Agenda item

Report from the Executive Director of Corporate Services.

Recommendations

That Cabinet:

1.    Note the update on the revenue budget financial outturn 2025/26.

2.    Note the Council’s progress on the delivery of the Local Council Tax Support Top Up payment scheme.

3.    Note the update to the Household Support Fund for 2025-26.

4.    Approve the capital budget variations as detailed in section 2.4 of the report.

At the Chair’s invitation Councillor Alam OBE, Cabinet Member for Finance and Community Safety introduced the report which provided Cabinet with an update on financial matters. It was presented as an interim update on the Council’s 2025-26 financial outturn, ahead of a more detailed report scheduled for July 2026.

The Council’s projected position improved from a £3.4 million overspend reported in December to £0.3 million. This £3.1 million improvement had previously been reported to Cabinet in February. Headline details of these improvements were included in the report. The directorate forecasts indicated a positive trajectory for the Council’s finances. Strong financial management was noted as essential in addressing future budget pressures and external uncertainties.

The improved position meant that reserves remained stronger than originally projected when setting the budget, supporting the Council’s overall financial standing during a period of economic uncertainty. Spending in line with the approved budget remained critical. Continued scrutiny of income and expenditure across all services, alongside robust budget monitoring, was identified as a priority to ensure delivery of annual and medium-term financial plans while maintaining financial resilience.

The Service Director, Financial Services, Rob Mahon noted the position was identified in the 2026-27 budget papers as under financial monitoring, with ongoing work with directors to reduce the overspend and align it with budget.

The December overspend was less than 1% of the Council’s net revenue budget and not considered significant. Actions had further reduced it, strengthening the financial position. The Council was entering 2026-27 in a more robust position, as reflected in the approved budget and council tax report, though some underlying outturn challenges remain and would require further discussion. A detailed outturn report would be presented to Cabinet in July, and potentially to Scrutiny, providing early analysis of revenue and capital positions while year-end processes were finalised.

The Chair invited questions from OSMB, with Councillor Yasseen welcoming the reduced overspend and noting it as a significant improvement. Support for crisis measures in the budget was welcomed, including free school meal vouchers (c.141,000 rising to 142,000), £413,000 for energy support, household fuel assistance, £90,000 for care leavers, and council tax subsidies. Clarification was sought on continuation of this support into 2026.

It was confirmed that the 2025–26 Household Support Fund figures reflected final outturn delivery, including total vouchers issued, value of energy support, and households supported.

Councillor Yasseen commended the scale of delivery and improving financial trajectory but raised concern over £6.2m of service pressures, particularly in Children’s Services, and sought assurance on further mitigating actions.

It was reiterated that there was no single solution to CYPS placement pressures. Actions had included reviewing placements and delivering prior savings, improving the position. The 2026–27 budget included a £2.8m uplift and £2m for inflation, though pressures were expected to exceed assumptions. Grant funding had provided additional support, but completion of savings plans remained critical, particularly the in-house residential programme (four placements across two properties in 2026–27) to reduce reliance on high-cost external provision.

Forecasting remained challenging due to demand volatility, but the position was considered manageable within 2026–27. While pressures persisted, many had been mitigated through the budget, with further work ongoing, including increased use of independent fostering. It was noted that pressures reflected a national trend, though benchmarking showed the Council performing comparatively well with an improving trajectory.

The Chair raised a question regarding lessons learned from the variance between the Quarter 3 forecast and the final position. It was noted that an improvement in the forecast position was typically observed in Quarter 4. Close working arrangements were in place with directorates across all levels of financial management to ensure forecasts were as accurate and transparent as possible throughout the year. However, it was acknowledged that forecasting remained challenging, and some movement in Quarter 4 was expected in both local authority and wider organisational contexts.

It was reported that efforts to minimise this variance had improved year on year, although further learning was ongoing. In particular, increased confidence in newer income streams was identified as an area for development. Reference was made to improved performance within country parks, where income targets had historically been difficult to achieve but were now being met due to service improvements.

A cautious approach to forecasting these income streams had been taken to ensure sustainability rather than short-term gains. This approach would continue into 2026-27, with a focus on confirming that income growth was stable and not solely driven by initial changes or new facilities. It was confirmed that finance teams would continue to work closely with services to strengthen forecasting accuracy.

