Month 6 Budget Monitoring Report
- Meeting of Performance and Overview Scrutiny Committee, Monday, 21st November, 2022 10.00 am (Item 5.)
Scrutiny of the Council’s budgetary position (revenue and capital).
Cabinet Member Rachel Garrick and Jonathan Davies presented the report and answered the members’ questions with Tyrone Stokes and Will Mclean.
As we end this financial year what element of the planned reserves is usable? Is it £16.6m? Are reserves the principal tool being applied to deal with the currently forecast cost overspend? Is that really ‘robust’?
The replenishment of reserves over the last two financial years was due principally to the funding provided by Welsh Government: they identified budget risks that authorities would face coming into this year, notably around social care income losses, and remaining pandemic effects. We always had an expectation that reserves would be used to cover expenditures this year. We didn’t build that into our budget setting because how those risks would manifest was very uncertain in timing and the amount. To clarify the reserves section in the report, and the level at the end of this year: if we utilised reserves as outlined in the budget recovery plan it would leave revenue reserves at £21.6m. We tried to show in the chart the further projection and risk if no corrective action were taken – it is a reasonable assumption to make that we would need further support if we didn’t take steps to address that position.
Just under £2.2m of savings will come from a reduction or redesign of services – are they mainly unfilled vacancies? Is more significant redesign not therefore required?
While there is a degree of continuing with vacancies in the workforce it isn’t a significant part of the recovery plan: the majority would be where services have identified alternative or flexible ways to generate income, whether through grants or agreements with joint partners. We have started conversations with services about the medium-term picture of their service models, given the onward budget deficit, but they need to be developed quickly.
What are the current projected plans for council tax increases next year?
Cabinet has not considered council tax levels for next year. We are going through the budget process currently, with lots of uncertainties about funding and cost pressures for next year; notably, the Autumn statement will have implications for funding next year, and the Welsh Government budget that is due to be published in December will provide further clarity. So, while we can make planning assumptions about council tax levels, those things need to come together for us to garner what the rate might be next year.
We are in a position where a number of risks have been realised; unfortunately, last year we chose a 2.9% increase, when the administration started the budget planning process, knowing that inflation was around 5.1% and that it climbed to 7% by the time they set that budget. We need to appreciate the scale: the problem won’t be fixed by a rise in council tax e.g. a 1% increase in council tax will only generate £700k. What we therefore need to discuss is funding, and the harder decisions that we will need to make. But that is more for the budget discussion, rather than Month 6.
But council tax is the main thing that residents look to the council for a clear understanding of?
Councillors need to take on the responsibility to discuss truthfully for residents what council tax can and can’t accomplish.
To clarify, the previous administration fixed the council tax increase in March when inflation was at 7%
Yes, that is the Consumer Price Index figure for March.
At the last People committee, the head of Children’s Services indicated that the service would continue to operate as it has been. Bearing in mind the huge overspend, should this be reconsidered and factored into your future plans?
We have been in discussions with the Chief Officer for Social Care, looking at the forward structure given our budgetary constraints over the medium term. Some of those things will take a lot longer to turn around than others. There are immediate steps that we can take to gain efficiencies or cost moderations but the demands are complex and increasing in this area, so to make those changes in that landscape is very challenging. We have opened conversations about increasing our preventative measures or working with regional partners to explore other opportunities to reduce costs.
The biggest cost drivers in terms of the outturn is high cost and complex placements for children, and the use of agency staff to cover vacancies. The recovery plan has been consulted widely in Children’s Services, driven by the Chief Officer. Some of the immediate things we can look at are negotiations with ABHB around continuing healthcare, and funding and service delivery for those high-cost placements – whether we can take some out-of-county placements or boost some of the provision to try to bring forward some of the work that has already been planned, and accelerate it in-year. We need to be mindful that there are 4 months left in the financial year.
Can we better understand the capacity challenge in chasing grant funding?
Internally, we provide finance support where we can too allow services, where possible, to maximise funding streams. Capacity restraints vary significantly across the authority. We are in active discussion with Welsh Government about our specific grant funding and the potential to move some into core funding, so we can mitigate wider cost issues.
What is the contract negotiation with providers looking like?
The commissioning team engages with providers before the financial year. During the budget setting for this financial year we put a cost estimate of £1.9m; this year we have done well to retain that figure but we now have a number of providers approaching the authority for early indications as to next year, especially with the increase in the real living wage which is going up by £1 next year. There is also the drain on energy costs, and care home providers have an increase in insurance premiums of 200-300%. This year, we feel confident that we can maintain the £1.9m but next year looks to be more challenging and we are pushing back on providers where they need to look at any possible costs themselves that can be lowered.
Why is the Disability facilities grant underspend so significant?
This relates particularly to the Capital budget. The pressure there is offset significantly by the potential release in budget for DFGs. This can be explained by the Covid period – the Capital Budget for DFGs was slipped forward during Covid. The service has taken analysis of the current demand and identified that the amount of budget that has accumulated over the past 2-3 years is more than is required given the current demand.
