Subject:
Targeted Budget Management (TBM) Provisional Outturn 2024/25
Date of meeting:
Thursday, 26 June 2025
Report
of:
Cabinet Member for Finance & City
Regeneration
Contact Officer: Name: Haley
Woollard, Deputy Chief Financial Officer
Tel: 01273 291233
Email: haley.woollard@brighton-hove.gov.uk
Ward(s) affected: (All Wards)
Key
Decision:
Yes
Reason(s) Key:
Expenditure which is, or the making of savings which are,
significant having regard to the expenditure of the City
Council’s budget, namely above £1,000,000 and is
significant in terms of its effects on communities living or
working in an area comprising two or more electoral divisions
(wards).
For general release
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
the provisional outturn position (i.e. Month 12 year-end) on the
council’s revenue and capital budgets for the financial year
2024/25.
1.2
The final outturn
position is subject to the annual external audit review of the
council’s accounts. The final position will be shown in the
council’s unaudited financial statements which are due for
publication by 30th June 2025 and must be signed by the Chief
Finance Officer (CFO) and will ultimately be reflected in the
audited set approved by the Audit & Standards Committee, due to
be published by 27th February 2026.
1.3
The provisional outturn is a
£1.091m underspend on the General Fund revenue budget.
This is an improvement of £4.401m from Month 9, mainly due to
significant improvements in the City Operations outturn. An
improvement of £1.985m (including £0.496m Business
Rates Levy) from the Month 9 position was assumed when setting the
2025/26 budget and therefore the outturn position represents an
additional improvement of £2.416m compared to the assumed
outturn of resources available. Section 11 sets out proposals for
the allocation of this additional resource.
1.4
The report outlines that the reported underspend has been achieved
through several measures. This includes the implementation of
strict vacancy and spending controls, and the receipt of some
significant one-off resources which have supported the General Fund
revenue outturn position. A reported underspend represents a
favourable position. However, this is not withstanding the
significant financial challenges and risks that the authority
faces, particularly in respect of temporary accommodation where
increases in demand are significant and unsustainable. This is
discussed further in sections 4 and 19.
1.5
The report also indicates that £4.760m (20%) of the
substantial savings package in 2024/25 of £23.627m was not
achievable largely due to exceptional inflationary pressures
experienced during the year.
2
Recommendations
2.1
Cabinet notes that the provisional General Fund outturn position is
an underspend of £1.091m and that this represents an
improvement of £2.416m compared to the projected and planned
resource position at Month 9 and taken into account when setting
the 2025/26 budget.
2.2
Cabinet approves General Fund carry forward requests totalling
£4.283m as detailed in Appendix 5 and assumed within the
provisional outturn.
2.3
Cabinet approves the proposed allocation of additional resources as
set out in paragraph 11.3.
2.4
Cabinet notes the provisional outturn for the separate Housing
Revenue Account (HRA), which is a break-even position.
2.5
Cabinet notes the provisional outturn position for the ring-fenced
Dedicated Schools Grant, which is an overspend of
£0.680m.
2.6
Cabinet notes the provisional outturn position on the Capital
Programme which is an underspend variance of £4.025m.
2.8
Cabinet approves new capital schemes requested in Appendix 8.
2.9
Cabinet notes the Treasury Management end of year review 2024/25 as
set out in Appendix 10.
3
Context
and 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
Cabinet. 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.
i)
General Fund Revenue Budget Performance
ii)
Housing Revenue Account (HRA) Performance
iii)
Dedicated Schools Grant (DSG) Performance
iv)
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 S151 Chief Financial 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 Corporate Leadership Team. More detailed
explanation of the variances can be found in Appendix
4.
|
Forecast
|
|
2024/25
|
Provisional
|
Provisional
|
Provisional
|
|
Variance
|
|
Budget
|
Outturn
|
Variance
|
Variance
|
|
Month
9
|
|
Month
12
|
Month
12
|
Month
12
|
Month
12
|
|
£'000
|
Directorate
|
£'000
|
£'000
|
£'000
|
%
|
|
(973)
|
Families,
Children & Wellbeing
|
72,692
|
71,630
|
(1,062)
|
-1.5%
|
|
2,357
|
Homes & Adult
Social Care
|
118,117
|
120,548
|
2,431
|
2.1%
|
|
(977)
|
City
Operations
|
40,814
|
37,017
|
(3,797)
|
-9.3%
|
|
735
|
Central
Hub
|
30,513
|
30,470
|
(43)
|
-0.1%
|
|
1,142
|
Sub
Total
|
262,136
|
259,665
|
(2,471)
|
-0.9%
|
|
2,168
|
Centrally-held
Budgets
|
(56,753)
|
(55,373)
|
1,380
|
2.4%
|
|
3,310
|
Total General
Fund
|
205,383
|
204,292
|
(1,091)
|
-0.5%
|
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).
