Subject:
Targeted Budget Management (TBM)
2025/26 Month 7 (October)
Date of meeting:
Thursday, 11 December 2025
Report
of:
Cabinet Member for Finance & City
Regeneration
Contact Officer: Name: John
Hooton, Director of Finance & Property
Haley Woollard, Deputy Chief Financial Officer
Email: john.hooton@brighton-hove,gov.uk
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
an indication of forecast risks as at Month 7 on the
council’s revenue and capital budgets for the financial year
2025/26. Effective financial management is a core component of
providing a well-run council, a key priority within the Council
Plan that demonstrates that the council manages within its finite
resources and optimises the use of those resources.
2
Recommendations
2.1
Cabinet notes the forecast risk position for the General Fund,
which indicates a potential forecast overspend risk of
£7.776m.
2.2
Cabinet notes the forecast overspend risk for the separate Housing
Revenue Account (HRA), which is an overspend of £1.216m.
2.3
Cabinet notes the forecast overspend risk for the ring-fenced
Dedicated Schools Grant, which is an overspend of
£2.463m.
2.4
Cabinet notes the forecast position on the Capital Programme which
is an underspend variance of £10.963m.
2.6
Cabinet approves the new capital schemes requested in Appendix
7.
2.7
Cabinet notes the Treasury Management mid-year review as set out in
Appendix 8 and summarised in paragraph 9.
3
Context and background
information
Overview of
Position
3.1
The forecast outturn
‘risk’ for 2025/26 at this stage is an overspend of
£7.776m on the General Fund revenue budget, representing 2.8%
of the net budget.
3.2
The forecast outturn includes a significant level of savings to be
at risk; the report indicates that £5.761m (36%) of the
substantial savings package in 2025/26 of £15.789m is
potentially at risk.
3.3
The Month 7 forecast gives a clearer indication of trends than
earlier forecasts. The forecast shows continued improvement, with
the forecast overspend being £7.710m lower than the early
Month 2 indications and £1.630m lower than the position
reported at Month 5. However, the forecast remains a significant
overspend risk for this time of year, particularly as significant
spending and recruitment controls have remained in place since
November 2024 which were implemented (and subsequently strengthened
in January 2025) to assist with managing down the 2024/25 forecast
overspend back to a balanced position.
3.4
Further measures have been implemented during 2025/26 to assist in
managing down the forecast position which include:
·
Creation of a new
officer-led Savings & Innovation Delivery Board which oversees
and monitors the delivery of the 2025/26 savings and recovery
plans.
·
Development of
service level financial recovery plans to mitigate and address
overspends.
·
Development of
transformation plans to address demand and costs, particularly in
key areas with the most significant demand pressures, including
Temporary Accommodation, and Children and Adult social
care.
3.5
The council’s reserve levels are very low and are therefore
unable to withstand substantial drawdown that could be required to
balance a significant overspend. It is therefore crucial that
further measures are considered to continue to manage down the
forecast overspend risk.
3.6
The TBM5 report outlined a number of further measures to be
explored to assist in managing the current forecast risk position.
The measures that are currently being explored or implemented are
as follows:
·
Emergency and
temporary accommodation – actions
on increasing the supply of TA and prevention work to reduce demand
is being progressed at pace. This is the most critical issue for
the Council to address both in year and future year
pressures;
·
Spending and
recruitment controls –
additional restrictions have been agreed to further delay
recruitment and pausing non-essential spend.
·
A
review of earmarked reserves – A review
of earmarked reserves has been undertaken, and the budget report,
elsewhere on this agenda, recommends the release of £1.041m
of earmarked reserves to a General Risk Reserve to cover all risk
types.
·
The
Chief Finance Officer will undertake a further review of earmarked
reserves to ascertain whether this un-earmarking could increase to
further bolster the risk reserve to offset the expected overspend
for 25/26.
·
Use
of any available ‘risk provisions’ or unexpected
one-off resources to mitigate the position in the short term. The
latter cannot normally be estimated and is only known when and if
it arises.
