EXECUTIVE WEDNESDAY 18 JANUARY 2017 AT 4.00 PM

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1 EXECUTIVE WEDNESDAY 18 JANUARY 2017 AT 4.00 PM PRESENT: Councillor Glover (Leader / Chairman) Councillor Dr Tickner (Deputy Leader, and Finance, Governance and Resources Portfolio Holder) Councillor Mrs Bradley (Economy, Enterprise and Housing Portfolio Holder) Councillor Ms Quilter (Culture, Heritage and Leisure Portfolio Holder) Councillor Miss Sherriff (Communities, Health and Wellbeing Portfolio Holder) Councillor Southward (Environment and Transport Portfolio Holder) OFFICERS: Chief Executive Deputy Chief Executive Corporate Director of Governance and Regulatory Services Corporate Director of Economic Development Chief Finance Officer ALSO PRESENT: Councillor Patrick (Chairman of the Audit Committee) Councillors Allison, Mallinson (J) and Nedved (Observers) WELCOME The Leader welcomed all those present to the meeting. CALL-IN The Leader reported that The Mayor had, on 7 and 10 January 2017, agreed that the following items should be exempt from call-in as call-in procedures would overlap the special City Council meeting on 7 February 2017 when the matters were scheduled for consideration: Budget Update - Revenue and Capital 2017/ /22 Treasury Management Strategy Statement, Investment Strategy and Minimum Revenue Provision Strategy 2017/18 Provisional Pension Fund Valuation Charges Review 2017/18 Community Services Executive Response to the Budget Consultation and Recommendations for the 2017/18 Budget APOLOGIES FOR ABSENCE There were no apologies for absence.

2 PUBLIC AND PRESS RESOLVED That the Agenda be agreed as circulated. DECLARATIONS OF INTEREST There were no declarations of interest affecting the business to be transacted at the meeting. MINUTES OF PREVIOUS MEETINGS The Minutes of the meetings of the Executive held on 24 October and 21 November 2016 were signed by the Chairman as a true record of the meetings. EX.01/17 BUDGET 2017/18 CONSIDERATION OF CONSULTATION FEEDBACK (Key Decision KD.21/16) Portfolio Finance, Governance and Resources Resources The Deputy Leader, and Finance, Governance and Resources Portfolio Holder reported the submission of the following documents in response to consultation on the Executive s draft 2017/18 Budget proposals: (a) Minutes of the budget consultation meeting with Non-Domestic Ratepayers / Business Representatives - 4 January 2017 (b) Minutes of the budget consultation meeting with Trade Union representatives 11 January 2017 (c) Minutes of the Resources Overview and Scrutiny Panel - 5 January 2017 Copies of feedback received in response to the budget consultation process had also been circulated prior to the meeting. The Deputy Leader commented upon the feedback received, which was extremely detailed and had informed the direction adopted by the Executive in relation to their Budget proposals in several areas. A number of questions had been raised which would be dealt with / responded to outwith the consultation process. In conclusion, the Deputy Leader wished to place on record thanks to all those who had responded to the budget consultation. Summary of options rejected None 1. That the Minutes of the consultation meetings with representatives of Non-Domestic Ratepayers / Business Representatives; and Trade Unions, attached as Appendices C and D; and the Extract from the Minutes of the Resources Overview and Scrutiny Panel be received.

