To receive the first budget monitoring report for the current financial year which reflects the first indication of the potential revenue and capital position of the Authority at 31 March 2023.
Cabinet considered the first monitoring report outlining the 2022/23 financial position. It provided an early indication of the potential revenue and capital financial position of the Authority as at 31 March 2023.
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 2022/23 approved budget savings plans; and an update on the Capital Investment Plan, including details of variations and reprogramming, that was recommended for approval.
The Budget for 2022/23 was approved by full Council on the 17 February 2022. The net General Fund revenue budget was set at £163.512m. This included £7.257m of savings to be achieved, of which £3.113m related to new business cases included in the 2022-2026 Medium-Term Financial Plan, £1.607m of full year effect of prior year business cases and £2.537m of savings previously achieved by one-off mitigations and non-permanent solutions.
Prior to any mitigation, the Authority’s approved net budget was forecast to outturn with a pressure of £18.456m. Table 1 in the report set out the initial variation summary across the General Fund.
The Authority, as you would expect at this stage of the financial year, was taking a prudent approach to forecasting including in relation to the on-going impact of Covid-19 which currently was forecast to add pressures of £5.551m to the General Fund in 2022/23. These pressures were primarily where fees and charges income had yet to return to pre-pandemic levels, where additional fixed term staff were employed to cover increased demand or to enable front-line service provision to continue unimpacted by employees needing to self-isolate. In addition to Covid-19, global market pressures existed around the Authority’s supply chain and current inflation levels, these combined added a further £5.293m to the overall pressure. The remaining £7.612m related primarily to staffing and other income related pressures across the services.
As part of the 2022-2026 Medium-Term Financial Plan (MTFP) agreed by Council in February £2.200m was set aside from the Change Reserve to support additional pressures in Home to School Transport (£1.800m), Special Educational Needs (£0.400m), additional children’s social care provision (£1.200m) and for the development of the Customer Relationship Management programme (£0.200m).
In addition to the use of the Change Reserve, £2.000m was also set aside to create a Covid-19 Reserve as part of the 2022-2026 MTFP, this included (£0.650m) to support additional caseloads within Children’s Services, (£0.350m) to support Home to School Transport and (£1.000m) to support reduced fees and charges income following the pandemic. Within the 2022-2026 MTFP, £0.150m was identified as planned use of the Insurance Reserve to support additional Repairs and Maintenance costs within the Authority’s Commissioning & Asset Management Service Area. The use of this funding has been included in Table 2.
Included within the position for Central Items is (£7.713m) of contingencies; of which (£3.116m) was being used to offset the pressures in Children’s Social Care, (£1.301m) was supporting the under achievement of savings targets and (£2.335m) is being used to support the non-energy related inflationary pressures being faced by the Authority. Further to this balance, an additional (£3.050m) was set aside in the 2022-26 MTFP to support anticipated pressures in 2022/23. Of this (£1.300m) was being used to support energy related inflationary pressures, (£0.964m) supporting non-energy related inflationary pressures and (£0.786m) supporting pressures relation to Special Guardianship Orders (SGO) within Children’s Services. With the allocation of this support, the Authority had been able to release a provision of (£0.300m) previously held on the balance sheet to support increased SGO costs.
The Authority was able to carry forward from 2021/22, £2.962m of Covid-19 related central Government grants. Of this (£1.811m) had been committed and was reflected in the £18.456m position reported in Table 1. The remaining balance of £1.151m was available to support on-going Covid-19 legacy pressures and was reflected in the revised position shown in Table 2.
With the inclusion of the planned support from the 2022-2026 MTFP, the adjusted General Fund position, as shown in Table 2, was a pressure of £9.605m. This reflected the continuing impact of Covid-19 being £2.400m over the support funding allocated. The main areas impacted were within Environment & Leisure where Sports and Leisure income from fees and charges continued to be lower than pre-pandemic levels. Initial projections suggested income would be higher than in 2021/22 but still only 80% of the income levels achieved pre-pandemic in 2019/20. Significant pressures also existed in Children’s Services, where the response to the impact of Covid-19 had seen staffing levels increase to manage a significant increase caseloads and demand for services for Children. This was not unique to North Tyneside and was being seen across the region and nationally.
The Inflation Rate had recently reached 9.1% and this was much higher than when the allocations were made in the 2022-2026 MTFP. This was forecast to add a further £3.029m in respect of both energy and non-energy related inflationary pressures. The majority of the inflation issues being in Adults Services across the external care market and contractual costs within Commissioning & Asset Management for catering supplies and the cost of Home to School Transport.
The remaining balance of £4.176m was attributable to pressures considered to be ‘Business as Usual’. Finance officers were continuing to work with Cabinet, the Senior Leadership Team and other senior officers across the Authority to review Business as Usual activity in a number of key areas: Children’s Services – staffing & placements; Children’s risks and the likelihood of crystallisation; SEND pressures; Adults Social Care – demand assumptions; Adults Social Care risks and the likelihood of crystallisation; Unachieved savings targets; Commissioning & Asset Management – Impact of SLA reductions; Law & Governance Structure – use of locums; and Revenues & Benefits position – overpayments. The aim of this work will be to ensure actions are in place to bring the outturn forecast for normal activities in on balance and it is anticipated the position will improve over the course of the financial year as planned remedial actions begin to impact on both expenditure and income.
New savings of £4.720m were agreed as part of the Budget approved by Council in February 2022 so the total savings the Authority had had to find in the eleven years following the 2010 Comprehensive Spending Review (CSR) as planned to 2022/23 came to £134.268m.
