Agenda item

To receive the fourth 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 202

Cabinet considered the fourth 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 Authority’s finances were complex in any year given the range of services that were delivered; the picture this financial year was even more volatile given the national and global economic challenges.  At a Service level, before the application of planned contingencies and central funding, the gross pressure would be £23.511m.  However, the budget for the year included contingencies of £6.752m and other central funding of £1.006m (both shown within the Central Items figure in Table 1). As a result, the total forecast year-end pressure for the General Fund, shown in Table 1 reduces to £15.753m.  Table 1 sets out the initial variation summary across the General Fund, with a detailed commentary of variances included in Annex 1 to the report.

Central Items, its use was identified as: £3.116m to offset the pressures in Children’s Social Care; £1.301m was supporting the under achievement of savings targets; and £2.325m to support the inflationary pressures being faced by the Authority. In September’s report, a £0.316m saving was included reflecting the part year reversal of the national insurance increase along with a £4.927m of Minimum Revenue Provision (MRP) savings following the conclusion of External Audit work into the methodology change; these items remained in the forecasts.  In 2021/22 these savings were set aside in a new MRP reserve, which remained on the balance sheet, but it was likely that the in-year saving would be required to support the bottom-line position in 2022/23, so was currently included in the forecast position.  This gave a total underspend for Central Items of £13.002m.

Table 2 added further detail to the information in Table 1.  The top half of table 2 breaks down the forecast £15.753m pressure into the main factors of covid legacy, utility, other inflation and other pressures. The covid pressures of £8.021m arose primarily from fees and charges income not yet returning to pre-pandemic levels and additional fixed term staff employed to cover increased demand or to enable front-line service provision to continue. 

The lower half of Table 2 included details of funding set aside to support known pressures.  As part of the 2022-2026 Medium-Term Financial Plan (MTFP) agreed by full Council in February, £2.200m was set aside from the Change Reserve to support additional pressures in Home to School Transport (£0.400m), 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). The £0.400m relating to Home to School Transport had now been allocated to Commissioning & Asset Management and was reflected in the services projected position, with the remaining £1.800m supporting the overall corporate pressure, in Table 2. In addition, £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. The £0.350m relating to Home to School Transport had now been allocated to Commissioning & Asset Management and was reflected in the services projected position, leaving £1.650m to support the overall corporate pressure (Table 2).

Within the 2022-2026 MTFP, £0.150m was identified as planned use of the Insurance Reserve to support additional Repairs and Maintenance costs. The use of this funding had been included in Table 2.  A further £1.300m of contingencies had not been applied to specific service areas/central items, so could support the overall corporate position.

Following the on-going review of provisions, the Authority had been able to release a provision of £0.300m relating to Special Guardianship Order costs, reported previously, along with a further £0.428m included in this report, giving an underspend of £0.728 in total.  £1.925m of funding previously reported in July had now been allocated to help cover the cost of the Pay Award, which was now approved at £1,925 for every full-time equivalent employee. Despite this additional allocation, the cost of the pay award was higher than the funding set aside and was reflected in the overall forecast for the year, which was reflected in individual service areas in the top part of Table 2. The Authority carried forward £2.962m of Covid-19 related central Government grants from 2021/22. Of this £1.462m had been committed and was reflected in the £15.753m position reported in Table 1. The remaining balance of £1.50 was available to support on-going Covid-19 legacy pressures and was reflected in the revised position (Table 2).

Taking all of the above into account, the result was a forecast year-end pressure of £8.625m, which was an improvement of £0.175m since the previous Cabinet report.

The main service areas facing forecast overspends were those most exposed to the new, emerging pressures, which were impacting on top of the residual covid-impacts. Environment, which included Sports and Leisure activities, was experiencing income shortfalls from fees and charges, which continued to be at lower than pre-pandemic levels.  That Directorate was significantly affected by energy costs, given it included streetlighting, leisure centres and customer first centres which were all energy intensive activities. In addition, higher inflation rates were significantly impacting on the waste management contract.

Children’s and Adults’ Services were forecasting significant pressures, as the impact of Covid-19 had seen the need to increase staffing levels to manage increases in both the complexity and volume of demand for services.  This was also resulting in increased payments to external providers. This was not unique to North Tyneside and was being seen across the region and nationally. Commissioning & Asset Management was forecasting overspends in catering supplies and the cost of Home to School Transport, with the cost of supplies and fuel rising rapidly in this period of high inflation. The Resources Directorate was experiencing overspends in Legal Services, associated with the level of locum solicitors dealing with a combination of increased demand and job vacancies, as well as the impact of the recovery of benefit overpayments in the Revenues and Benefits Service.