A further point was raised regarding how the ongoing success and sustainability of income generation at country parks would be ensured beyond any initial uplift. Andrew Bramidge, Executive Director, Regeneration and Environment noted that this also related to performance at Thrybergh. Strong income performance had been seen in the initial months at both Rother Valley and Thrybergh, with income at the Thrybergh café reported to have doubled following the opening of the new facility. This had provided increased confidence in income forecasts for the following year, although a cautious approach was being maintained to ensure that the uplift was sustainable rather than driven by an initial surge in demand. Ongoing monitoring throughout the year was confirmed, with it noted that confidence in income projections was higher than in previous years.

Councillor McKiernan asked whether the increase in the IT capital budget for data backup storage and hardware provisioning reflected inflationary pressures or an expansion in equipment. It was explained that the ICT capital reprofile reflected a combination of both inflationary pressures and updated service requirements. The reprofile aimed to present a more realistic assessment of what the service could deliver over the coming years. It was noted that the ICT capital programme had historically been flat-profiled, which often resulted in in-year adjustments, including slippage and savings. The ICT management team had taken a proactive approach in reviewing budgets, identifying achievable savings, and returning these to the wider capital programme. Overall, the revised profile was intended to better align investment with delivery capacity, while incorporating anticipated demand and inflation over the next three financial years.

In response to a follow up question, it was explained that the position reflected a combination of factors. ICT senior officers had undertaken a review of the Council’s infrastructure needs and capacity, including engagement with services to understand current and future requirements. It was noted that there was an increasing shift towards cloud-based and externally hosted systems, reducing the need for some on-premises server infrastructure. However, server requirements continued to be assessed to ensure they aligned with service needs and supplier requirements. Overall, the approach reflected both evolving technology trends and a reassessment of what equipment was necessary to support the Council’s ICT systems effectively.

A further question was raised regarding whether the shift from capital investment to subscription-based ICT services had resulted in increased revenue expenditure. It was confirmed that, while ICT contracts had experienced inflationary increases year on year, no additional pressure had been transferred into revenue budgets. It was also noted that the ICT capital programme had generated underspends through re-profiling and, over recent years, had returned savings to the capital contingency.

Councillor Baggaley requested a breakdown of the £2.4m improvement within CYPS and asked whether vacancies and turnover were impacting service delivery. It was confirmed that vacancies were not adversely affecting services, with recruitment managed to avoid any detriment. Savings were largely attributable to normal staff turnover. It was explained that most of the £2.4m improvement related to grant maximisation, including the use of additional external funding aligned to government priorities. The remainder reflected smaller savings from staff turnover and vacancies, alongside anticipated placements that had not occurred later in the financial year.

The Chair asked whether the £5.7m directorate overspend, offset by a £5.4m underspend in central services, was sustainable. It was explained that a central contingency had been set in 2025-26 to support social care pressures and had not initially been allocated to CYPS to maintain focus on savings delivery and transformation. Following review during budget setting, assurance had been gained, and a proportion was redistributed in 2026-27, including £2.8m to CYPS and £2m for inflation. It was noted that central services would continue to hold budgets for inflation and risk to manage uncertainty, but delivering large underspends year on year was not intended. The 2026–27 approach reflected a shift towards allocating funding to directorates based on confidence in delivery and need.

Councillor McKiernan raised concern that £1m had been allocated for ash dieback mitigation, with only £21k spent, and sought clarification. The Executive Director, Regeneration and Environment explained that the funding had been set aside based on anticipated impact, which proved lower than expected over the past two years, with fewer affected trees. It was noted that other tree diseases had since emerged, and the original allocation had been too specific; a broader provision would have been more appropriate.

Clarification was sought on whether a clear plan was now in place to utilise the allocated funding, particularly in relation to tree replacement and wider planting initiatives. It was confirmed that a more structured approach had been introduced, including a systematic programme of tree inspections. This proactive regime would identify trees requiring removal or replacement, ensuring that funding was directed appropriately. It was noted that this level of planned inspection and management had not been in place previously.

The Chair raised concerns about the risk of demand for the LCTS top-up scheme exceeding the £1.7m-£1.9m budget and how its impact on financial hardship would be measured. It was explained that a reserve, largely funded through the Crisis Resilience Fund, had been identified to support the scheme. While demand could exceed the budget due to its demand-led nature, the risk was considered low, although cost-of-living pressures could increase uptake in line with the scheme’s purpose. It was noted that the reserve was expected to support the scheme over three years within the Medium-Term Financial Strategy, though use in 2026-27 could reduce sustainability in later years, potentially requiring alternative funding. This risk was acknowledged but not considered likely at this stage. The scheme was described as means-tested and open year-round to support a wide range of residents experiencing hardship. Monitoring arrangements were in place, with data reported across the Council, and further enhancements were being developed to improve understanding of impacts and target support effectively.

