Revenue Capital Outturn 2021- 2022 Budget Monitoring Report - To scrutinise the draft report and identify any areas of for future scrutiny
Jonathan Davies presented the report and answered the members’ questions with Dave Loder, Peter Davies and Nicola Wellington.
Future challenges in service delivery are highlighted. Is there a more detailed set of assessments of likely risks? What about inflationary pressures and related issues?
Many of the risks will have been known at our budget-setting stage, when we did a full analysis of them. Some of the inflationary pressures might not have been apparent at that time; we have to respond to them quickly as they develop. Financial reporting for the following financial year will follow, with a formal Month 4 report coming to committee in September which will address some of the risks now presenting themselves. The main risks are highlighted in 3.28 and are those expected: we still see structural budget deficits related to demands on Social Care, Care Homes capacity is approaching 100%, so we are funding those placements, which we didn’t have to do during the pandemic. Staffing issues in Domiciliary Care are a key feature of the service, and the external help that is being brought in to support it. Homelessness is a key area of legacy impacts – there’s been a policy change from Welsh Government and there is a lot of detail still for us to work through in how to support that service.
Underspends are as much of a concern as overspends, as it suggests that services aren’t being delivered as hoped. Does ‘savings’ mean that we set out to save that money or are they underspends that we didn’t mean to incur e.g., staff cost savings in the School Psychology Service?
‘Savings’ or ‘mitigations’ primarily mean those that have been brought forward prior to the start of the financial year and which services have come forward with efficiencies or mitigations that can be made, shown in Table 2. The specific saving in the SPS was due to a staff vacancy. Underspends refer to what has happened during the year to the budget that was set, rather than savings or mitigations agreed at the start of the year, but the two are indeed sometimes conflated.
What is the explanation for the large Highways underspend?
It is comprised of two parts. The first is savings on staffing, as this area had a large number of vacancies. They are actively looking to fill those posts now. The second is the high levels of income last year, itself made up of two parts: we were able to recharge more staff costs to capital budgets and grants, and we had an increased road closure income, not communicated to Finance until later in the year. That income doubled from what it usually is, creating a large spike in our income. It is highly unlikely that there will be a similar underspend this year.
What does the surplus in Strategic Initiatives entail?
Strategic Initiatives is a corporate budget that we hold; the £1m underspend is a late grant that we received from Welsh Government to support our difficulty in council tax collection during the year. It’s in Strategic Initiatives to keep it separate from council tax, in order to report it transparently.
Where we see significant variances from budgets it would be useful to have a commentary as to the resultant impact on services. Vacancies are ‘why’, but what has it meant and what actions were taken to mitigate the drop in service level during that period, e.g., in Highways and Flooding?
In Appendix 1 the Director of the service looks to provide a wider commentary on the impact over the year, though not perhaps in the detail specifically asked about. The head of a service or those responsible would have a better indication of the ongoing effect that their underspend would have. Underlining features should be in the Performance reports.
For overall context, as we went through the last financial year we faced a significant overspend in the earlier months – we didn’t have sight of the significant windfall grants from Welsh government that we subsequently received. We ensured that we weren’t spending needlessly, sometimes holding vacancies where the impact has been assessed of doing so. Those judgements were made during the year, then the wave of grants came in. Regarding the current year 22-23, we expect a challenging position at Month 4. But when we set the budget for the current year we knew of the significant risks already mentioned and put aside reserve cover to offset some of the known risks. The issue will be the unknown risks, i.e., those emerging from the cost-of-living crisis and inflation manifesting in different ways, which might take a while to work their way through the system.
How far advanced are schools’ investment plans and how are they being enabled to realise them?
Schools received a number of grants towards the end of the year that they have been allowed to move over into the current financial year. We have worked with the schools to produce 3-year budgets which are effectively the investment plans, ensuring that the money is spent appropriately, in line with grants and T&Cs. With all of our schools we have the current financial 22-23 budget in place, signed off by the governing body. Where a school is in deficit, we have a recovery plan in place. We monitor schools on a monthly/bi-monthly basis to ensure the plans are met.
