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One of the duties of all treasurers when setting budgets is to prepare a medium-term financial plan for at least three years. And, as the final touches are being put to next year's budgets, it's interesting to look back and see how different 2009/10 looks compared with our plans 12 months ago. The answer is, it looks very different indeed. Our income streams have already taken a knock from the recession – and are likely to suffer further. Planning fees, parking charges and fines are all down, and it is necessary to budget for a further fall. The impact on means-tested charges is harder to predict, but is unlikely to be favourable. Yields from rentals have decreased and the flow of capital receipts has virtually dried up. The fall in interest rates has had a big impact on councils. Yields have plummeted and, with the Iceland effect, a cautious approach to investment has led to even steeper falls. There is little benefit on the borrowing side, as most councils are locked into long-term Public Works Loan Board rates. The normally-buoyant council tax yield has flattened out. We could normally count on at least 0.75% increase each year, but next year a 5% tax increase will mean only 5% more income. Meanwhile, demand for services is increasing as more people turn to public sector provision. This is most likely to be felt in education, but there will also be an impact in care for the elderly. Apart from the recession there is the Baby P effect. Social workers are adopting a far more cautious approach, leading to a noticeable increase in the number of children in the childcare system. All of these factors have left next year's budget looking very different from 12 months ago. I'm not suggesting we don't bother making medium-term plans, but it will be harder than ever to convince members that it is anything but a academic. Phil Walker is director of finance at Surrey CC

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WHITEHALL

Money Matters

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