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 £2.4m.

 

2.    Note whilst there is a projected overspend, the Council expects to be able to manage this pressure during the year and return to a balanced position following mitigating actions. Should that not be possible the Council will need to draw on its reserves to balance the 2025/26 financial position.

 

3.    Note the updated position of the Capital Programme.

 

 

At the Chair’s invitation Councillor Alam, Cabinet Member for Corporate Services, Finance and Community Safety introduced the item and made the following points:

·       This was the financial monitoring report for the period ending July 2025.

·       The Council’s overall financial position remained positive, despite a forecast overspend of £2.5 million.

·       The overspend was composed of a £7.5 million pressure in service directorates, with was offset by £5.3 million in central underspends.

·       The overspend was attributed to demand pressures in residential placements, particularly in social care, which reflected the position nationally.

·       Inflationary pressures were also a significant factor affecting costs.

·       The treasury management strategy was performing well, with short-term borrowing being used to minimise interest costs.

·       The capital programme had been updated, with some reprofiling of schemes into 2026-27 but the programme remained ambitious.

·       Confidence was expressed that the Council would manage the pressures and return to a balance position through mitigating actions.

·       The financial monitoring would continue closely over the coming months.

 

The Chair invited members of the Overview and Scrutiny Management Board (OSMB) to raise questions and queries on the item before them.

 

Councillor Blackham expressed scepticism about the Council’s ability to manage the overspend, especially given that two directorates were already significantly over budget just a few months into the financial year. It was suggested that the budgets for those directorates may not be realistic and called for better forecasting.

 

The Assistant Director, Financial Services acknowledged the concern and explained the Council expected underspends in grant-funded areas. Noting that treasury management was performing well. The Children and Young People’s Services (CYPS) directorate overspend was anticipated and offset by central contingencies. The Adult Social Care pressures were being actively managed with mitigating actions. It was confirmed that budget and medium-term financial strategy (MTFS) work was underway to realign budgets.

 

Councillor Yasseen observed that CYPS had been consistently overspend for a number of years, indicating a mismatch between the resources and demand. It was asked how the Council planned to redesign resources to reflect the true cost of services and want impact this had on other services that were under budget?

 

The Assistant Director, Financial Services explained the CYPS budget had been reduced over time, even though the overspend appeared consistent. Aspects that had contributed to this were that the number of looked-after children had decreased, but inflation and market costs had driven up placement costs. The internal residential care programme delays had impacted savings. It was clarified that other directorates had made temporary savings without major service delivery impacts.

 

In a follow-up question, Councillor Yasseen queried how long the Council could continue relying on its reserves and at what point would that approach become a concern?

 

The Assistant Director, Financial Services confirmed the Council’s reserves were robust and had increased over the past few years, with the minimum balance now three times higher than seven years ago. The planned use of reserves was strategic and not a sign of financial weakness. There was confidence that mitigations would allow the Council to balance the budget without excessive use of reserves.

 

The Chair asked about the impact staff vacancies was having on service delivery? In response the Chief Executive explained the vacancies were not at critical levels. There had been some areas such as Street Scene where there had been challenges, however overall service delivery was not significantly affected, and recruitment and retention remained a priority.

 

The Chair sought assurance that reorganisations in CYPS would lead to the appropriate savings? The Assistant Director, Financial Services explained the autumn budget setting process would assess delivered savings and inflation impacts, and the goal was to determine a sustainable base for CYPS without funding overspends.

 

The Chair asked the Strategic Director for Regeneration and Environment why the route optimisation saving in Waste Management had been delayed, and what the revised timeline was? The Strategic Director explained that implementation would begin in October following the summer trials and staff consultation.

 

The Chair followed up with another question to the Strategic Director for Regeneration and Environment regarding the financial impact of the income generation shortfalls for the country parks and markets.  The Strategic Director for Regeneration and Environment provided an update indicating that the country parks income was steady and on target. The income from the market was below target due to ongoing works, indicating that savings would be made elsewhere to offset the shortfall.

 

Councillor Baggaley raised concerns about the robustness of the CYPS savings plan. Councillor Baggaley then asked about the Brampton Vale strategic acquisitions item. The report indicated the site was reduced from 58 units down to 9 with £1 .7 million savings. Clarity was sought around that movement in number of units and number of savings because it was a bit out of kilter with that number of units and that savings. The Assistant Director, Financial Services indicated a written response would be provided to the question via the Chair.

 

Councillor McKiernan asked about under-occupancy in Council owned children’s homes querying why it was not set at 100% and why the Council only owed 85% when there were overspends in this area. Councillor McKiernan followed up indicating that another service was relying on agency support due to staff sickness. This was now the second director experiencing significant absence. Should members be concerned about a broader issue with sickness levels across the Council?

 

The Strategic Director for Adult Care, Housing and Public Health explained they continued to face challenges related to staff sickness across services. A contributing factor was the ageing workforce, which naturally brought increased physical health issues over time. Whilst the Council actively supported staff through training, improved equipment, and promoting safe working practices, the physical demands of hands-on care do take a toll.

 

To address this, the Council was focused on attracting younger people into the workforce. It had made significant progress in making the recruitment process more accessible and were prioritising candidates with the right aptitude and potential, which could develop further.

