Agenda item

To receive a report on a full overview of both the budget and service delivery performance position across the Authority as at 31 May 2023.

(Councillor Clark left the meeting at this point in proceedings and took no part in the following item of business).

Cabinet considered the first financial and performance monitoring report outlining the 2023/24 financial position.  It provided a full overview of both the budget and service delivery performance position across the Authority as at 31 May 2023.  In terms of the budget, it set out the forecast outturn position for 31 March 2024 for both revenue and capital.  For performance, it set out the key areas of service delivery, including where this impacted in budget terms; and the key performance metrics which would be monitored by the new Office for Local Government which had now been established by Government.

The report also set out the current position in relation to schools finance, the Authority’s Investment Plan and treasury management.  In addition, it provided details of additional revenue grants received up until 31 May 2023. 

The report set out the programme of work which was in place to manage and mitigate the 2023/24 budget pressures and formed the 2024-2028 Medium Term Financial Plan.  From a performance point of view, service delivery overall across the Authority remained strong.  Key areas of strength were delivery of the Our North Tyneside Plan 2021-2025 programmes including delivery of the affordable homes and carbon reduction programme.  The Ambition for North Tyneside Programme was progressing very well with regeneration projects across all four areas of the borough.  The Authority continued to manage high levels of demand in a number of areas including Education, Health and Care Needs Assessments, children in care and home care.

The forecast net pressure for the current year as at 31 May 2023 was £11.7m.  A breakdown of this by Directorate was shown in Table 1 of paragraph 1.5.1.2 of the report, with the key areas of variation summarised in the following paragraphs. A more detailed commentary of pressures was contained in section 1 of Annex 1.  Many of the pressures in the current year were consistent with those faced in recent years.  This included the impact of inflation, on both in-house delivery and externally commissioned services, as well as rising demand and increased complexity for services within both adults and children’s social care.  An overview of the key areas of pressure and related performance information was set out below.

Adults Services had a forecast pressure of £2.3m.  Within this, costs for externally commissioned care were the main cause, with the greatest pressure continuing within residential care.  This was partly mitigated by vacant posts, additional health income but the main improvement being seen in increased client contributions.  The pressure was driven by a range of factors, but primarily inflationary pressure on care providers fees and the lack of home care provision, resulting in more short-term residential care placements to facilitate hospital discharge.  Further detail was contained within section 1.2 of the Annex.  From a performance perspective within Adults Services, despite the focus to facilitate hospital discharge, the number of clients in short and long-term placements in residential and nursing care settings had remained constant. There was an on-going drive to find alternatives to short-term residential placements, where home care was not available, as well as improve the monitoring and reporting of these placements.  Demand for homecare services remained high and there was ongoing work to support the homecare market, which was a national issue across all authorities.

Children’s Services had a forecast pressure of £5.4m.  In 2022/23 there were significant pressures (£14.6m at its height) in Children’s Services.  The majority of this (£12.3m) related to services for children in care.  This was due to increased staffing costs for children’s social care and increased numbers of children, both in need and in care, compared to the numbers assumed when the budget was set originally.

A significant programme of work to analyse and understand the position, had resulted in an increase to the gross budget of £9.7m based on new assumptions.  This assumed a level of children in need at 1,600, with 330 of those being children in care.  The associated staffing requirement had been increased to 74 social workers.  In previous years the budget had been based on assumptions of 1,400 children in need with 260 children in care, supported by 55 social workers.  This led to significant financial pressures as well as increased demand on the team.  Within the current year, the increased budget had improved the position, however, there was still a forecast financial pressure due to the number of external residential care placements and the level of demand remaining higher than assumed.  The number of children in care was at 362, with the overall level of children in need at 1662.  Work was therefore ongoing with this area as part of the programme to mitigate and manage both the budget pressures and set the Medium-Term Financial Plan.  More information on Children’s Services was set out in section 1.3 of the Annex.

Commissioning and Asset Management (C&AM) had a forecast pressure of £6.2m due to two main areas.  Firstly, Home to School Transport which had a pressure of £2.9m due to higher-than-expected levels of children with complex needs who had support with transport.  This was further exacerbated by inflationary pressures on the transport contracts.  There was also a forecast pressure of £2.9m for Catering Services.  This was due to a combination of inflation on the costs of food purchases, staffing costs relating to sickness, maternity cover and ‘deep cleaning’ days and due to reduced income from fewer schools now using this service.  Further information on C&AM was included in section 1.5 of the Annex.

These main pressures in the General Fund were partly offset by a forecast underspend in Central items.  This included savings in the minimum revenue provision (£1.5m), treasury management savings (£1.0m) and the application of contingencies for general inflationary pressures (£1.1m).  Further details on Central Items is included in section 1.11 of the Annex.

A programme of work was in place to both manage and mitigate the 2023/24 budget pressures as well as form the 2024-2028 Medium Term Financial Plan.   A full overview of the 15 workstreams within this programme was set out in section 6 of the Annex.  The workstreams included the work in relation to the High Needs Block (section 1.5.2) and Children’s Services as referenced above.

