Essex County Council’s draft statement of accounts for 2011/12 reveals that the authority’s finances are managed robustly. The budget for the financial year was set against a backdrop of austerity, with the council needing to make £100m of savings.
The council is on course to make £370m of savings as part of the first stage of its ambitious programme to modernise working practices and become more efficient. This exceeds the original savings target of £300m.
As part of this programme, the Council has reorganised and restructured many of its areas. The cost of packages for people who left the council in 2011/12 was £12.7m for 1,161 people. Using the council’s median salary of £23,000 this would generate a total annual saving in the order of £34m, including national insurance and pensions’ costs.
There are also savings in a number of other areas. The number of officers being paid over £50,000 has reduced from 459 in 2010/11 to 434 in 2011/12 while the number of schools staff earning over £50,000 has fallen from 879 to 650. The amount paid on members’ allowances has also fallen following a reduction in the number of committees and the number of posts with a special responsibility allowance.
The Council’s internal auditors have recognised that the pension fund is well run - giving the areas of pension investment and administration the highest possible rating of ‘full assurance’. However, the pensions’ deficit - which is the shortfall needed to meet all pension liabilities present and future - has increased from £633m to £857m largely due to the volatility of the stock and bond market caused by the national and international economic situation.
County Councillor David Finch, Deputy Leader and Cabinet Member for Finance and Transformation, said “Our ambitious modernisation is on target to exceed its target of £300m in savings and is now forecast to deliver £370m of savings. While we have had to pay out money in the short term as a result of restructuring, this will deliver cost savings in the long term, which will far outweigh the initial cost.
“We monitor the situation regarding the pension fund on a continuous basis, but it is important to take the long term view when it comes to pension investments. The difficult stock market situation has clearly had an impact on the investments, but we are confident that the pension fund is well managed and in a robust position.”
Note: The draft Statement of Accounts is due to be presented to the authority’s Audit Committee on 29 June 2012.
£23m of the savings generated through the packages to people leaving the organisation would count against the transformation programme. The remainder relates to schools, which, due to the way they are funded, are not part of this programme.
The deficit in the pension scheme mirrors what is happening to all employers within the Local Government Pension Scheme (LGPS). This change does not alter the cash contributions that Essex County Council makes to the LGPS as these are set every three years by the council. The next valuation is in March 2013. This will also take into account the likely changes to benefit structure of the LGPS currently being discussed by employers, trade unions and the government. These changes are expected to lead to a reduction in the future costs of the LGPS.
You can access the draft version of the accounts online.