3 2. That the consultation feedback be received, it being noted that the comments had been taken into account by the Executive when formulating their final recommendations for the City Council's 2017/18 Budget to be submitted later in the meeting. To take into account consultation feedback when formulating recommendations on the 2017/18 Budget EX.02/17 **BUDGET UPDATE - REVENUE AND CAPITAL 2017/ /22 (Key Decision KD.21/16) (In accordance with Paragraph 15(i) of the Overview and Scrutiny Procedure Rules, The Mayor had agreed that call-in procedures should not be applied to this item) Portfolio Finance, Governance and Resources Resources Pursuant to Minute EX.125/16 and EX.126/16, the Deputy Leader, and Finance, Governance and Resources Portfolio Holder submitted report RD.49/16 providing an update to the Chief Finance Officer s report (RD.40/16) considered by the Executive on 19 December The Deputy Leader summarised, in some detail, the updated Budget projections in relation to the Draft Local Government Finance Settlement; the Settlement Funding Assessment; New Homes Bonus; Rural Services Delivery Grant; and Homelessness Grant as detailed at Section 2.1 of the report. He added that the figures for all of those funding streams had been provided by the DCLG up to 2019/20 only; therefore any figures beyond that were indicative. The draft settlement also confirmed that District Councils would be able to raise Council Tax by the greater of 2% or 5. The Deputy Leader informed the meeting that the Budget assumed a 5 increase in Council Tax for a Band D property, which equated to less than 10 pence per week. The Executive was aware of the financial difficulties faced by many families. It was not therefore their intention to revise the Council Tax Discount Scheme which would continue at the statutory levels thus protecting vulnerable groups. All of the elements described above, together with the income raised from Council Tax made up what was known as the Council s Spending Power. Within the settlement the Government made an assumption as to how much would be raised through Council Tax; however the precise figure was not known until each Council set its own Council tax levels and calculated its Tax Bases.

4 The overall effect of the draft Settlement was that by 2020/21 there would be an additional contribution to reserves of 416,000. The overall effect on budget pressures and savings, together with Reserves was depicted at Appendix A. Attention was further drawn to the outstanding key issues, details of which could be found at Section 3 of the Report. In conclusion, the Deputy Leader, and Finance, Governance and Resources Portfolio Holder moved the recommendations, which were seconded by the Leader. Summary of options rejected None That the Executive: 1. Noted the changes to the Revenue and Capital Budget projections for 2017/18 to 2021/22 which were incorporated into the Executive s draft Budget Proposals for consultation purposes. 2. Had considered the outstanding issues affecting the Revenue and Capital Budget projections; changes having been incorporated into the Executive s Budget Proposals 2017/18, where available, to be tabled later in the meeting. To prepare a draft budget proposal for 2017/18 for recommendation to the City Council EX.03/17 **TREASURY MANAGEMENT STRATEGY STATEMENT, INVESTMENT STRATEGY AND MINIMUM REVENUE PROVISION STRATEGY 2017/18 (Key Decision KD.21/16) (In accordance with Paragraph 15(i) of the Overview and Scrutiny Procedure Rules, The Mayor had agreed that call-in procedures should not be applied to this item) Portfolio Finance, Governance and Resources Resources Pursuant to Minute EX.127/16, the Deputy Leader, and Finance, Governance and Resources Portfolio Holder submitted report RD.51/16 setting out the Council's Treasury Management Strategy Statement for 2017/18 which had been prepared in accordance with the CIPFA Code of Practice on Treasury Management. He added that the Investment Strategy and Minimum Revenue Provision Strategy for 2017/18 were incorporated as part of the Statement, as were the Prudential Indicators as required within the Prudential Code for Capital Finance in Local Authorities.

