Agenda item

Jonathan Davies introduced the report and answered the members’ questions with Will McLean, Peter Davies, Deb Hill-Howells and Jane Rodgers:

 

Will a reduction in employer pension contribution rates, similar to the changes being made to the Teachers' Pension Scheme, also apply to the Local Government Pension Scheme, and what impact would that have on the Council's finances?

 

The Council is expected to see a similar reduction in Teachers' Pension Scheme contribution rates, but this will not generate a direct saving because the associated funding is provided through Welsh Government and will be offset accordingly. For the Local Government Pension Scheme, the Council agreed contribution rates with the pension fund approximately 12 months ago, resulting in rates that are already 3% lower than the previous level for the next three financial years. This reduction is already benefiting the Council's budget and reflects the strong financial position of the pension fund. The expectation is that these lower contribution rates could continue beyond the current three-year period.

 

The report shows significant underlying financial pressures, including undelivered savings, a shortfall in planned children's placement savings, and worsening school deficits. Given that some schools are now significantly behind their recovery trajectories, what specific interventions are being put in place for the highest-risk schools, and at what point would the Council conclude that existing recovery plans are no longer credible and require a fundamentally different approach?

 

The Council recognises that the financial position in schools has worsened and has been transparent about those risks. However, these challenges have developed over a number of years and are not unique to Monmouthshire. Recovery plans are already in place and are being actively monitored by officers, governors and schools. The current focus is on reviewing whether those plans remain realistic, whether they are being implemented effectively, and whether different measures may be needed where circumstances have changed. The Council considers it essential that recovery plans remain flexible and reflect the actual financial position of each school. Schools themselves, through headteachers and governing bodies, retain responsibility for managing their budgets and delivering recovery plans, although the Council will continue to provide support and challenge where required.

 

The Council is carrying out detailed professional discussions with schools involving finance, education and inclusion officers to assess financial risks and provide assurance. These discussions have shown that some schools may not be making full use of available central support and contingency funding, particularly in relation to learners with additional learning needs. The Council is working with schools to ensure they understand the resources available and is challenging schools to review staffing structures where costs have become unaffordable. While there is no single point at which recovery plans are automatically abandoned, the review process is intended to test whether existing plans remain achievable or whether a different approach is required to address the financial challenges. The Council has been clear with schools about the financial risks they present and acknowledges that difficult discussions and decisions will be needed to close funding gaps.

 

The Member welcomed the explanation but emphasised that, although the problem is not unique to Monmouthshire, the Council should do everything possible to address it. She also highlighted that school governors are volunteers rather than financial professionals and suggested that providing them with more support, training and understanding of school finances could help improve the situation.

 

The Council already offers professional learning and training to governors on school finance, budget management, additional learning needs and inclusion. Governors are supported to understand how budgets are set and monitored, as well as how schools can organise support for learners more effectively. The Council is encouraging schools to adopt sustainable staffing and support models that meet learners’ needs while remaining financially affordable, and this support is available to all governing bodies.

 

School deficits have worsened significantly over recent years, moving from a surplus position to a substantial overall deficit. Given the description of the situation as a serious financial risk and a crisis affecting schools across Wales, what is driving this deterioration, what support is available to schools, what interventions could be taken if recovery plans fail, and does this mean schools will need to reduce the number of teaching assistants?

 

The deterioration in school balances is not a recent issue. Deficits had been increasing before the pandemic, with more schools entering deficit positions between 2016-17 and 2019-20. Additional funding provided during the pandemic temporarily improved school balances, but it did not resolve the underlying structural financial pressures facing schools. As that temporary funding came to an end, the underlying challenges re-emerged.

 

The financial pressures facing schools are being experienced across Wales. Demand for support, particularly for pupils with additional learning needs, has increased significantly, and discussions are taking place nationally about additional funding. Monmouthshire maintains contingency funding to support schools where unexpected additional learning needs arise outside the normal funding cycle, although these funds are limited. Changes to Welsh Government funding arrangements are expected to allocate these resources directly to schools in future, reducing the Council's ability to hold contingency funds centrally.

 

The Council is undertaking enhanced engagement with schools that present the highest financial risks. This includes reviewing the adequacy of recovery plans and determining whether additional support, challenge or intervention is needed. The Council has statutory powers to issue warning notices to schools that fail to manage their budgets appropriately. In the most serious cases, budget management responsibilities could be removed from a school and brought back under Council control, although this would have significant practical and resource implications.

 

The Council is not proposing the automatic removal of teaching assistants from classrooms. Teaching assistants are funded where there are pupils with additional learning needs. However, schools are not funded through the formula to provide a teaching assistant in every Key Stage 2 classroom. Where schools choose staffing arrangements that go beyond the funding provided, this can create additional budget pressures. The Council expects schools to review staffing and class structures and consider more financially sustainable arrangements, such as mixed-age classes where appropriate, while remaining within required pupil-to-teacher ratios and continuing to meet learners' needs.

