To report the forecast position for 2025/26 at Quarter 1 (June 2025), 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.

The member for finance and corporate services introduced the report. 

It was highlighted that the council was the first council to submit its audit accounts for second year running. 

The forecast 2025/26 outturn was £4.3m overspend before management action at Quarter 1. This was expected to reduce to £1m with planned management activity.  The approved net revenue budget for 2025/26 was £231.5m which included planned savings of £3.9m

Recovery actions to reduce the forecast overspend by Quarter 4 included allocation of the budget resilience reserve to mitigate the impact of cost pressures and volatility in demand led budgets, continued review of the council’s contract arrangements and shareholding in Hoople Limited and action to challenge the forecast expenditure over the remainder of the financial year. 

Regarding savings it was noted that a review of the delivery of the 2025/26 approved savings had been completed, which had been informed by planned activity in year to date to determine the savings targets at risk of in year delivery.  The review confirmed that £1.6m of the total approved savings target for the year had been delivered at Quarter 1.  A further £2.3m was assessed as on target for the year.  No savings were assessed at risk. 

It was noted that the revised savings plan had been developed and totalled £11.9m with £5.9m being delivered and £4.6m were forecast to be delivered in year.  £1.4m remained at risk with focused activity to resolve or mitigate in year.  It was emphasised that delivery of savings in full and on time was critical to ensure the 2025/26 outturn position was balanced. 

The Dedicated Schools Grant (DSG) remains as an unusable reserve on the council’s Balance Sheet as permitted by statutory instrument which remains in place until 31 March 2028.  As of 1 April 2025, the cumulative deficit was £20m and the cumulative deficit will total £40.2m by 31 March 2026. 

The 2025/26 approved capital budget of £155.3m had been revised to £175.4m. The revised capital budget included £11.7m of unspent project budgets brought forward from 2024/25, removal of a project £6m and £14.5m additional grants. The forecast spend position, at Quarter 1 was £117.9m which represented a variance of £57.5m against the capital programme budget of £175.4m.  Forecast delivery of the council’s capital programme for 2025/26 assumed a requirement to undertake external borrowing and provision was made in the approved 2025/26 revenue budget to support this borrowing.

The capital projects expected to deliver positive impact on revenue budgets were highlighted and included the Home to School / SEN Transport cost pressures (council school transport fleet £0.4m and High Needs Grant £2.1m), social care demand and cost pressures (children’s residential homes £0.4m), Temporary accommodation demand and cost pressure (acquisition fund for housing provision £5m, empty property investment and development £0.6m) and repair and maintenance budgets (estates building improvement programme and works, highways and public realm investment works). 

The key risks to the capital programme were set out. 

It was highlighted that the forecast variance of £4.3m at Quarter 1 only equated to 1.9% of the net budget, before management action.  Therefore, once management action was undertaken, then the revised forecast would be £1m which would equate to 0.43% of the net budget, which would be the lowest figure than in previous years. 

It was noted that delivery of capital budgets was monitored and all project budgets were monitored. 

Group leaders gave the views of their groups. It was raised that the low variance was due to using reserves in year.   It was positive that there was control of finances within Childrens and Young People and it was acknowledged there were increased complexities within the report.  It was requested for cabinet to reflect on why more optimistic scenarios were raised rather than more realistic scenarios when delivering capital projects. A link reporting on capital and revenue would also be welcomed. 

It was noted that the dedicated schools grant deficit was large at £40m and all councillors should understand that without the statutory instrument, the council would be unable to balance its books.  The capital projects were welcomed, especially in assets and services including school transport, in county provision for short breaks and acquisition of properties to provide emergency accommodation.  However, concern was raised that adult social serviced required £2.8m of the budget reserve and reassurance was sought regarding controlling the demand.   

In response to group leaders, it was confirmed that adults were doing everything it could to reduce demand on its services in terms of supporting people who need domiciliary care and people who don’t need domiciliary care to prevent them from needing it in the future.  Noted there had been an increase in the level of improvements in technology and this will transform how people are cared for and increase their independence.

Regarding dipping into reserves in-year, it was confirmed that the previous administration did this at the end of the year, whilst this administration was being proactive rather than reactive.  Regarding the DSG deficit, it was highlighted that it’s a national issue for Government to address.  It was recognised by Grant Thornton at the recent Audit and Governance group, that this council’s projected deficit was trivial when compared to other councils who had a £200-£300m DSG deficit.   

Councillor Stoddart proposed the recommendations, and it was unanimously resolved that:

That Cabinet:

a)    Reviews the financial forecast for 2025/26, as set out in the appendices A-D, and identifies any additional actions to be considered to achieve future improvements; and

b)    Notes the management action identified to reduce the forecast outturn position for 2025/26; and

c)    Agrees the continuation of management actions to reduce the forecast overspend as identified in this report