Policy &
Resources
Agenda Item 58
Committee
Subject:
|
Targeted Budget
Management (TBM) 2022/23:
Month 5 (August)
|
Date of Meeting:
|
6 October 2022
|
Report of:
|
Chief Finance
Officer
|
Contact Officer:
|
Name:
|
Jeff Coates
|
Tel:
|
29-2364
|
|
Email:
|
Jeff.Coates@brighton-hove.gov.uk
|
Ward(s)
affected:
|
All
|
FOR GENERAL RELEASE
1
PURPOSE OF REPORT AND POLICY CONTEXT:
1.1
The Targeted Budget Monitoring (TBM) report is a key component of
the council’s overall performance monitoring and control
framework. This report sets out an indication of forecast risks as
at Month 5 (August) on the council’s revenue and capital
budgets for the financial year 2022/23.
1.2
The forecast risk for 2022/23 at Month 5 is a £13.114m
overspend on the General Fund revenue budget, approximately 6% of
the net budget, including a forecast overspend of £0.088m on
the council’s share of the NHS managed Section 75 services.
This is a very high projection at this stage of the year and
reflects the significant inflationary impacts being experienced by
the council, including an estimate of the national Local Government
NJC pay award based on the latest employers’ offer. A key
factor is the impact that inflation is having on the achievement of
savings programmes, particularly across social care, with 57% of
the 2022/23 savings package of £10.509m currently forecast to
be at risk.
1.3
There are also some continuing impacts from the pandemic in
relation to economic recovery which are currently suppressing
incomes such as planning fees and commercial rents as well as
continuing to drive higher Council Tax Reduction claimant
numbers.
1.4
The forecast presents a serious financial risk and, if not managed,
would severely impact on the level of the council’s reserves
which would need to be utilised to fund any overspend. The report
therefore covers necessary council-wide financial management
actions that have been introduced in order to aid recovery of the
position as far as possible.
2
RECOMMENDATIONS:
2.1
That the Committee note the forecast risk position for the General
Fund, which indicates a potential forecast overspend risk of
£13.114m. This includes a net overspend of £0.088m on
the council’s share of the NHS managed Section 75
services.
2.2
That the Committee note the forecast for the Housing Revenue
Account (HRA), which is currently an overspend of
£1.167m.
2.3
That the Committee note the forecast position for the Dedicated
Schools Grant which is currently an overspend of
£0.313m.
2.4
That the Committee note the forecast outturn position on the
capital programme which is a forecast overspend of £9.030m
and approve the variations and slippage in Appendix 6 and new
schemes as set out in Appendix 7.
3
CONTEXT/ BACKGROUND INFORMATION
Targeted Budget
Management (TBM) Reporting Framework
3.1
The TBM framework focuses on identifying and managing financial
risks on a regular basis throughout the year. This is applied at
all levels of the organisation from Budget Managers through to
Policy & Resources Committee. Services monitor their TBM
position on a monthly or quarterly basis depending on the size,
complexity or risks apparent within a budget area. TBM therefore
operates on a risk-based approach, paying particular attention to
mitigation of growing cost pressures, demands or overspending
through effective financial recovery planning together with more
regular monitoring of high risk demand-led areas as detailed
below.
3.2
The TBM report is normally split into the following sections:
i)
General Fund Revenue Budget Performance
ii)
Housing Revenue Account (HRA) Performance
iii)
Dedicated Schools Grant (DSG) Performance
iv) NHS
Controlled S75 Partnership Performance
v)
Capital Investment Programme Performance
vi)
Capital Programme Changes
vii)
Implications for the Medium Term Financial Strategy (MTFS)
viii) Comments of the Chief
Finance Officer (statutory S151 officer)
4
General Fund Revenue Budget Performance (Appendix 4)
4.1
The table below shows the provisional outturn for Council
controlled revenue budgets within the General Fund. These are
budgets under the direct control and management of the Executive
Leadership Team. More detailed explanation of the variances can be
found in Appendix 4.
