Agenda item

Budget monitoring report for quarterly scrutiny.

Officers suggested that it would be advisable to discuss the Month 7 Budget Monitoring report in conjunction with the draft Capital and Revenue proposals for 2020-21 as the budget monitoring report provided the wider context for the challenges being faced in the current year and moving forward.

Members heard that at month 7, the council is facing significant challenges, with the level of service overspends being very significant compared to recent years. Officers explained that in previous years, we have managed overspends so that at the point of budget outturn, we are usually breaking even or returning a small surplus and that continues to be the attempt.

Paragraph 3.2 provides a table which shows a net council surplus of £4 million.  In terms of context, these are driven from 3 areas:

·         Children’s services and looked after children pressures

·         Pressures in adult social care

·         Support for children with additional learning needs

Officers explained that as we don’t carry significant levels of reserves, we have had to put recovery plans in place to react to the situation we are in. Recovery plans are to curb all non-essential expenditure and where possible, to look to generate further savings whilst arresting the current position.

The committee was referred to paragraph 3.10 of report, which showed the position we are currently in and detailed our plan of action.  Officers advised we are forecasting a deficit of £3.987m and were fortunate to be able to make the teachers’ pay awards in the current year, £310k being provided by Welsh Government WG.  The £1.9m VAT recovery due to the Ealing ruling around leisure services income also will assist the position.  Members heard that consultants had been appointed to work with us on securing this recovery and that we have a strong case pending. The committee heard that we now have the flexibility to use capital receipts to funds costs associated with service reform.  Previously, permission was needed but now in line with Welsh Government guidance, the council is able to make that decision. Furthermore, we have been interrogating our spend to identify costs associated with service reform and over £2m reform costs could actually be addressed through the use of capital receipts.

Winter pressures could still be risk areas in terms of the budget and also the volatile service areas that are pressure points, notably children’s services, however, we are looking at where we stand with that long before the outturn budgetary position. 

In terms of the capital position, there is a small level of underspend in relation to 21^st Century Schools. Capital receipts are shown in the report and these have been impacted by the decision to make flexible use of capital receipts.  That will have an impact for this year and next year, but we have to balance the revenue account pressures with the capital.   In terms of month 7, the report provides the detail on overspends and underspends specific to the committees remit together with directors’ commentary.

We’ve mentioned the capitalisation directive already and we have transferred £500k expenditure across to the capital budget.  In terms of savings, if you refer to paragraph 3.11, you will see that of the £6.446 million built into this year’s budget, we’ve found 86%. The rest of those savings are either delayed or unachievable and greater detail is provided in the report, with the detail for this committee’s portfolio provided in the appendix.

The Finance Manager for Social Care and Health added that paragraph 3.60 details the mitigating action to address the overspend in Children’s Services and the proposed use of capital receipts to offset the overspend.  Similarly, paragraph 3.9 details how much capital will be used to bolster the revenue budget, adding that there is no capital in the social services directorate. He explained that as part of budget setting process, there are various budget setting targets to make savings and that it is not felt to be achievable.

The Finance Manager for Education highlighted that paragraph 3.2 details that the children and young people’s directorate are overspent in respect of additional learning needs support.  She highlighted the position in terms of school based redundancies, Teacher’s pay awards and Individual Schools Budgets, previously alluded to. 

Challenge: 

• The schools in deficit are a real concern. It appears that King Henry has a plan in place, but the deficits for Caldicot and Monmouth are increasing despite having plans in place, so my question is what mitigations are taking place?

King Henry has a plan in place but they aren’t hitting it at the moment. Caldicot is showing some small improvement. These reports only show a year of the recovery plan whereas it’s more helpful to see progress over a 3-year period. We are monitoring the schools monthly to make sure they are making improvements. We are working with Caldicot on some ‘invest to save initiatives’, so you may see a rise initially, but they are on target to come back.

• We know LAC has increased, so we don’t see how you can make any savings given that you cannot use capital. So what are your long term plans to address this?

You are right, there are limited actions we can take and we will discuss this as part of the budget proposals. We are trying to drive down costs in commissioning, but it is against very significant pressures.

Chair’s Conclusion:

I think we all share the same concern that all of our comprehensives are in significant deficit and many of our primaries too. We must recognise the difference in schools and we accept that this a national picture, but it’s cold comfort for head teachers trying to manage the position. We will continue to carefully monitor this and we hope for some improvements.