5 Included within the report was an overview of the background position and requirements which had come into operation on 1 April 2004 under the provisions of the Local Government Act Part 1 of the Act allowed a local authority to borrow money for any purpose that was within its control or for the purposes of the prudent management of its financial affairs. The main purpose for borrowing money was to fund capital expenditure, although some short-term borrowing was permitted to cover temporary cash flow needs. Since 1 April 2004 there had been no statutory limit to the amount that could be borrowed. There was, however, a requirement for full compliance with CIPFA's Prudential Code; the key objectives of which were to demonstrate that the proposed capital investment plans had been assessed by the Council as affordable, prudent and sustainable. Section 3(1) of the Act placed a duty on the Council to determine before the start of the financial year and keep under review the maximum amount that it could afford to borrow. That amount was called the Authorised Limit and was discussed at Appendix A to the report. The Deputy Leader highlighted, in particular, the borrowing strategy and the policy on borrowing in advance of need (Sections 7.2 and 7.3 referred). He further referred to the Council s investment strategy and counterparty limits (Section of the report) which had been revised to take account of the status of government backing in financial institutions. The draft Statement had been considered by the Executive on 19 December 2016 prior to the consultation period on the budget proposals for 2017/18. It had also been considered by the Audit Committee and the Resources Overview and Scrutiny Panel on 22 December 2016 and 5 January 2017 respectively (Minute Excerpts AUC.76/16 and ROSP.07/17(3)(c) referred). The Chairman of the Audit Committee explained that the significant difference related to the proposed change to the Minimum Revenue Provision (MRP) Strategy and proposed MRP holiday. Members felt it to be a pragmatic and effective approach if approved by full Council. The Deputy Leader, and Finance, Governance and Resources Portfolio Holder then moved the recommendation, which was duly seconded by the Leader. Summary of options rejected None That the Treasury Management Strategy Statement for 2017/18, which incorporated the Investment Strategy and Minimum Revenue Provision Strategy, together with the Prudential Indicators for 2017/18 as set out in Appendix A and the Treasury Management Policy Statement as set out in Appendix D, be approved for submission to the City Council on 7 February To recommend the Treasury Management Strategy Statement, Investment Strategy and Minimum Revenue Provision Strategy for 2017/18 to the City Council

6 EX.04/17 **PROVISIONAL PENSION FUND REVALUATION (Key Decision KD.21/16) (In accordance with Paragraph 15(i) of the Overview and Scrutiny Procedure Rules, The Mayor had agreed that call-in procedures should not be applied to this item) Portfolio Finance, Governance and Resources Resources The Deputy Leader, and Finance, Governance and Resources Portfolio Holder reported (RD.50/16) that the City Council was an employing authority within the Local Government Pension Scheme (LGPS) as administered by Cumbria County Council (the administering authority). It was a funded scheme, meaning that both the Council and its employees, who were members of the scheme, paid contributions into a fund independent of the Authority s own assets. The employer s contribution rate was determined every three years following an actuarial valuation of the assets and liabilities of the fund. Different rates would apply to different employers dependent upon the future pension liabilities that they each had to accommodate. The Pension Fund was revalued every three years and the provisional results of the actuarial valuation as at 31 March 2016 had recently been received from the Fund s Actuary. The new contribution results arising from the valuation would apply for the three year period commencing 1 April Details of the provisional valuation results, together with the financial implications of implementing those results were summarised at Section 2 of the Report. The provisional results required a budget pressure to increase the existing budget provision, which had already been factored into the draft Budget issued for consultation. The Deputy Leader explained that the figures highlighted assumed that the current arrangements for paying over pension contributions to the Pension Fund would continue as they were (i.e. that the deficit payment be made over 12 monthly instalments throughout each year and the current service contributions were paid at the same frequency). There was, however, an alternative approach that could realise significant savings to the Council and reduce the overall budgetary pressure highlighted above. The proposal was to prepay the full three year deficit contributions up front in April 2017, and to make an annual payment up front for current service contributions. As the current service contributions were based on actual pensionable pay during the year, that would be paid on an estimate basis each April with a reconciling amount due to/from the pension fund the following March. The advantages of that option were that the pension fund would be able to achieve better returns on the assets it had (investments) by having more cash available to invest earlier in the valuation cycle. The total amounts to be paid in each year were recorded at Section 3.4.

7 That approach had been taken by both the County Council and other district councils in the past and they had successful audits agreeing with the accounting treatment highlighted. In conclusion the Deputy Leader, and Finance, Governance and Resources Portfolio Holder moved the recommendations which were seconded by the Leader. Summary of options rejected to continue with current arrangements. That the Executive: (i) (ii) (iii) (iv) Noted the information received from the County Council; Approved the contribution rate of 15.6% (increased from 13.6%) to be applied in the period 2017/18 to 2019/20 for future service cost and approved the deficit recovery contributions payable as a lump sum over the same period; Noted the 14 year deficit recovery period; and Approved the payment in advance for the deficit recovery and current contribution amounts due in order to realise revenue savings, for recommendation to Council as part of the budget process. To ensure that future pension liabilities were adequately provided for within the annual budget process EX.05/17 **CHARGES REVIEW 2017/18 COMMUNITY SERVICES (Key Decision KD.21/16) (In accordance with Paragraph 15(i) of the Overview and Scrutiny Procedure Rules, The Mayor had agreed that call-in procedures should not be applied to this item) Portfolio Finance, Governance and Resources Resources The Deputy Leader, and Finance, Governance and Resources Portfolio Holder reported (SD.27/16 (amended)) that the Council s annual Fees and Charges exercise had been conducted during the autumn of In light of that exercise the Executive now proposed to remove all charges related to interment or cremation following the death of a child.