3.7
Housing People Services has made progress against the additional
financial measures agreed between TBM Month 5 and TBM Month 7, with
a tangible increase in savings achieved. This improvement reflects
a sustained focus on prevention, move-on strategies, and innovative
cost reduction measures, resulting in both a reduction in overspend
and a lower proportion of savings considered at risk. Despite these
positive developments, the service continues to face significant
financial pressures, particularly due to persistent and growing
demand for temporary accommodation, which has led to an overall
increase in the projected overspend in this area for TBM Month
7.
Targeted Budget
Management (TBM) Reporting Framework
3.8
That 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
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)
3.10 The report may
also include a Treasury Management update from time to time. This
is required to comply with the updated Treasury Management Code
which requires a minimum of quarterly reporting. Cabinet already
receives mid-year and end-of-year reviews and therefore two
additional interim reports will be provided via an appropriate TBM
report to ensure compliance with reporting requirements. A Treasury
Management mid-year review is included at Appendix 8 and the key
points are summarised in paragraph 8.
4
General Fund Revenue Budget Performance (Appendix 4)
4.1
The table below shows the
forecast 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
|
|
TBM
|
Forecast
|
Forecast
|
Forecast
|
|
Variance
|
|
Budget
|
Outturn
|
Variance
|
Variance
|
|
Month
5
|
|
Month
7
|
Month
7
|
Month
7
|
Month
7
|
|
£'000
|
Directorate
|
£'000
|
£'000
|
£'000
|
%
|
|
1,931
|
Families,
Children & Wellbeing
|
79,774
|
81,219
|
1,445
|
1.8%
|
|
7,431
|
Homes & Adult
Social Care
|
121,373
|
129,605
|
8,232
|
6.8%
|
|
(1,793)
|
City
Operations
|
50,802
|
49,009
|
(1,793)
|
-3.5%
|
|
1,353
|
Central
Hub
|
33,207
|
33,595
|
388
|
1.2%
|
|
8,922
|
Sub
Total
|
285,156
|
293,428
|
8,272
|
2.9%
|
|
484
|
Centrally-held
Budgets
|
(8,797)
|
(9,293)
|
(496)
|
-5.6%
|
|
9,406
|
Total General
Fund
|
276,359
|
284,135
|
7,776
|
2.8%
|
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 2025/26
and the previous three years for comparative purposes. This
indicates that forecast risk early in the year has been higher in
recent years. This is partly due to:
·
Pay
awards coming in higher than the budget assumptions due to
persistent inflation.
·
The
requirement to deliver successive, large savings programmes which
becomes increasingly challenging over time.
·
Continuing
economic conditions which are impacting external provider costs,
many income sources (demand), and recruitment costs and which is
difficult to predict with accuracy.
2023/24, was also
exceptional in terms of the availability of one-off resources of
over £10m across the year, which significantly aided in
addressing forecast risks.
Demand-led Budgets
|
Forecast
|
|
TBM
|
Forecast
|
Forecast
|
Forecast
|
|
Variance
|
|
Budget
|
Outturn
|
Variance
|
Variance
|
|
Month
5
|
|
Month
7
|
Month
7
|
Month
7
|
Month
7
|
|
£'000
|
Demand-led
Budget
|
£'000
|
£'000
|
£'000
|
%
|
|
1,166
|
Child Agency
& In House Placements
|
28,718
|
29,736
|
1,018
|
3.5%
|
|
4,282
|
Community
Care
|
80,706
|
85,058
|
4,352
|
5.4%
|
|
6,049
|
Temporary
Accommodation
|
3,141
|
9,470
|
6,329
|
201.5%
|
|
11,497
|
Total
Demand-led Budget
|
112,565
|
124,264
|
11,699
|
10.4%
|
The chart below shows the monthly forecast variances on the
demand-led budgets for 2025/26.
TBM Focus Areas
4.5
There are clearly
ongoing pressures across most 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:
4.6
Children’s Services: The projected outturn position
showed significant cost pressures: £0.272m on Home to School
transport, In House Children's Disability Residential Provision
£0.325m, PFI £0.215m and £1.018m on
Children’s Placements. This together with other underspends
of £0.265m and a recovery plan of (£0.120m) result in a
Month 7 overspend of £1.445m. Key drivers of the position are
as follows:
·
Home to School
Transport:There are 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 contributing to the overspend in
Home to School Transport. The service is also increasingly impacted
by local driver, vehicle passenger assistant, vehicle shortages and
increased running costs. There is also a lack of competition in the
transport market, particularly minibus providers, which is
increasing contract prices still further. There is also
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 to educational provisions where they were the
only children attending and using HTST.
