To report the forecast position for 2023/24, including explanation and analysis of the drivers for the material budget variances, and 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, the principal points were raised.

The Q2 report forecasts an overspend of £13.8m, which is an increase of £0.3m from the £13.5m forecast at Q1. The overspend represents a variance of 7% with the most significant forecasted overspend being in Children and Young People of £11.8m.  

As part of the proactive measures to address the current year overspend, each Directorate will implement additional expenditure controls to support existing recovery activity in 2023/24 and these controls will continue, as required in 2024/35. These measures are expected to reduce the forecast overspend down to £10.5m. 

Council previously approved a total of £14.1 million Directorate Savings for 2023/24.  A review of the 2023/24 approved savings has been undertaken  and confirmed that £7.3m of savings forecast will be delivered this year and £6.8m of the total target is at risk of delivery at Quarter 2.

The key variances in excess of £250k at Q2 are £1.6m within Community and Wellbeing in regards to Physical Support due to both cost and demand pressures in residential care, cost pressures in nursing care and demand pressures in homecare. In respect to Children and Young People there is a £4.5m overspend, £3m overspend in respect to Agency staff and £2m overspend representing additional demand in SEN transport. Within Economy and Environment a £1.3m reduced income for Development Planning and Building Control. Lastly, within Corporate Services a £1.2m overspend in the PMO arising due to staffing cost pressures.

The 2023/24 approved Capital Budget of £140.3m has been revised down to £89.7m. 

Confirmed that despite these significant challenges Herefordshire Council’s financial position remains very stable. 

Cabinet members discussed the report and it was clarified that that the key variance of £1.3m for Development Planning and Building Control, was partly due to deferment of fee uplift by the Government, which is now coming to an end and the national downturn in development and housing. Clarified that this is reduced income, not overspend.  Also, there is the issue of phosphates and the River Lugg which is impacting on delivery of houses. 

Group leaders gave the views of their groups.  Concerns were expressed regarding figures and if these were achievably.  Clarification for Children’s and Young people was requested in respect of the projected underspend in improvement. Further detail was requested regarding the savings at risk and the effect of those savings on delivery of services and how those savings have been made.  The involvement of the Scrutiny Management Board was welcomed but noted there have been timing difficulties.  In respect of Corporate Services, notably Thrive, concern was expressed regarding the £1m overspend and clarification sought regarding the original budget. Further detail was requested regarding the £1.2m overspend in the Project Management Office.  It was expressed that the Council needs to become a more efficient value for money authority without impacting members of the public too severely. 

In response to queries it was noted that;

The Planned savings in Children’s were at risk due to a lack of response in the market to recruit and whilst placement budgets have been managed robustly, they still were unable to achieve the savings that were set. 

Regarding Children’s improvement work, recruitment of staff with a particular skill set has not been possible.  Confirmed the improvement work has taken place by delivering this in house. 

Clarified that the All Ages Social Care funding has been used to support social care and is included in the base budgets. 

Acknowledged the difficulty in timing of the Scrutiny meetings and welcomed the willingness to try and accommodate those meetings to try and improve the budget in February. 

Confirmed a full written response will be provided regarding the Thrive programme. 

It was unanimously resolved that;

(a)   Review the financial forecast for 2023/24, as set out in the appendices A-D, and identifies any additional actions to be considered to achieve future improvements;

(b)    Note the forecast revenue outturn position at Quarter 2 2023/24 of a £13.8 million overspend, before management action, and the potential impact of this overspend on the council’s reserves;

(c)   Note the impact of the 2023/24 forecast outturn on the 2024/25 budget requirement and the future financial sustainability of the council;

(d)    Request that Scrutiny Management Board reviews the budget monitoring position and that relevant Cabinet Members provide explanation for key variances and actions identified to address key pressures; and

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