8 Those proposals related to Appendix H of the Charges Review Report 2017/18 Community Services (SD.27/16). It was proposed that the following charges be deleted: Cremation of a child, 1 month 17 years (currently ) Interment of a child, 1 month 17 years (currently ) Interment of a child, 1 month 17 years (out of hours Mon-Saturday) (currently ) Interment of a child, 1 month 17 years (out of hours: bank holidays) (currently ) The proposal alluded to emanated from discussions within the Labour Group. The Deputy Leader, and Finance, Governance and Resources Portfolio Holder moved the recommendation, which was duly seconded by the Leader. Summary of options rejected Not to delete the charges referred to That the Executive agreed to the removal of the current charges in respect of interment or cremation following the death of a child as identified in the background section of Report SD.27/16 (amended). To ensure that the City Council s Corporate Charging Policy was complied with EX.06/17 **EXECUTIVE RESPONSE TO THE BUDGET CONSULTATION AND RECOMMENDATIONS FOR THE 2017/18 BUDGET (Key Decision KD.21/16) (In accordance with Paragraph 15(i) of the Overview and Scrutiny Procedure Rules, The Mayor had agreed that call-in procedures should not be applied to this item) Portfolio Finance, Governance and Resources Resources The Leader made reference to the Executive's Budget proposals for 2017/18, copies of which were tabled at the meeting. The Leader began by emphasising the City Council s clear commitment to be a listening Council. He thanked all those who had taken part in the Budget consultation process, including non-domestic ratepayers; business representatives; Trade Union representatives; Overview and Scrutiny Members; and members of the public. In response to concerns expressed by the Community and the Environment and Economy Overview and Scrutiny Panels regarding the proposal to remove the pensioner discount for allotments for anyone over 60 years of age, the Executive had agreed to delete that proposal from the Budget Proposals.

9 The Leader further referenced the very positive Budget Consultation Meetings held on 4 and 11 January Business representatives had acknowledged the changes in Government funding and many challenges faced by the authority. They considered the Executive Budget Proposals 2017/18 issued for consultation to be well presented and did not consider it necessary to discuss the proposals in detail; and had congratulated the Executive for having competently identified necessary savings. The Leader indicated that the City Council s two main priorities were to support the health and wellbeing of its residents; and supporting business growth and skills development to improve opportunities and economic prospects for the people of Carlisle. Accordingly, the Executive s response to the Budget consultation and recommendations on the General Fund and Capital Estimates reflected the following: The majority of consultation responses received, particularly from the Talkin Tarn Amateur Rowing Club and the Brampton Sailing Club, expressed well rehearsed concerns at the proposed rise in the Talkin Tarn annual parking permit charges from 52 to 104. Having given careful consideration to those concerns, the Executive had removed the proposed price increase for annual permits at Talkin Tarn from their Budget Proposals (the charge to remain at 52 per annum). In addition, up to 10 complementary parking permits would continue to be provided for the Talkin Tarn Club. The above demonstrated the Executive s clear commitment to health and wellbeing, together with a recognition of the valuable contribution which the Clubs made to the community. In conclusion, the Leader formally moved the Executive s Budget Proposals 2017/18, including removal of the proposed increased charge for annual permits at Talkin Tarn (thus reversing the Executive decision taken on 19 December 2016 Minute EX.128/16 referred). He further reiterated the Executive s Decision to remove the current charges in respect of the interment or cremation following the death of a child outlined at Minute EX.05/17 above. The Deputy Leader, and Finance, Governance and Resources Portfolio Holder formally seconded the Executive Budget Proposals 2017/18. In so doing, he provided an overview of the amendments made since the 19 December 2016 meeting of the Executive as follows: Car Parking Charges The proposed price increase to the annual Membership Parking Permit at Talkin Tarn (from 52 per annum to 104 per annum) had been removed. Allotments The proposal to remove the pensioner discount for anyone over 60 years of age so that all allotment plot holders paid the same standard rate had been deleted.