Forecast
|
|
2022/23
|
Forecast
|
Forecast
|
Forecast
|
Variance
|
|
Budget
|
Outturn
|
Variance
|
Variance
|
Month 2
|
|
Month 5
|
Month 5
|
Month 5
|
Month 5
|
£'000
|
Directorate
|
£'000
|
£'000
|
£'000
|
%
|
3,253
|
Families, Children & Learning
|
103,262
|
106,497
|
3,235
|
3.1%
|
754
|
Health & Adult Social Care
|
75,012
|
75,759
|
747
|
1.0%
|
1,589
|
Economy, Environment & Culture
|
42,035
|
43,559
|
1,524
|
3.6%
|
1,305
|
Housing, Neighbourhoods & Communities
|
25,885
|
27,070
|
1,185
|
4.6%
|
1,454
|
Governance, People & Resources
|
30,593
|
32,313
|
1,720
|
5.6%
|
8,355
|
Sub Total
|
276,787
|
285,198
|
8,411
|
3.0%
|
281
|
Corporately-held Budgets
|
(60,531)
|
(55,828)
|
4,703
|
7.8%
|
8,636
|
Total General Fund
|
216,256
|
229,370
|
13,114
|
6.1%
|
4.2
The General Fund includes general council services, corporate
budgets and central support services. Corporate Budgets include
centrally held provisions and budgets (e.g. insurance) as well as
some cross-cutting value for money savings targets. Note that
General Fund services are accounted for separately to the Housing
Revenue Account (Council Housing). Note also that although part of
the General Fund, financial information for the Dedicated Schools
Grant is shown separately as this is ring-fenced to education
provision (i.e. Schools). The chart below shows the monthly
forecast variances for 2022/23 and the previous three years for
comparative purposes.
Demand-led Budgets
4.3
There are a number of budgets that carry potentially higher
financial risks and therefore could have a material impact on the
council’s overall financial position. These are budgets of
corporate significance where demand or activity is difficult to
predict and where relatively small changes in demand can have
significant implications for the council’s budget strategy.
These can include income related budgets. These therefore undergo
more frequent and detailed analysis.
Forecast
|
|
2022/23
|
Forecast
|
Forecast
|
Forecast
|
Variance
|
|
Budget
|
Outturn
|
Variance
|
Variance
|
Month 2
|
|
Month 5
|
Month 5
|
Month 5
|
Month 5
|
£'000
|
Demand-led
Budget
|
£'000
|
£'000
|
£'000
|
%
|
1,660
|
Child Agency & In House Placements
|
24,477
|
26,022
|
1,545
|
6.3%
|
2,809
|
Community Care
|
86,873
|
88,941
|
2,068
|
2.4%
|
1,480
|
Temporary Accommodation
|
5,160
|
6,876
|
1,716
|
33.3%
|
5,949
|
Total Demand-led Budget
|
116,510
|
121,839
|
5,329
|
4.6%
|
The chart below
shows the monthly forecast variances on the demand-led budgets for
2022/23.
TBM Focus Areas
The main pressures
identified at Month 5 are across parts of Families, Children &
Learning, Homelessness, Transport, City Environmental Management
and Culture, Tourism & Sport. Information about these pressures
and measures to mitigate them are summarised below:
4.4
Families, Children & Learning: The current projected
position identifies potentially significant cost pressures:
£1.405m on Children’s Social Care Services,
£0.883m on Adult Learning Disabilities Community Care,
£0.340m on in-house disability provision and £0.824m on
Home to School transport. However, there are estimated recovery
measures totalling (£0.284m). These, together with other
variances of £0.067m result in a forecast overspend of
£3.235m overspend as at Month 5. The key drivers of the
overspend are as follows:
·
Children In
CareSince the
beginning of the 2020/21 financial year the number of children in
care has risen by 9%. The post pandemic period has seen children
with increasingly complex needs as well as well as problems in
foster care recruitment causing an acute sufficiency issue making
placing children in families either in-house or with external
providers very difficult. This has inevitably led to increasing
numbers of children being placed in residential homes or very
expensive semi-independent placements. The result of the increasing
complexity of need has resulted in a small number of very high-cost
placements with a combined cost of £1.692m at an average unit
cost of £14,607 per week. The cost pressures on Residential
and Semi-independence placements, resulting in a forecast overspend
of £2.357m, has had a significantly adverse impact on the
achievement of the 2022/23 savings measures. A number of the
savings targets have been achieved, however as a direct result of
the sufficiency and complexity pressures identified above the
result is the unachieved savings of £1.278m (3% of the
Children’s Safeguarding & Care budget)
reported.