 

What coaching and practical support is available to school governors and school leaders, beyond formal training, to help them manage budgets and address financial challenges?

 

School governors play a critical role in financial management, safeguarding, and providing support and challenge to school leaders. Where schools face particular difficulties, the Council works closely with both the Chair of Governors and the Headteacher through regular discussions and engagement. While there is no separate formal coaching programme for governors, officers provide ongoing support through constructive and informed conversations that are intended to help schools work through challenges and identify solutions.

 

The Council's approach is to work closely with schools when problems arise, offering guidance and support tailored to individual circumstances. Through bodies such as the Monmouthshire Association of School Governors, governors are also encouraged to raise concerns and seek advice. The emphasis is on maintaining a collaborative relationship with schools and helping governors and leaders understand and respond to financial pressures in a practical way.

 

What progress has been made on the review of surplus school places, and can reducing surplus capacity across school clusters help address the current financial pressures facing schools?

 

The Council has reviewed surplus places across its four school clusters. The position is broadly balanced in the Abergavenny and Caldicot clusters, but there are significant levels of surplus capacity in the Monmouth and Chepstow clusters. Officers are currently analysing the latest pupil numbers, live birth data and other local information to assess future demand and determine the most appropriate way to address those surplus places. Reducing surplus capacity is recognised as one factor that could help deliver a more sustainable and efficient education system and support the long-term financial position of schools. The Council expects that specific proposals will need to be developed for the Monmouth and Chepstow clusters, but further work and local engagement are required before those proposals can be brought forward.

 

Why is the Council reporting a £464k revenue overspend when school balances are forecast to move to a cumulative deficit position of £9.337m by 31 March 2027, including a forecast £2.456m deterioration during 2026/27? In the interest of accuracy and transparency, shouldn't the actual local authority forecast overspend be combined with the school deficit forecast for 2026/27? Is the 10-year school recovery forecast still credible given deficits have worsened by around 30% since this forecast was produced just a few days ago? Was there ever a 5-year, or even 1-year forecast showing deficits reaching today's level?

 

The figures are reported separately because the Council's centrally managed budgets and delegated school budgets operate under different financial arrangements and responsibilities. While both are important to the Council's overall financial sustainability, schools are responsible for managing their own delegated budgets through headteachers and governing bodies. The report aims to be transparent by presenting both the Council's forecast position and the schools' deficit position together within the same financial reporting framework, while maintaining the distinction between areas directly controlled by the Council and those delegated to schools.

 

The ten-year recovery forecast was introduced to provide a strategic view of the schools' financial position over time. Officers acknowledged that the starting position is now weaker than anticipated and that this raises legitimate questions about whether the projected recovery trajectory remains realistic. The forecast is therefore not intended to be fixed, but rather a tool to support ongoing challenge and scrutiny of school recovery plans.

 

A significant proportion of the overall deficit is concentrated within a relatively small number of schools, particularly several secondary schools and the pupil referral service. Officers stated that the greatest opportunity for improvement lies in achieving successful recovery in those schools. While the position remains challenging and recovery will take time, the Council's focus is on ensuring recovery plans are robust, realistic and actively monitored.

 

The schools' financial position requires significant scrutiny and intervention, but responsibility for school deficits rests primarily with the schools themselves rather than the Council's central budget holders. For that reason, it would not be appropriate to merge the two figures into a single overspend figure. Both the schools' position and the Council's own financial pressures are serious challenges and should receive equal attention, but they represent distinct areas of accountability.

 

The £464,000 forecast overspend does not tell the whole story of the Council's finances. The report identifies substantial underlying pressures across services, particularly in adult social care, children's services, transport and other demand-led areas. Some one-off funding and grants help offset these pressures in the current year, but the underlying financial challenges remain significant and will be examined further through the Medium Term Financial Plan process.

 

What is causing the £227,000 overspend at CastleGate Business Park, what are the ongoing discussions with tenants about, and how might the outcome of those discussions affect the financial position?

 

The overspend is linked to ongoing challenges in fully letting the building, with approximately 38,000 square feet of space currently unoccupied. The Council remains in active discussions both with prospective tenants and with existing tenants regarding rental and service charge arrangements, while also working with the Cardiff Capital Region to explore opportunities to attract high-value occupiers to the site.

 

Specific details of the negotiations could not be provided because they are commercially confidential and involve both current and potential tenants. Officers confirmed, however, that an update on the investment property portfolio, including CastleGate, is scheduled to come before the committee later in the year. It is anticipated that some of the more detailed discussion will need to take place in a closed session because of the commercially sensitive nature of the information.