In relation to individual schools, they were required to submit their rolling three-year budget plan to the Authority by 31 May each year.  All schools had provided returns but two still required final Governor approval, therefore the figures for 2023/24 included in this report were draft.

The provisional outturn for school balances for 2022/23 was a deficit of £0.4m.  Budget plans submitted by schools indicated that this would increase to a deficit of £8.5m by the end of 2023/24. There were currently 14 schools that had submitted a deficit budget plan for 2023/24.  It was noted that there were five new schools requiring a licenced deficit agreement in 2023/24 and nine schools that continued to require support.  Of these nine schools, one had a structural deficit, which meant that the school was unable to submit a recovery plan which showed it coming back into financial balance within 3 years which was required in line with the scheme for financing schools.  The Authority would hold budget review sessions with the fourteen schools involved across July and September.

There had also been significant pressures within the Dedicated Schools Grant (DSG) in relation to the High Needs block which ended 2022/23 with an overspend of £9.6m.  As reported previously, to address these pressures, the Authority had joined the Department for Education’s (DfE) Safety Valve Intervention Programme on 1 April 2023.  Subject to meeting specific performance measures, this would provide the Authority with £19.5m of revenue funding to support the current deficit position within this budget area. The DSG Management Plan (which was submitted to the DfE as part of the agreement), demonstrated how, over a five-year period, the Authority would bring the High Needs Block back into balance by the end of that period.  The Authority was on track to reach a positive in-year balance on this budget by the end 2027/2028.  The current year position included the first tranche of funding from the DfE of £7.8m.

The Authority’s DSG management plan forecasted that there would be 2,134 Education Health and Care Plans (EHCP) maintained in January 2024 and currently the authority was on track to do this.  There were 2,140 EHCPs at the end of May 2023.  The rate of EHCPs maintained by the Authority had slowed, despite the higher demand for Education, Health and Care Needs Assessments in North Tyneside compared to national and regional rates.

As part of the Safety Valve Intervention Programme, the Authority would receive £4.7m from the DfE in capital funding to support the Dedicated Schools Grant (DSG) Management Plan which would be used to develop an Early Years hub and increase the Additionally Resourced Provisions (ARPs) in schools.  As part of this programme, the Authority was working with its maintained special schools to agree pupil numbers and the banding of these pupils which could impact on the funding they received.

The projected outturn position for the Housing Revenue Account (HRA) was an underspend of £0.015m.  The main areas of pressure within this budget area related to housing repairs due to the impact of inflationary increases on materials and subcontractor prices.  There was also an anticipated pressure due to the 2023/24 pay award expected to be greater than assumed in the HRA Business Plan.  Other significant pressures related to the cost-of-living crisis and the continued uncertainty and volatility of utility bill costs.  In performance terms for housing, rental income collection was better than forecasted despite the gradual increase in rent arrears for current tenants due to the impact of Universal Credit.  Fewer than 1% of homes were empty and available for letting, therefore maximising the amount of rent that could be collected.

The approved 2023-2028 Investment Plan totalled £329m (£114m in 2023/24) and was detailed in table 22 of the Annex, within section 4.  A review of the Investment Plan had resulted in proposals for variations (changes to the financing of the Plan) of £6.8m and reprogramming (changes to the delivery of the Plan) of £0.3m in 2023/24, details of which were set out in Section 4 of the Annex, paragraphs 4.3 and 4.4.  At the end of May 2023, spend of £6.3m had been incurred in year, representing 5.21% of the overall plan for 2023/24.  Progress on the Affordable homes programme; Housing Capital delivery programme; Asset Planned Maintenance programme; Highways and Infrastructure Works; Ambition for North Tyneside; Killingworth Lake; and Waggonways project were detailed in paragraph 1.5.4.2 of the report.

The level of external borrowing (excluding PFI) had remained the same since 31 March 2023 at £422m to 31 May 2023.  The level of internal funding remained high at £68.5m at 31 May 2023 (£102m at 31 March 2022).  This was in line with the Authority’s Treasury Management Strategy as this avoided external interest charges wherever possible.

As at 31 May 2023 the Authority had Treasury investments of £15m.  During April and May 2023, £0.2m was generated through interest earned on investments, of which £0.1m related to income earned on HRA balances.  The Authority invested in line with Chartered Institute of Public Finance Accountancy (CIPFA) guidance, maintaining a low-risk approach to investments.

The table in paragraph 1.5.6.1 of the report set out the details of new revenue grants received up to the end May 2023.

Cabinet considered the following decision options: either to agree the recommendations as 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, Housing Revenue Account (HRA), schools finance and Treasury

Management together with the service delivery performance position

across the Authority as at 31 May 2023, be noted;

(2) the Authority’s Investment Plan spend of £6.3m to 31 May 2023 and the

proposed financing of the Plan to the end of the year, be noted;

(3) variations of £6.8m and reprogramming of £0.3m for 2023/24 within the 2023-2028 Investment Plan; be approved; and

(4) the receipt of £2.274m new grants including the acceptance of all Grant Funding Agreements and, in relation to the UK Shared Prosperity Fund for Communities and Place, be approved, and the Assistant Chief Executive be authorised to procure any goods, works or services to deliver the outcomes for that grant, be approved.

(Reason 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.)