Agenda item

The Leader presented the first report on the agenda which explained the current forecast position on the Council’s revenue budget and the financial risks and opportunities that presented themselves within the July update.

This was the first revenue monitor report being presented to Cabinet for this financial year.

Against a net budget of £373m, the forecast position reflected an underspend of just over £3million. This took into account the contingency budget and the anticipated in-year underspend against capital financing budgets.

Whilst an overall underspend was projected, it was noted that service areas were collectively forecasted to overspend by £3.7m, excluding schools. This update provided confirmation that some of the known risks at the start of the year materialised and were causing significant overspends, especially within Children’s Services. As anticipated, it was currently proving possible to offset service area overspends with the general contingency and underspends within capital financing.

The key areas contributing to the £3m forecast underspend position included:

(i)                Increased demand across key social care areas including children’s out of area and emergency placements. These two areas alone contributed an overspend of almost £4.5m to the overall service position.

(ii)              Increased demand within adults residential and non-residential service also contributed £2m to the overall service position. This was, however, offset by the overachievement of community care income because of an increased number of users contributing to their care.

(iii)             Significant pressures were evident within Housing and Communities, in relation to homelessness. Despite the Council allocating a significant budget increase for 2023/24, to address the ongoing impact of the overspend incurred last year, costs had increased further and an overspend of £711k was projected. This was an area that saw a significant increase in costs over the last two years, following the Welsh Government’s policy aim to dramatically reduce homelessness.

(iv)            There were forecasted underspends against non-service budgets, specifically the general contingency and capital financing. Savings in these areas, as set out within the report, were more than offsetting the net service area overspends, resulting in an overall underspend for the whole Council.

(v)              There was an anticipated shortfall against the delivery of 2023/24 and prior year savings of over £1.6m. The two services responsible for most of the shortfall are Adult Services and Housing and Communities. Within Housing and Communities, it was not possible to evidence achievement of this saving, especially given the overall overspend in this area. Within Adult Services, only partial achievement was being forecast, partly due to a lack of available resources to undertake the work to realise the savings. It was, however, anticipated that these would be fully achieved in readiness for the next financial year.

As school variances were managed via individual school’s balances, the overall underspend of £3m did not include the schools’ position. Schools were collectively forecasting an overspend against a budget of £5.8m which would see balances reduce from £14.4m to £8.6m by the end of the financial year.

Considering the significant level of savings that schools needed to deliver during 2023/24 and the level of recurring expenditure included within the £5.8m overspend, officers continued to closely monitor school balances over the medium term as part of the Council’s deficit avoidance and prevention strategy.

As the first reported revenue monitor of the year, it was clearly subject to change as the year progressed and new issues and opportunities emerge.

As explained within the report, the prospect of additional grant funding from Welsh Government is potentially less reliable than it may have been in previous years, following the recent announcement by the First Minister.

In addition to the risk of grant funding not materialising, there were other risks that could negatively impact the position, including:

(i)                The cost of pay awards exceeding the level of provision contained within the budget, especially in the case of the NJC pay award, which was not finalised.

(ii)              Other inflationary pressures emerging, despite the gradually reducing level of inflation nation-wide.

(iii)             Demand pressures increasing further and resulting in increasing overspends against demand-led services, such as Housing and Communities and Children’s Services.

Given that there was a risk that this position could change and an overspend emerge, every effort must be made to mitigate overspending within service areas and to bring the service area position back towards a balanced position by the end of the year.

Whilst an underspend was currently forecasted, there remained the possibility that this position could worsen as the year progresses. As well as this, there were currently constraints upon capital resources, and a revenue budget underspend was one way of assisting with this challenge. Because of this, overspending service areas needed to take steps to improve their positions and underspending service areas should continue to ensure that their positions did not negatively change during the remainder of the year.

Comments of Cabinet Members:

§  Councillor Davies mentioned that the Council was in unchartered territory, with the First Minister recently announcing an overspend of £900m.  Cabinet Members worked hard to ensure robust forecasting in order that there were no hidden surprises. As Cabinet Member for Early Years and Education, the in-year cuts impact on grant provision was extremely concerning. This was a bleak picture for us all.  Cabinet would focus on service delivery where possible and had to prioritise statutory responsibilities.

Decision:

Cabinet

·        Noted the overall budget forecast position outlined within this report, which comprised of service area overspending, offset by underspends against non-service budgets.

·        Noted the risks identified throughout the report and in the Head of Finance comments, such as in relation to demand issues being faced and the unconfirmed NJC pay award for 2023/24.

·        Noted the overall shortfall in the delivery of savings accepted as part of the 2023/24 revenue budget.

·        Noted the forecast movements in reserves.

·        Noted the overall position in relation to schools, acknowledging the risk that some individual deficit positions could emerge by the end of the financial year.