·
Children’s
Placements: The Children's
Placements budget is facing significant challenges, driven by
various factors affecting the cost and availability of suitable
placements for children in care. In recent years,
there has been a noticeable rise in the number of children entering
care with increasingly complex needs. This includes a small number
of children with significant safeguarding risks requiring
placements that offer specialised care and support at a very high
cost. In addition, the prevailing market conditions have made the
current framework contracts unattractive to providers and have
resulted in the necessity to make more placements outside of the
framework contract at higher rates.
Ongoing
difficulties in recruiting foster carers have continued to cause
sufficiency issues. The shortage of foster carers makes it
problematic to place children in family settings, whether in-house
or with external providers. This shortfall in available foster
placements forces the service to select for more expensive care
options. The number of
children in Care remains relatively stable and the demand pressures
are being managed through high quality social work intervention and
the recently established Early Help service. However, the issues
with very vulnerable children with complex needs coming into care,
the local care provider market and fostering recruitment has led to
substantial cost pressures on the placement budget.
·
Schools
PFI: The
Schools’ PFI (Private Finance Initiative) was set up in 2003
to improve the facilities at four schools within the city - Dorothy
Stringer, COMART (now closed), Patcham High and Varndean –
using private finance to fund the capital improvements. The scheme
runs for 25 years and a Special Purpose Vehicle (a legal entity
created to fulfil specific or temporary objectives) “Brighton
& Hove City Schools Ltd” was set up as part of it. This
is currently owned by SEMPERIAN. The scheme is funded partly by a
DfE grant with schools paying an annual charge back to the council
and partly via an annual drawdown of earmarked reserves. The annual
charge is updated each March for the RPIX (RPI All Items Excluding
Mortgage Interest) for the 12 months to February. Once the 25-year
period is complete (~ 31st March 2028) the contract with SEMPERIAN
ends and the assets will be transferred back to the
council.
It is forecast
that by the end of the 2025/26 financial year the Schools’
PFI contract will be overbudget by £0.215m. Despite receiving
pressure funding to compensate for the reserve depletion in 23/24,
it is not predicted to be sufficient to cover the
higher-than-expected PFI contractor costs plus inflation. For
prudency the forecasted inflation for 25/26 and beyond has been
assumed in the model at 3%, despite the Office for Budget
Responsibility forecasting that it will average out at 2% between
2024 and 2028.
The PFI contract
finishes on the 31st March 2028. There will be both risks and
benefits involved in the completion of this contract. Ultimately it
gives the Council ownership of the asset and all its associated
costs but also the control of its budget. However, for this to be
successful it will require the correct support from Property and
the Procurement and Commissioning Teams.
Schools
Budgets
For 2025/26, there
are 28 schools requiring Licensed Deficits totalling approximately
£8.3m. After allowing for schools with surplus balances the
overall net position based on 2025/26 school budget plans shows a
net deficit of £6.8m. The latest position based on in-year
school forecasts shows a slightly improved situation with a net
deficit of £5.6m predicted.
The current
forecast for the 2025/26 central Dedicated Schools Grant is an
in-year deficit of £1.783m. At the end of the 2024/25 there
was an overspend on central DSG of £0.680m, meaning the
cumulative overall deficit position at the end of 2025/26 is
estimated to be £2.463m. The DSG position is described in
more detail in Appendix 4 below.
Homes &
Adults Social Care: The directorate faces significant challenges in
2025/26 in mitigating the risks arising from increasing demands in
homelessness and adult social care, managing the unit costs in
temporary accommodation and the care market, and delivering all of
the saving plans for 2025/26. It is to be noted that this is after
applying service pressure funding of £8.391m in 2025/26 which
has been used to fund budget pressures resulting from the increased
unit costs and complexity. Despite the hard work to fully
achieve the planned savings, the increase in demand and complexity
is exceeding the forecast used for the budget setting. The
TBM Month 5 (September) report to Cabinet included a number of
strategic financial recovery plans for Temporary Accommodation and
Homelessness, which are currently being put in place or explored
further with future reports planned to be presented to Cabinet at
future.
