To comment on the Cabinet report.

The Lead Member for Finance and Economic Development introduced the latest Financial Update report.  The Panel were informed that as he had already briefed Members regarding the latest financial position he would provide an overview and answer any questions.

The Panel were informed that the financial update reports had shown that since July 2018 there had been early pressures on the budget mainly due to the increased demand and cost of children in care, pressure on parking income and recovery of . debt from revenues and benefits.  It was reported that there would be a NET pressure of around £1.5 million.

The budget position was being driven by national pressures.  The current pressures were being partially mitigated resulting in a net service pressure of £3,044,000 along with an additional £1,500,000 from the Business Rates Pilot, leaving a financial pressure across the Council of £1,544,000 as detailed in appendix A.

The report provided additional appendices explaining the pressures and actions taken to get to the current financial outturn position.

With regards to children in Care the Lead Member for Finance and Economic Development informed that an additional child entering the system could cost between £50,000 to over £150,000 per year. In forecasting the year end position it had been assumed that the national and local increase in demand and cost would continue.

The Lead Member also informed that the other major area of pressure was the projected income from parking.  When setting the budget the Lead Member had informed that there had been a policy decision not to increase parking provision for local residents but ,after benchmarking, to increase parking charges proportionally for visitor parking.  What had not been expected was that there would be a shift in an increase of resident parking and thus a corresponding drop in projected income due to increased use of the vantage card.

Officers were asked to provide a range of realistic mitigating actions which had also been appended with a matrix of delivery risk.   There were also additional funding opportunities such as higher than expected revenue from Business Rates Pooling.

The Chairman asked that with regards to the AFC pressures were they due to demographic pressures or poor management.  The Director of Children’s Services responded that there was an appendix to the report that provided additional information on these pressures.  Over the last year there had been significant variances in demand on the AFC and Optalis services.  The contract for AFC had been set less than previous years as it was expected that the contract would deliver savings.  AFC had provided a downward trend in the number of children in care but recently the national trend of more children going into care had hit the Royal Borough resulting in the highest rate since the 18 month of the AFC contract.  It had not been possible to achieve the planned savings and there were additional pressures due to children entering the system.

The chairman said that this was a volume issue that would have an impact on any local authority.  The Panel were informed that this was the case and even though we were below the south east and England average the increased demand and shortage of places had created a pressure. 

Cllr Brimacombe thanked the Lead Member and officers for the briefing that had been provided.  He mentioned that there was a net pressure of around £1.5 million but there was a lot going on under the surface. Joining AFC was to raise our standards but there had been a flat line budget for the last few years whilst costs were increasing.  Cllr Brimacombe asked was the budget not prudent.  The Panel were informed that in 2015 additional resources had been provided to improve standards as well as the additional capacity from AFC.  It was felt that there was sufficient budget. 

Cllr Brimacombe said that there had been previous pressures within children’s services, costs were increasing and there was the national trend of more children going into care.  Given these circumstances he said he was surprised that the budget had been at the level it was. 

The Lead Member informed that it was clear that there had been changes to volume and price variance.  Council’s budgeted differently to the corporate world and were susceptible to volume and price variances.  

The Interim Managing Director informed that the management team had worked hard on the budget so that next year’s one would take into account the recent trends. 

The Lead Member informed that the reported pressures included the projected trend continuing and that these trends would be included in setting next year’s budget.

Cllr Brimacombe mentioned that appendix A1 showed two large variances to the budget in July and November and asked what had happened in the organisation that required this additional funding.  The Panel were informed that they were not adverse variances but additional funding being made available.  As the pressures within the organisation arose it was felt that they could be mitigated but over time this became unrealistic.  It was acknowledged that the senior management team needed to be more realistic with savings and projected income and to bring forward pressures earlier.

Cllr Brimacombe said that the budget must have either been unrealistic or over optimistic.  It was clear that the budget was set too low and that he wished to see next year’s budget fully funded.

The Chairman said that the trend in Children’s Services would be built into next year’s budget.  This year’s budget had a lot of funds going into reserves which was prudent. 

Cllr Brimacombe said that the number of un-achievable savings within the report indicated staff not being removed at the right time and adjustments not being made straight away, therefore he was not confident about the budget process.  He was looking forward to seeing this being corrected. 

Cllr Brimacombe questioned the budget methodology and was informed that last year the budget preparations went through O&S Panels, this process did not adequately predict the variances and pressures that arose. For this year’s build he was happy to show the methodology behind the key numbers.  This will show that the story behind the assumptions. 

Cllr Brimacombe questioned the impact on the quality of the organisation and service provision due to the mitigating actions. If there was no impact then why were they not done sooner, for example additional parking enforcement income why was this not done earlier.  He was sceptical that the mitigating actions were achievable and there were a number that were areas being capitalised and thus not savings.

The Chairman mentioned that capitalising revenue would not impact service delivery. 

Cllr Quick mentioned that it was right to be scrutinising the budget and it was good that the Lead Member and officers were taking into account the current trend when setting next year’s budget.   Looking at the national picture it was good that we had a healthy reserve above the recommended level. 

The Lead Member informed that when prudent it was the policy to add to our reserves and this would continue as we did not know what may happen in the future. 

Cllr Brimacombe mentioned that there had been £8.7 million in pressures this year and asked if a similar amount would be added to next year’s budget.  The Lead Member said that it was too early to say but it was clear that the adverse variances would continue and thus it would be diligent to have the mitigation flow into next year’s budget. 

Cllr Brimacombe recommended that the other scrutiny panels should look at their areas within the budget and guide officers.

Resolved Unanimously: that the Corporate Services O&S Panel considered the Cabinet report and unanimously endorsed the recommendations.