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 as well as challenging and reviewing the current projected risks the authority was facing in a number of key areas including ‘Children’s Services; High needs/SEND; Adults Social Care; Unachieved savings targets; Commissioning & Asset Management; Law & Governance; and Revenues & Benefits’. The aim of this work would be to ensure actions were in place to bring the outturn forecast for normal activities in on balance and it was anticipated the position would improve over the course of the financial year as planned remedial actions began to impact on both expenditure and income. Should any balance remain at year-end then this would need to be supported from the Strategic Reserve, significantly reducing the level of un-ringfenced reserves the Authority had available.

New savings of £4.720m were agreed as part of the Budget approved by full Council in February 2022 taking the total savings the Authority had had to find in the eleven years following the 2010 Comprehensive Spending Review (CSR) 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 sections below, with more detail included in the regular reports on this topic to the Overview, Scrutiny and Policy Development Committee.

The new savings of £4.720m were combined with £2.537m of brought forward targets that still required a permanent solution from previous years, meaning the overall target to achieve in 2022/23 was £7.257m. These savings were factored into Tables 1 and 2 of the report but were shown separately in section 1.5.3.3 for transparency.

Adults Services were projecting to achieve the full £0.950m target. Within the CYPL pressure of £13.477m reported earlier, £2.800m related to the non-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 these CYPL savings to remain unachieved in 2022/23.

Within Commissioning & Asset Management, £0.400m of cross-cutting 2022/23 savings were held with £0.036m projected to be achieved and £0.026m of the Procurement saving projected to be achieved to date by in year actions, with work on-going across the Authority to achieve the balance by the year end. The unachieved savings were included in the forecast pressure in the report (Table 1).

All savings in the other service areas were forecasted to be achieved.

Schools were required to submit their rolling three-year budget plan by 31 May each year and as reported previously the total planned in-year deficit for 2022/23 is £5.533m.  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.  Finance officers were working with schools to produce an update on 2022/23 school finances position which would be presented to Cabinet in the next financial report.

The High Needs Block ended 2021/22 with a pressure of £13.511m.  The forecast of the Budget position for 2022/23 indicated an anticipated in-year pressure of £4.416m reflecting continued demand for special school places, producing a cumulative deficit balance of £17.927m.

The Housing Revenue Account was forecast to have year-end balances at 31 March 2023 of £0.281m. These balances were £0.090m lower than budget which was set at £0.371m.

Universal Credit was fully implemented across North Tyneside on 2 May 2018.  As of the end of November 2022, 4,049 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 2022-2027 Investment Plan totalled £331.281m (£103.523m in 2022/23) and was detailed in the Annex (Table 20) to the report. The Annex also set out (Section 4) 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 £0.152m and reprogramming of (£10.942m) of which more details were set out in the Annex (Section 4).  The revised Investment Plan stood at £92.733m for 2022/23 and to the end of November 2022 spend of £40.858m had been incurred which represented 44.06% of the revised plan.

The Investment Plan continued to face significant inflationary pressure and Senior Officers within the Authority had undertaken a review of the expected financial impact on approved schemes with the relevant project managers. The review had confirmed that for the majority of schemes there had been an ability to re-profile planned works to future years given supply issues and rising costs. However, in some cases it was proposed to utilise the Authority’s contingency allocation within the Investment Plan in order to maintain delivery plans. The use of the contingency was managed as part of the Investment Programme Board governance arrangements. The corporate risk register included risks for such inflationary pressures to the investment plan and the position was monitored on an ongoing basis. 

The 2021-2025 Our North Tyneside Plan (Council Plan) sets out the overall vision and policy context within which the Medium-Term Financial Plan and Budget were set.  The Council Plan, “Building A Better North Tyneside”, had five key themes – ‘A caring North Tyneside; A thriving 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 which the Authority was seeking to deliver; these were detailed in the Council Plan itself. The Authority had plans in place to deliver all elements of the Plan and performance against delivery was carefully monitored.  An update report on the progress of delivering the 2021-2025 Our North Tyneside Plan was presented to Cabinet in September 2022.

Cabinet considered the following decision options: to approve 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 30 November 2022 (Annex sections 1, 2 and3), be noted;

(2) the receipt of (£1.134m) new revenue grants (as outlined insection 1.5.4 of the report), be approved;

(3) the Authority’s Investment Plan spend of £40.858m to 30 November 2022 and the financing of the Plan to the end of the year (Annex Section4), be noted;

(4) variations of £0.152m and reprogramming of (£10.942m) for 2022/23 within the 2022-2027 Investment Plan (Annex Section 4), be approved;

(5) the information on the Collection Fund (Annex section 6), be noted;and

(6) the write-offs of business rates identified in Table 29 (Annex section 6 paragraph 6.5.1), 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.)