4.3
The chart below shows the monthly forecast variances for 2024/25
and the previous three years for comparative purposes.
Overview: General Fund Revenue Budget
Performance & Risks
4.4
The above graph illustrates
that the TBM forecast position during 2024/25 has varied from a
peak of £10.137m at TBM2 (May) to the provisional outturn of
a £1.091m underspend. The underspend has been achieved as a
result of a number of measures, one of which has been strict
vacancy and spending controls. These controls were implemented in
November 2025, and further strengthened in January 2025 following
the deterioration of the forecast at TBM8 (December). Whilst the
spending controls have had a significant positive impact on the
outturn position, the approach has an impact on service delivery
across the council and is not a sustainable method for managing the
financial challenges that the organisation faces in the long
term.
4.5
Of the total 2024/25 savings
package of £23.627m, a total of £4.760m (20%) were not
achieved. This may add further pressure on 2025/26 revenue budget
where there is already further significant savings of
£15.799m to deliver during 2025/26.
4.6
Furthermore, the provisional
outturn includes some considerable overspends in areas which carry
high levels of future risk for the organisation. For example, as
described in 4.9, Temporary Accommodation has incurred an overspend
of £2.652m as a result of the high, and increasing, numbers
of households in Temporary Accommodation. This trend is continuing
into 2025/26 and therefore likely to be at risk of further
overspend in the current financial year.
4.7
Therefore it’s important
to recognise that whilst an underspend is a positive position to
have achieved, further work needs to be undertaken to ensure the
council reaches a position where key financial challenges can be
met in a sustainable way.
Demand-led Budgets
|
Forecast
|
|
2024/25
|
Provisional
|
Provisional
|
Provisional
|
|
Variance
|
|
Budget
|
Outturn
|
Variance
|
Variance
|
|
Month
9
|
|
Month
12
|
Month
12
|
Month
12
|
Month
12
|
|
£'000
|
Demand-led
Budget
|
£'000
|
£'000
|
£'000
|
%
|
|
(1,585)
|
Child Agency
& In House Placements
|
27,575
|
25,914
|
(1,661)
|
-6.0%
|
|
604
|
Community
Care
|
79,271
|
79,320
|
49
|
0.1%
|
|
2,535
|
Temporary
Accommodation
|
6,526
|
9,178
|
2,652
|
40.6%
|
|
1,554
|
Total
Demand-led Budget
|
113,372
|
114,412
|
1,040
|
0.9%
|
The chart below shows the monthly forecast variances on the
demand-led budgets for 2024/25.
TBM Focus Areas
4.9
There are clearly
ongoing pressures across many areas of the council, particularly
front-line, demand-led areas which is a clear indicator of the
inflationary and demand pressures driven by current economic
conditions. Key areas of pressures are outlined below:
4.10
Children’s Services: The final outturn position showed
significant cost pressures: £0.721m on Home to School
transport, and a shortfall in Public Health Funding of
£0.350m. This together with underspends on Children’s
Placements of (£1.661m), and other underspends of
(£0.472m) result in a year-end underspend of (£1.062m).
Key drivers of the outturn position were as follows:
·
Home to School
Transport:There were
several factors contributing to the overspend 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, lack of
local SEND school sufficiency, and increased numbers of routes
required to accommodate individual post 16 learners’
timetables. Market forces
within SEND transport are also contributed to the overspend in Home
to School Transport. The service was increasingly impacted by local
driver, vehicle passenger assistant, vehicle shortages and
increased running costs. There was also a lack of competition in
the transport market, particularly minibus providers, which is
pushed up contract prices still further.
There
was increasingly less capacity in the local system to meet demand,
not just in the numbers of children requiring transport but the
nature of the transport requirements. There was also an increase in
solo routes being created, both to educational provisions where
they were the only children attending and using HTST. Since
September, 12 routes were created and 10 of those were
solo.
Schools’
Budgets
At the end of the
2024/25 financial year there is a net deficit school balances
position of £2.623m. This represents a worsening of the
financial position of £2.904m when compared to the net
surplus position of £0.281m at the end of 2023/24. There are
30 schools (out of a total of 55 maintained schools) that have
overspends at the end of the 2024/25 financial year. This
represents 55% of all schools. Draft school budget plans for
2025/26, which accommodate estimated carry forwards from 2024/25
continue to show a worsening financial position for the
city’s schools.