The governance structure of the Efficiency Savings Programme included a monthly review of progress by the Senior Leadership Team (SLT). In addition, in-year budget and performance progress meetings were held between officers and Cabinet Members to consider progress and actions being taken to deliver savings. The variations in relation to the savings were outlined in the report.
New savings were proposed for 2022/23 of £3.113m combined with £1.607m of savings targets that were agreed in prior years budget setting processes for delivery in 2022/23. Savings targets of £2.373m within Health, Education, Care and Safeguarding (HECS) and £0.164m within Commissioning & Asset Management (C&AM) were met in 2021/22 through Covid grants, alternative management actions or through one-year funding sources. These targets still required permanent achievement increasing the total savings brought forward from prior year business cases to £4.144m. The overall target to achieve in 2022/23 was therefore £7.257m.
Within HECS, Adults Services were projecting to achieve the full £0.350m relating to business cases brought forward from prior years. Within the CYPL pressure of £14.372m, £3.223m related to the achievement of savings targets. In the previous financial year these savings had been significantly impacted by Covid-19 and as such, achievement had been supported by Central Government Covid-19 grants. With these grants not available in 2022/23 and on-going demand-led pressures already impacting the service, current projections were for all CYPL savings to remain unachieved in 2022/23.
Finance Officers continued to attend meetings with senior managers and the Head of Service across adult and children’s services and individual managers had assigned responsibilities to pursue deliverability of existing schemes and to identify alternative proposals during 2022/23.
The forecast assumed that LMB would approve the 15p increase in paid school meals commencing September 2022. School meals increases had been delayed for two years so previous income targets for 2020/21 & 2021/22 were also included in these figures. If not approved by LMB the undeliverable element would increase. The schools leaving the SLA were confirmed so £0.025m of the 2022/23 savings target for paid school meals and SLA income would not be delivered. £0.030m of the cleaning savings target was forecast to be met. Of the £0.486m yet to delivered £0066m was undeliverable and £0.420m was yet to be identified. All savings in these services were forecasted to be achieved.
A table containing details of new Revenue Grants received during April and May 2022 was set out in section 1.5.4 of the report.
Schools were required to submit their rolling three-year budget plan by 31 May each year. The total planned deficit for 2022/23 is £5.532m. 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.
The High Needs Block ended 2021/22 with a pressure of £13.512m. The initial forecast of the Budget position for 2022/23 indicated an anticipated in-year pressure of £3.413m reflecting a further rise in demand for special school places, producing a cumulative deficit balance of £16.924m.
The Housing Revenue Account (HRA) was forecast to have year-end balances at 31 March 2023 of £3.139m. These balances were £0.070m higher than budget which was set at £3.069m.
Universal Credit was fully implemented across North Tyneside on 2 May 2018. As of early June 2022, 3,809 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 progresses to identify any adverse impacts on the Budget position.
The approved 2022-2027 Investment Plan totalled £325.029m (£114.280m 2022/23) and was detailed in table 22 of the Annex. The Annex to the report also set out in Section 6 delivery progress to date, planned delivery for 2022/23, reprogramming and other variations identified through the Investment Programme Governance process.
An officer led review of the Investment Plan had resulted in proposals for variations of £0.365m of which more details were set out in Section 6 of the Annex to the report. The revised Investment Plan stood at £114.280m for 2022/23 and to the end of May 2022 spend of £5.287m had been incurred which representsed4.64% of the revised plan.
Significant inflationary pressures were being experienced across the UK, and senior officers within the Authority had undertaken a review of inflationary impact to the Investment Programme. Supply issues and rising costs were being reviewed and to date the Authority anticipated no impact to the cost of the capital. However, there may be an impact on the delivery of some planned activity. The corporate risk register included risks for such inflationary pressures to the investment plan.
The 2021-2025 Our North Tyneside Plan (Council Plan) set out the overall vision and policy context within which the Financial Plan and Budget were set. The Council Plan had five key themes – A thriving North Tyneside; A caring North Tyneside; A secure North Tyneside; A family-friendly North Tyneside; and a green North Tyneside. For each theme there was a set of policy outcomes that the Authority was seeking to deliver, these are detailed in the Council Plan itself. The Authority had plans in place to deliver all elements of the Council Plan and performance against these plans was carefully monitored.
With regards to financial performance against the Plan, the area under most financial pressure was Health Education Care and Safeguarding. In common with most local authorities, and in line with the national picture, North Tyneside had seen costs within adult social care 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.
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
funding. As such, the levels of looked after children (LAC) and children who required
supervisionafter 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 there were a wide range of levels of care provided,
with more complex cases now being faced.
Cabinet considered the following decision options: to accept the recommendations set out in paragraph 1.2 of the report; or alternatively, to not accept the recommendations.
Resolved that (1) the forecast budget monitoring position for the General Fund, Schools’ Finance and Housing Revenue Account (HRA) and as at 31 May 2022 (Annex sections 1, 2 and 3), be noted;
(2) the receipt of £0.832m new revenue grants (as outlined in section 1.5.3 of the report, be approved;
(3) the Authority’s Investment Plan spend of £5.287m to 31 May 2022 and the financing of the Plan to the end of the year (Annex Section 4), be noted; and
(4) the variations of £0.365m for 2022/23 within the 2022-2027 Investment Plan (Annex Section 4), be approved.
(Reason for decision: It was important that Cabinet continues to monitor performance against the Budget, especially given the current level of financial pressures faced by the public sector.)