Resolved: the Committee (a) endorsed the retention of the income target for trade waste and it urged that officers ensure that systems were improved to enable the target to be met; (b) requested information about the recommendations from the APSE review; and (c) agreed that that a further update on budget pressures in the environment division should be brought before the Committee within six months on the progress being made on: future financial modelling and the savings achieved from ending the hire of fleet vehicles.
The agenda was varied to consider this item before the item on budget cuts.
4.1 Nigel Tyrell (Director of Environment) introduced the report, the following key points were noted:
· The report was provided to address the Committee’s concerns about the persistent reporting of overspending in the Environment Division.
· Over the past 10 years the Council had delivered savings of over £173m.
· The division had made cuts of £6m over the past five years. More than £800k of savings was proposed for 2020/21.
· The Environment Division had a workforce of more than 420 people providing a broad range of services.
· The refuse service collected three different types of waste from 134,000 households each week working out at around 54,000 separate collections every day.
· Any increase in the number of households in the borough increased the cost of staffing, vehicles and disposals.
· Since 2013/14 the number of household waste collections had increased by 17%.
· The budget for the service did not increase in line with the increase in collections.
· The refuse service was forecasting an overspend by £1.5m (this represented two thirds of the overspend in the division).
· The causes for the overspend could be traced back to changes to waste disposal in 2015.
· Officers put forward proposals to diversify recycling in anticipation of the end of the incineration contract with SELCHP (South East London Combined Heat and Power plant).
· The proposals put forward by officers were rejected by Mayor and Cabinet to allow for scrutiny by councillors and public consultation.
· Following consideration by the Environmental Sustainability Committee (Thursday, 26 November 2015) the following changes were made to the original proposals:
a) The subscription for subscription garden waste be £60 instead of the £80 initially proposed by officers.
b) Introduction of a weekly food collection service and reduction of refuse collections to fortnightly
c) Retention of a weekly comingled recycling service
· These changes presented a significant increase in dry mixed recycling and food waste collections as well as significantly reducing the cost of garden waste collection.
· These changes were presented and accepted by the Mayor and Cabinet. The original savings proposal was also accepted as part of a list of savings.
· As a result of these two decisions, savings of £500k were taken. Recommendations to increase refuse collection frequencies and a lower level of garden waste subscription charges (from £80 to £60) were adopted.
· There was insufficient co-ordination between the savings report and the scrutiny feedback process meaning that officers did not have the opportunity to reconfigure the savings proposal to reflect the increased service cost of a weekly recycling/food and garden waste service or adjust income expectations from garden waste subscriptions. This created an immediate £500k gap within the refuse collection budget.
· The intention had been to review the changes in light of the substantial level of changes.
· The changes to the service also presented a number of unbudgeted operational challenges.
· Additional crews were required due to problems collecting recycling from some properties. Additional time was also needed for crews to dispose of refuse.
· There were additional unbudgeted costs associated with higher than anticipated requests for replacement bins.
· The hire of additional refuse vehicles to enable flexibility in the service resulted in a budget pressure of £550k. Mayor and Cabinet had approved the purchase of new (and more efficient) fleet vehicles – the first of which were due to come into service in the coming months.
· There were also pressures on the budget due to higher disposal costs. Although overall volumes of waste were decreasing – recycling was currently more expensive than incineration. It was estimated that each additional ten thousand tonnes of waste that was recycled rather than incinerated cost an additional £160k in disposal costs.
· There was also a 5% (£300k) overspend in the street cleansing budget.
· Since 2010 – the workforce had been reduced by 23%. However – in line with Council policy – the number of directly employed staff had increased. This had limited the service’s ability to manage staff costs using the flexibility provided by agency staff.
· There were additional costs associated with employing directly staff which had not been budgeted for.
· The Council was moving to a new system for financial forecasting. However, this had taken longer to implement than had been anticipated. Managers in the environment division had not been receiving the figures and monitoring information required to regularly review budgets.