The outturn
position of the 2024/25 central Dedicated Schools Grant (DSG) is an
overspend of £0.680m. It is also important to note that the
central DSG budget for 2024/25 includes the one-off funding from
the underspend of £1.275m carried forward from 2023/24. This
means there is an in-year overspend of £1.955m. The DSG
position is described in more detail in Appendix 4.
4.11
Adults Services:
The service faced
significant challenges in 2024/25 in mitigating the risks arising
from increasing demands from client needs, supporting more people
to be discharged from hospital when they were ready and maintaining
a resilient local provider market. It is to be noted that this is
after applying service pressure funding of £10.302m in
2024/25 which has been used to fund budget pressures resulting from
the increased complexity and costs of care.
The 2024/25 savings plan for Adult Social
Care totalled £4.541m. There were continued actions focussing
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 service had a Modernisation Programme which
aimed to implement a consistent strengths-based approach across key
work streams, ensuring robust pathways were in place, developing a
community reablement offer and re-designing the front door service.
The Health & Social Care system continues to be under
considerable pressure, and this generated additional costs for the
council due to:
·
Pressures on the system due to short-term grant monies
and an unresolved
national, long-term funding solution;
·
Significant pressures on the acute hospital resulting in
increased costs to support timely discharge into residential,
nursing and home care;
·
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.
The funding of all care packages was
scrutinised for Value for Money, ensuring that eligible needs were
met in the most cost-effective manner which not always met
people’s aspirations. Established safeguards were in place to
provide assurance within this process.
In respect of financial recovery and the
management of Community Care Budget pressures, a monthly savings
and efficiencies meeting provided rigorous monitoring and oversight
of the Adult Social Care & Health savings progress.
Additionally, each month the top ten spends on placements and
packages of care were reviewed to ensure immediate remedial action
was undertaken to look at options and, wherever possible, reduce
the cost of care whilst meeting the assessed need. Negotiations
were also held with Sussex Partnership NHS Foundation Trust
regarding addressing the high spending commitment within the Mental
Health s75 arrangements.
Housing Services and Temporary
Accommodation (TA): The current overspend is due to increased demand for
temporary accommodation since December 2023, along with a rise in
rental costs. This is a national issue; however, Brighton &
Hove have seen a 3% increase compared to 10% nationally. As a
result, the temporary accommodation service overspent by
£2.652m, with £1.146m of savings not met.
A Temporary
Accommodation (TA) Reduction Plan has been developed, setting out a
range of activities to either reduce the number of households
entering TA; assist households to move on from TA, or reduce the
cost of the TA we are using. As a broad overview, these actions can
be categorised as Prevention, Move-On’s to sustainable
accommodation, cost reduction measures, and increasing income
through improved collection and reducing void turnaround
times.
The overspend
relates to the following elements:
Emergency
nightly booked (Spot Purchased): The budget was set for an
average of 160 households per night for the year. However, since
April 2024, the council has supported an average of 337 households
per night, an increase of 155 compared to the previous financial
year. The service aims to reduce the average nightly cost wherever
possible, but greater demand, increased costs, and the continuous
decline of temporary accommodation leased properties pose
significant challenges. Consequently, this budget has overspent by
£1.719m.
The underlying
trend is that the number of households using nightly booked
accommodation is increasing due to changes in the private rented
sector. Over the past year, many landlords have exited the market
due to cumulative external events beyond the control of the local
authority, such as increases in landlord taxes, rising mortgage
rates, and the threat of impending legislation. The private rented
sector is also the greatest means of preventing homelessness
Booked
Accommodation: The service is facing significant pressures on
the overall costs of Block Booked accommodation. The budget
anticipated a reduction of 88 units during 2024/25, however, due to
increased demand and the limited opportunities for move households
onto social housing and the private rented sector, there has been
an increase of 138 units. Additionally, the council is experiencing
substantial increases in contract prices, resulting in an overspend
of £0.758m. The council is about to trial a pilot which would
separate the leasing of the property from its management. It is
anticipated this could result in annual savings of £0.345m,
as well as improving the service to residents.
Private Sector
Leased (PSL) TA: The service is underspent by £0.123m,
driven by fewer leased properties as landlords withdraw from the
rental market. There are 52 fewer properties now than in April
2024, with many renewal contracts still under negotiation. The
downward trend has slowed as the service has been successful over
recent months enabling more leases to be renegotiated. A marketing
campaign is underway to inform potential landlords of the benefits
of leasing to the council. Unsurprisingly, the new leases are
commanding a higher rate and shorter terms. The reduction in
private sector leased properties contributes to the increased use
of nightly booked and block booked accommodation
The
service is actively seeking measures to reduce the number of
households in temporary accommodation by exploring innovative and
alternative provision methods and move-on options as part of the
Temporary Accommodation Reduction Action Plan. The service has
improved its processes to reduce the use and length of stay in
temporary accommodation by enhancing homeless prevention and
facilitating moves to more sustainable accommodation. This is
particularly challenging in a city where private sector rents are
very high, supply is limited, and benefit levels remain static.
