Agenda item

Purpose: To report on the financial performance of the Council’s revenue budgets. This report is Quarter One for the 2023/24 financial year.

Joseph Holmes (Executive Director – Resources) presented the Revenue Financial Performance Report for Quarter One 2023/24 (Agenda Item 7).

The following points were raised in the debate:

·       Members asked for clarification about the financial pressures facing the Planning Service.

·       It was explained that fees did not cover the cost of processing planning applications, resulting in a subsidy to the taxpayer of around £5 million per year nationally. Planning fees were set by central government and a bill was going through Parliament seeking to increase them, but this had been delayed. The uplift in fees had been expected earlier in the year, so an in-year financial pressure had resulted.

·       Concerns were expressed that the Council may not have sufficient funds to achieve its net zero carbon emissions ambitions, and it was suggested that the wording in the Environmental Impacts section of the report should be amended to reflect this.

·       Officers felt that the short-term environmental impact related to this particular paper would not affect the Council’s net zero ambitions. This would be more relevant for the budget reports for 2024/25.

·       Members asked what assets the Council was looking to sell, and whether care homes may be sold.

·       It was stated that all assets were under review. Assets not currently in use could be realised more quickly. Any proposals would require Executive approval. It was confirmed that the sale of care homes was not being considered at this time.

·       There was a question about the impact of the People Directorate’s recruitment and retention programme.

·       Officers indicated that this was starting to be effective with an increase in the number of permanent staff and a reduction in agency staff. Monthly agency spend with Commensura had fallen from around £750,000 per month to circa £570,000. There had been positive articles in the trade press about the benefits of working at West Berkshire Council. The change was considered to be a step in the right direction, but more work was needed.

·       Members noted that the biggest overspend was in Children’s and Family Services. There was little that could be done to reduce placement and legal costs, which meant that agency costs had to be the key focus. Members asked what factors were proving attractive in recruiting permanent staff.

·       26 agency staff had transferred to permanent roles in the last four months. The new Talent Attraction Business Partner was felt to be instrumental in encouraging new staff to join the Council. Officers also highlighted that the Council was trying to grow its fostering and adoption offer, since this was cheaper than residential homes, with better outcomes for children.

·       Members asked about recruitment outside the Commensura contract.

·       Spend on agency staff was around £12 million in 2022/23, of which nearly £10 million was through the Commensura contract. Reasons for recruiting through other providers included: the need to recruit to specialist posts; and the need to recruit rapidly during the pandemic or in response to unexpected changes in government policy. The Financial Review Panel (FRP) was key to managing agency spend and figures would be better in Q2 and Q3.

·       Members asked about the level of inflation provided for within the revenue budget.

·       It was explained that different levels of inflation were used for different elements. Contracts were usually linked to CPI or RPI at particular points in the year (e.g., Waste Contract used the RPIX figure in January, which was 14.2%). The Council had greater control over non-contract spend (e.g., Adult Social Care was below 3%). Energy inflation had risen steeply, but it was now falling. It was noted that the staff pay deal had yet to be agreed.

·       There was a question as to why all pressures relating to demand-led services had not been built into the budget.

·       The pressures mostly related to Adult Social Care. The model produced a wide assessment of the best and worst case scenarios. The budget was set just below the mid-point, because inflation had been forecast to fall quite quickly. However, it had not fallen as quickly as Bank of England (BoE) / Office for Budget Responsibility (OBR) forecasts. The budget had been set through discussion with the political administration at that time.

·       Members asked what would have happened if the Council had not taken the step of introducing the FRP to reduce spending.

·       It was confirmed that the overspend forecast would have been higher, but it was hard to quantify the level of impact, other than in relation to agency spending. The approach was designed to prioritise essential spending and protect vulnerable residents.

·       Members challenged whether the modelling and budget setting processes were fit for purpose.

·       It was acknowledged that a £7 million overspend would use nearly all of the Council’s general fund reserves. The number of children in care had increased unexpectedly from 166 at the start of last year to 209 in June 2023. Some of these placements cost hundreds of thousands of pounds. There had also been an increase in the number of children with Health and Care Plans, which had driven cost pressures in the Education Service. The Council had traditionally operated with low levels of reserves and tight financial controls. The current pressures were seen as a ‘perfect storm’ of factors coming together. It was highlighted that other councils were facing similar pressures.

·       Given that numbers in care had been rising for years, this suggested that a different way of modelling demand was needed.

·       Officers indicated that the modelling results were based on the data available at the time the budget was set. The model produced best and worst case scenarios. However, numbers of children in care were at a historical high and long-term trends were much lower, so the increase had not been predicted.

·       It was suggested that preventative measures should be put in place.

·       Members noted that forecasts were rarely accurate and could not foresee unprecedented levels of volatility. It was accepted that the model was flawed, but it was the best tool available.

·       With regards to budgeting, it was noted that decisions about future changes in inflation were made in relation to the BoE / OBR forecasts. There had been no secrecy in how the budget had been put together. Opposition Members had had the chance to proposed amendments in relation to the budget last March, but none had been sought.

