Agenda item

Purpose: To report on the in-year financial performance of the Council’s revenue budgets.

The Commission considered a report (Agenda Item 10) concerning the Revenue Report for Quarter One 2022/23..

Joseph Holmes (Executive Director - Resources) introduced the report. Key points from the presentation were as follows:

·         The Council was forecasting an overspend of £2.1 million after mitigations.

·         There would be further impacts associated with inflation and the staff pay award.

·         Within the People directorate, there was increased demand from both Adult and Children Social Care. Adult social care had gone up by 5-6%

·         There were residual income pressures from Covid, particularly in relation to car parking and the leisure contract.

·         The underlying position of savings was positive.

·         Some mitigations were proposed, which would be reviewed at the end of Quarter 2.

Members asked about the likely future direction of the overspend and whether central government would provide additional support. Officers noted that in previous years, demand for adult social care places decreased in months five and six, but the last two years had been affected by Covid. There had been no announcement to date regarding additional central government funding. It was noted that other local authorities had similar overspends for Q1. Additional grants had been claimed for initiatives such as Homes for Ukraine, which would be recorded in the Q2 report.

Clarification was sought as to the meaning of the term “managing demand to the model”. It was explained that this was about trying to keep clients out of care for as long as possible by offering advice and guidance or other support not delivered by the local authority. Clients were supported through lower level services for as long as possible, e.g. through reablement support.

Members queried why despite lower occupancy in our own care homes, clients were being placed in externally commissioned beds, which cost more. It was confirmed that some homes were unable to cope with the complexity of the individual’s care needs, or there could be issues that meant it was not suitable for an individual to go to a particular care home (e.g. placement restrictions for certain types of care).

Members asked why the forecast increase was 20 clients in 2022, but the model only showed 10 in 2023. It was explained that this was down to the way in which the model was calculated, which was based on trend analysis in previous years as well as local intelligence about clients. In previous periods, there had been government support for hospital discharge and these clients would subsequently be picked up by the Council.

Members noted that there were limited reserves and asked about the impacts of inflation, rising energy costs, rising interest rates and the pay award. Officers stated that the minimum levels of reserves was £7 million and the current level was £8.9 million. If the predicted outturn was achieved, then it would push the reserves below its minimum level. In relation to bank rates, it was noted that there would be an underspend due the Council not borrowing for the current year’s capital programme. With respect to energy inflation, spend was forecast to increase from £0.75 million to £1.7 million. Some funding had been set aside for this, but energy prices had continued to rise. Similarly some funding had been set aside for adult social care inflation. Another area of inflation was around the waste contract, which had been provided for in the budget. Inflation would have a much larger impact in 2023/24.

Members asked about the underlying assumptions used to calculate the revised forecast. It was explained that some inflation would not be present in the Q1 report because inflation was not so high at that time, so there would be additional inflationary pressure in Q2. The current forecast included the best guess as to any additional inflationary impacts.

Members suggested that inflation could rise as high as 18-20% and asked if forecasts could be changed to reflect these rates. It was confirmed that more of this would be included in the Q2 report. Officers indicated that more paragraphs could be added on inflation. It was noted that Timelord 2 had reduced the Council’s office needs and would help to offset some energy inflation impacts. However, Members pointed out that staff may want to return to the office rather than pay to heat their homes.

Members asked how figures on pages 7-9 related to each other and indicated that the report was not user-friendly. Specific queries were made in relation to the Planning Service, where a saving of £100,000 was forecast despite the service struggling to recruit staff and being reliant upon agency support. It was explained that the plan was not to make savings but to reduce agency costs in line with the budget. Members expressed concern that workload would increase and applications would be processed more slowly, which would have wider implications for the economy. Officers confirmed that there the efficiency of the Planning Service would be improved and processes would be sped up to support economic growth. Also, greater levels of income would be generated from Planning services.

Members asked for more quantifiable details of agency spend across departments with comparison against budget to be included in future finance reports.

Action: Future finance reports to include details of agency spend across departments with comparisons against budgets.

Members highlighted a reference to overspend in Adult Social Care due to agency cover in the report, and asked how much this was. Officers noted that there was further information in the table below. It was confirmed that agency costs had increased and this was being considered by Personnel Committee. Also, a Recruitment and Agency Panel had been set up, which would consider all new recruitment and agency staff requests. Members noted that increased costs were incurred by asking agencies to recruit staff rather than doing it in-house – this had been raised at Personnel Committee.

In relation to annualised client number for long-term Adult Social Care services, it was noted that the number had increased by 70 between 2020/21 and 2021/22, with a further increase of 113 into 2022/23. Clarification was sought as to the reason for the increases. It was explained that there was a gap around close-down when figures weren’t monitored and reported. However, they were profiled into the base budget. Also, during Covid, a number of clients had been funded through different funding streams, who then became clients of the Council when funding structures had changed.

Councillor Ross Mackinnon was invited to comment as Portfolio Holder for Finance and Economic Development. He reiterated the point that the pressures were not as a result of failure to achieve savings, or poor forecasting, but they were due to factors outwith the Council’s control. He noted that the Adult Social Care model had been reviewed by an expert from the Local Government Association who had provided positive feedback.