Agenda item

Month 4 Budget Monitoring report - Scrutiny of the Council's budgetary position (revenue and capital).


Cabinet Member Councillor Rachel Garrick presented the report, Jonathon Davies and Peter Davies in attendance to assist her in answering members’ questions.


·         I was surprised and disappointed to hear of the £8.8m shortfall in the budgetary position and I’d like to know whether there are weaknesses in our budget management process, and I’d like to ask why we heard of this via a press release. I don’t feel this was adequately communicated.   Also, I object to the term ‘budget recovery’ when we are talking about service cuts.


Cabinet Member Councillor Rachel Garrick:  All group leaders were briefed in advance of the agendas for Governance and Audit Committee and this committee being published so this is a conversation you would need to have outside the meeting with your group leader. I can confirm that due process was followed.


·         If we are already in month 7 but are discussing a report detailing the position at month 4, given the severity of the situation, is it not appropriate that we look at the month 7 headline position, rather than waiting for the lengthy reporting schedule to catch up?

Cabinet Member Councillor Rachel Garrick:  We are reacting to the forecast and looking to see how we can recover the budget.

Deputy Chief Executive:  There are times when our budget monitoring reporting and the alignment of the scrutiny committee dates may mean that we are reporting retrospectively and there is a process those reports have to go through.  The first cabinet meeting was 19th October, so it’s just been a consequence of this, however, the month 6 report will be available in the next couple of months. It is my responsibility to arrest and recover a budgetary position and there are times that this can be achieved without necessarily resorting to service cuts or services being withdrawn, as sometimes efficiencies can be made, and conscious decisions taken.  Today’s report talks to the levers we are intending to use, and the month 6 report will provide further detail on those. In terms of your question as to whether there are inherent weaknesses in our budget management process, I’d like to emphasise the budget pressures that were evident in March and the risks in the escalating social care costs reported at that time. Together with factors such as the pay award and the current economic climate, these factors together have led us to the current position. We need to arrest the position to achieve a balanced budget by the end of the year, which is something we have a track record of being very effective in doing.

·         In your role, you will have a good understanding of what month 5 and 6 look like, however I think it’s important all councillors are kept up to date with the headline position, rather than awaiting the full report.


We have management accountancy maintaining this continually, identifying where the biggest risks are and preparing updated forecasts. The month 4 report provide a very representative analysis of the situation we face at month 5.


·         Has this happened before on this scale? What can councillors do to assist and what do you think the impacts are on services? Why are children’s services costs so high?


We always knew there was pressure coming forward into this financial year and we know the Covid Hardship Fund was due to end on 31st March. This created uncertainty as to how quickly the legacy pressure would impact. The wider economic environment has accelerated those impacts in addition to the inflationary environment, the staffing shortages that have led to the need for agency staff and the increased demand for additional services. For example, if we consider the homelessness challenge - we knew there would be a residual pressure coming into this year as a result of the policy change by Welsh Government and we knew that sufficient consequential funding wasn’t going to flow from Welsh Government, but what we didn’t know was how quickly the situation would develop and together with the cost of living crisis and the inflationary pressures, it has accelerated things and created an unprecedented overspend position early in the year, to which we knew we would have to apply a level of reserve. There are options available outlined in the report in terms of leverage measures and the senior leadership team will be keeping all options on the table given that the situation is rapidly evolving on a daily basis.


·         In terms of the overall position, recognising this is not a planned monitoring report, the descriptions and language used in the report is akin to Armageddon situation, whereas you are suggesting that things haven’t got any worse or any better, which could suggest there hasn’t been corrective action taken at month 5 and month 6 and that now there is 5 and a half months to correct a serious situation. The question I want to answer residents in my ward is if this continues and reserves continue to be applied in the way suggested, doesn’t this inevitably lead to council tax rises to fill the space that would otherwise be managed by budgetary control? 

