The council’s budget for the new financial year was agreed by the Council in March 2013. We are required by law to set a balanced budget which shows where the resources we plan to spend will come from. The main available sources are through central government funding and council tax. It is also possible to use reserves, but they can only be used once and we need to ensure that they are maintained at a sufficient level to cover the financial risks that we face. The central government funding system has changed significantly this year and now incorporates an element of ‘Business Rates Retention’ so that councils can gain additional funding from growth in the local business rates tax base, although they will also lose funding if the tax base falls.

Although it is not straightforward to compare 2013/14 with earlier years we estimate that our funding from central government has reduced by about £7.5m (9 per cent). Members decided to hold Council Tax unchanged, therefore qualifying for a council tax Freeze Grant from government equivalent to a one per cent increase (£850k). Overall there was a net reduction in the resources available. At the same time we needed to provide for the impact of inflation (£2.6m) and to fund investment in member priorities and meet unavoidable cost pressures (£1.7m). This resulted in a requirement to make savings of around £12m to balance the budget.

Savings for 2013/14 are being delivered mainly through the existing Smarter Services Sutton programme (about £11m). The remaining £1m comes from the early results of some of the Smarter Council projects and from additional interest earned from our treasury management operations. This reflects the fact that our cash balances are currently quite high due to holding government grants, mainly for future capital investment.

Our overall general fund revenue budget for 2013/14 is £155.2m. We expect our resources to fall over the medium term to around £144m by 2016/17, assuming no change to council tax. Given the cost pressures we face and assuming that the remaining savings under the SSS programme are delivered by 2014/15 as planned, we currently forecast a funding gap of £5.8m in 2014/15 rising to £23.6m by 2016/17. This is equivalent to a further 15 per cent budget reduction over that period, and work is under way to agree an approach to deal with this.