Agenda item

To submit a report by the Head of Function (Resources)/Section 151 Officer.

The report of the Head of Function (Resources) and Section 151 Officer setting out the financial performance of the Council’s services for the third quarter of the 2018/19 financial year along with a summary of the projected position for the year as a whole was presented for the Executive’s consideration.

The Portfolio Member for Finance reported that the overall projected financial position for 2018/19 is an estimated overspend of £1.589m which is a significant improvement on the predicted overspend of £2.66m at Quarter 2. However, it must be noted that although the overspend on services has also reduced, they are still forecasted to overspend by £2.972m (2.61%) as at 31 March, 2019. If this trend continues in accordance with the Quarter 3 forecast, the Council’s General Reserve Fund is likely to reduce to £4.720m by the year-end which is well below the minimum balance of the general reserve which has been set at £6.5m as approved by the Full Council on 28 February, 2018.

The Head of Function (Resources)/Section 151 Officer said that the improved financial position at Quarter 3 is mainly due to the following –

•           Quarter 3 data reflects a greater proportion of actual recorded expenditure and consequently, is based to a lesser degree on estimates thereby making the figure more accurate.

•           In November, 2018, Heads of Services on the authority of the Senior Leadership Team were sent a briefing note advising them of the need to make savings. This suggested a number of measures needed to reduce expenditure/increase income by year-end e.g. delaying recruitment on vacant posts, limiting overtime and introducing fee increases earlier. It is commendable that these suggestions were made and that Heads of Service have implemented the advice on the expenditure within their control.

•           An underspend in Corporate Finance, specifically on capital financing costs – Minimum Revenue Provision and interests charges - which has helped reduce the figure by approximately £500k.

The Officer said that notwithstanding the projected overspend is an improvement on Quarter 2 it should not be lost that there is still a predicted overspend of £3.5m on the Council’s three  main services – Education, Children’s Services and Adults’ Services. The savings on Corporate Finance is a one- off windfall and is unlikely to be available in 2020/21; therefore action needs to be taken to address the shortfall in funds, the cost of services and to control the demand for services. Although this level of overspending can be funded from the general reserves in 2018/19, it will deplete the general reserves to a figure well below the generally accepted minimum which is a cause for concern particularly if the pattern of overspending continues. It will be necessary during the 2019/20 or 2020/21 budget setting process to fund the underlying level of overspending and to begin the process of replenishing the general balances. This is a prudent approach and is necessary to ensure the long-term financial viability of the Council.

The Executive in considering the report, acknowledged the efforts made by the Council’s services to reduce expenditure in the last quarter. The Executive noted that the services that are currently overspending – Children’s Services, specifically the Looked After Children budget and Adults’ Social Care are particularly susceptible to demand pressures with increasing demand a key factor in the financial pressures which these services are experiencing. The Executive noted that there is therefore a crucial distinction to be made between being “overspent” and being “underfunded.” These budget lines will be allocated increased funding in the budget next year.  The Executive noted that the impact of austerity – which has seen the Council’s budget reduce over successive years – comes through clearly in the report, and it emphasised that if the Council is to continue to deliver services in the way expected of it especially its statutory responsibilities in adults’ and children’s social care, then it has to be properly funded. This needs to be recognised by Welsh and Central Governments as a matter of priority.

The Portfolio Member for Finance referred to the Wales Audit Office’s 2017/18 Audit Letter for the Isle of Anglesey County Council dated 5 February, 2019 in which the Auditor General recognises that “austerity funding remains the most significant challenge facing all local government bodies in Wales and that these financial pressures are likely to continue in the medium term.”  The Letter notes that “the 2018/19 local government funding settlement saw the Council’s settlement increase by only 0.7% when inflation is more than 2%.” The Portfolio Member said that he believed that one of the root causes of the financial stress which councils are experiencing are decisions taken by the Central Government over  a period of years to reduce the income tax burden meaning it has less resources to allocate to the Welsh Government which in turn is reducing its funding to Welsh councils with the result that the burden of taxation is shifting to local taxation resulting in more pressure on, and year on year increases in Council Tax as councils try to make up the funding gap.

It was resolved –

•           To note the position set out in in appendices A and B to the report in respect of the Authority’s financial performance to date and expected outturn for 2018/19.

•           To note the summary of Contingency budgets for 2018/19 detailed in Appendix C to the report.

•           To note the position of the invest-to-save programmes in Appendix CH to the report.

•           To note the position of the efficiency savings for 2018/19 in Appendix D to the report.

 •          To note the monitoring of agency and consultancy costs for 2018/19 in Appendices DD and E to the report.