 

The report refers to further pressures associated with CastleGate Business Park. Are these ongoing and recurring pressures likely to continue affecting the Council's resources position?

 

The pressures at CastleGate Business Park are principally linked to vacant units within the building. While parts of the site remain unoccupied, the Council experiences a shortfall in rental income and must also meet service charge costs that would otherwise be paid by tenants. These factors are contributing to the forecast overspend currently being reported.

 

The Council's priority is to secure tenants for the vacant space, as doing so would increase rental income and transfer responsibility for service charges from the Council to the occupiers. Officers confirmed that active work is continuing to fill the empty units, and improving occupancy remains the key mechanism for reducing the ongoing financial pressure associated with the site.

The report shows an underspend of £268,000 in passenger transport due to changes to home-to-school transport eligibility. Given ongoing concerns about pupils experiencing late buses, buses not arriving, or overcrowded public services, are savings being made at the expense of service quality, and could some form of contingency support be considered for affected pupils?

 

Savings have been achieved by increasing the number of eligible learners travelling on public bus services rather than dedicated school transport. The Council monitors passenger numbers with operators and has introduced dedicated school transport where overcrowding has been identified. Increased use of public bus services has been linked to the £1 fare scheme, which has led to more fare-paying passengers using routes previously relied upon by school pupils. As a result, some eligible learners have been moved from congested public services onto dedicated school transport.

 

Current monitoring shows no capacity issues on some of the routes that have attracted complaints, and observation work has found that, in some cases, pupils are standing despite seats being available, including on double-decker buses. The Council stated that it will continue reviewing services and will introduce dedicated transport where evidence demonstrates a capacity problem.

 

Concerns were also raised about buses that fail to arrive as scheduled.

 

Officers they liaise regularly with bus operators and will investigate and challenge any reported non-arrival of services.

 

If pupils are standing when seats are available, do bus drivers not have an obligation to ensure that pupils are seated before the vehicle moves off?

 

There is a distinction between dedicated school transport and public bus services. On dedicated school transport, each learner is allocated a seat. On public bus services, however, different regulations apply and operators are permitted to carry standing passengers up to a specified standing capacity. Drivers can ask pupils to sit down, but if seats are available and passengers choose to stand, the regulations for public services allow the journey to continue, provided overall capacity limits are not exceeded.

 

Could drivers be instructed not to move off when pupils are standing and seats remain available, or could clearer guidance be issued to require this?

 

Guidance is already issued encouraging drivers to remind pupils to sit down. However, because these are public bus services rather than dedicated school transport, the legal rules allow standing passengers. Drivers can ask passengers to sit but cannot compel them to do so, and the service may continue operating within the permitted standing capacity. Council staff travelling on buses had witnessed drivers asking pupils to sit down, with some pupils choosing to remain standing.

 

A number of budget pressures are attributed to an inability to achieve staff vacancy factor savings. Using community hubs as an example, what does this mean in practice, and is the Council regularly reviewing whether these vacancy assumptions remain realistic and fit for purpose?

 

The staff vacancy factor is a budget assumption that a proportion of posts across the organisation will be vacant during the year because of staff turnover, retirement, promotion or people moving jobs. The Council currently assumes a level of vacancy savings based on an overall staff turnover rate of around 8%.

Where services are unable to achieve those savings, it is often because staffing levels need to be maintained to ensure services can continue to operate safely and effectively. In some areas, organisational structures are already relatively lean, leaving little opportunity to leave posts vacant without affecting service delivery. Services are expected to manage these pressures within their overall budgets.

 

The vacancy factor is reviewed annually as part of the budget-setting process. Officers stated that assumptions can be increased or reduced following discussions with directors and senior managers if they are no longer considered appropriate.

 

The number of children looked after has increased by around 13-14% over recent months, despite the Council's focus on prevention and early intervention. What has driven this increase, and is there a pathway to reducing those numbers again in the future?

 

The Council had previously succeeded in stabilising the number of children looked after, but an increase has been seen since the start of the current year. A significant factor has been a small number of large sibling groups entering care, including one family that moved into the area from elsewhere. In children's services, the arrival of a few large family groups can have a substantial impact on overall numbers and placement costs.

 

Wider social and economic pressures are affecting families and communities, creating increased demand for support and, in some cases, leading to more children requiring care. While individual family circumstances are at the heart of each case, these broader pressures are contributing to the rise in numbers being seen.

 

The recent increase appears to have been influenced by a combination of exceptional cases involving large sibling groups and growing demand pressures within communities.

 

Chair’s Summary:

 

Thank you to the officers for the report and their responses. The report was moved.