Agenda item

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

The report of the Director of Function (Resources)/Section 151 Officer setting out the financial performance of the Council’s services at the end of Quarter 2 of the 2022/23 financial year was presented for the Executive’s consideration.

Councillor Ieuan Williams, Portfolio Member for Education and the Welsh Language presented the report and provided background information about the budget that was set for 2022/23. The overall projected financial position for 2022/23 including Corporate Finance and the Council Tax fund is a projected underspend of £1.128m which is 0.71% of the Council’s net budget for 2022/23. However, there is a significant amount of uncertainty over the final position due to additional costs arising from staff pay awards and rising energy prices; higher prices to be paid for the majority of the goods and services bought by the Council as a result of inflation; increased demand and costs associated with the winter months as well as a general increase in demand because of the cost of living crisis. The projected underspend also includes the use of £3m of reserves to respond to additional pressures. Although the headline forecast figure therefore indicates a positive position for 2022/23, it is not a true reflection of the situation and it is highly probable that at year end the revenue budget will be closer to break even or possibly overspent. The underlying position after taking out the use of reserves and additional grant funding is significantly worse with an underlying deficit of over £4m which will have to be addressed when setting the 2023/24 budget.

The Director of Function (Resources)/Section 151 Officer affirmed the Portfolio Member’s comments and said that the financial situation is likely to deteriorate in the second half of the year meaning also that setting the 2023/24 budget will be very challenging because of the factors referred to by the Portfolio Member which are set out in detail in the report. He referred to particular concerns regarding the position in relation Children and Adults’ Social Care which are under increasing pressure from rising demand and are forecast to overspend to a significant degree even though additional grants and reserves are being used to reduce the overspend. On the other hand a projected surplus in the Waste Management Service’s budget primarily from the sale of green waste subscriptions and recyclable materials provides an opportunity to adjust the income budget upwards. While the current core Council Tax income is forecasted to exceed the budget as is the Council Tax Premium budget, the situation can change as people’s circumstances change and appeals are made and discounts and exemptions are applied, and also as properties are transferred from the domestic to the business rates register. Any end of year overspend will have to be funded from the Council’s general reserves which in turn reduces the scope to use reserves to balance the 2023/24 budget the setting of which is expected to be a very difficult task. The revenue budget will be reviewed monthly going into the second half of the year.

Councillor Dafydd Roberts, Chair of the Finance Scrutiny Panel confirmed that the Panel would be focusing its attention on the position in Adults’ and Children and Families’ Services in upcoming meetings.

The Executive noted the situation and acknowledged the challenges ahead many of which it was recognised stem from factors beyond the Council’s control. The Executive also noted that the headline figures alone do not portray the true picture which is one of budgets coming under increasing pressures as a result of higher costs and growing demand for the Council’s services especially in Children and Adults’ Social Care and that the use of reserves and grants masks the true position. Questions were asked about the Council’s energy costs and the position with regard to fixed deals which the Executive viewed as a high risk area given the number and range of its buildings and also about the staff pay award and whether the Council should be expected to fund pay awards that are agreed nationally and may add a significant amount to its pay bills. In light of all the issues that may influence the budget position, the Executive queried how realistic is the end of year forecast.

The Director of Function (Resources)/Section 151 Officer clarified how the teaching and non-teaching staff pay awards are determined and confirmed that no additional funding is expected to be provided to cover the associated costs for either group. The Council is part of a national framework for the purchase of energy until 2023/24 which is undertaken by an arm’s length company linked to Kent County Council which purchases on behalf of a number of local authorities nationally. However prices are reviewed annually in October and whilst the latest prices have just been received and are yet to be examined, figures provided by the company two months ago showed a 60% rise in the price the Council pays for its electricity  and a 160% rise in the price of gas meaning that on this basis the Council’s annual energy spend would rise from in the region of £3m to £5m.  The Director of Function (Resources)/ Section 151 Officer further advised that taking all things into consideration the £1.128m forecast underspend for 2022/23 is probably overly optimistic and this in turn will have implications for the 2023/24 budget strategy.

The Chief Executive advised that the Re:fit Programme which is intended to help public bodies reduce energy usage by implementing energy efficiency measures and which generates in the region of £300k savings per annum is not enough to make up the price gap in what is a fast changing energy market.

It was resolved –

·                To note the position set out in Appendices A and B in respect of the Authority’s financial performance to date and expected outturn for 2022/23.

·                To note the summary of contingency budgets for 2022/23 as detailed in Appendix C.

·                To note the monitoring of agency and consultancy costs for 2022/23 in Appendices CH and D.

·                To approve the transfer of the £100k underspend for increasing broadband in schools to an earmarked reserve to fund the broadband improvements in 2023/24 which have been delayed due to the completion of proper procurement processes.