To seek the views of the Scrutiny Management Board on the draft revenue budget proposals for 2025/26.

The Cabinet Member Finance and Corporate Services provided an overview of the report, the key points are detailed below:

The budget had initially been set at £223.4 million with a £2 million funding gap, assuming a 3.99% council tax increase.

On November 28, 2024, the central government announced that rural support grants (previously allocated to Herefordshire) were being discontinued and replaced with:

·       The Recovery Fund

·       The Social Care Grant

·       The Children's Services Prevention Grant

On December 18, 2024, the provisional settlement had resulted in a net loss of £7.1 million in government grants, leaving a £6.76 million final deficit.

To balance the budget outside of the central core funding available, the council:

·       Used Extended Producer Responsibility (EPR) funding (a £1.1 billion government fund).

·       Scaled back growth programmes within directorates by £1.4 million.

·       Allocated £1.2 million from the Hereford Enterprise Zone business rates.

The Cabinet Member Finance and Corporate Services explained that by taking the actions described the council had been able to achieve a balanced budget for 2024/25.

The discussion was opened up to the committee and the key points of the debate are detailed below:

1. The committee looked at income sources and questioned whether fees and charges were optimised to generate maximum revenue.

o   The Cabinet Member Finance and Corporate Services detailed how the council’s income was derived from multiple streams. Council tax brought in £146 million, business rates £40 million, government grants £29 million and various service fees and charges made up the remainder.

o   It was explained that quarterly monitoring reports tracked all income sources and highlighted variances over £250,000.

o   An internal audit on planning fees had found that past income targets were overestimated leading to unrealistic budget expectations

2. The committee requested clarity on whether other income streams faced similar overestimations.

o   The Cabinet Member Finance and Corporate Services stated that the council’s external auditors confirmed that the budget that had been set in the current financial year 2024/25 was achievable, measurable and appropriate.

3. The committee moved on to the Community Well-being budget where it noted there had been a 15.27% (£6.86 million) increase driven by: rising demand for adult social care services, a 50% increase in residential care placements, 23% increase in domiciliary care requests and rising care provider costs due to wage increases and inflation.

4. The committee noted key funding allocations of £448,000 to cover National Insurance increases, £7.36 million for inflationary cost pressures and an £11 million contingency fund for unexpected demand spikes.

5. The committee raised concerns that there appeared to be no clear long-term savings plan, unlike children's services, which had a multi-year savings target.

6. The committee asked how sustainable the increased funding was and whether there should be a dedicated strategy to reduce costs in adult social care?

o   The Cabinet Member Adults, health and Wellbeing explained that the council was investing in preventative care such as home adaptations, technology and voluntary services. It was also reviewing care provider contracts for cost efficiency. Stricter spending controls had been introduced and any expenditure above £500 now required director sign-off.

7. The committee considered the Children’s and Young People’s Services Budget and the forecasted balanced budget for 2024/25.

8. The committee examined the savings plan of £10.2 million over three years, which would primarily come from: reducing high-cost residential placements (already reduced from 52 to 36 placements), hiring permanent social workers to cut agency staffing costs and developing in-county special education facilities to reduce expensive out-of-county placements.

9. The committee noted SEND transport cost pressures and the budget of £14 million, which included an increase due to growing Special Educational Needs (SEN) demand.

10. The committee enquired as to whether the savings delivery plans were realistic and whether they could be shared with the committee.

o   The Cabinet Member Finance and Corporate Services explained there was a planned £50,000 capital investment in bus route optimization software, £350,000 for new minibuses to reduce reliance on private transport providers and that an external review of school transport efficiency would look at how further efficiencies could be implemented.

o   The Director of Finance gave an assurance that the plans could be shared with the committee.

11. The committee moved to the Economy and Environment budget and noted a budget increase of £4 million to £42.45 million.

12. The committee raised concerns around historic miscalculation of planning income and sought confirmation that no other shortfalls existed.

o   The Director of Finance explained that planning fees had previously been overestimated, but that the £1million planning income target had been reduced to reflect realistic expectations. An internal audit had been conducted to benchmark against other councils to ensure expectations were realistic and in line with similar authorities.

13. The committee enquired about the long-term strategy for transport cost control.

o   The Cabinet Member Finance and Corporate Services highlighted key income and expenditure shifts including home-to-school transport budget consolidation, with £5.7 million transferred from the education budget and £5.3 million transferred from the highways budget. In addition to this £4.8 million had been allocated from the UK Shared Prosperity Fund.   

o   It was stated that there would be a strategic focus on infrastructure projects and sustainable economic growth, which would be backed up through efficient procurement and contract management.

In conclusion the committee requested that in future there should be additional transparency around planning income estimates and adult social care cost controls measures.