10 Council Tax The estimated Council Tax surplus for 2016/17 to be redistributed in 2017/18 had been calculated as at 15 January 2017 with a City Council share of the surplus being 136,682 for 2017/18. That was an additional 87,000 of income for the City Council (non-recurring) and had been included in the Budget resolution. Final tax base had been calculated and had increased from 32, to 32, The increases in Council Tax yield as a result had been incorporated into the Budget resolution and, at 78,000 in 2017/18 increasing to 87,000 by 2021/22, equated to an additional 411,000 over the lifetime of the Medium Term Financial Plan (MTFP). Reserves Following the changes highlighted above, appropriations to/from Reserves had been updated in the Budget resolution with an overall increase in the level of Reserves over the period of the MTFP amounting to 498,000. The Deputy Leader also summarised the key outstanding issues in the following terms: Revenue Support Grant and other Government Grants The Budget resolution incorporated the draft Local Government Finance Settlement figures as received in December Final confirmation was still awaited. Housing Benefit Administration Grant allocations had not yet been received and any changes would, if known, be incorporated prior to Council approving the budget in February 2017 and would involve an appropriation to/from reserves. The Disabled Facilities Grant (DFG) allocation had not yet been confirmed for 2017/18. Parish Precepts Parish Precept figures had been updated for all but one Parish which was still to meet. Final confirmation of the precepts requested would be incorporated into the final Budget. There was no impact to Council reserves of parish precepts. Pensions Revaluation Although draft figures were included within the Budget resolution, final confirmation was still awaited. The Deputy Leader also updated the meeting upon Treasury Management issues, advising that, due to changes to the level of UK Government backing in both the Royal Bank of Scotland (RBS) and Lloyds, counterparty limits had been amended to 6 million for all UK Banks and UK Building Societies (paragraph on page 38 referred). In conclusion, the Deputy Leader paid tribute to the Chief Finance Officer and her staff for their professional expertise and hard work in preparation of the 2017/18 Budget papers. He emphasised that the Executive was ambitious in their aim to grown the City. The 2017/18 Budget Proposals, together with the prudent approach adopted to spending / early decision making contributed towards achievement of that goal. Summary of options rejected A number of options which had been considered as part of the Council s 2017/18 budget deliberations as identified in various reports

11 That the Executive Budget Proposals for 2017/18, attached as Appendix E, be forwarded to the City Council for approval on 7 February 2017 with the following amendment included: With the exception of the matters specified at (a) and (b) below, agree the charges relating to those services falling within the responsibility of the Community Services Directorate [set out in Report SD.27/16 and relevant Appendices; the Addendum to the Report; and Report SD.27/16 (amended)], noting the impact those would have on income generation: (a) The proposed increase to the Annual Membership Parking Permit at Talkin Tarn (from 52 per annum to 104 per annum) was removed. (b) The current charges in respect of interment or cremation following the death of child, as identified in Report SD.27/16 (amended) were removed. To produce the Executive's budget proposals for 2017/18 for recommendation to the City Council EX.07/17 NOTICE OF EXECUTIVE KEY S (Non Key Decision) Portfolio Cross-Cutting Community; Environment and Economy; and Resources The Notice of Executive Key Decisions dated 20 December 2016 was submitted for information. The Town Clerk and Chief Executive was scheduled to report on the ICT Replacement Programme Provision for 2015/16 and 2016/17 (KD.29/16). Further operational and financial information was required to properly advise Members and the matter was therefore deferred. Summary of options rejected None That, subject to the above, the Notice of Executive Key Decisions dated 20 December 2016 be noted. Not applicable

