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 £6.1m.

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.

Consideration was given to the report which set out the financial position as at the end of July 2024 and forecast for the remainder of the financial year, based on actual costs and income for the first four months of 2024/25. Financial performance was a key element within the assessment of the Council’s overall performance framework and was essential to the achievement of the objectives within the Council’s policy agenda. To that end, this was the second financial monitoring report of a series of reports for the current financial year which would continue to be brought forward to Cabinet on a regular basis.

As at July 2024, the Council estimated an overspend of £6.1m for the financial year 2024/25. This was largely due to demand led pressures on children’s residential placements, adults social care packages, home to school transport and the expected 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 fallen to 2.2%, the Council’s base costs had significantly increased across the recent high inflation period. 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 £17.0m was concerning, elements of the overspend were forecast and two key Budget contingencies were 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. This position had improved due to re-profiling of capital programme delivery, pushing back the need to borrow. It was estimated that this should see the Council generate savings of at least £4m for 2024/25, though again market conditions were out of the Council’s control.

As a result of those corporate provisions and savings, an underspend of £10.9m was forecast within Central Services bringing the Councils net overspend down to £6.1m. Though the £17m Directorate overspend was significantly mitigated, the residual pressure would need to be addressed in year by the Council to prevent further use of reserves. As such Directorates had been required to develop in year budget recovery plans to identify actions and opportunities to reduce the current overspend position. This work was underway but not yet at a stage where it could be factored into the current position.

There remained funding uncertainty for the local government sector beyond 2024/25. The Local Government financial settlement was only a one-year allocation and the future impact following the change in central Government at the national elections was not yet known.

The report was considered by the Overview and Scrutiny Management Board (OSMB), who advised that the recommendations be supported. Councillor Steele explained that concerns had been raised at the meeting regarding the home to school transport costs, the child placement overspend, and the temporary accommodation overspend. However, explanations had been provided by the Cabinet Member and Strategic Director and as such, no additional recommendations were required.

Resolved:

That Cabinet:

1.    Note the current General Fund Revenue Budget forecast overspend of £6.1m.

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.