·
Care
LeaversThe number of
care leavers requiring financial support for accommodation has been
steadily rising over the last 12 months. As at 31st August 2022
there were 140 care leavers in receipt of financial support
compared with 115 at the same time last year – a rise of 22%.
The result is the forecast overspend of £0.315m for care
leaver expenditure.
·
Adults with
Learning Disabilities The 2022/23
community care budget allowed a 2% across the board fee uplift to
all providers across all care types. However, due to recent events
such as the increase in the cost of living and the higher than
anticipated increase in the living wage there have been strong
representations from providers for an additional uplift in 2022/23.
The forecast allows for a further uplift of 2% in fees across all
providers (this equates to approximately £0.650m) and this is
a significant reason for the predicted overspend on this budget.
The current forecast overspend on the Adult LD community care
budget is £0.883m (2.5% of the community care budget).At the
same time, the 2022/23 savings target of £0.926m within the
Adult LD community care budget is anticipated to be fully achieved
through the specific savings strategies set out in the 2022/23
corporate budget proposals.
·
Home to School
Transport. The are several
factors contributing to overspends in Home to School Transport.
These include increased demand on the service (both at 5-16 ages,
and 16 up until 19th birthday), increased numbers of
children requiring single occupancy journeys (16% increase on this
time last year), settings outside of the city being named in EHCPs
(13% increase on this time last year) and increased contract prices
on routes which accommodate dual placements, part-time timetables,
alternative provision and post 16 provision. Local driver, vehicle
passenger assistants, and vehicle shortages and increased fuel
costs are resulting in the service receiving fewer and more costly
bids on routes. These shortages are not unique to B&H, they are
being seen across the country and a benchmarking exercise is
underway to ascertain the scale of the problem by the DfE who have
declared that nationally HTST is at significant risk of failure due
to these unprecedented issues. There is increasingly less capacity
in the local system to meet increasing demand, not just in the
numbers of children requiring transport but the nature of the
transport requirements.
The forecast for the 2022/23 central
Dedicated Schools Grant is currently an overspend of £0.313m.
More details are provided in Appendix 4.
4.5
Adults Services: The service is facing significant
challenges in 2022/23 in mitigating the risks arising from
increasing demands from client needs, supporting more people to be
discharged from hospital when they are ready and maintaining a
resilient local provider market. It is to be noted that this is
after applying service pressure funding of £3.211m in 2022/23
which has been used to fund budget pressures resulting from the
increased complexity and costs of care.
At this stage,
£1.270m of the £2.224m 2022/23 savings plan are being
forecast as unachievable this financial year. The impact of wider
pressures that have emerged during the course of the year has
resulted in increased forecast unit costs equating to a financial
pressure of approx. £0.5m. Actions are focussed on attempting
to manage demand on and costs of community care placements across
Assessment Services and making the most efficient use of available
funds.
The HASC
directorate has a Modernisation Programme which aims to implement a
consistent strengths-based approach across key work streams,
ensuring robust pathways are in place, developing a community
reablement offer and re-designing the front door service. Currently
the Health & Social Care system is under considerable pressure,
and this is generating additional costs for the council due
to:
·
Pressures on NHS
budgets resulting in reduced funding contributions from the
CCG;
·
Significant
pressures on the acute hospital resulting in increased costs to
support timely discharge into residential and nursing home
care;
·
Ongoing
transformation of GP practices and enhancement of their clinical
screening and general medical services which contribute to
preventative support;
·
Pressures on NHS
outreach and other preventative services including community
nursing (known as Integrated Primary Care Teams);
·
Workforce
capacity challenges across adult social care services;
·
There
is also focus nationally on improving rates of hospital discharge
in order to accommodate winter pressures.
The funding of all care packages is
scrutinised for Value for Money, ensuring that eligible needs are
met in the most cost-effective manner which will not always meet
people’s aspirations. Established safeguards are in place to
provide assurance within this process.