2025/26 savings plan
for the directorate totals £9.256m, in addition to this,
pressure mitigations of £5.025m were also applied to 2025/26
service pressure funding allocated corporately. There are continued
actions focussing on attempting to manage demand for, and costs of
services/accommodation across Homes and Adult Social Care and
making the most efficient use of available funds.
Adult Social
Care
The total financial recovery plan for Adult Social
Care totals £8.860m, with £6.470m achieved to date and
£2.061m reported at risk. The Adult social care and
commissioning departments continue to implement a strengths-based
approach across key work streams in adult social care, 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 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;
·
Increased complexity particularly in relation to working
age adults and the associated costs of service delivery.
·
Continued workforce capacity challenges across adult social
care services.
·
Increasing demand due to changes in funding arrangements
including clients no longer being eligible for Continuing
Healthcare.
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.
In respect of
financial recovery and the ongoing management of Community Care
Budget pressures, a monthly savings and efficiencies meeting
provides 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 are reviewed to ensure
immediate remedial action is undertaken to look at options and,
wherever possible, reduce the cost of care whilst meeting assessed
need.
Temporary Accommodation
(TA):
The total financial
recovery plan target for Temporary Accommodation is £5.421m,
with £3.176m achieved to date and £1.415m being
reported at risk. The current overspend is due to increased demand
for temporary accommodation along with a rise in rental costs. 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:
·
Nightly
accommodation (spot purchased) was budgeted for an average of 193
households per night for the year. However, the forecast assumes
that the average units per night will be 600. 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 been overspent by £4.982m. The
service is implementing additional measures to reduce the number of
households accommodated as part of the financial recovery plan and
future budget strategy.
·
Block
Booked - The service is facing significant pressures on the overall
costs of Block Booked accommodation. The budget is set at 317 units
per night during 2025/26, but due to increased demand, the forecast
assumes 457 units. Additionally, the council is experiencing
substantial increases in contract prices, resulting in an overspend
of £0.989m.
·
Private Sector
Leased TA is overspent by £0.758m. Despite lower numbers of
leased properties being used for TA as landlords withdraw their
properties from the rental market, the new leases are also
commanding a higher rate and shorter terms. This is part of the
reason for the increased numbers of Block Booked
accommodation.
·
Staffing costs
were £0.400m underspend due to significant vacancies and
recruitment challenges.
The directorate
manages substantial income budgets for parking, planning, and
venues each sensitive to fluctuations in visitor numbers,
commercial activity, and the wider economy. For 2025/26, City
Operations faces challenging in-year savings targets, primarily
focused on service redesigns and income generation. Of the
£1.782m planned savings, £1.388m is either achieved or
expected to be achieved, leaving £0.394m at risk. Key risks
relate to income generation in Parking Services and City Parks,
service redesigns, and efficiency measures such as the review of
Multi-Functional Devices across the council.
As of Month 7, the directorate is
forecasting a net underspend of £1.793m showing no movement
compared to Month 5. Significant work has been undertaken between
Month 5 and Month 7 to mitigate pressures identified. The forecast
includes increased costs for essential highway maintenance and
backlog clearance, offset by staffing underspends a result of the
vacancy controls in place, improved income forecasts in sports
& leisure, building control, and planning fees. A review of
Direct Revenue Funding (DRF) of the capital programme following the
2024/25 outturn has released additional revenue resources, further
strengthening the in-year position. While this has increased the
council’s borrowing requirement, the revenue cost-benefit
justified the decision.
In response to the council’s
financial position, Financial Recovery Plans (FRPs) have been
introduced for overspending areas. These include boosting Print
& Sign income from Month 5 through increased service
visibility, further enhancement of green waste income (currently
outperforming budget).
Income trends require ongoing scrutiny,
with seasonal adjustments necessary to reflect historic patterns
particularly for summer-sensitive areas like parking. Early-year
data should be treated cautiously, as complete monthly figures are
typically delayed by two to three weeks. While current trends are
positive, volatility remains a risk. Financial recovery actions
will continue to be explored to mitigate potential income
pressures, combining income-boosting initiatives with
cost-reduction strategies.