12 EX.08/17 SCHEDULE OF S TAKEN BY OFFICERS (Non Key Decision) Portfolio Cross-cutting Community; Environment and Economy; and Resources Details of decisions taken by Officers under delegated powers were submitted. Summary of options rejected None That the decisions, attached as Appendix A, be noted. Not applicable EX.09/17 JOINT MANAGEMENT TEAM (Non Key Decision) Portfolio Various Community; Environment and Economy; and Resources The Minutes of the meeting of the Joint Management Team held on 24 October 2016 were submitted for information. Summary of options rejected None That the Minutes of the meeting of the Joint Management Team held on 24 October 2016, attached as Appendix B, be received. Not applicable PUBLIC AND PRESS RESOLVED That in accordance with Section 100A(4) of the Local Government Act 1972 the Public and Press were excluded from the meeting during consideration of the following item of business on the grounds that it involved the likely disclosure of exempt information as defined in the paragraph number (as indicated in brackets against the minute) of Part 1 of Schedule 12A of the 1972 Local Government Act.

13 EX.10/17 FUTURE OF INTERNAL AUDIT (Non Key Decision) (Public and Press excluded by virtue of Paragraph 3) Portfolio Finance, Governance and Resources Resources Pursuant to Minute EX.97/16, the Deputy Leader, and Finance, Governance and Resources Portfolio Holder submitted report RD.46/16 on the future of Internal Audit. The Deputy Leader reminded Members that the current Internal Audit Shared Service agreement terminated on 31 March The Executive had, on 24 October 2016, confirmed that the Council would not continue with the Internal Audit Shared Service arrangement with the County Council post March 2017; and agreed, in principle, to bring the service back in-house subject to an appropriate financial appraisal and business case being considered and approved at a future meeting of the Executive. The report under consideration today provided the business case on the future delivery of the internal audit function as an in-house service provision. The report and business case had been considered by the Audit Committee on 22 December 2016 and their comments were now included within the business case. Members of the Resources Overview and Scrutiny Panel considered the report at their meeting on 5 January Excerpts from the Minutes of both meetings were also provided, which recorded that: The Audit Committee had RESOLVED: That the Audit Committee had given detailed consideration to Report RD.46/16 and the draft business case, the submission of which was welcomed, and made the undernoted comments and observations for transmission to the Executive: (a) (b) (c) (d) The Audit Committee supported the in principle decision to bring the Internal Audit service back in-house. Consideration needed to be given to TUPE arrangements and the implementation of good governance arrangements for the operation of the Internal Audit function. That the Audit Committee recommended that a desk top exercise be undertaken which detailed the advantages / disadvantages of an external procurement process to be submitted to the Executive to inform decision making. The Audit Committee expects that a full external review of the Internal Audit function be undertaken within 2 years of the service coming back in-house (in line with CIPFA practice) in order that the Committee may receive the required level of assurance that the service was working effectively. The Resources Overview and Scrutiny Panel had RESOLVED That the Future of Internal Audit report (RD.46/16) be welcomed.

14 The Chairman of the Audit Committee reported that the Committee did initially have concerns, the majority of which had been allayed and satisfied in the draft business case. She added that the two main issues raised by Members were as recorded at Recommendations (c) and (d) above. The Deputy Leader had been in attendance at the Audit Committee meeting on 22 December 2016, and recognised that those issues had now been addressed within the draft business case before the Executive today. The Deputy Leader then moved the recommendations, which were duly seconded by the Leader. Summary of options rejected not to approve the preferred option as detailed within the business case That the Executive: 1. Had considered the business case on the future of the Internal Audit Service, appended to Report RD.46/16, noting the comments made by the Audit Committee and the Resources Overview and Scrutiny Panel. 2. Approved the preferred option for the service to be delivered in-house as detailed in the business case. To ensure that the Council fulfilled its statutory requirement to make arrangements for the proper administration of its financial affairs which included an effective internal audit function that was resourced and maintained. [The meeting ended at 4.30 pm]