4.6
Housing Services and Temporary Accommodation: Overall these
services are forecast to overspend by £1.716m. This is
partially offset by an underspend on the Housing options budget of
(£0.700m) and there is a financial recovery place to further
reduce costs by (£0.200m). However, although the service has
made good progress in meeting its budget savings, £0.275m of
budget savings for 2022/23, are currently at risk. The
overspend relates to the following elements:
A provision for underlying Temporary
Accommodation and Rough Sleeping pressures of over £1m was
provided in the 2021/22 budget, which was expected to be supported
by additional funding from the government’s announcement of
an additional £254 million national funding. However,
although core funding increased overall, it was insufficient to
support the service pressure funding and the budget therefore
remains significantly oversubscribed (by £1m) due to the
number of leased and emergency properties required.
Emergency accommodation is forecast to
overspend by £0.273m, a reduction of £0.243m since
month 2 due to a reduction in the number of block booked
properties. However, the level of spot purchase properties
remained largely static during the summer months (102 as at
16th September 2022) and therefore cost reductions are
lower for the remainder of the year and it is becoming more
challenging to reach the forecast 45 units by 31st March
2023.
Repairs costs for leased TA properties
have increased substantially and this budget is forecast to
overspend by £0.476m, an increase of £0.264m on the
month 2 forecast due to inflationary pressures and the backlog of
repairs needed in the first half of the year. The costs of private
sector leased properties for TA have continued to rise as contracts
are renewed at higher rents and the forecast variance has increased
by £0.196m as a result to a small overspend of £0.021m.
The current number of empty leased properties in TA has steadily
reduced so far this year as the backlog of works is cleared.
However, there are still more properties empty for longer than the
current budget allows for and the budget for rent loss on voids is
forecast to overspend by £0.100m, although this is an
improvement compared to the forecast at month 2 and this trend
should continue into 2023/24. There is also an overspend on the
contribution to the bad debt provision of £0.189m and
£0.050m on loss of Housing Benefit Subsidy. These pressures
are partially offset by a contribution of (£0.417m) from
Homelessness Prevention Grant after other forecasts for prevention
expenditure has been taken into account.
There are various short-term funds
(such as the Household Support Fund) that the council can use to
try to alleviate the rising cost of living for low-income
households, which may mitigate some of this pressure going forward.
For this year, the housing service has a one-off budget of
£1.280m (carried forward from 2021/22) for homelessness
prevention which may relieve the immediate rising cost of living
pressures for households and therefore allow further reduction in
EA/TA numbers as the year progresses. This budget is now forecast
to underspend by £0.700m which alleviates some of the
overspends above.
£0.275m of 2022/23 budget savings
are at risk and even though numbers of households in Emergency
Accommodation (EA) and Temporary Accommodation (TA) have reduced
and £1.505m of savings have been made, the service is still
overspending, largely as a result of new pressures on repairs and
rental costs of TA and EA. There is a financial recovery plan
in place to further reduce the numbers in EA and reduce costs by
£0.200m. This will be challenging in the last six months of
the year and it is likely that £0.075m of savings will remain
unmet in year.
Separately to this, Seaside Homes is
forecast to overspend by £0.320m due to similar pressures on
repairs costs and void rent loss due to backlogs caused by the
pandemic and current inflationary pressures. There is a further
forecast overspend of £0.187m associated with the provision
of additional emergency hotel accommodation originally acquired
early in the pandemic as a result of the Government’s
'Everyone In' Initiative. This is due to the 2 remaining hotels
being decanted later than anticipated at budget setting time. The
one remaining hotel is planned to be decanted during October.
The Housing Service will continue to
work to improve this Temporary Accommodation overspend position in
the new financial year. Housing are continuing to seek additional
cost reductions to reduce the overspend further through the
continuation of the Homelessness Transformation Programme which is
an ‘end to end’ improvement programme to help the
service improve its processes to reduce the use and length of stay
in Temporary Accommodation by improving homeless prevention,
homeless processes and enabling move on to more sustainable
accommodation. The service is already seeing reductions to the
number of households in TA through a combination of better
prevention from homelessness and improved move-on. Further
efficiencies will be sought by (for example) continuing to improve
move-on processes, void turnaround times in emergency
accommodation, and improving income collection thereby continuing
to reduce costs in 2022/23 in line with the budget strategy.
