Agenda item

Report from the Strategic Director of Finance and Customer Services.

Recommendations:

That Cabinet:

1.    Note the current General Fund Revenue Budget forecast overspend of £4.6m.

2.    Note that actions will continue to be taken to reduce the overspend position but that it is possible that the Council will need to draw on its reserves to balance the 2024/25 financial position.

3.    Note the updated position of the Capital Programme, including proposed capital programme variations to expenditure profiles and funding.

At the Chair’s invitation Councillor Alam, Cabinet Member for Finance and Safe and Clean communities introduced the report, noting that as of November 2024, the Council estimated the overspend at £4.6m for the financial year. This was due to demand led pressures on children’s residential placements, adults social care packages, home to school transport and the impact of the Local Government Pay Award.

In addition, the Council was still impacted by the inflationary pressures in the economy. Even though inflation had now fallen to 2.3% (albeit an increase from 1.7% in October), the Council’s base costs had significantly increased across the recent high inflation period by well in excess of 20%. Increased costs across this period were also being felt by the social care market, in particular leading to market prices increasing at above inflation levels and placing further pressures on the Council’s Budget. 

Whilst the Directorate overspend which stood at £15.5m was concerning, it had reduced from a peak of £17.2m and elements of this overspend were forecast with two key Budget contingencies created as part of setting the Council’s Budget and MTFS for 2024/25. The Council set a Social Care Contingency of £3.4m and a Corporate Budget Provision of £3.5m to support anticipated pressures across Social Care and Home to School Transport, whilst detailed review work of these services was undertaken, and operational improvements were delivered to reduce cost pressures and create cost avoidance.

The Council’s Treasury Management Strategy continued to perform well with the Council’s approach to borrowing adapted to minimise the level of borrowing and borrow short term, to ultimately minimise interest costs. It was estimated that this should see the Council generate savings of at least £4m for 2024/25, though again market conditions are out of the Council’s control. 

Although the final forecast overspend was £4.6m at this stage, further management actions were being identified along with trying to bring expenditure in line with budget setting.

The Assistant Director, Financial Services explained they had been actively working with all key service areas facing pressures to reduce costs were possible in year, to maximise grant funding and ensure any non-essential spend was removed. That activity would continue through to the end of the financial year and the aim was to minimise the use of reserves at year end.

Reserves would be required if there was an overspend at year end.  It was expected that the £4.6m would reduce a little further through those activities.

The Vice-Chair noted that the South Yorkshire Mayoral Combined Authority (SYMCA) had been indicating that the government would allow ten percent of capital monies to be used for revenue purposes, would that flexibility become available the Council? The Assistant Director, Financial Services explained that local authorities had had the ability, since 2022, to capitalise some revenue activity if linked to change and transformation programmes however it was not known if the flexibilities for SYMCA would also be available to the Council. It was noted the Council would not was to push too much of its revenue costs into capital against borrowing funded schemes.

The Assistant Director, Financial Services noted that when the budget for home to school transport was set in 2024-25, an overspend was anticipated, in the region of around £3.5million.  A programme of change was taking place with various elements being considered. 

Councillor Blackham sought clarification regarding the use of reserves to meet the shortfall. The Assistant Director, Financial Services explained that the Adult Social Care pressures weren’t foreseen when the budget was set and the shortfall would be filled from reserves already earmarked for financial support.

Upon a vote the following was resolved:

Resolved: That the Overview and Scrutiny Management Board supported the recommendations that Cabinet:

1.         Note the current General Fund Revenue Budget forecast overspend of £4.6m.

2.         Note that actions will continue to be taken to reduce the overspend position but that it is possible that the Council will need to draw on its reserves to balance the 2024/25 financial position.

3.         Note the updated position of the Capital Programme, including proposed capital programme variations to expenditure profiles and funding.