4.8
Central Hub:
There is a forecast overspend
of £0.388m, representing an improvement of £0.965m
compared to Month 5. This improvement incorporates the estimated
financial recovery measures.
The primary driver of
the overspend is a £1.705m pressure within Estate Management.
Key factors include £0.525m from lost rental income due to
the decanting of New England House, void costs (including NNDR),
and fire safety waking watch. Additional pressures of £0.220m
on the agricultural estate and £0.065m at Bartholomew House,
where rental income targets have not yet been met. However, leasing
of the 3rd and 4th floors has delivered savings by transferring
operating costs to tenants. Further pressures include £0.152m
at Phoenix House (voids and rent-free periods) and £0.118m at
Hove Technology Centre.
Other significant
pressures include a £0.750m forecast overspend within
Welfare, Revenues & Business Support (WRBS), driven mainly by
Staffing pressures of £0.500m, including £0.200m to
clear the council tax backlog. Procurement costs for HR systems
(MHR iTrent), including the Datamart module, totalling
£0.305m.
These pressures are
partially offset by two main forecast underspends amounting to
£0.751m. There is an underspend of £0.457m within
People and Innovation, mainly vacancy savings and pausing
non-statutory improvement work in Innovation (£0.141m), plus
savings in Human Resources (£0.170m) and Health & Safety
(£0.159m). The second element is an underspend of
£0.294m within Governance and Law, primarily from
overachievement of income (Local Land Charges and Registrars) and
staffing savings.
Further Financial
Recovery Measures (FRM) totalling £1.360m have been
identified, including:
·
£0.500m
expected contract recovery costs
·
£0.600m
redistributed funds following the closure of the Coast to Capital
LEP
·
£0.260m
savings in planned maintenance within Property
Management.
These FRMs,
previously reported separately, are now incorporated into the
service forecasts from which they are expected to be achieved.
4.9
Centrally-held
Budgets: There is a forecast underspend of
£0.496m. Within this an overspend of £0.803m relates to
the additional cost of the 2025/26 pay award above the amount
provided in the budget.
There is a forecast
pressure of £0.915m on Housing benefit Subsidy. The main
element of this is a pressure of £1.081m on a certain benefit
type for vulnerable tenants which is not fully subsidised. The
costs in this area have continued to rise since last year. A post
has been created which will have the remit of investigating this
pressure with the intention of maximising subsidy received. This
pressure is partially offset by a surplus of £0.187m on the
net position of the recovery of overpayments.
The corporate saving
in relation to functional alignment activities from 2024/25 is also
held in this area. At present £0.974m of this is at risk,
which is included in the forecast.
These pressures are
offset by a £3.260m underspend in Financing Costs, primarily
as a result of previous
year slippage and reprofile of the capital programme the capital
programme review has reduced the in-year borrowing need resulting
in an underspend in the current financial year. In addition, the
council continues to maximise its internal reserves to meet is
capital financing requirement, which while limiting investment
returns, will delay the need to externally borrow during a time of
elevated borrowing rates and reduce in year borrowing costs.
Monitoring Savings
4.10
The savings package
approved by full Council to support the revenue budget position in
2025/26 was £15.789m following directly on from a
£23.627m savings package in 2024/25 and makes 15 years
of substantial savings packages totalling over £248m 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.
4.11 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 7
and shows that gross savings of £10.158m have been achieved
or are anticipated but that inflationary pressures (exceptional
price increases) have reduced these by £0.130m. Including
other unachievable savings of £5.631m, a total of
£5.761 (36%) of savings is forecast to be unachieved in
2025/26.
Housing Revenue Account Performance
(Appendix 4)
4.12 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 – and the majority of funding
is from the rent and service charges paid by tenants and
leaseholders. The forecast outturn is an overspend of
£1.216m, this position includes variances within specific
service areas, details of which are provided in the Revenue Budget
Performance Appendix. Any overspend in the HRA will result in
a contribution from general reserves at year end (as at Month 7 the
general reserves balance is £7.7m – equivalent to
approximately 10% of income from rent and service charges).
