Agenda item

July Revenue Budge Monitor


The Leader presented the report to Cabinet colleagues.  This was the first revenue monitor presented to Cabinet this financial year, and explained the current forecast position of the Authority as at July 2022.


Against a net budget of £343million, the July revenue position currently forecasted an overspend of £3.1million, which represented around 1% variance against budget. This overspend was after the use of all revenue budget contingencies of £4.9 million included in the 2022/23 revenue budget, as agreed by Cabinet in February 2022.


As reflected in the 2022/23 budget report, and 2021/22 outturn report, this financial year presented the potential for more stability, relative to the last two years, with the effects of the COVID-19 pandemic potentially set to ease. It was known however, that the Welsh Government Hardship Fund would end, therefore, any costs associated with recovery, and challenges experienced in achieving historical income levels would fall upon the Council.


Despite having established sizeable budget contingencies for the 2022/23 year to deal with legacy impacts relating to Covid,crucially, two new issues emerged since the budget was agreed:


§  The provisional NJC and Teacher’s pay offer for 2022/23 was higher than the provision allowed for (average +4% higher for NJC and +1% higher for Teachers)


§  Inflationary increases over the last six months, which continued to increase, impacted on the Council’s budget, for example fuel, and major external contracts such as school transport. Officers continued to manage these within existing resources, as best as practically possible.


As shown in the report and its appendices, coupled with the pay award impact, the current position was explained in the following way:


§  There was significant overspending in some key demand areas and other emerging risks within service areas


§  These were partially offset by savings against (i) revenue budget contingencies, made available to the Council (ii) the Council tax reduction scheme and (iii) other non-service budgets.


Some areas throughout the Authority were reporting significant overspends against specific activities. These overspends related to demand-led activity areas, such as Social Services, therefore there was an inherent risk of change should demand levels change from current forecasts during the remainder of the year.


The key areas contributing to the £3.1million forecast 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 £2.9million to the overall service position.

(ii)          The National Employers agreed to a one-year final offer to the trade unions representing the NJC workforce. The average increase for Council staff was in the region of 8% compared to only 4% provision in the budget.  Whilst this was yet to be agreed, it represented a forecast overspend of £2.4million for non-school based staff.


(iii)        Significant pressures were evident within Housing and Communities, in relation to homelessness. An overspend of £2.9million was forecast.  The main issues were temporary and lack of suitable accommodation resulting in significant use of hotel and B&B options and the cap on Housing Benefit subsidy resulting in only a proportion of these costs being covered by the Department for Work and Pension (DWP).


(iv)        Education SEN transport was forecasting a £200k overspend due to higher operator costs due to inflation and £255k car parking income shortfall.  The anticipated overspend in these areas of emerging risk was expected to be around £500k by the end of the financial year.


(v)         An anticipated shortfall against the delivery of 2021/22 and prior year savings of over £600k, 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.


(vi)        Underspending against both the core revenue contingency budget and the other temporary contingencies provided mitigation against service area overspending.  The forecast underspend of £4.7million was shown against non-service budgets.  In addition, there was a forecast underspend of £1.2million against the council tax reduction scheme budget.


The report highlighted that, overall, schools were anticipating a net overspend of £6.1million.  As well as the impact of a higher pay offer compared to the budget increase provided, schools were drawing down on reserves built up over the previous two years as they move to catch up and strengthen provision after the impacts of Covid. 


In comparison to previous years, whilst no schools set a deficit budget, a number of schools were at risk of entering a deficit position once the impact of the pay awards was reflected in individual school forecasts.


Overall, the current position on school balances represented a significant change from the concerns evident in previous financial years. The overall surplus position was projected to total £9.7million and appeared set to continue for at least the next financial year.  It was, important, however, 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. 


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. At this point, the issues that gave rise to individual significant overspending were known with certainty and the values attributed were realistic.


Clearly the position currently being reported was concerning and it was important that every effort was made to bring the position back towards a balanced position by the end of the year.


In an effort to achieve this, services would continue to robustly review their forecasts and identify ways to mitigate the overspends, such as by identifying in-year savings and managing any new pressures within existing resources as much as is practically possible.


As well as having a focus on the in-year position, it would be important for services to understand any longer-term impacts of the challenges being faced and identify strategies for minimising those impacts. This was because there was already a challenging outlook for the medium term and any further financial issues would only add to that challenge. 


Comments of Cabinet Members:


§  Councillor Marshall mentioned that social services figures were facing challenges.  There was a long term project opening at Windmill Farm, which was recently visited by the Leader with the Minister that would assist in placement allocation. The Cabinet Member for Social Services also praised the work of staff at the Rosedale properties, again considering the challenges faced by the team.


§  Councillor Batrouni as a new member praised work undertaken by the previous Cabinet prior to the local elections in May as well as helping the schools of Newport in coping with the pressures, with forward thinking. The employee pay deal was a significant cost to the council should it go ahead and the council recognised that the staff were also suffering under the cost of living crisis.  Councillor Batrouni also voiced his concern with the homelessness situation.  The Leader thanked the Cabinet Member for Organisational Transformation for his comments and added that the council wrote to the previous Prime Member for support with the cost of living crisis.


§  Councillor Clarke support the Leader’s presentation and agreed with Councillor Batrouni’s comments, there were many challenges ahead for residents of Newport. 


§  Councillor Forsey voiced concern about the cuts being faced, which was a serious situation.


§  Councillor Harvey agreed with the comments of Cabinet colleagues and referred to increased costs.


§  Councillor Lacey also agreed with comments and wanted to highlight that the council was doing it’s best to look after all residents within Newport.




That Cabinet -

§  Noted the overall budget forecast position resulting from the issues included in this report and the potential for an overspend position to exist at the end of the financial year.

§  Agreed that the Chief Executive and the Executive Board instigate specific measures to manage the overall forecasts within the core revenue budget, including revenue budget contingencies.

§  Noted the risks identified throughout the report and in the Head of Finance comments, particularly in relation to the Teachers and NJC pay awards for 2022/23, homelessness and the lasting impacts of the pandemic.

§  Noted the forecast movements in reserves.

Noted the overall position in relation to schools, when compared to previous years, but also noted the risk that deficit positions could emerge in the future if good financial planning and management is not undertaken.

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