To report the forecast position for 2024/25 at Quarter 1 (June 2024), including explanation and analysis of the drivers for the material budget variances, and to outline current and planned recovery activity to reduce the forecast overspend.

To provide assurance that progress has been made towards delivery of the agreed revenue budget and service delivery targets, and that the reasons for major variances are understood and are being addressed to the cabinet’s satisfaction.

The cabinet member for finance and corporate services introduced the report and highlighted that the report represents 3 months of actual transactions and 9 months of estimated income and expenditure. It was noted that it highlighted emerging budget pressures due to increasing demand across social care budgets, temporary accommodation and Special Educational Needs (SEN) transport services.

The approved revenue budget of £212.8m included planned savings of £19.5m comprising of £11.6m of directorate savings together with £7.9m of council wide budget savings. This year’s Q1 revenue outturn position for 2024/25 showed a variance from budget of £10.8m.  Management actions are currently planned to reduce this overspend to £6.8m as shown at table 2 of the report. 

This variance represents total cost pressures of £12.1m comprised of: £4.5m in-year net cost pressures for increased demand for adult social care, temporary accommodation and Home to School Transport. £4.8m 2024/25 savings targets currently assessed as at risk.  £0.4m 2023/24 savings targets assessed as at risk. £2.4m Council wide savings pending completion of directorate restructuring and vacancy reviews and this represents the balance of the MERS target.

The variance is reduced by £1.3m of delivered Children & Young People 2024/25 savings which were previously removed from the 2024/25 budget by the amendment in February 2024 that was approved.

It was noted that the forecast overspend is expected to reduce to £6.8m through the actions in Table 2 of the report. It was highlighted that each directorate will continue to identify further recovery action and options to mitigate at risk savings targets and ensure recurrent spending is sustainable within the resources available. Directorate recovery plans will also continue to be delivered.  

It was note that the additional expenditure controls implemented during 2023/24 and the associated management recovery actions had a positive impact on the final outturn position.  Thereby providing evidence that these actions work and it was confirmed that these controls remain in place to support recovery activity in 2024/25. 

Directorate panels will continue to review expenditure on goods and services as well as changes in staffing arrangements to challenge over expenditure for the remainder of the financial year. 

It was highlighted that this was a very different position to the one Cabinet found in Q1 last year, where in-year action must be taken to identify the steps to reduce the forecast overspend of £13.5m at Q1. Cabinet Portfolio holders conduct monthly reviews of their financial positions together with their Corporate Directors and this has been further supported by the improved quality of the Cabinet financial report.  It was reported that that the Finance Team have been shortlisted for the 2024 Public Finance award for Excellence in Governance, Reporting and Assurance.

A review of the delivery and status of the 2024/25 approved savings had been undertaken to determine savings targets at risk of in-year delivery. This confirmed that £8.2m (43%) of the total savings target for the year had been delivered at Quarter1 with a further £6.5m (33%) assessed as ‘on target/in progress’ for the year.  Savings of £4.8m (24%) are assessed as ‘at risk’ with work underway to identify mitigations. It was confirmed that at risk is defined as where activity is not progressed enough at this point in the year to evidence that the saving can be realised.

The £1.3m savings in the Children & Young People Directorate budget cam from S2 (Reduction in Social Worker establishment) and S3 (Reduction in number of agency social workers). Activity to deliver saving target S1 (Reduction in High-Cost Placements) £1m is assessed as ‘in progress’ but not reflected in the outturn position at Quarter 1. However, it was highlighted if this were Q4 then this savings target would be confirmed as being achieved.

It was highlighted that the delivery of savings in full and on time was critical to ensure the 2024/25 revenue outturn position was balanced and to prevent further pressure on future years’ budgets. Progress on delivery of savings and mitigations will continue to be monitored and reported in the next budget monitoring report to Cabinet.

Confidence in the Council’s position had been emphasised by Grant Thornton (external auditors) in their Audit findings report and Value for money report for 2023/24 Financial Year. Their reports provided valuable external assurance in respect of the Council’s financial sustainability and resilience with no significant weaknesses identified.  Grant Thornton undertook a review of Children’s Services finances comprising “additional work to better understand the drivers of the overspend in Children’s services and where expenditure assumptions are realistic”. Their findings were positive and noted that the Council recognised financial pressures and had included an additional £11m in the 24/25 budget; was taking steps to reduce costs whilst ensuring placements were safe and appropriate and had set a budget for Children’s services which was based on realistic assumptions.