·       It was highlighted that the FRP brought additional scrutiny and oversight to the process of spending public money. The Council had acted quickly when the projected overspend had been identified. Every week, proposed spending was reviewed line by line. Agency workers had been reduced from 178 to 154. There had been issues with some old invoices emerging and some spend without supporting purchase orders, but financial discipline was now being imposed. In relation to the forecast spend, it was accepted that some additional sensitivity analysis could have been carried out and there was a commitment to look at this for next year’s budget. It was confirmed that the Council would work with its auditors to ensure that hit its zero overspend target. There was lots still to do in terms of understanding what was driving cost increases. For example, in relation to early help, it was highlighted that West Berkshire had fewer officers than in Bracknell and Wokingham who were working to reduce the number of children who needed to go into care.

·       Members asked if the recruitment freeze applied across all levels of the Council. Also, there was a question about recruitment in other local authorities and whether small unitary authorities struggled to attract staff who could earn more elsewhere.

·       It was confirmed that the FRP considered all recruitment requests. There was not a freeze on recruitment and roles were being advertised. It was accepted that some staff left to get more money elsewhere, but equally West Berkshire sometimes recruited on the basis that it paid higher salaries. The issue of staff leaving to seek more pay was not thought to be any worse than in previous years.

·       Clarification was sought whether the number of agency staff had reduced just in Children’s Services, or across the board. It was confirmed that the reduction related to all agency staff.

·       Members asked if the reduction in agency staff would lead to an increase in children’s social workers’ caseloads.

·       It was stated that there was a push to make agency workers permanent members of staff and there had been some success with this. Saving were not being made by increasing caseloads. Although gaps were accepted in some services, this was not the case with children’s social workers.

·       It was stressed that children were only taken into care when necessary. West Berkshire appeared to be an outlier compared to other local authorities and Members asked if officers understood why.

·       Officers indicated that timely, proactive intervention could help families from reaching crisis and children being taken into care. Other local authorities had a broader / more robust / better resources provision. There was a question about how best to invest in the service. The Council had sought expert external advice. This had suggested that there was no single solution, but lots of small changes should have the desired effect.

·       Members asked for the Q1 deficit figures.

·       The Q1 figures were highlighted in the appendix.

·       There was a challenge around whether the Council should run its own care homes, or if there was a more economic way of working.

·       It was explained that a Strategy Board had been held with Members to review this and further work was planned to consider the pros and cons of different approaches.

·       Members asked if the LGA or the government was suggesting that local authorities should be looking at a range of scenarios (e.g., the equal pay claim faced by Birmingham City Council).

·       The Executive report included details of what would happen if spend was to exceed the level of reserves. The Council would seek a capitalisation directive from the government. Other local authorities had done this and had had them approved (e.g., Bournemouth Christchurch and Poole). Birmingham and several other local authorities had issued S114 notices, which stopped all non-essential spending. Ideally, the Council would not get to either of these positions. A break even position was recognised as difficult to achieve, but as a minimum, the Council needed to ensure that the overspend was greatly reduced. Government had recently consulted on their proposals for best value and the next step for councils to consider.

·       It was suggested that rising unemployment could affect residents’ ability to pay their Council Tax and officers were asked if this had been considered.

·       It was confirmed that Council Tax and Business Rates collection rates were holding up well, but this was recognised as something that needed to be monitored, and it was discussed as part of the budget setting process.

·       Members noted the restrictions on overtime, but asked about emergencies (e.g., social care).

·       Officers indicated that there were exceptions to the overtime ban.

·       It was highlighted that officers may find it difficult to take time off in lieu if they were having to cover for vacant posts.

·       It was confirmed that this was considered by the FRP and where possible measures were put in place to ensure that staff worked their contracted hours. This was being monitored to ensure that the Council was complying with health and safety legislation.

·       There was a question about the potential to address rising home to school transport costs.

·       It was highlighted that children with Health and Care Plans often had associated transport needs. Costs had gone up by 15% in the last year and accounted for around £4m per year. A review had been commissioned to identify potential savings.

·       Clarification was sought as to what was involved with seeking capital directives.

·       Officers indicated that government would ask questions around benchmarking of costs, auditing of accounts, levels of reserves, sources of pressures, etc. The Minister would issue a ‘minded to’ capitalisation directive of £Xm and the Council would be subjected to a review through the Department for Housing and Levelling Up. Subject to the outcome of the review, the Minister would then issue the capitalisation directive. The Council would need to repay this through additional capital receipts or there would be an additional charge on top of interest rates charged by the Public Works Loan Board.

·       Members asked about lessons learned through the FRP.

·       There was a strict rule around no payments without purchase orders, which had been an issue with some agency staff. Most expenditure requests were approved, but some were rejected, or further information was requested. Officers were getting used to providing supporting evidence for spend. It had been a journey for the FRP and for officers. It had helped to reinforce that money was tight and it was suggested that this may become ‘business as usual’.

RESOLVED to note the report.