency remains at the core of our values and priorities,
and the Council will continue to use our well established strategies and processes to
increase productivity and added value for our community. Our commitment is made
clear in the Council's crosscutting priority of "ensuring efficiency, effectiveness and
equity in the delivery of excellent services to meet the needs of the community." It is
also important to note that, our commitment to efficiency is one that we share in
common with our partners.

In pursuance of our goals, a five-year efficiency programme is shown below

2009/10 2010/11 2011/12 2012/13 2013/14

£8.62m £8.62m £15.5m £15.5m £15.5m

It is worthy of note that the current government efficiency agenda is planned for
three years only; from 2008/09 to 2010/11. The figures for later years are derived
from the mid-range forecast in the Financial Survey and at this stage are indicative.

6.1 The Delivery Framework – Our Efficiency Work Strands

Over the years, the Council has put in place and embedded a number of processes
and projects for driving value for money and efficiencies. This efficiency strategy
sets out our plan to use the following work strands as the vehicles to deliver further
efficiencies and value for money gains. This framework will be reviewed every year
to ensure that our annual action plans are realistic and adequate.

Currently, the Lewisham efficiency work strands are

Revenue Budget Process

Customer Service Transformation
Income Generation
Modernisation of Adult Social Care
Procurement
Worksmart
 Better use of Technology
Cross Cutting Services
Collaboration – Partnership working

6.2 Description of the Work Strands

6.2.1 Revenue Budget Process

The revenue budget process supports and delivers efficiency and VFM
improvements. As part of the budget planning processes, service directorates
will continue to be asked to carry out structural and organisational reviews to
identify areas that could contribute a certain percentage (e.g. 4%) to the
overall efficiency target. These savings proposals are then taken to Members
for consideration.

The process for identifying and proposing efficiency savings by Directorate

Management Teams (DMTs) will normally include service priorities and
pressures, organisational capacity, use of technology, service plans,
performance management reports, partnership opportunities and legislative
requirements etc. in their considerations.

6.2.2 Customer Service Transformation

A key priority for the Council is to implement the Customer Services Strategy
– “Lewisham puts people first; providing better access to better services”.

The Executive Directors for Customer Services and Resources are leading a
programme of service reviews. These reviews emphasise customer focus
and service improvement but which then link to the medium term budget
strategy and the delivery of value for money.

A range of service transformation and efficiency reviews have been

developed and are programmed for 2009/10 to 2011/12 to support the
Council’s budget strategy. Proposals to redesign services and end to end
reviews of back office and support services will help deliver cash releasing
efficiency savings.

Back office and support service efficiency reviews are being undertaken by a
community of service re-design specialists, built up from across the Council
through the Council’s involvement in the Communities and Local Government
(CLG) National Process Improvement Project (NPIP). The reviews are being
managed within the Managing Successful Programmes (MSP) framework.

6.2.4 Income Generation

A review of income generation has taken place and a draft Corporate

Charging Policy has been written. The aim of the policy is to create a
standardised approach to charging and establish an overarching set of
 principles that formulate consistency in the application of concessions and
subsidies.

The review also looked at individual discretionary services to determine the

possibilities of generating further income either from, for example, offering
additional services or applying alternative charging mechanisms to the
service.

However, in the light of the economic downturn, this review is being re-
configured to ensure that an appropriate balance is taken between the
optimising income and the potential impact that would have on residents.

6.2.5 Modernisation of Adult Social Care

The Programme Director for Adult Social Care and Modernisation has
developed a modernisation programme which will involve: first client contact
via Access Point; Occupational therapy / telecare assessment; full electronic
working for the care assessment process; and mergers of Care Assessment
Teams with further skill mix. This is part of the overall Customer Services
Transformation programme and there are strong interdependencies between
this programme and the Customer Transformation Programme.

6.2.6 Procurement

As part of the Council’s Procurement Strategy a series of efficiencies will help

contribute to the Budget Strategy of the next few years. These include
smarter procurement in: office stationery; travelling and hotels; consultants;
post; vehicles; mobile phones and other miscellaneous items. The further
enhancement of the procurement function across the Council will be a critical
element in meeting the scale of efficiencies required to be made by the
Council over the next few years.

6.2.7 Worksmart

Under the ‘Worksmart’ Programme a re-appraisal of the Council’s

requirements for office accommodation has been made in the light of the
changes to work styles and the opportunity of increasing capacity of existing
buildings and disposing of redundant ones. A medium term strategy is being
pursued that will prolong the life of the Town Hall and invest in Laurence
House to increase capacity. This will enable less suitable buildings to be
vacated with resultant efficiency savings. The changes to the management
and ownership of the housing stock also provide an opportunity to realign the
use of office accommodation.

6.2.8 Better Use of Technology

Lewisham has introduced a number of Information and Communication

Technology (ICT) projects to support and enhance and improve service
delivery and are used by managers to deliver efficiency gains, some of them
are:
 • Customer Relationship Management (CRM) system to allow for better
customer information management and to improve delivery of customer
services.

• Council-wide data sharing and better data storage through the Microsoft
Sharepoint system.

• Implementation of the new integrated HR/Payroll system.

• E-procurement systems to improve procurement process, financial

commitment and suppliers management

• Replacement of the SWIFT integrated system to improve ICT provisions

for the Supporting People Services, Adult and Children’s Social Care
Services.

6.2.9 Cross Cutting Services

In developing savings proposals for the 2010/11 budget it has been identified
that there would be value in developing a number of cross-cutting service
reviews. It is planned to bring these reviews forward to assist the delivery of
savings proposals in later years.

6.2.10 Collaboration – Partnership Working

The Council has a strong record of partnership working and collaboration

with other external bodies. This is spring board for considering the
opportunities for efficiency savings to be made across Lewisham, not just
within the Council. The work being undertaken as one of the pilots for Total
Place will be an important contributor to how such collaboration will be taken
forward.

7. Organisation, Monitoring and Management

The Lewisham Efficiency Programme is led by the Chief Executive who reports to
our elected Mayor.

The effective management and monitoring of the reviews, processes, projects and
programmes are done through the activities of the following bodies.

The Lewisham’s Corporate Efficiency and VFM programme is managed and

monitored through the activities of the of the following Management groups.

Chief Executive’s Efficiency Board

Executive Programme Board
Efficiency Programme Board

Various other projects and programme management teams have been created to
manage the implementation of specific efficiency streams e.g. Worksmart .