HRA Risks
4.13 The HRA
continues to face 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:
·
Volume of Health
& Safety compliance
·
Delays related to
Building Safety compliance
·
Disrepair
claims
·
Rent
arrears and collection rate
4.14 The HRA
will continue to review spend to try to improve the current
financial position. Any
variations will be reported to future Cabinet meetings. Officers
are part of the London Directors of Housing Group and will
endeavour to work with peers as well as working with the Housing
leads in the LGA, to explore how central government can support
social landlords in investing in safety and quality improvements
whilst also seeking to increase supply.
5
Dedicated Schools Grant
Performance (Appendix 4)
5.1
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 £2.463m 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.
6
Capital Programme Performance
and Changes
6.1
The table below provides a
summary of capital programme performance by Directorate and shows
that there is an overall underspend of £10.963m which is
detailed in Appendix 6.
|
Forecast Variance Month 5
|
Directorate
|
Reported Budget Month 7
|
Forecast Outturn Month 7
|
Forecast Variance Month 7
|
Forecast Variance Month 7
|
|
£'000
|
|
£'000
|
£'000
|
£'000
|
%
|
|
(42)
|
Families, Children & Wellbeing
|
22,048
|
22,006
|
(42)
|
-0.2%
|
|
0
|
Homes & Adult Social Care
|
11,029
|
11,029
|
0
|
0.0%
|
|
0
|
City Operations
|
82,666
|
82,666
|
0
|
0.0%
|
|
0
|
Central Hub
|
21,481
|
21,481
|
0
|
0.0%
|
|
(5,859)
|
Homes & Adult Social Care - HRA
|
107,345
|
96,424
|
(10,921)
|
-10.2%
|
|
(5,901)
|
Total Capital
|
244,569
|
233,606
|
(10,963)
|
-4.5%
|
(Note: Summary may include minor rounding differences to Appendix
6)
6.2
Appendix 6 shows the changes to
the 2025/26 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 at Month 5.
|
Summary of Capital Budget Movement
|
Reported Budget Month 7
|
|
|
£'000
|
|
Budget approved at Month 5
|
241,994
|
|
Changes reported at other committees and already
approved, to be included for Month 7
|
13,998
|
|
New schemes to be approved in this report (see
Appendix 7)
|
2,261
|
|
Variations to budget (to be approved)
|
1,994
|
|
Reprofiling of budget (to be approved)
|
(15,636)
|
|
Slippage (to be approved)
|
(42)
|
|
Total Capital
|
244,569
|
6.3
Appendix 6 also details
any slippage into next year. Project managers have forecast that
only £0.042m of the capital budget will slip into the next
financial year, however, this will be reviewed again for Month
9.
7.1
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 2025/26 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
7.2
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, Innovations fund, Asset Management Fund
and the Information, Technology and Digital Investment Fund. The
planned profile of gross capital receipts for 2025/26, as at Month
7, is £19.535m which includes receipts expected for a major
industrial lease extension at Moulsecoomb and Patcham Court Farm.
There are also a number of residential and commercial properties
identified for disposal as reported within the Residential Property
Strategy report and Commercial Investment Property Strategy report
to committee in December 2023 as well as the disposals approved by
Cabinet on 27 June 2024, 24 April 2025 and 16 October 2025. To date
there have been receipts of £1.460m in relation to the sale
of properties at Grand Parade Mews, New Dorset St, East Brighton
Park, Oxford St and Pickers Hill as well as some minor lease
extensions and loan repayments. A further £5.5m was received
in early November in respect of the Freshfield Estate. The capital
receipts performance will be monitored over the remainder of the
year against capital commitments.
7.3
The forecast for the ‘right to buy sales’ in 2025/26 is
that an estimated 78 homes will be sold for approximately
£12.000m. This step increase in sales is because the
discount provided for Right to Buy (RTB) reduced in November 2024
and there was an increased level of applications leading up to that
deadline. Receipts from RTB sales are expected to reduce
significantly in future years. The net retained receipt is used to
fund investment in the HRA capital programme, specifically the new
supply of affordable housing. As at the end of October, 43 homes
were sold for a total receipt of £7.368m.
Collection Fund Performance
7.4
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.
