Agenda item

To receive the fifth budget monitoring report for the current financial year which reflects the indication of the potential revenue and capital position of the Authority at 31 March 2022.

Cabinet considered the fifth monitoring report outlining the 2021/22 financial position. It provided the latest indication of the potential revenue and capital financial position of the Authority as at 31 March 2022.

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 2021/22 approved budget savings plans; and an update on the Capital Investment Plan including details of variations and reprogramming that were recommended for approval.

The budget for 2021/22 was approved by full Council at its meeting on the 18 February 2021. The net General Fund revenue budget was set at £150.154m. This included £4.537m of savings to be achieved, all of which had been identified in previous years.

The forecast overall pressure for the General Fund Revenue Account was estimated at £2.902magainst the approved net budget. This was made up of a forecasted pressure of £0.675m on normal activities and £2.227m relating to the impact of Covid-19. The pressure on normal activities in the service was driven mainly by Health, Education, Care and Safeguarding at £6.557m, reflecting the continued pressures in Children’s Services, 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 £4.996m of pressures in Corporate Parenting and Placements and £1.317m in Integrated Disability and Additional Needs. The drivers for these pressures continued from 2020/21 and were 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.

The figures recorded to the end of January 2022 included a projection of £0.716m of costs relating to the recent storms that had hit the region.  It was expected that these costs would be met from the insurance Reserve.

With regards to the impact of Covid-19, the main drivers behind the £19.737m impact on services were also within Health, Education, Care and Safeguarding where £12.243m was for increased costs to the Authority. Significant Covid-19 related pressures also existed in Environment, Housing and Leisure (£3.056m) and in Commissioning & Asset Management (£2.999m).

The report outlined the revenue grants which had been received during December 2021 and January 2022.

In addition to the £2.655m of revenue grants the Authority had also received £6.385m of brownfield grant funding from the North of Tyne Combined Authority.

The latest position in respect of Schools Funding was provided in the Annex to the report. Schools were required to submit their rolling three-year budget plan by 31 May each year. The total planned deficit for 2021/22 was £3.902m. The Authority had been working with schools for a number of years with regard to long-term strategic issues of surplus secondary places and the associated financial pressures, which continued to be compounded by rising employment costs. The outturn for the year ended 31 March 2021 showed a surplus of £3.721m, which revised the trend of deficits over the previous few years.

As well as school balances being forecast to reduce overall, some individual schools continued to face significant financial challenges. There were six schools with deficit budget plans for 2021/22, all of which continued to be deficit following 2019/20. The High Needs Block ended 2021/21 with a pressure of £8.880m. The latest forecast of the budget position for 2021/22 indicated an anticipated in-year pressure of £4.533m reflecting a further rise in demand for special school places.

The Housing Revenue Account was forecast to have year-end balances at 31 March 2022 of £3.807m, assuming all identified Covid-19 related costs and income shortfalls were covered centrally. The balances were £0.795m higher than budget which had been set at £3.012m, due mainly to an in-year estimated underspend of £0.748m, against an in-year budget of £1.943m, as well as a prior year brought forward improvement on balances of £0.047m.

Universal Credit had been fully implemented across North Tyneside on 2 May 2018. As of the end of January 2022, 3,753 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 2021-2026 Investment Plan totalled £292.639m (£87.528m 2021/22) andwas detailed in the Annex. The Annex also set out the delivery progress to date, planned delivery for 2021/22, reprogramming and other variations identified through the Investment Programme governanceprocess.

The monthly monitoring of the Investment Plan had resulted in proposals for variations of £0.796m and reprogramming of (£9,304m) of which more details were set out in the Annex to the report. The revised Investment Plan stood at £87.469m for 2021/22 and to the end of January 2022 spend of £43.360m had been incurred which represented 55.26% of the revised plan.

In terms of treasury management, the Bank of England had raised base rate from 0.10% to 0.50% in two increments.  A rise in December 2021 from 0.10% to 0.25%, followed by another rise from 0.25% to 0.50% in February 2022.  The rise in bank rate was a response to the increased levels of inflation driving domestic cost and price pressures, which was forecast to peak to over 7% in April 2022.  The Bank of England committee updated their forecast anticipating base rate to rise to 1.50% by mid-2023.

The report also outlined progress against the 2021-2025 Our North Tyneside Plan which set out the overall vision and policy context within which the Financial Plan and Budget were set.

TheAuthority hadplans inplace todeliver allelements ofthe CouncilPlan andperformance against these plans was carefully monitored. The area under most financial pressure was Health, Education, Care andSafeguarding.

In Adult Social Care, as with most local authorities, and in line with the national picture, North Tyneside had seen costs continue 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.

InChildren’s Services,good progresscontinued tobe madeon engagingwith 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 suggestedthat, whilstfluctuating, therewas ageneral trendof asteady increasein numbers ofLAC, butthere wasa widerange oflevels ofcare provided,with morecomplex casesnow being faced.

Cabinet considered the following decision options: either to accept the recommendations as set out in Section 1.2 of the report, or alternatively, to not approve the recommendations.

Resolved that (1) the forecast budget monitoring position for the General Fund, Schools’ Finance and Housing Revenue Account as at 31 January 2022, as set out in the Annex to the report, be noted;

(2)   the receipt of £2.655m new revenue grants beapproved;

(3)   the receipt of £6.385m brownfield grant funding be approved;

(4)   the Authority’s Investment Plan spend of £43.360m to 31 January 2022 and the

financing of the Plan to the end of the year, as set out in the Annex to the report, benoted; and

(5)   the variations of £0.796m (£0.245m for 2021/22) and reprogramming of (9.304m) 

for 2021-22 within the 2021-2026 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.)