Report of the Deputy Chief Executive and City Treasurer attached

The Executive considered a report of the Deputy Chief Executive and City Treasurer, which provided an overview of the Council’s current financial position for 2022/23.

The Executive Member for Finance and Resources advised that since the budget was set in February 2022, there had been several significant changes that were impacting on the Councils financial position which was resulting in a forecast overall position for 2022/23 of an overspend of £20.1m,  a deterioration of £15.6m since the last report to Executive in July. This was mainly due to the announcement of a higher than expected one year pay award offer for 2022/23 (£9.5m), additional utilities inflation (£3.9m), higher than expected price inflation (£3.6m) and other pressures, largely relating to income shortfalls (£3.4m).This shortfall was projected to increase to

£33m next year and £73m by 2024/25.

In relation to the delivery of the required £13.4m of net savings, £3.2m were forecast to be delivered and £4.7m considered at medium risk. £5.5m had been mitigated through the use of reserves as part of the budget process, as delivery against the original plan in Adults services was delayed due to the ongoing pandemic in 2021/22. Officers were working to address these to ensure all savings are achieved or mitigated on recurrent basis.

At this stage there was no indication of any financial support from central government, consequently, all directorates where being required to review budgets and identify in year savings and mitigations to support the current year position, including bringing forward savings options being developed for next year, only filling vacancies where necessary for service and savings delivery and discretionary spend to be reduced or delayed amongst other mitigations.  Any remaining overspend which could not be mitigated in year would require a call on the smoothing reserve or the general fund reserve.

The inflationary pressures outlined in the report were expected to continue into future years.  This coupled with funding uncertainty increased the risks associated with setting a balanced and sustainable long-term financial plan and represented a deterioration of the Council’s financial position if no action is taken.  It was therefore vital that the Council continued with its programme of innovation and reform and developed its operating model to help tackle these challenges and keep the Council’s finances stable and sustainable.

A programme of budget cuts and savings totalling £60m was being developed and would be reported to scrutiny committees in November 2022.  To support and mitigate against the high levels of uncertainty a full review of reserves had been undertaken to enable a realistic and resilient budget to be set.  Whilst it was early in the financial year, vigilance was needed given there were significant uncertainties and risks to the position and inflationary pressures could increase further.

Officers were working to reduce the overspend through identifying in year efficiencies and working with suppliers to reduce and mitigate inflation requirements. Progress would be reported back to Executive in December.

Councillor Leech sought clarification on the level of inflation officers had used in calculating the Council’s financial position, what adjustments would need to be made to future years budgets should revenue income not return to previous levels and whether there was any restrictions on which Parks would be eligible to the Levelling Up Parks fund.

Decisions

The Executive:-

(1)      Note the report and forecast outturn position which is showing a £20.1m overspend.

(2)      Approve the use of unbudgeted external grant funding as set out in Appendix 2 to the report.

(3)      Approve the use of budgets to be allocated as set out in Appendix 2 to the report.

(4)      Approve the use of reserves as set out in Appendix 2 to the report.

(5)      Note that an urgent key decision will be taken in relation to agreeing the energy contracts as set out at paragraph 2.8 of the report.