Agenda item

September Revenue Budget Monitor Report


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


This was the second revenue budget monitor report presented to Cabinet this financial year and it reflected an underspend of £3.5m, which was a £0.5m improvement on the July figures.


This position considered 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 forecast to overspend by £3.5m, excluding schools.


This update provided confirmation that some of the known risks, as at the start of the year, have materialised and were causing significant overspends, especially within Children’s Services. It was anticipated however, that it would be possible to offset service area overspends with the general contingency and underspends within capital financing.


The key variances contained within the overall position included:


(i)                An 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)               An increased demand within adult residential and non-residential services also contributed £2.1m to the overall service position. This was, however, offset by the overachievement of community care income as a result 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 £1m was being projected. This was an area that had seen 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 the majority of the shortfall were Adult Services and Housing and Communities. It was not possible to evidence achievement of the saving within Housing and Communities, especially given the overall overspend in this area. Within Adult Services, whilst some proposals were proving difficult to currently achieve, it was identified that previously unachieved staffing-related savings (totalling £481k) could be permanently offset against the levels of residential income being received from service users. Cabinet was asked to approve the virement required in order for this saving to be shown as permanently achieved.


As school variances were managed via individual school’s balances, the overall underspend of £3.5m did not include the schools’ position. Schools were collectively forecasting an overspend against budget of £5.4m which would see balances reduced from £14.4m to £9.1m by the end of the financial year.


In light of the significant level of savings that schools needed to deliver during 2023/24 and the level of recurring expenditure included within the £5.4m overspend, officers would continue to closely monitor school balances over the medium term as part of the Council’s deficit avoidance and prevention strategy.


Cabinet colleagues also noted that the report contained a request to approve the use of the Transformation Fund to support the resources required to deliver various aspects of the Council’s Transformation Programme, predominantly the Assets stream of work. The request totalled £774k and covered a three-year period.


The report confirmed that there was adequate funding within the Fund to cover this expenditure. It was, however, important to note the Head of Finance’s comments regarding the need to prioritise the replenishment of this fund from any underspend this year, to ensure that adequate funding was available for future commitments.


Now that the midway point of the year was reached, some of the previously reported risks no longer existed, such as the NJC pay award for this year, which was confirmed as being in line with previous expectations. Some risks remained however, particularly around demand-led services, which could show a high level of volatility. With this in mind, there remained the possibility that the position could change between now and the year end.


Given that there was a risk that this position could change and an overspend or reduced underspend emerged, efforts must continue to 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.


Part of the reason for needing to ensure an underspend was achieved, was because of the current constraints on capital resources and the Transformation Fund. A revenue budget underspend was one way of assisting with this challenge. This re-iterated the need for overspending service areas 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 noted that there were no spending reserves in Newport schools and as the Cabinet Member for Education and Early Years, Councillor Davies had to consider the risk that some school budgets might become unsustainable. Councillor Davies however was confident that the finance team, having worked closely with all schools, were on course to set a balanced budget for the next financial year, with support being provided where concerns were highlighted. Councillor Davies also mentioned that the overspend on additional learning needs (ALN) represented an increasing cost as well as an increasing need and understood the level of support these children required and was grateful for the support provided by schools but that Newport City Council was tied with funding.


§  Councillor Batrouni was concerned that the underspend would be seen as a positive position for the Council, however, it was important that residents read the detail of the budget and the revenue pressures. There was overspends in out of area placement for children and in schools and whilst this was offset by capital finance, this might not be the case next year.


§  Councillor Marshall highlighted context around children’s issues and as a Local Authority, the Council was readying itself. The journey was challenging and placements were limited in relation to childcare provision. Officers were working hard to look at new assets to combat this moving forward. Councillor Marshall wanted to assure residents that this was always at the top of the agenda when meeting with officers.





·        Noted the overall budget forecast position outlined within this report, which was 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.

·        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’ budgets, acknowledging the risk that some individual deficit positions could emerge by the end of the financial year.

·        Approved the virement within Adult Services, as detailed within the report.

·        Approved the use of the Transformation Fund to cover the cost of internal and external resource requirements for the Transformation Programme, as set out in the report and Appendix 5 of the report.

·        Noted the recommendation from the Head of Finance that replenishment of the Transformation Fund was made a priority for any underspend at the end of the financial year, in order to ensure adequate funds to be able to support savings proposals that would be critical for future years’ budget setting processes.

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