Although Local Housing Allowance (LHA) rates have been increased
for 2024/25, the Housing Benefit rate for those in temporary
accommodation remains at the 2011 level. Further efficiencies are
being sought by continuing to improve homelessness prevention,
identifying additional move-on opportunities, securing the best
prices for all temporary and nightly accommodation, improving void
turnaround times, and enhancing income collection, thereby
continuing to reduce costs in line with the budget strategy
The
Housing Options Service also completed a Service Redesign in May
2024. As well as achieving an annual saving of £0.285m, this
now provides a far greater focus on homelessness prevention.
Following transition to this new operating model we are now seeing
improvements in terms of a reducing rate of households coming into
TA, less complaints and improved decision making.
Services are
starting to see a steady return to pre pandemic levels of activity,
this being in line with city recovery. The savings targets can only
be achieved if demand exceeds pre-2019 levels for key income areas
such as paid parking, commercial activities and Planning &
Building Control fee incomes. In-year pressures have been mitigated
by reductions in supplies & services and holding vacant posts
to reduce staffing costs, but this directly affects service
delivery and has a visible impact on the city.
City Operations has
been working on financial recovery plans and measures to mitigate
the forecasted overspends, this includes the implication of the
spend controls which remain in place across the council.
The overall
position for City Operations is a net £3.797m underspend at
outturn, a net increase to the underspend of £2.820m since
Month 9 reflecting improvements in income collection and the
continued actioning of financial recovery plans and measures. There
are pressures within the outturn which have been identified in year
including the pressure of £0.540m relating to the NJC
arrangements with the Royal Pavilion Museums Trust, increased costs
identified in Environmental Services resulting in a £0.577m
overspend, a significant pressure relating to Planning fees of
£1.184m. Offsetting these pressures is an underspend in the
forecast for City Infrastructure of £3.302m and underspends
on staff costs across the service.
The movement from
month 9 is a £2.820m improvement, relating to improvements in
paid parking incomes, lower than forecasted parking contract costs,
coast protection grant received, 50% share of the successful
Business Rates appeal for the Brighton Centre and release of
surplus management fee income to revenue. In addition there has
been delayed spend and further eligible capitalisation within
Digital Innovation and City Infrastructure, further incomes for
Brighton Centre, Seafront rents and Trade and Garden Waste. These
underspends have been offset by further reductions in planning
incomes, increases in BikeShare pressures and reductions in
Architect internal fee incomes as a result of a reduced capital
programme.
4.13
Centrally-held
Budgets: There is an overall overspend of £1.380m.
Of this £1.365m relates to the additional cost of the 2024/25
pay award in excess of the amount provided for in the budget.
There is also a
pressure of £0.764m on Insurance budgets caused by an
increase in the value of claims paid.
There is a final
pressure of £0.896m on the Housing Benefit Subsidy budget.
The main element of this is a pressure of £1.038m on a
certain benefit type for vulnerable tenants which is not fully
subsidised. This pressure has continued to rise since last year but
is being investigated to assess what steps can be taken to reduce
it. This pressure has been partially offset by a surplus of
£0.178m on the net position of the recovery of
overpayments.
The corporate
‘Organisational Redesign’ saving of £2.475m is
also held in this area. The redesign has now been completed and the
new organisational structure came into force on 1 January 2025. As
noted previously, an additional vacancy target was applied
council-wide, generating savings of £1.271m to recognise the
lead-in time to implement the redesign. A risk provision of
£1.000m was also set aside to mitigate this risk and these
two measures substantially cover the savings target.
There is an
underspend of £1.131m on financing costs (an increase of
£0.384m from TBM9) which mostly due to increased investment
income as a result of higher balances than forecast and long-term
borrowing being delayed until next year.
There has also been
an increase of £0.238m in the Homes for the City of Brighton
& Hove LLP distributable profit recognised for the financial
year ending 31 March 2024, following the final sign off of the
Statement of Accounts for 2023/24.
Surplus income of
£0.496m was received in respect of distributed Business Rate
Levy surplus.