What is our message for schools regarding their investment strategies? How will deficits be funded?
There have been discussions with headteachers in recent weeks regarding the budget position, they are fully aware of it for next year and the medium term. The overall message is that it’s wise to emphasise restraint and look at the sustainability of their ongoing staffing structures, especially where there are inherent budget deficits in some schools. To address those, budget recovery plans will be agreed with the Cabinet Member, focussing on cost moderation or looking at sustainable staffing structures, noting that a very high proportion of school costs is staffing. It won’t be a quick fix: recovery plans will look to bring the schools into a sustainable position over a number of years.
Where schools have identified investment needs in their recovery plans, what is the potential impact of them not spending that now?
Directly linked to improvement activity, investment in additional staff will be required at some times; very often linked to grant funding. Given how school HR works there are defined periods of time through the year when conversations around staffing decisions can take place. Some schools have made plans to make capital investments in the school body and fabric: we have schools that wanted to provide greater levels of outdoor learning environments – those are the right sort of things to stop and discuss, which we are doing. So the type of investment informs the conversation that takes place. If it’s funded by grant or additional monies then it will carry on, where there is capital investment we are saying to pause and think about how to use the funds in the future.
Regarding the running theme of staffing problems, how heavily do we rely on goodwill? Is there data showing a reliance on untaken TOIL (Time Off In Lieu)?
Yes, we have those figures. It’s very much up to Heads of Service to look at the local factors playing into their service, and deal with any goodwill that is being used, which isn’t sustainable. The policy in place allows managers to manage TOIL, as there is a maximum that can be accumulated, and come up with a sustainable way forward to reduce them down in line with service requirements. As there is a maximum we would not rely on goodwill.
High-cost placements tend to be staff-intensive, so how are they affected by the current recruitment and retention difficulties?
The picture varies by service so an overall answer is difficult.
Because the figure for Children’s Services is so large the breakdown isn’t very helpful for scrutiny.
Yes, we will break down these figures further in the future. The biggest driver of the Children’s Services overspend is high cost residential placements. Their complex nature drives up the cost. External placements can cost upwards of £1m per child, annually, based on the social care assessed need and where there is a clinical need, in conjunction with ABHB. The supply in the market is low but the demand is very high, which is a national issue. Agency staffing is another cost driver as agency staff cost more than the staff on our payroll.
Table 5, Section 7.2, forecast budget savings for next year: how do we hold confidence in those given the current position and overspend?
For the service budget recovery plans it is up to chief officers to come up with proposals for meeting their targets. Cost moderation is the most difficult to achieve in the current environment but there are opportunities for further funding and working with joint partners. It’s useful to note that over £1.5m of proposals were identified as low-risk so there is some confidence that directorates are maintaining pressure on those. The key paragraph is the use of ‘at least’ £2.18m – there is scope to increase that, which we hope to see. Finance teams will support directorates in identifying further areas to increase income or generate cost going forward.
In the Month 4 report there were 2000 hours of unmet social care need each week in the county. Do we need to do more to be realistic with our residents about that situation and look for more community engagement where that is possible, and do more to support prevention?
These factors are playing into the ongoing conversations with Social Care as to how the service might look. There is community engagement as part of the budget setting process. The unmet need is multi-faceted as to how it has occurred e.g. hospital discharge comes to social care to fill the void, and there is a recruitment and retention crisis in social care, so there is a difficulty to get care packages. We already have strong community links e.g. the Community Connections project that looks at prevention but that can only go so far: the demand is outstripping the service that we have, hence the unmet need hours. However, there might be indirect support in some of those cases.
The Chair thanked officers for their work, and Cabinet Member Rachel Garrick for attending today to address the committee. Councillor Garrick emphasised that she has an open-door policy should any Councillor wish to discuss matters pertaining to the budget further. The Chair congratulated Jonathan Davies on his appointment as Head of Finance.
Peter Davies noted that Finance will look at the timing for Month 9 to make sure that it comes forward on as timely a basis as possible.
Officers agreed to take back the comments about how they report i.e. to give a more detailed breakdown of the Social Care spend in the future.
The committee agreed to move the report.
- Document To Follow
- 20221121 P&O Committee - Revenue Capital budget forecast month 6 - Covering report (Final), item 5. PDF 834 KB
- 20221121 P&O Committee - Revenue Capital budget forecast Month 6 - Appendix 1 - Detailed forecasts, item 5. PDF 851 KB
- 20221121 P&O Committee - Revenue Capital budget forecast Month 6 - Appendix 2 - Progress against mandated savings, item 5. PDF 376 KB
- Appendix 3, item 5. PDF 23 KB
- 20221121 P&O Committee - Revenue Capital budget forecast Month 6 - Appendix 4 - Service budget recovery plan, item 5. PDF 647 KB