The external audit report also provided valuable external assurance over the controls and processes that were in place, confirming that “arrangements for identifying, developing, monitoring and reporting on savings were appropriate.” The auditors noted that “the budget is based on realistic assumptions in key areas.”

In respect of the 2024/25 approved capital budget of £160m, this has been revised to £176.1m. The revised capital budget includes £15.3m of unspent project budgets brought forward from 2023/24, approved movements of £0.3m, removal of Maylords Library project £2.6m and £3.1m of additional grants. Table 4 of the report shows the breakdown.

It was noted that the forecast spend position is £110.3m which represented an underspend of £65.8m against a budget of £176.1m. Appendix B, Table A contains the full details.  The underspend of £3.2m was from projects that delivered below the project budget and £62.6m in respect of project budgets to be rolled forward for delivery in financial year 2025/26.  It was confirmed that these amounts represented budgets that may not be committed in this financial year for projects which are funded by grants or construction that had started late and therefore the budget was retained for delivery in future periods.  It was confirmed that the forecast under spend will reduce in Q2 when the budgets are reprofiled to match expected delivery. 

It was highlighted that the full capital programme analysed by project for current and future years is at Appendix B, Table B.

It was noted that at the recent Scrutiny Management Board (SMB) the members reported frustration with the slowness of the capital programme. However, significant progress with the delivery of the capital programme was being made. To date in financial year 24/25, £23.1m had been spent with further commitments of £35.1m, totalling £58.2m. This was a significant increase in previous years when at the same point £34.3m (2023/24) and £35.5m (2022/23) had been spent or committed. 

It was confirmed to the SMB that a full and detailed review will take place and the Council’s reserves strategy will be updated.

It was confirmed that this administration was fully committed to delivering a balanced budget.  It was noted that the auditor’s report provided assurance over the controls and processes that are in place to support this budget setting.  It was further highlighted that the Council’s financial position is strong and stable, based on a robust governance framework; the reserves are above average level for unitary council and the Council has low levels of borrowing. 

It was highlighted that the Council’s accounts for 2023/24 had recently been subject to audit and the Audit Findings Report which will be presented to the Audit & Governance Committee later today.  It was raised that the Council will likely be one of the first councils in the country to receive an audit opinion for 2023/24.

There were comments from Cabinet members. The impact of budget amendment line was queried. It was raised that the impact meant the Council were unable to use £2.3m of reserve to cover the overspend last year of £8.7m and instead other areas were considered including £800k which was taken from the climate reserve fund. 

Group leaders gave the views of their groups. The report was welcomed but concern was raised regarding the length of time it had taken for the report to come to Cabinet.  It was requested that the quarterly reports were brought more swiftly. 

The accuracy of forecasting the budget was queried.  It was also noted that delivery plans were outstanding for all the savings programmes, including the Thrive programme.  It was also queried if the city centre masterplan was being used in this work to ensure it is being used holistically.

It was noted there had been upfront investment in the Children’s directorate and no overspend was forecast.  However, it was raised that the risk elements of children’s savings were not clearly represented in Appendix one. Also, assurance was sought that the £800k which was removed from the climate reserve would be repaid to that earmarked reserve.

Concerns were raised regarding the increase in high needs care cases in the Adults Wellbeing directorate, the under delivery of £1.3m in planning and the impact of vacant posts being deleted. 

In respect of the capital programme, it was noted that it should be correct to ensure it is delivered in year.  Although it was also noted that having variances within the capital programme can be beneficial as it allowed the Council to undertake some of its best projects. It was also highlighted that the Council had never been able to deliver the capital programme within a year due to the nature of capital projects. 

In response to the queries, it was confirmed that regarding vacant posts being deleted and the rationale behind that, this would be picked up on separately. It was also highlighted that September was the normal time to report Quarter 1. 

The points raised by Councillor Harvey were noted.  Whilst transparency and openness were always important in the reports, these points will be considered in the quarterly reports going forward. 

In respect of under delivery in the planning target, it was queried if the target amount was correct.  It was noted that a transformation programme through the planning improvement board had been completed.  This identified that the level of income and staffing capacity were in line with the Council’s rural counterparts, which suggested the issue was with the target rather than the directorate.  Revisions of the target will be considered.  It was highlighted that a new ‘pre app’ service was being launched and this should result in a positive change in time. 

It was unanimously resolved that:

a)    Review the financial forecast for 2024/25, as set out in the appendices A-D, and identifies any additional actions to be considered to achieve future improvements; and

b)    Note the management action identified to reduce the forecast outturn position for 2024/25; and

c)    Agree the continuation and strengthening of management actions to reduce the forecast overspend as identified in this report.