Carry Forward Requests (Appendix 5)
4.14
Under the
council’s Financial Regulations, the S151 Chief Finance
Officer may agree the carry forward of budget of up to
£0.050m per member of the Corporate Leadership Team (up to a
maximum of £1m in total) if it is considered that this
incentivises good financial management. However, due to the
challenging financial situation, all requests are being presented
to Cabinet for consideration. Similarly, carry forwards have only
been proposed where there is clear evidence of a fully-funded,
prior commitment that was not able to be completed or undertaken by
the end of the financial year. This will normally be supported by a
contractual or purchase order commitment.
4.15
Carry forward requests include grant funded and non-grant funded
carry forwards totalling £4.283m which have been assumed in
the outturn figures above. An analysis of these is provided in
Appendix 5 split into two categories as follows:
·
The
non-grant funded element of carry forwards totals
£1.321m. These items have been proposed where funding is in
place for contractual commitments, existing projects or partnership
working that cross over financial years and it is therefore due to
a timing issue that this money has not been spent in full before
the year-end.
·
The
grant funded element of carry forwards totals £2.962m.
Under current financial reporting standards, grants received by the
council that are unringfenced or do not have any conditions
attached are now recognised as income in the financial year in
which they are received rather than in the year in which they are
used to support services. Carry forward is therefore required to
ensure the grants are available to fund the commitments against
them next year.
Monitoring Savings
4.16
The savings package
approved by full Council to support the revenue budget position in
2024/25 was £23.627m. This followed directly on from a
£14.173m savings package in 2023/24 and 14 years of
substantial savings packages totalling over £232m since
government grant reductions commenced in 2010, and which have been
necessary to enable cost and demand increases to be funded
alongside managing the reductions in central government grant
funding.
4.17
Appendix 4 provides a
summary of savings in each directorate and indicates in total what
has been achieved, what has been offset by in year pressures and
the net position of unachieved savings. 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 12 and shows that gross savings of £19.195m have been
achieved but that inflationary pressures (exceptional price
increases) have reduced this by £0.328m. Including other
unachievable savings of £4.432m, this means that a total of
£4.760m (20%) was unachieved in 2024/25.
5
Housing Revenue Account
Performance (Appendix 4)
The Housing Revenue Account (HRA) is a
separate ring-fenced account which covers income and expenditure
related to the management and operation of the council’s
housing stock. The majority of expenditure is funded by Council
Tenants’ rents and housing benefit (rent rebates). The
provisional outturn is breakeven, this position includes an
overspend of £0.150m across service areas offset by an
underspend against the capital financing budgets. The outturn
includes pressures arising from the Large Panel Systems (LPS)
emergency response, as well as variances within specific service
areas, details of which are provided in Appendix 4.
HRA
Risks
5.1
The HRA is entering into a period of significant uncertainty
regarding the financial position, there are major risks that need
to be addressed and monitored to ensure that the position remains
stable. These risks include but are not limited to:
·
Health &
Safety compliance
·
Building Safety
compliance
·
Disrepair
claims
·
Rent
arrears and collection rate
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 provisional
outturn is currently an overspend of £0.680m and more details
are provided in Appendix 4.
6.2
Currently, the government is
providing legislation known as the Statutory Override facility that
means any deficit associated with the Central DSG is excluded from
the council’s general fund financial position at the end of a
financial year. The regulations require the negative balance
(central DSG deficit) be held in an unusable reserve which remains
there for the lifetime of the regulations. The override facility is
currently due to expire in March 2026 and an announcement is
expected in the near future where the government will set out their
future intentions relating to the Statutory Override. This means
that a negative unusable reserve of £0.680m has been
established at 31 March 2025.
7
S75
Partnership Performance (Appendix 4)
7.1
The Section 75 Services represent those services delivered by local
NHS Trusts and the Council under Section 75 Integrated Agreements.
Services are managed by Sussex Partnership NHS Foundation Trust
(SPFT) and the Council and include health and social care services
for people whose primary support reason (PSR) is Adult Mental
Health and Memory and Cognitive Support Services. The spend
reflects the totality of people with a PSR of Mental Health and
Memory and Cognitive Support, most of which is within the S75
arrangement, but some of which is within other assessment teams,
such as the Hospital Discharge Team and Locality Teams for older
adults. The provisional outturn is an overspend of £1.712m
and more details are provided in Appendix 4.
8
Capital
Programme Performance and Changes
8.1
The
Capital programme spans more than one financial year and therefore
monitoring is different to that of the revenue budget. Performance
needs to be looked at from 5 different viewpoints at the end of the
year as follows:
i)
Variance: The
‘variance’ for a scheme or project indicates whether it
has broken-even, underspent or overspent. If the project is
completed, any underspend or overspend will be an outturn variance.
