Agenda item

To receive the fifth budget monitoring report for the current financial year which reflects the forecast financial position as at 31 January 2021.

Cabinet considered the fifth monitoring report outlining the 2020/21 financial position.  Itprovidedanindicationofthe expectedrevenueandcapitalfinancialposition ofthe Authority as at 31 March2021.  The reported position was expected to change over the coming months as the response and recovery to Covid-19 continued.

Thereport covered the forecast outturn of the Authority’s General Fund and HRA revenue budget including management mitigations where issues had been identified; the delivery of2020/21approved budget savingsplans; 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 on the Authority’s cash position; and an update on the Capital Investment Plan, including details of variations and reprogramming, that were recommendedforapproval.

In terms of the General Fund Revenue Account, the forecast overall pressure was estimated at £3.041m against the approved net budget.  This was made up of a forecasted pressure of £0.053m on normal activities and £2.988m relating to the impact of Covid-19.  This was after a forecasted transfer to reserves of a £13.527m surplus relating to Section 31 grants. An additional £1.841m was also forecast to be transferred to reserves relating to growth received from the North of Tyne Combined Authority following the Authority’s participation in a business rates pool in 2019/20. At this stage it was anticipated that this funding would be held in reserve to support businesses and residents form the impact of Covid-19 during 2021/22 and in future years.

The £0.053m pressure in the services was driven mainly by Health, Education, Care and Safeguarding (HECS) reflecting the continued pressures in Children’s Services of £5.647m and Adult Services of £0.756m. 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 £4.942m of pressures in Corporate Parenting and Placements, £1.454m in Wellbeing and Assessment and £0.962m in Integrated Disability & Additional Needs. The drivers for these pressures continued from 2019/20 as outlined in the report.

It was still anticipated that the Authority would deliver a balanced budget position for normal activities by the end of 2020/21.

The financial impact of the pandemic continued to have a significant effect on the projected 2020/21 outturn position.  The Authority had received four payments of Local Authority Support Grant funding from the Government (total of £16.369m), of which £0.733m had been allocated due to Covid-19 pressures arising in March 2020.

On 2 July 2020, the Government had also announced support would be provided in relation to pressures on sales, fees and charges. The Authority had now received its initial payment, covering the period April–July 2020, to the value of £2.463m and had submitted the second claim covering August–November 2020 to a value of £1.786m. This second amount had not yet been received but was included in the forecasted position reported. The Cabinet Member for Finance and Resources was being kept up to date with the impact of all grant funding relating to Covid-19 and any further grant funding would be reported to Cabinet.

The impact of pressures arising from Covid-19 in 2020/21 were forecasted to be significant and the January position contained Covid-19 pressures over and above the level of grant funding received to date.  Due to the level of uncertainty of how service delivery would continue to be impacted by Covid-19, it was expected the reported position would change over the remaining months to year end as the response and recovery continued.  Like all authorities North Tyneside was seeing a clear financial impact as a result of the pandemic and 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.

Further measures had been outlined by the Chancellor in his Spending Review announced on 25 November 2020. Further details of these measures could be found in the 2021-2025 Financial Planning and Budget Process: Cabinet’s Initial Budget proposals report presented to Cabinet on 30 November 2020.

With regards to the impact of Covid-19, the main drivers behind the £2.988m shortfall were also within Health, Education, Care and Safeguarding where £14.586m was for increased costs to the Authority of supporting the market (£7.600m), impact on savings targets (£1.626m), increased costs for children in care (£1.708m), costs associated with rapid testing (£1.058m), lost income within School Improvement (£0.625m), Public Health (£0.597m), additional demand (£0.494m), additional staffing costs, PPE, and supplies and services within Integrated Services (£0.643m) and other miscellaneous losses (£0.235m).

Significant Covid-19 related pressures existed in Environment, Housing and Leisure, (£7.844m) due to loss of income in areas such as Sport & Leisure and Highways & Transport and in Commissioning & Asset Management through income lost within Catering (£4.768m).

In relation to schools funding, the total planned deficit for 2020/21 was £6.689m.  These budgets had been revised, mainly following discussions with schools showing deficit balances, to an expected deficit of £6.755m.  After the second monitoring period of the year, this position was forecast to be £2.900m, a total improvement of £3.855m against the budget plan and an improvement of £2.777m since the first monitoring period.  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.

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 £3.809m reflecting a further rise in demand for special school places. 

The report outlined the revenue grants which had been received during December 2020 and January 2021.

The HRA was forecast to have year-end balances at 31 March 2021 of £4.911m, assuming that all identified Covid-19 related PPE costs and General Fund-related services delivered through the HRA were covered. These balances were £0.092m lower than budget which was set at £5.003m. The lower than forecast balances related to a combination of factors as set out in the report.

At 31 January 2021, there were 3,241 tenants of North Tyneside Homes on Universal Credit with arrears totalling £2.831m. This was up by 667 and £0.621m from the beginning of the year when there were 2,574 tenants on UC with arrears of £2.210m, and up from the end of November when there were 3,199 tenants on Universal Credit (increase of 42 tenants) with related arrears of £2.683m (increase of £0.148m). 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 £257.918m (£68.816m 2020/21) and was detailed in the Annex.  The Annex also set out delivery progress to date, planned delivery for 2020/21, reprogramming and other variations identified through the Investment Programme Governance process.

Regular monthly monitoring of the Investment Plan had resulted in proposals for reprogramming of £8.299m in 2020/21 and variations of £7.189m across the life of the plan, of which more details were set out in the Annex to the report.  The revised Investment Plan stood at £61.370m for 2020/21 and to the end of January 2021 spend of £33.536m had been incurred which represented 54.65% 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 for LAC levels suggested that, whilst fluctuating, there was a general trend of a steady increase in numbers, but therewere a wide range of levels of care provided, with more complex cases now being faced.

The Elected Mayor thanked the Cabinet Member for Finance and Resources and all parties involved in the important budget monitoring processes throughout the year.

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) that the forecast budget monitoring position for the General Fund, Collection Fund, Schools’ Finance and Housing Revenue Account as at 31 January 2021 be noted;

(2) the receipt of £4.930m new revenue grants be approved;

(3) the Authority’s Investment Plan spend of £33.536m to 31 January 2021 and the financing of the Plan to the end of the year be noted; and

(4) the variations of £0.853m and reprogramming of £8.299m 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.)