 

In critical services, where staffing levels directly impacted safety, the Council sometimes needed to use agency support. However, it did not automatically cover all vacancies with agency staff. The impact was assessed, and the aim was to stay within budget to avoid additional financial pressure.

 

There had been notable improvements, particularly in social care recruitment, and a continued reduction in agency reliance was expected. Nonetheless, the ageing workforce remained a key challenge that would continue to be managed proactively.

 

The Strategic Director for Children and Young People’s Services said they had seen real progress in reducing agency use, especially in children’s services, thanks to a national memorandum that capped agency social worker spend. Those roles were previously among the costliest, so the reduction has had a positive financial impact. Residential services remained a challenge. Homes must meet minimum staffing levels to stay compliant and ensure young people’s safety. When staff were off sick or following incidents, the Council had to use agency cover. A recruitment drive for residential workers was underway, supported by HR, which should help reduce agency reliance further.

 

Regarding the query about residential occupancy, it was noted that this was not just about numbers, it was about stability and care. The Council was working to bring children with complex needs back from expensive external placements, but transitions took time. Behaviour often worsened initially, so flexibility in placements was needed. Most homes were two-bed, and while 100% occupancy was not realistic, the Council aimed for 85%, which was considered high. At times, children might be placed alone or temporarily moved due to property damage. For example, one young person helped repair and repaint their room after an incident, which was a great outcome, though it temporarily reduced occupancy. The Council was working hard to maintain high occupancy while ensuring safe, supportive environments.

 

The Chair asked about the impact of the local government pay award on the Council’s budget? The Assistant Director, Financial Services explained the local government pay award had a projected £2.3 million impact on the budget for the financial year, affecting the Medium-Term Financial Strategy (MTFS). The Council had anticipated it might exceed initial assumptions but avoided overestimating during budget setting to prevent unnecessary savings targets.

The actual cost was lower due to staff turnover and vacant posts, which did not attract the pay award. This provided some in-year mitigation and reduced the overall financial pressure.

 

Councillor Tinsley queried why the market income shortfalls had not been anticipated and asked whether recruitment to new and existing roles was being held back to offset any overspend?

 

The Assistant Director, Financial Services explained that recruitment was not paused in any service area to manage the market overspend. There were no corporate instructions to develop in-year savings; instead, strategic directors were expected to manage budgets within existing pressures. Vacancies arose through natural turnover, and recruitment continued as needed. Market service spends proved more challenging than expected. Income recovery from the market project remained below projections, despite budgeted discounts for traders. These shortfalls contributed to ongoing financial pressures, which were partially anticipated in the MTFS.

 

The Strategic Director for Regeneration and Environment explained that market footfall had declined compared to previous years, which impacted trader income. However, losses were offset in part by capitalising several posts within the regeneration team against project expenditure. As previously, no vacancies were held. Whenever a post became vacant, recruitment was conducted as quickly as possible to maintain service delivery.

 

The Vice-Chair noted that the local development plan had to be completely rethought and that there had been reports that it was going to exceed £1 million. It was asked what pressures that might have had on the budget.

 

In response the Assistant Director, Financial Services explained that the local development plan was an exercise that was undertaken frequently, it was a considered factor when budget planning and MTFS setting, and the team worked with the service to develop what the spend profile of a local development plan would actually be. This was built into the budget and MTFS. It was the cabinet part for the local development plan which referenced the cost of the previous local development plan, which I think was where the £1 million indicator came from. The team worked with the service to see whether that £1 million would hold in the current market, given the amount of work needed to be done on the local development plan. It was used as a benchmark figure.

 

Councillor C Carter queried section 2.1.2.2 regarding the Finance and Customer Services budget, noting that overall, it looked balanced, however, there was a £0.4 million overspend on catering. More clarify around this overspend was requested. In a follow up question Councillor C Carter also noted the report mentioned several contract changes and asked if those changes had been implemented?

 

The Assistant Director, Financial Services explained that whilst the overspend remained an overspend position, it was worth noting that 12 months earlier it had stood at £1.4 million. Work had been carried out as part of setting the 2024-25 budget, including uplifting the fees and charges to schools when awarding the contract, to ensure the council was moving towards fully recovering its costs, as it should for a traded service. 

 

This represented a move in the right direction, and the plan had been to continue that improvement through 2025-26 and 2026-27. While it had not been possible to include extensive planning packs, that gradual progression was helping to place the council in a stronger financial position. The Assistant Director, Financial Services went on to say that in terms of the contract changes, they were in the process of being implemented.

 

The Assistant Director, Property and Facilities Services explained that the team had reviewed the catering operational model to improve efficiency, prompted by market conditions and the loss of several school contracts, which were with academies that were shifting to national suppliers as they expanded. This loss highlighted the need to reassess the business model, which also helped identify and deliver savings.

 

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

1.    Note the current General Fund Revenue Budget forecast overspend of £2.4m.

2.    Note whilst there is a projected overspend, the Council expects to be able to manage this pressure during the year and return to a balanced position following mitigating actions. Should that not be possible the Council will need to draw on its reserves to balance the 2025/26 financial position.

3.    Note the updated position of the Capital Programme.

 

Additional actions agreed at the meeting were:

·       That information on the movement in number of units and number of savings associated with the Brampton Vale strategic acquisitions item would be provided to members of OSMB.