Generally, only explanations of significant forecast variances of
£0.100m or greater are given.
ii)
Budget
Variations: These are changes to the project budget within year,
requiring members’ approval, and do not change future year
projections. The main reason for budget variations is where capital
grant or external income changes in year. Some variations may also
be an increase in budget for additional funding received to cover
additional costs.
iii)
Slippage: This
indicates whether or not a scheme or project is on schedule.
Slippage of expenditure from one year into another will generally
indicate overall delays to a project although some projects can
‘catch up’ at a later date. Some slippage is normal due
to a wide variety of factors affecting capital projects, however
substantial amounts of slippage across a number of projects could
result in the council losing capital resources (e.g. capital
grants) or being unable to manage the cashflow or timing impact of
later payments or related borrowing. Wherever possible, the council
aims to keep slippage below 5% of the total capital
programme.
iv)
Reprofiling:
Reprofiling of budget from one year into another is requested by
project managers when they become aware of changes or delays to
implementation timetables due to unforeseeable reasons outside the
council’s direct control. Reprofiling requests are checked in
advance by Finance to ensure there is no impact on the
council’s capital resources before they are recommended to
Cabinet.
v)
IFRS
changes: These accounting adjustments are only applied at year-end
and are necessary for the council to comply with International
Financial Reporting Standards (IFRS) for the Statement of Accounts.
This concerns the determination of items of expenditure as either
capital or revenue expenditure. Only items meeting the IFRS
definition of capital expenditure can be capitalised; expenditure
not meeting this definition must be charged to the revenue
account.
For many capital
schemes there may be instances where some of the costs are of a
day-to-day servicing nature and are not true capital expenditure.
It would be impractical for an authority to assess every item of
expenditure when it is incurred as to whether or not it has
enhanced an asset. A practical solution is therefore applied
instead and as part of the closure of accounts process an
assessment is made by capital programme managers and Finance to
determine the correct classification of capital or revenue. Where
an element of the scheme is deemed to be revenue, the capital
budgets are reduced by the same amount as the items that are
subsequently charged to the revenue account to ensure no overall
budgetary impact. These changes are designated as ‘IFRS
Adjustments’ in Appendix 7.
8.1
The table below provides a
summary of capital programme performance by Directorate and shows
that there is an overall underspend of £4.025m which is
detailed in Appendix 7.
|
Forecast Variance Month 9
|
|
Reported Budget Month 12
|
Provisional Outturn Month 12
|
Provisional Variance Month 12
|
Provisional Variance Month 12
|
|
£'000
|
Directorate
|
£'000
|
£'000
|
£'000
|
%
|
|
0
|
Families, Children & Wellbeing
|
13,434
|
13,434
|
0
|
0.00%
|
|
93
|
Homes & Adult Social Care
|
6,874
|
6,874
|
0
|
0.00%
|
|
0
|
City Operations
|
46,030
|
46,013
|
(17)
|
0.00%
|
|
0
|
Central Hub
|
4,023
|
3,845
|
(178)
|
-4.40%
|
|
(2,281)
|
Housing Revenue Account
|
74,784
|
70,954
|
(3,830)
|
-5.10%
|
|
(2,188)
|
Total Capital
|
145,145
|
141,120
|
(4,025)
|
-2.80%
|
(Note: Summary may include minor rounding differences to Appendix
7)
8.2
Appendix 7 shows the changes to
the 2024/25 capital budget. Cabinet’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 of the Month 9 report.
|
Summary
of Capital Budget Movement
|
Reported
Budget Month 12
|
|
|
£'000
|
|
Budget
approved as at TBM month 9
|
163,600
|
|
Reported
at Other Committees/IFRS Changes
|
(5,776)
|
|
New
schemes in 2024/25 (for approval – Appendix 8)
|
75
|
|
Variations
to budget (for approval – Appendix 7)
|
7,831
|
|
Reprofiling
of budget to later years (for approval – Appendix
7)
|
(14,954)
|
|
Slippage
(for noting only)
|
(5,631)
|
|
Total
Capital
|
145,145
|
8.3
Appendix 7 also details
any slippage into next year. At this stage project managers have
forecast that £5.631m of the capital budget will slip into
the next financial year and this equates to approximately 3.88% of
the capital budget.
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 full Council. This
section highlights any potential implications for the current MTFS
arising from the 2024/25 financial year 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.
Capital Receipts Performance
9.2
Capital receipts are used to support the capital programme and
transformation programmes. For 2024/25 there was a total of
£10.389m capital receipts (excluding ‘right to
buy’ (RTB) sales and other HRA receipts), which includes the
transfer of two properties to the HRA and the land at Moulsecoomb
Hub. Other disposals include 2-3 Pavilion Buildings, 43 Shirley
Street and 39a George Street. There were also receipts for lease
extensions, loan repayments, deposits and the release of a
restrictive covenant.