Do we capture the end of year data for vacancies per department across the organisation?
The data in terms of specific vacancies is within the portfolio of our Chief Officer for People & Governance and colleagues in HR, so can be captured and made available.
Do you foresee maintenance support being a challenge in the next few years? Will that capacity issue hinder the realisation of those plans?
There is a concern that capacity is an issue, in our own workforce and in contractors. It’s a case of working very closely with schools to programme in when the works can be done. The Maintenance grant doesn’t have to be spent by 31st March 2023 so there is time for us to work with schools to ensure that the money is spent.
Are there plans or forecasts to cover any ongoing risk of reduced use of Spytty Park and Castle Gate?
Those assets were affected during Covid. Welsh Government extending the use of the Covid Hardship Fund to offset those losses was laudable. Occupancy levels in Castle Gate Business Park remained very strong through the pandemic, though. Newport Leisure Park was naturally affected more, given the nature of the tenancies, but we were able to keep those tenants secure through the Hardship fund. The tenants are operating well, and we will continue to assess that through the investment committee. During the early stages of budget-setting for 22-23 there was an identified risk in CG Business Park with one of the tenants giving notice; we have expanded an existing tenant into much of that space. It is often misunderstood but these tenants contribute significant net income to the council, allowing us to sustain and deliver services.
Is there an update on the Weighted Unexpired Lease Terms?
That information isn’t to hand, we will need to provide it later.
What would the pandemic impacts have been if additional funding hadn’t been introduced? Do we have better sight of pressure points moving forward?
If the Hardship Fund money hadn’t been forthcoming in 2020, we didn’t have the reserve cover to withstand the pressures. We would have had to react with very significant changes. Wales has benefitted much more from funding into local government and the Hardship Fund than counterparts in England. We’ve been able to restore and replenish reserves. Without such a level from the Hardship Fund, finances would have been beyond fragile.
There will be further waves of Covid, and future pandemics. Would it be advisable to draw together what worked, what we shouldn’t have done etc. in order to be prepared for future problems?
The emergency support structures from the Civil Contingencies Act came into play very successfully in March 2020. Matt Phillips, Chief Officer for People & Governance, holds the portfolio responsibility for Emergency Planning, which will have undertaken its own debrief, which will also have been done at Gwent and Welsh Government level. There are inquiries into Care Homes during the pandemic, which will lead to a body of evidence of what has been learned at a local and national level. Perhaps a summary of the lessons learned could be sought from Matt Phillips.
The recommendations were moved and agreed by members. The committee requested that a breakdown of the inflationary pressures be emailed to members to assist them in gaining an understanding of the impact of inflation on the Council’s budgetary position. It will be important to draw together the learning from the pandemic, particularly financial impacts that led to service impacts, to ensure we are resilient as possible for whatever lies in store.
- 7a 20220707 P&O Committee - Revenue Capital Outturn 2021-22 - Covering Report, item 7. PDF 365 KB
- 7b 20220727 P&O Committee - Revenue Capital Outturn 2021-22 - Appendix 1 - Outturn Report, item 7. PDF 1004 KB
- 7c 20220727 P&O Committee - Revenue Capital Outturn 2021-22 - Appendix 2 - Budget savings progress 2021-22, item 7. PDF 399 KB
- 7d 20220727 P&O Committee - Revenue Capital Outturn 2021-22 - Appendix 3 - Capitalisation directive 2021-22, item 7. PDF 12 KB
- 7e 20220727 P&O Committee - Revenue Capital Outturn 2021-22 - Appendix 4 - Movement in individual school balances, item 7. PDF 125 KB
- 7f 20220727 P&O Committee - Revenue Capital Outturn 2021-22 - Appendix 5 - Capital slippage requests, item 7. PDF 432 KB