Agenda item

To receive the third budget monitoring report for the current financial year which reflects the forecast financial position as at 30 September 2020.

Cabinet considered the third monitoring report outlining the 2020/21 financial position. 

It provided an indication of the expected revenue and capital financial position of the Authority as at 31 March 2021.  The reported position was expected to change over the coming months as the response and recovery to Covid-19 continued.

The report covered the forecast outturn of the Authority’s General Fund and 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; an indication of the impact of Covid-19 on the Collection Fund; the implications of Covid-19 of the Authority’s cash position; and an update on the Capital Investment Plan, including details of variations and reprogramming, that were recommended for approval.

In terms of the General Fund Revenue Account, the forecast overall pressure was estimated at £5.142m against the approved net budget.  This was made up of a forecasted pressure of £0.883m on normal activities and £4.259m relating to the impact of Covid-19.  This was after a forecasted transfer to reserves of a £12.719m surplus relating to Section 31 grants.  The surplus would be held in reserve and utilised to support the Collection Fund deficit that would be faced in 2021/22 due to these measures. 

The £0.883m pressure in the services was driven mainly by Health, Education, Care & Safeguarding (HECS) reflecting the continued pressures in Children’s Services of £5.286m and Adult Services of £0.788m. This was before inclusion of the contingency based budgets, which were held and reported with Central Items, that had been created by Cabinet as part of the 2018/19 budget setting process to reflect the on-going pressures in social care being felt locally and nationally.

Included in this projection was £4.480m of pressures in Corporate Parenting and Placements, £1.433m in Wellbeing and Assessment and £1.010m in Integrated Disability & Additional Needs. The drivers for these pressures continued from 2019/20 as outlined in the report.

It was anticipated that the outturn forecast for normal activities 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 £4.259m shortfall were also within HECS where £11.725m was for increased costs to the Authority of supporting the market (£5.403m), impact on savings targets (£2.713m), increased costs for children in care (£1.233m), lost income within School Improvement (£0.666m), Public Health (£0.597m), additional demand (£0.494m), and other miscellaneous costs such as staffing costs, PPE, and other income losses (£0.619m).

Significant Covid-19 related pressures existed in Environment, Housing and Leisure, (£7.871m) due to loss of income in areas such as Sport & Leisure and Highways & Transport and in Commissioning & Asset Management through income lost within Catering (£4.585m).

Current indications were that the Covid-19 funding received to date did not cover all anticipated costs/loss of income.  Discussions were on-going at both local and national level around the financing of the residual pressures expected as a result of Covid-19.

The report outlined the revenue grants which had been received during June and July 2020.

The total planned deficit for schools 2020/21 was £6.689m.  These budgets had been revised, mainly following discussions with schools showing deficit balances, to an expected deficit of £6.681m.  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.

In July twelve schools had been identified as expecting to be in deficit during 2020/21, including two schools in structural deficit. Following the allocation of falling rolls and headroom funding in July, another school had now been moved out of deficit and another three schools were being considered for this funding, to be agreed in November at Schools Forum. Before any adjustments relating to this agreement, the total balances of these deficit schools were expected to total £12.516m.

The High Needs Block had ended 2019/20 with a pressure of £4.542m.  The forecast of the budget position for 2020/21 indicated an anticipated in-year pressure of £3.457m reflecting a further rise in demand for special school places. 

The Housing Revenue Account was forecast to have year-end balances at 31 March 2021 of £6.576m; assuming all identified Covid-19 related costs and income shortfalls were covered centrally. These balances were £1.572m 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 £1.361m, against an in-year budget of £2.590m, due to underspends arising on repairs budgets from Covid-19 impacts (£0.927m) combined with forecast vacancy savings of £0.129m.

At 30 September 2020, there were 2,972 tenants of North Tyneside Homes on Universal Credit with arrears totalling £2.525m. This was up by 398 and £0.315m from the beginning of the year but was down from the end of August. A team was working proactively with tenants to minimise arrears and 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 totalled £244.320m (£67.307m 2020/21) 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 £1.094m and variations of £6.923m of which more details were set out in the Annex to the report.  The revised Investment Plan stood at £74.875m for 2020/21 and to the end of September 2020 spend of £15.220m had been incurred which represented 20.33% of the revised plan.

The report also outlined progress against the 2020-2024 Our North Tyneside Plan. The area under most financial pressure was Health, Education, Care and Safeguarding.

In Adult Social Care, in common with most local authorities, and in line with the national picture, North Tyneside had seen costs continuing to rise.  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.  Data suggested that there was a general trend of a steady increase in numbers of LAC, 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 30 September 2020 be noted;

(2) the receipt of £11.714m new revenue grants be approved;

(3) the Authority’s Investment Plan spend of £15.220m to 30 September 2020 and the financing of the Plan to the end of the year be approved; and

(4) the variations of £6.923m and reprogramming of £1.094m for 2020/21 within the

2020 – 2025 Investment Plan 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.)