Agenda item

To consider a report outlining the current revenue and capital monitoring position and proposals regarding any required actions.

Portfolio Holder – Cabinet Member for Corporate Services, Community Safety and Finance

Strategic Directorate – Finance and Customer Service

The report set out the financial position at the end of September 2022 and forecast for the remainder of the financial year, based on actual costs and income for the first six months of 2022/23. Financial performance was a key element within the assessment of the Council’s overall performance framework and essential to achievement of the objectives within the Council’s policy agenda. This was the third financial monitoring report of a series of monitoring reports for the current financial year.

As of September 2022, the Council estimated an overspend of £18.2m for the financial year 2022/23. Whilst the core directorates services had a forecast year-end overspend of £8.1m on the General Fund, there was £10.1m of estimated unbudgeted cost resulting from the wider financial impact of the war in Ukraine, inflation, energy price increases and the impact of the 2022/23 pay award, costs that the Council could not have projected within its Medium Term Financial Planning. These additional financial challenges have been factored into the current forecast following a review of the impact of these pressures on the current year and Medium-Term Financial Planning. It was noted that at the time of publication, the local government settlement had not been announced.

The Leader introduced the report, highlighting that although the revenue position had worsened since it was last reported, action was being taken within directorates to address the overspend in the revenue budget. Assurance was also given that careful consideration was given to capital expenditure and progress on capital projects.

The Chair thanked the Leader for his introduction and opened the report for questions.

Further clarification was sought to establish what was being considered to achieve savings and the potential impact of these on staff and services. The Leader confirmed that all staff were invited to identify savings and efficiencies. There was a programme of measures outlined in the report to mitigate in-year pressures. In addition, he noted that in the short term, recruitment to some vacancies had been temporarily delayed although posts were not removed.  Other measures considered included deferring professional accreditation to the following year. However, given the significant budget challenges, the Council may have to consider if it could no longer afford to support some activities.

Details were sought on the use of the Homelessness Rough Sleepers Initiative Grant. It was highlighted that the authority had a good track record of accommodating rough sleepers however, the focus of this work was to ensure that people were supported before they become street homeless. The Chief Executive noted that there was also a challenge supporting people to find secure accommodation, however, staff were in place to do this.

In the respect of the overspend and budget pressures, it was asked how Rotherham compared with similar authorities, noting that that it should be recognised that this was a national issue. The Strategic Director for Finance and Customer Services confirmed that a number of Council were reporting significant overspends and a corresponding impact on services. She highlighted prudent assumptions had been made in setting the Council’s budget however, a large proportion of the pressures were due to external factors outside the control of the authority. It was anticipated that there would be an improvement in the October forecast as controllable overspend was managed. December’s monitoring report would inform budget setting proposals.

A view was expressed that the funding gap was not caused by the Council being imprudent or irresponsible with its finances.  The steps taken to build adequate reserves would allow the Council to mitigate some of the impact. Clarification was sought to establish if action was being taken by the Local Government Association to raise concerns with the Government. The Leader confirmed that this is the case. The Leader noted that a substantial proportion of the £8m forecasted pressures could be attributed to placement costs for looked after children. Steps to reduce these pressures had been considered by the committee previously. It was noted that other authorities were facing similar pressures with social care costs.

Details were sought about the impact of the war in Ukraine on the budget. It was outlined that the pressures were linked largely to energy costs and inflation, rather than the costs associated with the refugee support programmes.

Clarification was sought if the Council’s asset based was being reviewed to look at income generation, particularly in light of greater number of people adopting hybrid working patterns. Details were also sought if any capital projects could be accelerated to reduce revenue spend, for example decarbonisation projects. It was stated that all options were being considered including longer term proposals which would require decision. It was highlighted that the focus was on what savings could be achieved this financial year to reduce the overspend without having an impact on service delivery.

It was reiterated that the over a number of years, the Council had made sure that it had adequate reserves to cover pressures. However, the pay award, rising inflation and energy costs could not have been foreseen. It was noted that the Council revenue budget ran to thousands of items, therefore line-by-line scrutiny by Members would be time-consuming and unhelpful. Officers summarised variations within the budget by Directorate clearly signposting Members to pressure and trends. It was difficult to forecast the level of Council Tax as Government announcements were awaited. However, there was an assumption of a 3% increase built into the existing Medium Term Financial Strategy.

Resolved:

1.         The current General Fund Revenue Budget forecast overspend of £18.2m be noted by Cabinet.

2.         That actions will continue to be taken to reduce the overspend position but that it is likely that the Council will need to draw on its reserves to balance the 2022/23 financial position be noted by Cabinet.

3.         The updated Capital Programme be noted by Cabinet.

4.         The proposed use of the Market Sustainability and Fair Cost of Care Fund be approved by Cabinet.

5.         The proposed use of the Homelessness Rough Sleepers Initiative Grant be approved by Cabinet.