Agenda item

The Leader presented the report that provided an update on the revenue monitoring position as at July.  The report showed a much improved position than that reported to the May Cabinet, with the reported overspend reducing from £5.4 million to £683,000, a quite considerable reduction.  This reflected the changes resulting from confirmed funding from Welsh Government for Covid-19 related expenditure and loss of income, which includes additional financial support for:

•           Loss of income for quarter 1 and confirmation that the full £78m of Welsh Government funding could be used for loss of income, improving forecasts considerably;

•           Continued support for Adult Social Care and Homelessness into quarter 2;

•           Announcement of £264m across Wales for the remainder of the financial year to cover covid-19 pandemic related lost income and increased costs.

The financial measures mentioned above have enabled the overspend forecast to be decreased substantially from that reported in May, however, the report noted that there is still further detail required on the application of the additional funding and what it can be used for.  Therefore, there is still a level of uncertainty with the forecasts that will need reflecting as the detail is clarified.

The key areas contributing to the forecast overspend are:

(i)         Undelivered 2020/21 and prior year budget savings£1,540k

(ii)        Increased demand for independent fostering agencies         £446k

(iii)       Impact of on-going school budget overspending                   £305k

(iv)       Staffing and other service area underspends                         (£1,608k)

One of the main areas of overspending (see (i) above) relates to the non-delivery of savings across a number of service areas.  This equates to £1.5 million for 2020/21 and prior year savings and is not unique to one particular service area. 

The Leader confirmed the forecasted delivery of savings have been significantly impacted by the covid-19 pandemic, reducing the projected savings to 80% of the target.  Whilst the current delay is unavoidable, services will need to deliver these savings by the end of the current financial year at the latest so that they do not carry forward as an issue into next year, alongside potentially further new savings that may be required.    

The report asked Cabinet to note and approve this, which will require on-going focus by Heads of Service and their teams; certainly something for individual Cabinet Members to monitor in their meetings with Heads of Service.

Another area of overspending reported in previous forecasts are those in demand-led areas.  Whilst this has seen an improvement since the May forecast, there are still overspends reported within the Children’s service area, including overspends on independent fostering.  Given the inherent nature of this budget risk, numbers in this area could change throughout the year as has been the case over the last 2-3 years and this therefore represents a risk.  The report confirmed these areas will continue to be closely monitored. 

As reported in May, the schools’ forecast position continues to be an issue, with schools forecasting in-year overspends of £1.4m, which are above their available school reserves by £305,000.  This is a significant concern for the Authority and officers are continuing to work closely with those schools to ensure that deficit recovery plans are in place and that action is taken to reduce spend.

The overspends on the non-delivery of savings, on demand led services, and schools’ budgets have been offset by the use of contingency of £1.4m and underspends, largely due to staff savings across other service areas, leading to the overall position of £683,000 overspend.

The Leader confirmed the need to remain cautious about this position, as, whilst it is a significant improvement on May, it is still an overspend position, and there remains significant uncertainty on the future of the covid-19 pandemic and what actions the Council will need to put in place if there is a continued increase in cases.  There is also uncertainty on the level of income that will be received from Council Tax and the impact on the Council Tax Reduction Scheme as employees come off the furlough scheme and the impact of the economic downturn on this.  These areas will continue to be closely monitored and updated in future forecast reports.

The Leader invited her Cabinet colleagues to comment and all agreed that these are unprecedented times, with lots of new challenges having been met but acknowledging more challenges lay ahead. All praised the hard work of officers during this time to ensure plans are in place to mitigate these challenges.

The Leader thanked all her cabinet colleagues, council officers, teachers and school governors who are supporting the authority during this pandemic to ensure that services continue to be provided to the people of Newport.

The Leader confirmed that in summary the report asked Cabinet to note:

•           the overall budget forecast position and the significant overspending within service areas which is predominately resulting from undelivered MTFP savings impacted by the on-going pandemic, the risks associated with this and accept the recommendation  that Heads of Service focus on and implement agreed savings as soon as is possible;

•           the planning assumptions within the forecast position and in particular, the uncertainly around:

(i)         the on-going impact that Covid-19 will have upon service areas and;

(ii)        funding support available from Welsh Government for the remainder of the financial year.

•           the forecast movements in reserves;

•           the very significant financial challenges facing schools and the serious impact it will likely have on the Council’s other revenue budgets and reserves.  Note the action currently in progress and the Head of Finance comments on the seriousness of this position.

Decision:

Cabinet voted and unanimously agreed the report.