Agenda item

To consider the financial performance of the Council’s Revenue and Capital budgets following the Q3 2025/26 outturn.

Councillor Iain Cottingham (Portfolio Holder for Finance and Resources) presented the report (Agenda Item 6) which outlined the financial performance of the Council’s revenue and capital budgets following the Q3 2025/26 outturn.

The forecast Q3 revenue outturn was £8.5m/4.5% adverse to the budget. Total net revenue was forecast at £192.0m in the Q3 outturn, vs £183.4m in the budget.

Following the Q2 reprofiling of £22.5m of capital budget, approved by the S151 Officer in consultation with the Portfolio Holder for Finance, the revised position at Q3 for the expected capital expenditure in 2025/26 was £50.8m against an updated budget of £59.2m resulting in an underspend of £8.4m.

The report noted that in December 2025, a revised Exceptional Financial Support (EFS) request of £20m had been submitted to the Ministry of Housing, Communities and Local Government (MHCLG). This sum would enable the Council to maintain the required S151 recommended General Fund level at outturn in order to support the 2026/27 revenue budget and provide greater resilience to the reserves in future financial years.

The Q3 revenue outturn position, which had increased by £1.7m from Q2, was predominantly made up of the following areas:

·       Adult Social Care overspend of £4.1m, which included £1.9m in relation to care homes.

·       Children’s Social Care overspend of £3.7m which included placement costs (£2.8m).

·       Transformation, Customer and ICT (£1m).

·       Finance, Property and Procurement (£800k).

The report also outlined the primary drivers for the £1.7m increase to the outturn position.

The Government had advised that it would be focusing on reducing costs of external placements.

Turning to capital, Councillor Cottingham highlighted that the weighted average cost of borrowing was 3.89%. The Public Works Loan Board (PWLB) rate stood at 5.6%. The Council was looking to maximise short-term borrowing and avoid higher long-term rates, alongside ensuring compliance with the requirement that no more than 30% of borrowing was short-term.

Councillor Cottingham concluded by highlighting the very recent Government announcement which proposed that it would meet 90% of existing costs being incurred against the Dedicated Schools Grant (DSG) and for Special Educational Needs and Disabilities (SEND) placements. This could be in the region of £27m. The full detail of this announcement needed to be analysed.

A number of questions were asked by the Committee the responses to which were as follows:

·       Concerns were raised about the sustainability of projected borrowing which would increase over the course of the Medium Term Financial Strategy (MTFS). It was noted that this depended on the Council’s ability to service debt (the Minimum Revenue Provision (MRP)). There was therefore a reliance on the continued availability of EFS from Government.

·       Controls on non-statutory spending were discussed and Members were advised of the Financial Review Panel which was in place to scrutinise expenditure (and had been for some time). However, Councillor Cottingham explained that it was the Administration’s policy to maintain a broad range of services, such as libraries, sport, and culture, rather than cutting non-statutory services. This was despite the Government’s unfair funding review.

·       Shannon Coleman Slaughter (Service Director – Finance, Property and Procurement) explained that spend panels reviewed all non-contracted expenditure to ensure it was essential and supported by a sound business case.

·       Demographic modelling had been undertaken for Adult Social Care. There was an ageing population, many of whom would need care in years to come. The importance of early intervention and preventative investment, particularly in dementia care, was emphasised.

·       The increasing reliance on EFS across local authorities was noted. The Local Government Chronicle had reported that a third of local authorities were in receipt of or planning to request EFS.

·       Concern was voiced at the reducing level of Business Rate retention, with the majority of this funding going elsewhere in the country. The Council only expected to retain 13p in the pound in 2026/27.

·       The increase in average costs for care providers was attributed to factors such as National Insurance uplifts, inflation, and renegotiated contracts. Costs could be reviewed, alongside care provision being maintained. A reduction in self-funding contributions was noted, possibly linked to cost of living pressures.

·       The recent government announcement regarding funding for the DSG/SEND deficits was returned to and it was queried if this only related to historic debt. Councillor Cottingham reiterated that the full detail of this announcement would be analysed and explained that the potential financial benefit had not been taken into account in budgets. Councillor Heather Codling (Deputy Leader and Portfolio Holder for Children and Family Services) added that, after reviewing the Government statement, the Government would meet 90% of costs incurred to the end of the 2025/26 financial year, subject to meeting certain conditions, which included a SEND reform programme. There was however uncertainty about deficits incurred between 2026 and 2028.

·       The Portfolio Holders advised that in-year financial pressures and/or mitigations had not led to reduced capacity or raised thresholds for service provision. The closure of a specific SEND unit was attributed to staffing issues rather than funding.

·       The fact that the continued ownership of care homes had not been budgeted for as a contingency was queried and it was acknowledged that, with hindsight, this should have been the approach. However, final negotiations were ongoing when the previous year’s budget was being set.

RESOLVED that the report be noted. It would next be considered by Executive on 12 February 2026.