Agenda item

Revenue Budget Monitor - July 2021


The Leader presented the report to Cabinet.


This was the first revenue monitor presented to Cabinet this financial year and it explained the current forecast position of the Authority as at July 2021.


Against a net budget of £316million, the July revenue position currently forecasted an underspend of £5.3million, representing a 1.6% variance against budget. This position was inclusive of the continued financial impact of the COVID-19 pandemic and assumes full reimbursement of additional expenditure and lost income for the remainder of the year. This followed confirmation from Welsh Government that the Hardship Fund would remain available until March 2022.  This was a welcomed addition to this years forecast position as although the rollout of the vaccination programme enabled a lifting of restrictions and reopening of the economy, it was evident that the financial impact on the Council’s budget continued to be felt during this financial year.


As shown in the report and its Appendixes, the position could be explained in the following way:


-         Overall, service area spend was more or less on budget

-         Then, the underspend came from savings against the (i) capital financing budget (ii) the revenue contingency budget which was currently not needed and (iii) some other non-service budgets which were not committed currently. These together produced the £5m underspend.


Although budgets were balanced overall in service areas, some individual areas continued to overspend against specific activities. As in previous years, these overspends related to demand-led activity areas, such as Social Services, and therefore there was an inherent risk that they may change should demand levels change from current forecasts.


In addition to this, there remained several unknowns in terms of the longer-term impacts of the pandemic, such as the impact upon unemployment levels as and when the support for employees who were furloughed began to be withdrawn. This monitoring position did not make any assumptions in terms of that longer term impact and would require to be closely monitored as the pandemic situation continued to evolve.


The key areas contributing to the £5.3million forecast position included:


(i)                Increased demand across key social care areas including children’s out of area placements, independent fostering agencies and adult community care.  These three areas alone contributed an overspend of almost £350k to the overall service position.


(ii)               In addition to these continued risks, there were also issues that emerged during the year and would continue to be closely monitored.  These included, but were not restricted to, inter agency adoption, children’s emergency placements and the increase costs in respect of dealing with ‘ash die-back’.  The anticipated overspend in areas of emerging risk was expected to be more than £700k by the end of the financial year.


(iii)              There was an anticipated shortfall against the delivery of 2021/22 and prior year savings of over £600k, which was largely due to delays in progressing the necessary actions, some of which was a result of the pandemic. Whilst the level of unachieved savings in relation to the current financial year was lower than in previous years, there remained a need to ensure that all savings were delivered, in full, as soon as possible and officers continued to take action to ensure these were delivered from the earliest opportunity.


(iv)             Underspending against non-service budgets explained the key elements of the forecast underspend as previously mentioned.  Firstly, there was a forecast underspend of £2.7million in relation to the Capital Financing budget. As part of the budget setting for 2021/22, the capital financing costs of the current capital programme, which ended in 2022/23, were funded up front. This resulted in a saving within the Minimum Revenue Provision budget and the interest payable costs, as this budget was not yet required.  This underspend was known and understood at the point at which the budget was agreed in March of this year.


(v)               Furthermore, given that an underspend position was anticipated at this stage of the year there was no requirement to utilise the council’s general revenue budget contingency of £1.3million therefore adding to the non-service underspend.


The report highlighted that, overall, schools were anticipating a net overspend of £2million, after allowing for reimbursement of eligible expenditure and lost income from the Hardship Fund.


Although schools are expecting to overspend against budget, it should be noted that schools carried forward significantly higher balances at the end of the 2020/21 financial year, compared with previous years. This higher level of balances was primarily the product of Welsh Government grants issued towards the end of the last financial year, which offset spend that schools had already budgeted for. As a result, schools carried forward higher than anticipated balances, which, in most individual cases, would be more than sufficient in offsetting the overspends being reported.


In comparison to previous years, only four schools were projecting to hold deficit balances, totalling £1.3million, with two of those expecting to be smaller than the previous year.


The current position on school balances represented a significant change from the concerns evident in previous financial years. Now that an overall surplus position, projected to total £7.5million, was anticipated, and appeared set to continue for at least the next financial year, it was important that there remained a focus on school budgets, to ensure that, as much as possible, a return to the previous position was avoided. This must be balanced with trying to avoid a situation whereby balances could be considered excessive and would, therefore, be a key consideration when setting future revenue budgets and reviewing the medium term financial plan. 


Comments of Cabinet Members:


Councillor Jeavons referred to the Ash Die back in the large trees around Newport.  Specialist equipment was provided and the council would continue to move through the city to removed the diseased trees.  The  WG had provided some funding and this was something that the Council had to deal with and it came at a great cost.


Councillor Cockeram mentioned that the overspend in Social Services was a serious issue but placement for children within Newport was a bold step but the capital would offset the overspend.  There was a big push for Independent fostering and on 20 September Newport Foster Carers were being promoted for two weeks. 


Councillor Davies referred to the net overspend in Education Services and although a grant was received, there was a surplus in the school budget.


The Leader thanked the Governors and volunteers for their support.



That Cabinet

§  Noted the overall budget forecast position and the potential for an underspend position to exist at the end of the financial year.

§  Noted the continued financial challenges being experienced by certain, demand-led, services and the need for robust financial management in these areas, as well as the level of currently unachieved budget savings.

§  Noted the risks identified throughout the report and in the HoF comments, particularly in relation to future years and the lasting impacts of the pandemic.

§  Noted the forecast movements in reserves.

§  Noted the improved overall position in relation to schools, when compared to previous years, but also note the remaining deficit positions for some schools and the risk of past issues re-emerging if good financial planning and management is not undertaken.


Action by:

That Cabinet / Head of Finance / Corporate Management Team:


§  HoS continued to keep under review the key risk cost areas and taking action, with Cabinet Members, to move towards balanced positions for those budgets currently projected to overspend.

§  HoS delivered agreed 2021/22 budget savings as soon as practically possible, but by the end of the financial year at the latest.

§  HoS and budget holders closely monitored the impact of the easing of restrictions relating to the pandemic and identify, escalate, and mitigate emerging risks in a timely manner.

Cabinet Members and HoS promoted and ensured robust forecasting throughout all service areas, including agreeing and implementing appropriate actions to balance spend and available budgets.

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