Cabinet Member Councillor Rachel Garrick:  I think you may have taken a lot from some casual language on that implication, but I’ll ask officers to provide an update on the actions that have been identified and that we believe we can take at this stage.

Officers:  The ‘no better, no worse’ comment is related to the £8.8m position. The question around the used of reserves is well made and we are very cautious in drawing on those and similarly, the use of capital reserves. There are things we cannot precisely pre-determine, and we have an upcoming central government fiscal event that will talk to the position for public services. Regardless of any fiscal deficit that needs to be arrested nationally, if not next year, but over the medium term for the current government, it’s difficult to speculate on the outcome of that. Council tax will be a topic for conversation for all councils across the UK with hard decisions to be made to bring a balanced budget to the council. We are not unique, all councils are in this situation.  We need to communicate honestly with each other and with communities about such difficult decisions. 


·         As a new councillor, please can you explain why the children services overspend is so high?


The overspend is due to the cost of placements for children. When a child comes into care, the process begins by exploring opportunities with family and friends, but if this isn’t successful, we try our in-house carers, then if that isn’t possible, we seek independent carers, with a residential setting being the last resort. This is extremely challenging, as there is a national shortage of placements and foster carers across the UK. So every time we need to place a child in care, it is a major incident for us to even find a placement, never alone to find the right placement. Often the children have complex needs and may have suffered abuse and trauma and therefore they need a bespoke package to look after them – these placements are costly at the best of times, but in the current market which is so constrained, they are even more difficult to find, and this is our statutory duty as a council.


·         Of the £8.8m budgetary shortfall at month 4, are you able to say how much of that was incurred by month 4 or whether it is building month on month? You also mention £9.8m of capital receipts that we are due.  Are financial factors likely to affect receipt of that and put greater pressure on the budgetary position?


It would be a challenge to explain the monthly progression, but we can provide further detail on the major issues and how they have progressed through the year if the committee requests it. In terms of the capital receipts that were expected, we have now received £7m of the £9.8m, so a significant part of the risk falls away.


·         The committee would like to be kept as closely up to date with the situation because whilst we understand the process in forecasting and preparing the reports, members need to be informed in order to reassure their residents.


·         Are we responding to crisis in families that result in high-cost placements rather than putting in preventative provision, recognising the staffing input required and the costs of placements?

The costs of these placements are very high, but the preventative work we do to try to avoid children going into residential care is consistent right throughout the service, at all levels to reduce and prevent children coming into care. If foster placements break down, we have services in place, and I want to reassure you that there is prevention and de-escalation of risk at every tier, but there are some instances when a residential placement is the only option. We also have our MIST service which seeks to bring children out of residential, but a key issue is our shortage of foster carers.

·         Chair: I think this is an area where members could assist, in spreading the message about how rewarding foster caring is.


·         Will schools with a projected budget deficit be assisted to manage it?


We have 6 schools and the Pupil Referral Service in a deficit position at present. We do not provide them with financial assistance; however, the finance teams work with the schools over an extended period of time to produce budget recovery plans to bring them back into a surplus position.

Chair’s Summary:

The Performance and Overview Scrutiny Committee has scrutinised the Month 4 budget position and expressed significant concern for the Council's budgetary position at month 4. The Committee acknowledged the reasons for the deficit position and recognised that other councils will be facing similar challenges, however, the scale of the challenge is felt to be unprecedented and significantly concerning at month 4. Members have expressed concern about the use of reserves and agreed that this approach would be an unsustainable approach to fund service delivery in the subsequent year. I would like to request that, if possible, the Month 6 report be brought to the next meeting on 21st November 2022, however if that isn't possible, that an interim report be brought before members to detail the headline position. The chair expressed thanks that two cabinet members, Councillors Garrick and Thomas, attended the Scrutiny Committee and responded to questions raised, restating how important it was for the scrutiny function and for the cabinet, but also for residents, to be assured that they have a well-functioning council.


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