Report of the Deputy Chief Executive and City Treasurer attached

The Executive considered a report of the Deputy Chief Executive and City Treasurer, which outlined the projected outturn position for 2023/24, based on expenditure and income activity as at the end of July 2023 and future projections.

The Executive Member for Finance and Resources reported that the current budget monitoring forecast was an overspend of £9.6m and that there were considerable risks to the position relating to the impact of rising demand and increasing costs.

The main pressures were being felt in the social care budgets reflecting the national pressures in the health and social care sector and trends being experienced across most Social Care providing local authorities.  A £3.7m forecasted overspend in Adult Social care was largely in relation to the provision of long term care arrangements with demand above 2023/24 budget assumptions.  Whilst strong progress on the approach to reduce demand through ‘prevent, reduce and delay’ was being made through the Better Outcomes Better Lives (BOBL) initiative, it was unlikely that the additional demand management savings (£5.5m) envisaged from client social care packages would be delivered. As such the overspend was in part being offset by employee underspends across the Directorate due to difficulties in recruitment.

The forecasted £4.9m overspend in Children’s Services was after taking account of £3.9m of mitigations against key pressures. The underlying cost drivers related to higher placement costs for Looked After Children (LAC) and Care Leavers Supported Accommodation, small increases in External Residential and Care Leaver placements numbers, Remand activity, and Home to School Transport pressures.  The biggest pressure related to external residential placements and increased complexity of need of the current cohort with placement costs having increased by 44% in the current financial year.  Investment in provision for those children with higher levels of needs was underway. Once this work was complete it was expected that this would reduce some of the pressures on the external residential care budgets.  The main variations in the other service departments totalled £0.9m.

As part of the 2023/24 budget setting process £25.2m of savings were agreed. Of these £15.1m (60%) were on track for delivery, £1.5m (7%) were risk rated medium, and £8.5m (33%) rated high risk in terms of the likelihood of delivery. Officers were working to identify alternative savings where original plans might not be achieved or delayed. 

The report went on to outline the following budget virements which required approval

·                The transfer of part year funding for Graduate Management trainees from HROD to directorates totalling £293k

The report also provided details of additional grant notifications that had been received since the budget had bene set and which were now reflected in revised budgets:-

·                Adults - Market Sustainability and improvement fund £4.055m

·                Corporate Core - Household Support Budget £12.906m

·                Libraries - Build a business in GM libraries - £0.601m

·                City Policy - Innovate UK Net Zero Pathfinder GM £86k 2023/24, £0.516m 24/25, £301k 25/26

·                Corporate Core - Transparency Code New Burdens £13k

·                Housing - Tenant Satisfaction New Burdens £63k

In addition, when the budget was set in February 2023 a total of £14.3m was identified for price and electricity inflation.  £2.2m was allocated to Children’s for internal placements, £0.5m to Education Home to School Transport and £2.7m to Adults as a contribution to market sustainability. At period 2 requests from Childrens services totalling £2.4m were agreed, mostly relating to fostering and residential placements.  This left £6.4m in the corporate price and utilities inflation budget for inflation pressures.  Additional inflation requests were currently being considered and would be brought back to a future Executive meeting for approval. 

At this stage it was envisioned that the known increased costs could be contained within the available inflationary budgets made available for 2023/24 however this remained a risk.

It was also reported that allowance for a 6% pay increase was allowed for in the budget costing an estimated £15.6m.  In February the National Employers offered a £1,925 pay increase from 1 April 2023 and 3.88% for those above the top of the pay spine.  The estimated budget requirement to fund this offer for MCC staff was £15.5m for 2023/24, and therefore within the available budget.  Should any pay award above this level be agreed, this would exceed the current provision in the budget.

The Executive Member for Finance and Resources concluded that it was very early in the financial year and vigilance was needed given there were significant uncertainties and risks to the position as cost of living and inflationary pressures could increase.  Any overspend this year would be a direct call on the General Fund Reserve which would need to be reimbursed in future years.  In addition any ongoing impact of the pressures faced this year would need to be addressed in the 2024/25 budget.  It was therefore important mitigations were identified to bring forecast spend back in line with the available budget.

Councillor Leech sought clarification as to whether the increase in placement costs within Children’s Services were as a result of an increase in overall costs,  inflationary pressures or an increase in the demand on this service.  He also sought clarification as to the cause of the projected overspend in the Corporate Core as he noted that in previous years, this Directorate had usually produced a budget underspend

Decisions

The Executive:-

(1)       Note the global revenue monitoring report and forecast outturn position which is showing a £9.6m overspend.

(2)       Approve budget virements to be reflected in the budget as set out at paragraph 2.9 of the report

(3)       Approve the use of additional revenue grant funding as set out at paragraph 2.10 of the report.