Richard Harbord: The budget pressure in on 151 officers

Once upon a time, even in difficult years, the budget process in a local authority was an exciting but calm event with a well rehearsed routine. The section 151 officer surrounded the process with a mystique which ensured that they were the only person who could bring it all together.

Indeed, I have a framed copy of the budget calculations of the borough treasurer of Richmond when I was deputy. The entire budget was set out in his unmistakeable hand on one side of A4. This particular budget was a very important one as it was his last year before retirement and he was determined to go out in a blaze of glory with a nil increase in the rate.

He was very close to the council leader, who he played golf with every Thursday afternoon, and I expect he shared with him the likely final position. The rest of us had no idea what the outcome would be. Remember this was a London borough of some size and the way the pre-determined target was hit is all laid out on that dog eared piece of paper.

He achieved his end and left suitably admired. I was fortunate enough to become his successor and early in the year it dawned on me that in fact we had no reserves whatsoever. My first year ended in a rate increase of 28%, which did not make a very auspicious start to my reign.

The situation as shared with members in advance of the budget was a difficult one and the budget ultimately rescued by the borough treasurer producing a rabbit from his hat. As time went on members grew more relaxed about the dire warnings of savings needed etc, and came to expect, and rely upon, the rabbit to resolve budget difficulties. This strategy was in some places eventually overplayed and there came a time when all the rabbits had been used up and disappointment set in.

Of course, in days gone by we did not attempt to formalise medium term planning in any way otherwise a whole row of rabbits would have been needed. The budget was a work of mystery shared only by the 151 officer, leader and chairman of the policy committee.

The budget making of today is far removed from that. Resources are scarce, the removal, or curtailing, of services a regrettable necessity and the pressure is on the 151 officer in an entirely different way. In one sense the days of Revenue Support Grant that we all complained about seem to have been far easier than the current system.

There are a number of pressures that must be faced. The level of reserves is an obvious one. There can be no justification for maintaining unnecessarily large reserves while cutting services and making redundancies. But judging the correct level of reserves is not easy. There are attempts to smooth out future savings in the medium term financial strategy to ensure sustainable authorities for four to five years . This may well necessitate the defence of rather larger reserves in the early years.

The other major difficulty is the business rate income forecast. This is a wholly uncertain process. The base business rate may be known but getting sufficient information on the likely appeals and making some sort of judgement about the success or otherwise of those appeals is a very uncertain business. The difficulty is that large sums of money are involved and refunds from lost appeals, over which the authority has no control, may necessitate several years of refunds back to the last revaluation or another key date. At the same time local authorities are finding business premises that have never been on the list and getting these into rating takes time and creates further difficulties for forecasting.

Auditors have expressed some concern over the accuracy of forecasts which underpin the budget. An optimistic forecast preserves services and a pessimistic forecast may mean unnecessary cuts. It is likely that such forecasts will be subject to an individual sign off by the 151 officer and that auditors should verify the forecast as a routine measure.

Whichever way you look at it the pressure on 151 officers to get these matters right is becoming ever more intense. Failure to do so could place the authority in financial difficulty or/and lead to reputational damage.

In difficult times, after a revaluation, 90% of the values on the list may be challenged. Of those, 90% will be dismissed. Spotting the other 10% is the key .

Richard Harbord is a consultant and a former chief executive of Boston Borough Council