Price increases have been applied,
however the anticipated income has yet to be achieved as these
areas are dependent on demand including tourism and visitor
numbers. The most significant areas of shortfall are £0.605m
for parking tariff increases, £0.872m for resident permit
increases where demand has reduced and reduction of maintenance
budgets of £0.080m within Property. These activities and
services had been heavily impacted by COVID-19 in previous years
and the services are starting to see recovery, but these targets
will only be achieved if demand returns fully to pre covid
levels.
The directorate also contains large
budgets for the waste collection and street cleansing services
which are forecasting greater than budgeted costs due to agency
cover of vacant posts. As recruitment into these posts is
conducted, high agency spend should reduce the overspend on these
services.The overall effect of the above factors is a forecast risk
of £1.803m for Month 5. The Directorate is applying financial
recovery measures of reviewing expenditure budgets and income
potential throughout the year to address budget overspends within
Parking and Venues services. These financial recovery measures will
seek to reduce the forecast risk to £1.524m.
4.8
Governance, People and Resources: There is a forecast
pressure of £1.658m relating to current and former Orbis
services which is split as follows:
£0.776m relates to the financial
impact of disaggregating (withdrawing) various services including
Business Operations (now part of Welfare, Revenues & Business
Support), Finance, and HR. This relates both to the impact of
reversing previously integrated roles, resulting in an associated
loss of economies, as well as the realisation of unachieved savings
in Business Operations due to the divergence of the partners’
business requirements, including the procurement of different
corporate HR and Finance systems and the associated impact on being
able to achieve the planned integration and standardisation
of services.
BHCC’s contribution to the
Partnership has also increased by £0.879m plus inflation in
respect of continuing Orbis services. However, this cost primarily
relates to IT&D and includes revenue and capital financing
costs of addressing infrastructure, digital and service
requirements in BHCC, together with an increase in service demands,
for which it is required to contribute a higher contribution under
the terms of the Inter-Authority Agreement.
4.9
Corporately-held Budgets: There is a forecast overspend of
£4.703m on corporately-held budgets, however, this is
primarily because the projected additional costs of the NJC Local
Government pay award are held on this budget line until the pay
award is officially confirmed and costs are allocated to
directorates. The projected additional cost is £4.545m which
is based on the employers’ pay award offer of a £1,925
flat-rate increase for all NJC salaries. This is equivalent to a
6.3% increase on the payroll compared with the 2% increase included
in the budget for 2022/23. This pressure is after allowing for the
£1.260m remaining one-off provision for pay from the 2021/22
outturn.
There is also an estimated pressure of
£0.781m on Housing Benefit Subsidy income. Of this pressure,
£0.482m relates to a particular benefit type for vulnerable
tenants (Regulation 13) which is not fully subsidised. This is
being investigated to fully understand the reasons for the growth
in this area. There is also a pressure of £0.349m on the net
recovery of overpayments and other areas. The surplus on the
recovery of overpaid former council Tax Benefit is currently
forecast at £0.050m.
The above are partially offset by
increased investment income from investing cash balances of
£0.560m which is predominantly due to the increasing interest
rate environment which is driving up investment returns.
Monitoring Savings
4.10
The savings package approved by full Council to support the revenue
budget position in 2022/23 was £10.509m following directly on
from a £10.687m savings package in 2021/22. This is very
significant and follows 12 years of substantial packages totalling
over £199m, since government grant reductions commenced in
2009/10, that have been necessary to enable cost and demand
increases to be funded alongside managing the reductions in central
government grant funding.
4.11
Appendix 4 provides a summary of savings in each directorate and
indicates in total what is anticipated/achieved or is at risk.
Appendix 5 summarises the position across all directorates and
presents the entire savings programme. The graph below provides a
summary of the position as at Month 5. This shows that
£6.020m (57%) is currently at risk. Mitigation of these risks
will be included in the development of services’ financial
recovery actions as far as possible.
