Agenda item

To receive the first budget monitoring report for the current financial year which reflects the forecast financial position as at 31 May 2020.

Cabinet considered the first monitoring report outlining the 2020/21 financial position.  It provided an early indication of the potential revenue and capital financial position of the Authority as at 31 March 2021.

The report covered the forecast outturn of the Authority’s General Fund and Housing Revenue Account (HRA) revenue budget including management mitigations where issues had been identified; the delivery of 2020/21 approved budget savings plans; an indication of the impact of Covid-19 on Collection Rates and on the Collection Fund; the implications of Covid-19 for the Authority’s cash position; and an update on the Capital Investment Plan including details of variations and reprogramming that were recommended for approval.

The budget for 2020/21 had been approved by full Council at its meeting on the 20 February 2020.  The net General Fund revenue budget was set at £161.361m.  This included £3.244m of savings to be achieved (£0.805m relating to 2020/21).

The forecast overall pressure for the General Fund Revenue Account was estimated at £12.968m against the approved net budget. This was made up of a forecasted pressure of £0.908m on normal activities and £12.060m relating to the impact of Covid-19.  The £0.908m pressure in the services was driven mainly by Health, Education, Care & Safeguarding reflecting the continued pressures in Children’s Services of £4.284m and Adult Services of £1.023m, partly mitigated by the contingency balances that had been created as part of the 2018/19 budget setting process and continued to be held centrally to reflect the on-going pressures in social care being felt locally and nationally.    

Included in this projection was £3.663m of pressures in Corporate Parenting and Placements, £2.195m in Wellbeing and Assessment, and £0.848m in Disability and Mental Health.  The drivers for these pressures continued from 2019/20, as outlined in the report.

It was anticipated that the overall outturn forecast would improve over the course of the financial year as planned remedial actions began to impact on both expenditure and income.

With regards to the impact of Covid-19, the main drivers behind the £12.060m shortfall were also within Health, Education, Care and Safeguarding where £11.991m was for increased costs to the Authority of supporting the market (£3.513m), impact on savings targets (£2.691m), additional demand (£2.454m), increased costs for children in care (£1.211m) and lost income within School Improvement (£0.868m).

Significant Covid-19 related pressures existed in Environment, Housing and Leisure, (£5.427m) due to loss of income in Sport & Leisure and Highways & Transport and in Commissioning & Asset Management through income lost within Catering (£3.824m).

The report outlined the revenue grants which had been received during April and May 2020.

Schools were required to submit their rolling three-year budget plan by 31 May each year.  The total planned deficit for 2020/21 was £6.689m. The Authority had been working with schools for a number of years with regard to the long-term strategic issue of surplus secondary places and the associated financial pressures which continued to be compounded by rising employment costs.  As anticipated, 2019/20 was the fifth year of balances decreasing following a long-term trend of rising balances in North Tyneside and the overall projected balances for 2020/21 continued this trend.

As well as school balances reducing overall, some schools continued to face significant financial challenges.  There were twelve schools with approved deficits in 2020/21, with seven of these schools continued to be in deficit following 2019/20 and five schools that were new to deficit in 2020/21. 

The High Needs Block had ended 2019/20 with a pressure of £4.542m.  Initial forecasting of the budget position for 2020/21 indicated an anticipated in-year pressure of £1.943m reflecting a further rise in demand for special school places.  The Authority was planning for places at the end of 2020/21 to total approximately 786. 

The Housing Revenue Account (HRA) was forecast to have year-end balances at 31 March 2021 of £6.339m, assuming all identified Covid-19 related costs and income shortfalls were covered centrally.  The balances were £1.335m higher than budget which had been set at £5.004m.  The higher than forecast balances were mainly as a result of higher opening balances due to the impact of the previous year’s financial performance (£0.211m) but there was also an in-year estimated underspend of £1.124m, against an in-year budget of £2.589m, due to underspends arising on repairs budgets from Covid-19 impacts (£0.965m) combined with forecast vacancy savings of £0.159m.

Universal Credit had been fully implemented across North Tyneside on 2 May 2018.  As of 31 May 2020, 3,926 North Tyneside Homes tenants had moved on to Universal Credit and a team was working proactively with tenants to minimise arrears.  This position would be closely monitored as the year progressed to identify any adverse impacts on the budget position.

The approved 2020-2025 Investment Plan, as adjusted for proposed reprogramming, totalled £263.937m and was detailed in the Annex.  The Annex also set out the delivery progress to date, planned delivery for 2020/21, reprogramming and other variations identified through the Investment Programme governance process.

An officer led review of the Investment Plan had resulted in proposals for reprogramming of £9.659m and valuations of £4.271m of which more details were set out in the Annex to the report.  The revised Investment Plan stood at £74.096m for 2020/21 and to the end of May 2020 spend of £1.286m had been incurred which represented 1.74% of the revised plan.

The report also outlined progress against the 2020-2024 Our North Tyneside Plan which set out the overall vision and policy context within which the Financial Plan and Budget were set. 

The Authority had plans in place to deliver all elements of the Council Plan and performance against these plans was carefully monitored. The area under most financial pressure was Health, Education, Care and Safeguarding.

In Adult Social Care, as with most local authorities, and in line with the national picture, North Tyneside had seen costs continued to rise.  Along with the number of adults supported increasing over the last few financial years, the individual needs of those residents had increased due to people living longer with multiple complex conditions.  Supporting those needs required more intensive packages of care which were more expensive to provide.  In addition to older people, younger adults with learning disabilities and physical disabilities were also living longer, often with multiple complex issues.

In Children’s Services, good progress continued to be made on engaging with children in the early years of life to ensure that they were ready for school.  Safeguarding vulnerable children and maximising their educational attainment remained key priorities.

Over recent years, there had been an increase nationally in demand for children’s residential placements but with no corresponding increase in central government funded provision. As such, the levels of looked after children (LAC) and children who required supervision after leaving care continued to generate a significant financial pressure.  In year data suggested that LAC levels, whilst fluctuating, there was a general trend of a steady increase in numbers, but there was a wide range of levels of care provided, with more complex cases now being faced.

Cabinet considered the following decision options: either to agree the recommendations as set out in Section 1.2 of the report, or alternatively to disagree with the proposals.

Resolved that (1) the forecast budget monitoring position for the General Fund, Collection Fund, Schools’ Finance and Housing Revenue Account as at 31 May 2020, as set out in the Annex to the report, be noted;

(2) the receipt of £10.609m new revenue grants be approved;

(3) the Authority’s Investment Plan spend of £1.286m to 31 May 2020 and the financing of the Plan to the end of the year, as set out in the Annex to the report, be noted; and

(4) the variations of £4.271m and reprogramming of £9.659m for 2020-21 within the 2020 - 2025 Investment Plan, as set out in the Annex to the report, be approved.

(Reasons for decision: It is important that Cabinet continues to monitor performance against the Budget, especially given the current level of financial pressures faced by the public sector.)