9.3
The Government receives a proportion of the proceeds from
‘right to buy’ sales with a proportion required by the
council to repay debt; the remainder is retained by the council and
used to fund the capital investment programme. The total net usable
receipts for ‘right to buy’ sales in 2024/25 was
£2.855m including £2.313m available for replacement
homes. There was also a total of £0.163m receipts for the HRA
for non RTB sales including the sale of a property and some
land.
Collection Fund Performance
9.4
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.
9.5
The Collection Fund for council tax closed with an overall deficit
position of £2.475m. The main drivers for this deficit are
backdated student exemption cost £1.014m, increased Severely
Mentally Impaired (SMI) exemption cost £0.768m, increased
council tax reduction (CTR) claimant numbers £0.698m and
reductions in anticipated collection £0.310m. This is partly
offset by additional council tax premium income. The
council’s share of the deficit is £2.094m and
represents a decrease of £0.110m from the position previously
reported and this will be incorporated into the surplus / deficit
position for the 2026/27 budget.
9.6
The collection fund for
business rates closed with an overall deficit position of
£5.124m (£2.306m brought forward and £2.818m
in-year). The cost of successful appeals against the 2017 rating
list was the main reason for the brought forward deficit. The
in-year deficit position was due to significantly higher than
anticipated appeal costs against the 2017 rating list, which was
£4.911m above the level anticipated. In addition, the
anticipated growth in the overall taxbase was £1.714m less
than forecast and there was £1.362m higher empty property
relief than forecast. Offsetting these cost increases is
significant additional income as the result from a backdated
increase to the rateable value of a single assessment amounting to
£4.836m. The council’s share of the £5.124m
deficit position is £2.511m. After allowing for section 31
compensation grants and contributions from the collection fund
section 31 adjustment reserve the council’s net share is
£1.520m. This represents an increase of £0.585m from
the position previously reported and this will be incorporated into
the surplus / deficit position for the 2026/27 budget.
9.7
The creation or re-designation
of reserves, the approval of budget transfers (virements) of over
£1 million, and agreement to new financial commitments of
corporate financial significance require Cabinet approval in
accordance with the council’s Financial Regulations and
Standard Financial Procedures. There are no items requiring
approval at this stage.
9.8
A new DSG Non useable reserve
has been created reflecting the DSG deficit position detailed in
6.2.
9.9
The council’s reserves and provisions have been fully
reviewed as part of the annual closure of accounts process and a
schedule of the reserves is shown at Appendix 9.
9.10
The current recommended minimum General Fund working balance is
£9.000m. The working balance was drawn down in 2022/23 by
£3.376m to fund the general fund revenue overspend, and a
strategy is in place to replenish over a 3 year period to
2026/27. The recommendations within this report will bring
the working balance to £7.840m as at 31 March 2025.
9.11
The graph below demonstrates that the council’s reserves and
balances are at minimal sustainable levels and remain low compared
to similar sized authorities. The Medium Term Financial Strategy
will be refreshed and an approach proposed for increasing the
council’s minimum working balance to improve financial
resilience.
10
Treasury Management End of Year
Review 2024/25
10.1
The 2024/25 Treasury Management
Strategy, including the Annual Investment Strategy was approved by
full Council on 22 February 2024.
10.2
The CIPFA Treasury Management
Code requires the performance of the treasury management activity
against the strategy and key prudential and treasury indicators to
be reported at least twice a year, to be presented to Cabinet as
part of the TBM process.
·
Investment
balances have continued to reduce as the council maintains a
strategy to maximise the use of internal reserves and balances to
temporarily finance the borrowing need in the capital
programme.
·
The
highest risk indicator on investments during the period was 0.006%
which is well below the maximum benchmark of 0.050%.
·
The
return on investments has slightly exceeded the benchmark rates for
the period.
·
The
council entered into two tranches of new PWLB borrowing for the HRA
totalling £60m in the last 6 months of 2024/25. This
borrowing was undertaken in response to interest rate reductions to
reduce the HRA under-borrowing position.
·
The
two borrowing limits approved by full Council have not been
exceeded.
·
The
Annual Investment Strategy parameters have been met throughout the
6-month period.