4.2 Nigel Tyrell, Kevin Sheehan and Theron Newman responded to questions from the Committee, the following key points were noted:
· A third of the overspend was due to vehicle hire costs; a third was due to the lower than projected realisation of income from trade waste and a third was due to other unanticipated costs.
· The refuse service had mostly stayed within budget in the years before the significant changes in 2016 (the change in the regularity of residual waste collections; charges for green waste collection; providing food waste collection and moving some responsibilities to Lewisham Homes).
· The changes were now well established – but the reality of providing the services had created budget pressures.
· Some additional income had been realised from trade waste – but not as much as has been forecast and not enough to match overspending in other areas.
· The financial system that the Council provided to manage trade waste subscriptions and to raise invoices had created a number of problems (including creating incorrect and duplicate invoices). These problems made it more difficult to account correctly for income. It also made it more difficult to sell services commercially.
· Up to date information was necessary to enable the service to ensure all business were up to date with payments.
· The targets for trade waste income remained relevant – in order to maintain a sense of urgency and challenge.
· The Association for Public Service Excellence (APSE) had carried out a review of environmental services and it had made a number of recommendations for improvement.
· In 2015 a number of models for the future of the service had been considered. The Council took external advice – and reviewed operations at other Councils. The model was changed through the budget process.
· It was recognised that the financial model for delivering services (and forecasting future costs) could have been revisited sooner.
· It was anticipated that the delivery of new vehicles would alleviate some (potentially up to half) of the pressure on the refuse service budget (but it was not clear what the exact figure would be).
· As well as the actions to reduce vehicle hire costs and to increase income from trade waste subscriptions - work was still required to tackle overspending in other areas of the service.
· Discussions were happening at a national level about the production and management of waste. In the longer term – the Government intended to make suppliers and retailers deal with waste (and to produce less).
· Discussions were also happening across London about the opportunities to increase recycling.
4.3 In Committee discussions, the following key points were also noted:
· The Environment Division was not the only service in the Council that had been required to make cuts whilst maintaining services.
· A member gave an example of problems and difficulty presented when attempting to sign up to have trade waste collected.
· Members were concerned that the service appeared not to have spent within its budget in recent memory.
· The Committee was concerned that there appeared to be a lack of financial modelling for the delivery of environmental services (specifically in terms of: population growth; the number of flats in the borough and – the changes to incineration costs).
· Members highlighted the lack of political will to fundamentally change the delivery of services.
· The Committee expressed its concern about the lack of joined up thinking between corporate services and the environment division – particularly in relation to the availability of capital expenditure for use on purchasing refuse vehicles.
4.4 Councillor Sophie McGeevor (Cabinet Member for Environment and Transport (job share)) addressed the Committee - the following key points were noted:
· There was a growing realisation that one of the most effective means to manage waste would be a ‘pay as you throw’ system – in which the cost of refuse collection would be related to the volume that households produced. However, the Government was slow in making changes.
· The Council had to make the best of the situation in which it found itself.
4.5 Councillor Amanda de Ryk (Cabinet Member for Finance and Resources) addressed the Committee – the following key points were noted:
· As a former member of Sustainable Development Select Committee (at the time of the decision regarding changes to waste services in 2015/16) she recognised that the options being presented included assumptions about costs and estimates of expenditure. However, there was no indication in the modelling from officers that the decisions being taken would result in significant overspending and budget pressures.
· Councillors relied on professional advice from officers to make sound financial decisions.
· Cabinet Members were doing their best to balance budgets in difficult financial circumstances.
· Overspending in one service had impacts across the Council.
4.4 Resolved: the Committee (a) endorsed the retention of the income target for trade waste and it urged that officers ensure that systems were improved to enable the target to be met; (b) requested information about the recommendations from the APSE review; and (c) agreed that that a further update on budget pressures in the environment division should be brought before the Committee within six months on the progress being made on: future financial modelling and the savings achieved from ending the hire of fleet vehicles.
 Sustainable Development Select Committee