5
Housing Revenue Account Performance (Appendix 4)
5.2
This year will still be challenging for the HRA as the service has
to deal with inflationary pressures, the rising costs of utilities,
and continues to deal with the rent loss and other costs associated
with the remaining backlog of empty properties. The service will
continue to review spend to try to reduce this forecast overspend
during the year. If this cannot be managed within budget then the
overspend can be met from HRA reserves, as outline in the HRA
budget report for 2022/23 the level of reserves continues to be
monitored. Of this reported overspend £0.284m (24%) relates
to the short term pressure on financing costs as a result of
borrowing being undertaken early than anticipated in order to take
advantage of more favourable interest rates.
6
Dedicated Schools Grant Performance (Appendix 4)
6.1
The Dedicated Schools Grant (DSG) is a ring-fenced grant within the
General Fund which can only be used to fund expenditure on the
schools budget. The schools budget includes elements for a range of
services provided on an authority-wide basis including Early Years
education provided by the Private, Voluntary and Independent (PVI)
sector, and the Individual Schools Budget (ISB) which is divided
into a budget share for each maintained school. The forecast
outturn is currently an overspend of £0.313m and more details
are provided in Appendix 4. Under the Schools Finance Regulations
any underspend or overspend must be carried forward within the
schools budget in future years.
7
NHS Managed S75 Partnership Performance (Appendix 4)
7.1
The NHS Trust-managed Section 75 Services represent those services
for which local NHS Trusts act as the Host Provider under Section
75 Agreements. Services are managed by Sussex Partnership
Foundation Trust (SPFT) and include health and social care services
for Adult Mental Health and Memory and Cognitive Support
Services.
7.2
This partnership is subject to separate annual risk-sharing
arrangements and the monitoring of financial performance is the
responsibility of the respective host NHS Trust provider.
Risk-sharing arrangements result in financial implications for the
council where a partnership is underspent or overspent at year-end
and hence the performance of the partnership is included within the
forecast outturn for the Health & Adult Social Care
directorate. An overspend of £0.088m is currently forecast
and more details are provided in Appendix 4.
8
Capital Programme Performance and Changes
Forecast Variance Month 2
|
Directorate
|
Reported Budget Month 5
|
Forecast Outturn Month 5
|
Forecast Variance Month 5
|
Forecast Variance Month 5
|
£'000
|
|
£'000
|
£'000
|
£'000
|
%
|
0
|
Families, Children
& Learning
|
31,323
|
31,288
|
(35)
|
-0.1%
|
0
|
Health & Adult
Social Care
|
455
|
505
|
50
|
11.0%
|
0
|
Economy, Environment
& Culture
|
89,136
|
97,023
|
7,887
|
8.8%
|
0
|
Housing,
Neighbourhoods & Communities
|
6,725
|
6,725
|
0
|
0.0%
|
0
|
Housing Revenue
Account
|
102,980
|
104,108
|
1,128
|
1.1%
|
0
|
Governance, People
& Resources
|
2,142
|
2,142
|
0
|
0.0%
|
0
|
Total
Capital
|
232,763
|
241,793
|
9,030
|
3.9%
|
(Note: Summary may include minor
rounding differences to Appendix 6)
8.2
The forecast overspend of £9.030m includes a variance of
£7.887m for part of the loan facility agreements that require
the council to provide equity loans to Homes for the City of
Brighton & Hove LLP (LLP). However, these loans will not be
required once the Golden Brick milestone is met at which point the
development agreements will be triggered. All loans provided to the
LLP are therefore expected to be repaid this year in full and the
variance will then be negated. The remaining overspend relates
primarily to the Victoria Road sports facilities and housing scheme
due to cost over-runs. More details are provided in Appendix
6.
8.3
Appendix 6 shows the changes to the capital budget and Appendix 7
provides details of new schemes for 2022/23 to be added to the
capital programme which are included in the budget figures above.
Policy & Resources Committee’s approval for these changes
is required under the council’s Financial Regulations. The
following table shows the movement in the capital budget since
approval at Budget Council.
Summary of Capital Budget
Movement
|
Reported Budget
Month 5
|
|
£'000
|
Budget approved as
at TBM Month 2 (May)
|
233,494
|
Changes reported at
other committees and already approved
|
4,306
|
New schemes to be
approved in this report (see Appendix 7)
|
2,142
|
Variations to budget
(to be approved)
|
4,429
|
Reprofiling of
budget (to be approved)
|
(11,706)
|
Slippage (to be
approved)
|
0
|
Total
Capital
|
232,763
|
8.4
Appendix 6 also details any slippage into next year. However, as
normal, project managers have forecast that none of the capital
budget will slip into the next financial year at this early
stage.