Councillor Yasseen raised a query regarding the Public Health underspend used to offset Adult Social Care pressures and its potential impact on prevention and health inequalities, particularly in the context of ICB changes.

It was noted that further detail would be provided in the July outturn report to Cabinet, with Directorate representation to address the issue in depth. It was confirmed that the underspend was relatively small and not expected to significantly impact public health outcomes. Ongoing work was also noted to review arrangements with the ICB and maximise the use of increased Public Health grant funding in 2025-26 and 2026-27.

The Chair raised a question regarding how anticipated changes in legislation, particularly in relation to electric vehicle infrastructure, would be accounted for in future projects. It was acknowledged that predicting changes in national policy remained challenging. While local policy could be more readily planned for, national legislative changes could arise during the lifecycle of projects and impact both capital and revenue budgets. It was explained that such risks were considered as part of project and budget risk management, with policy changes included within risk registers for both major and minor capital schemes, as well as within revenue planning processes. However, it was noted that some changes could not be fully anticipated. Reference was made to the electric vehicle infrastructure project as an example, where policy changes during a delivery period of approximately five to six years had required additional works that were not originally planned. It was also noted that, due to earlier budget pressures, elements such as car parks at Rother Valley had been value engineered out of the scheme but later reinstated as a result of subsequent policy changes.

Councillor Baggaley asked whether the flood resilience funding was new or additional. It was confirmed that the funding related to an existing programme established following previous flooding, with schemes delivered in phases by the drainage team. Costs had exceeded initial estimates following detailed assessment, reflecting a needs-led approach. The funding was already included in the Council’s budget and did not represent additional resource. It was clarified that, while the works would not fully prevent future flooding, they were intended to improve property resilience and reduce impact, with delivery ongoing.

The Chair asked about the Council’s resilience to current global economic and market pressures. It was reported that the Council was in a robust position to manage external challenges. While global factors continued to present difficulties for budget and treasury management, these were not unprecedented, and the Council had successfully managed similar pressures in recent years, including COVID-19, high inflation, the cost-of-living crisis, and wider geopolitical events. It was noted that this reflected strong financial management, supported by a robust budget and Medium-Term Financial Strategy, alongside maintained and strengthened reserves. Overall, confidence was expressed that the Council was well placed to manage ongoing economic uncertainty.

Councillor Baggaley queried the outstanding R&E variance, including route optimisation, the contamination pilot, and responsible waste grants, and sought a progress update. It was confirmed that the main element of route optimisation, the service restructure, had been completed and delivered the primary savings. However, routes had not yet operated for a full financial year, and late 2025-26 operational challenges had impacted delivery. It was reported that performance was nearing stabilisation, with further work continuing into 2026-27 to fully realise planned savings, including route optimisation and removal of two routes. Progress had been made, but delivery was not yet complete and would be closely monitored.

It was confirmed that, if full delivery was not achieved, updates would be provided to Cabinet with alternative options. An update on the contamination pilot and responsible waste grants would be provided separately.

Councillor Baggaley queried the extent to which treasury underspends were due to delays in capital programme delivery and whether this reflected deferred work. It was explained that around £2.5m of the underspend related to capital slippage, which, while not desirable, was common. The Council adopted a prudent approach by providing revenue cover at approval stage, creating in-year flexibility where slippage occurred and resulting in central underspends. It was emphasised that, while this supported the overall position, the priority remained timely delivery of the capital programme in line with strategic objectives.

Councillor Bacon asked whether the capital programme variations set out in section 2.4 included the recently approved changes relating to the Markets and Libraries project. It was confirmed that these variations were not included in section 2.4, as they had already been reported to and approved by Cabinet. As a result, those changes had already been incorporated into the Council’s capital programme and were not reflected again within that section.

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

1. Note the update on the revenue budget financial outturn 2025/26.
   
   
2. Note the Council’s progress on the delivery of the Local Council Tax Support Top Up payment scheme.
   
   
3. Note the update to the Household Support Fund for 2025-26.
   
   
4. Approve the capital budget variations as detailed in section 2.4 of the report.