11
Proposed allocation of available
outturn resources
11.1
The outturn position of £1.091m underspend represents an
improvement of £2.416m compared to the projected and planned
resource position at Month 9 as outlined in the 2025/26 General
Fund Budget Report, which included the assumption that the
following allocation of one-off resources would be required to
maintain a balanced budget position for 2024/25:
|
One-off
Item/Allocation
|
£m
|
|
Reprofiled
2024/25 repayment of Working Balance
|
1.125
|
|
Reduced 2024/25
Waste PFI contribution
|
0.200
|
|
Assumed one off
resources to be applied to 2024/25
|
1.325
|
11.2
The improvement in the TBM outturn position has resulted in these
one-off allocations not being required.
11.3
The outturn underspend
of £1.091m provides additional one-off resources. This allows
the council to make an early contribution to replenish the working
balance. Work is currently being undertaken to formulate a
Financial Sustainability Strategy which will be presented to
Cabinet in July 2025. An early working balance contribution is
solid progress towards this objective and strategy.
12
Analysis and consideration of
alternative options
12.2
The underspend provides
available resources for which the basic options are to:
i)
Replenish the
Working Balance toward the minimum recommended level (£9m) as
far as possible, following its reduction in respect of the
overspend in 2022/23;
ii)
Hold
the resources in whole or in part as a separate risk provision to
support the sustainability of the 2025/26 budget position given the
large savings programme of £15.789m;
iii)
Allocate the
resources in whole or in part to identified priorities.
12.3
The proposed allocation at 11.3 above prioritises i) on the basis
of the issues outlined in Section 19.
13
Community engagement and
consultation
13.1
No specific consultation has
been undertaken in relation to this report.
14
Financial implications
14.1
The financial implications are
covered in the main body of the report. Financial performance is
kept under review on a monthly basis by the Corporate Leadership
Team and members and the management and treatment of strategic
financial risks is considered by the Audit, Standards & General
Purposes Committee.
Finance Officer consulted: Jeff
Coates Date:
19/05/2025
15.1
Decisions taken in relation to
the budget must enable the council to meet 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.
15.2
The Treasury Management actions
reported in the review document at Appendix 10 are carried out in
accordance with the powers conferred by Part 1 of the Local
Government Act 2003, which permit local authorities to invest for
the purposes of the prudent management of their financial affairs.
Regard must be had to statutory guidance in the form of the
Prudential Code for Capital Finance in Local Authorities issued by
the Chartered Institute of Public Finance and Accountancy. The
Council’s approach is considered to be consistent with that
Code and the requirements of the Act.
Lawyer consulted: Elizabeth Culbert
Date:
15/05/2025
16.1
There are no direct equalities
implications arising from this report.
18
Health
and Wellbeing Implications:
18.1
The council’s budget
includes many statutory and preventative services aimed at
supporting vulnerable children and adults. The budget prioritises
support to these core and critical services including management of
any emerging in-year pressures to minimise impacts on statutory
provision.
19.1
The achievement of an outturn underspend is a favourable position,
particularly when compared to early forecasts in the year which
indicated pressures of over £10 million. However, alongside
normal financial management actions across services, this has
required the use of strict council-wide vacancy and spending
controls to support the position for most of the year, which has
had unavoidable impacts on some service delivery. The position has
also been supported by significant one-off resources including a
returned distribution from the Business Rate levy, increased
investment income from high cash balances resulting from delayed
capital project spending, a successful Business Rates appeal for
the Brighton Centre, and review and release of grants and
provisions where appropriate.
19.2
The Council’s financial sustainability is a critical concern
due to the very low level of reserves balances. The LGA peer
challenge fed back that “The Council has very little, to no,
tolerance in its financial resilience… it needs to
prioritise a plan to increase the overall level of reserves at
pace”, and the Council’s External Auditors noted
in their annual opinion “a significant weakness in
arrangements for financial sustainability remains”. This
outturn position enables the Council to begin to address these
concerns. The target general fund reserves position of £9m
itself is very low when looking at available benchmarks, this will
need to be increased in an updated Medium Term Financial Strategy
early in 2025/26.
19.3
The underlying position is therefore very challenging which has
been recognised in the 2025/26 budget process resulting in the need
to provide for around £24 million additional service pressure
funding, contributing to a large savings requirement in 2025/26 of
nearly £16 million.
19.4
The proposed allocation of the surplus resources as outlined in
11.3 to replenish the working balance is key in helping the
authority move towards a more sustainable financial position.
Supporting Documentation
Appendices
1.
Financial Dashboard Summary
2.
Revenue Budget Movement Since Month 9
3.
Revenue Budget Performance RAG Rating
4.
Revenue Budget Performance
5.
Carry Forward Requests
6.
Summary of 2024/25 Savings Progress
7.
Capital Programme Performance
8.
New Capital Schemes
9.
Schedule of Reserves
10.
Treasury Management Update