9
Implications for the Medium Term Financial Strategy (MTFS)
9.1
The council’s MTFS sets out resource assumptions and
projections over a longer term. It is periodically updated
including a major annual update which is included in the annual
revenue budget report to Policy & Resources Committee and Full
Council. This section highlights any potential implications for the
current MTFS arising from in-year TBM monitoring above and details
any changes to financial risks together with any impact on
associated risk provisions, reserves and contingencies. Details of
Capital Receipts and Collection Fund performance are also given
below because of their potential impact on future resources.
9.2
The forecast risk at Month 5 indicates a number of underlying
pressures, for example, across children’s residential care,
Adult Learning Disability services, homelessness, Orbis Services
and some income targets. Excluding income pressures where every
effort will be made to turn the positions around, the majority of
expenditure pressures have been reflected in the Medium Term
Financial Strategy projections reported to the July meeting of
Policy & Resources Committee and will be kept under review as
the 2023/24 budget process progresses and further TBM forecasts are
provided during the year.
Capital Receipts Performance
9.3
Capital receipts are used to support the capital programme. Any
changes to the level of receipts during the year will impact on
future years’ capital programmes and may impact on the level
of future investment for corporate funds and projects such as the
Strategic Investment Fund, Modernisation Fund, Asset Management
Fund and the Information, Technology and Digital Investment Fund.
The planned profile of capital receipts for 2022/23, as at Month
02, is £13.3m which includes receipts expected from the land
transferring to the HRA for the Moulsecoomb housing redevelopment,
land disposals at Patcham Court Farm, Patcham Place Lodge and
Montague Place, plus a number of lease extensions. To date there
have been receipts of £0.202m in relation to some minor lease
payments and lease extensions. The capital receipts performance
will be monitored over the remainder of the year against capital
commitments.
9.4
The forecast for the ‘right to buy sales’ in 2022/23
(after allowable costs, repayment of housing debt and forecast
receipt to central government) is that an estimated 40 homes will
be sold and net retained receipt of up to £2.000m available
to re-invest in replacement homes. In addition to this net retained
receipt the HRA will also retain circa £0.500m to fund
investment in the HRA capital programme. To date 21 homes have been
sold in 2022/23.
Collection Fund Performance
9.5
The collection fund is a separate account for transactions in
relation to council tax and business rates. Any deficit or surplus
forecast on the collection fund relating to council tax is
distributed between the council, Sussex Police & Crime
Commissioner and East Sussex Fire Authority, whereas any forecast
deficit or surplus relating to business rates is shared between the
council, East Sussex Fire Authority and the government.
9.6
The council tax collection fund forecast deficit has increased by
£0.899m to £2.485m for the financial year outside of
the 3-year spread of the deficit from 2020/21 that is already
funded. The main area resulting in the increased deficit is CTR
awards where the caseload numbers have increased by 1.5% throughout
June to August against a taxbase forecast that had assumed a
reducing caseload as the economy recovered from the pandemic. The
cost of living and other global factors would appear to be
impacting recovery. The main components of the overall deficit are
CTR awards £0.928m, Student exemptions £0.756m and SMI
exemptions £0.697m. The council's share of the overall
deficit of £2.485m is £2.105m.
9.7
The business rates collection fund forecast continues with a
break-even position for the financial year outside of the 3-year
spread of the deficit from 2020/21 that is already funded. There
are a range of risks that could change this forecast significantly
with the main uncertain factors being the level of business
failures and any step increase in empty properties. This will, in
part, be dependent on government support for business to manage
inflationary impacts including energy costs.
Reserves, Budget
Transfers and Commitments
9.8
The creation of reserves, the approval of budget transfers
(virements) of over £0.250m, and agreement to new financial
commitments of corporate financial significance that are not
provided for in the approved budget and policy framework require
Policy & Resources Committee approval in accordance with the
council’s Financial Regulations and Standard Financial
Procedures. There are no new reserves or budget transfers requiring
approval at this stage.
10
ANALYSIS & CONSIDERATION OF ANY ALTERNATIVE OPTIONS
10.1
The provisional outturn position on the General Fund is an
overspend of £13.114m. This includes a forecast overspend of
£0.088m on the council’s share of the NHS managed
Section 75 services. Any overspend at year-end would normally need
to be met from reserves or other one-off resources.
11
COMMUNITY ENGAGEMENT & CONSULTATION
11.1
No specific consultation has been undertaken in relation to this
report.
12.1
The forecast risk at Month 5 of £13.114m represents 6.1% of
the net General Fund. This is a very high forecast risk at this
stage of the year and is driven by a range of factors including
inflationary pressures, continuing economic and supply chain
impacts from the pandemic, and other global economic factors such
as the Russian war on Ukraine and withdrawal from the EU.
12.2
These factors are not easily overcome and the economic outlook
suggests that the UK may enter into recession for a period of time
which will put further pressure on many of the council’s
income streams but will also place continuing pressure on the
Council Tax Reduction budget and potentially demand-led services
such as social care, housing and homelessness. Directorates will
continue to explore all possibilities for mitigating the position
and identifying financial recovery measures but this will also need
to be supplemented with more widespread financial management action
to assist the position. Not making significant in-roads into the
overspend has the potential to seriously impact the council’s
financial sustainability by depleting its reserves and
significantly reducing its flexibility to manage large, predicted
budget gaps in future years.
12.3
In response, the Executive Leadership Team have introduced
widespread vacancy and spending controls to assist the position.
These include introducing an automatic delay to recruitment
advertising for vacant positions, excluding exemptions such as
social care establishments, hostels and social workers, alongside
increased spending controls to restrict non-critical spend and
increase the level of authorisation required for the purchasing and
commissioning of goods and services. All controls will be managed
by Directorate Management Teams (DMTs) who will need to consider
health & well-being impacts on staff as well as impacts on
service delivery to clients and customers in making vacancy
(recruitment) and spending decisions and can over-ride controls
where necessary. However, some impact on staffing capacity and
service delivery is likely but clearly cannot undermine the
council’s statutory duties and responsibilities.
13
FINANCIAL AND OTHER IMPLICATIONS
Financial Implications:
13.1
The financial implications are covered in the main body of the
report. Financial performance is kept under review on a monthly
basis by the Executive Leadership Team and the management and
treatment of forecast risks is considered by the Audit &
Standards Committee as part of its review of strategic risks.
Finance Officer Consulted: Jeff
Coates
Date: 20th September 2022
Legal Implications:
13.2
Decisions taken in relation to the capital and revenue budget must
enable the council to observe its legal duty to achieve best value
by securing continuous improvement in the way in which its
functions are exercised, having regard to a combination of economy,
efficiency and effectiveness. The council must also comply with its
general fiduciary duties to its Council Tax payers by acting with
financial prudence, and bear in mind the reserve powers of the
Secretary of State under the Local Government Act 1999 to limit
Council Tax & precepts.
Lawyer Consulted: Elizabeth
Culbert
Date: 26th September 2022
Equalities Implications:
13.3
There are no direct equalities implications arising from this
report.
Sustainability Implications:
13.4
Although there are no direct sustainability implications arising
from this report, the council’s financial position is an
important aspect of its ability to meet council priorities
including Carbon Neutral priorities set out in the Corporate
Plan.
Risk and Opportunity Management Implications:
13.5
The council’s revenue budget and Medium Term Financial
Strategy contain risk provisions to accommodate emergency spending,
even out cash flow movements and/or meet exceptional items. The
council maintains a recommended minimum working balance of
£9.000m to mitigate these risks. The council also maintains
other general and earmarked reserves and contingencies to cover
specific project or contractual risks and commitments.
SUPPORTING DOCUMENTATION
Appendices:
1.
Financial Dashboard Summary
2.
Revenue Budget Movement since Month 2
3.
Revenue Budget RAG Rating
4.
Revenue Budget Performance
5.
Summary of 2022/23 Savings Progress
6.
Capital Programme Performance
7.
New Capital Schemes