7.5
The collection fund for council tax is forecast to be in deficit by
£1.413m at year end, an increase of £0.142m from TBM
Month 5. The primary driver is a forecast 0.5% reduction in council
tax income collection (+£1.184m). There are other areas of
variances on discounts, premiums and exemptions which broadly
cancel each other out. The forecast includes a reduced level of
banding increases compared to previous years, which may be affected
by the backlog within the council tax service as well as VOA
reporting issue from new systems. The council tax service is
experiencing a high level of backlog due to system issues which
continues to add further complexity in forecasting the underlying
position. The council’s share of the deficit is £1.195m
and will be included as a one-off shortfall to be funded as part of
the 2026/27 budget.
7.6
The collection fund
for business rates is forecasting an overall deficit position of
£2.320m (£1.910m brought forward and £0.410m
in-year), a decrease of £1.712m from TBM Month 5. The
primary reason for the decrease in the deficit is a higher than
anticipated level of backdated new assessments added to the ratings
list since TBM Month 5. This has been able to partially offset the
increased cost of appeals previously reported. The cost of
successful appeals is the primary reason for the overall deficit in
both the bought forward and in year position. Successful appeals
for both the 2017 list and 2023 list have both been above the level
allowed within the budget. Whilst the 2017 list has just 3
outstanding appeals as at the end of August (which provides a high
level of certainty over the potential cost), it is more complex to
forecast the impact of the 2023 outstanding appeals list whilst
appeals continue to be received. An additional £1.750m
has been assumed for further successful appeals on the 2023 list,
which is in line with successful appeals to date. There have been
other offsetting changes, including a reduction in the level of
small business rates relief awarded and an increase in empty
property reliefs awarded. The
council’s share of the deficit position, after allowing for
section 31 compensation grants and contributions from the
collection fund section 31 adjustment reserve, is £0.569m (a
decrease of £0.834m from TBM5) and will need to be funded as
part of the 2026/27 budget.
Reserves, Budget Transfers and
Commitments
7.7
The creation or re-designation
of reserves, the approval of budget transfers (virements) of over
£1.000m, 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.
7.8
The level of reserves held is
kept under review and the table below shows the usable General Fund
Reserves as at 31st March 2024 and 2025 as well as the
estimated balances as at 31st March 2026. It is
imperative that the current overspend forecast is addressed by the
actions outlined paragraph 3.6. Failure to sufficiently do so will
risk having to draw down most of the General Fund working balance,
which currently stands at £8.965m following the planned
contribution to reserves of £1.125m during
2025/26.
|
|
Balance
as at 31st March 2024 £'000
|
Balance
as at 31st March 2025 £'000
|
Estimated
Balance as at 31st March 2026
£’000*
|
|
General
Fund Working Balance
|
5,624
|
7,840
|
8,965
|
|
Held
in Working balance for specific future commitments
|
2,579
|
411
|
175
|
|
PFI
Reserves
|
8,601
|
9,671
|
7,208
|
|
Grants
Carried forward
|
6,152
|
2,574
|
0
|
|
Schools
LMS Reserves
|
282
|
-2,623
|
-5,600
|
|
Other
Usable Reserves
|
7,926
|
10,163
|
6,642
|
|
Total
General Fund Usable Reserves
|
31,164
|
28,036
|
17,390
|
(*) The
estimated balances as at 31st March 2026 are not
directly comparable as figures for grants carried forward and
departmental carry forwards are unknown and assumed as zero at this
stage. The figures for these at 31st March 2025 were
£2.574m and £1.709m (within Other Usable Reserves)
respectively.
7.9
A review of the level of
reserves has been undertaken as part of the actions agreed in the
Month 5 report (paragraph 3.6). This has identified balances of
£1.041m that can be released to a new General Risk Reserve as
part of supporting the 2026/27 budget. This is shown in more detail
in the 2026/27 budget setting report elsewhere on this
agenda.
8.1
The 2025/26 Treasury Management Strategy, including the
Annual Investment Strategy was approved by full Council on 27
February 2025.
8.2
The CIPFA Treasury Management Code requires the performance
of treasury management activity against the strategy and key
prudential and treasury indicators to be reported at least twice a
year. This includes a
mid-year treasury management report which is reported to Cabinet as
part of the TBM process. Appendix 8 provides a mid-year review of
treasury management activity for the first half of 2025/26,
measured against benchmarks and the key indicators in the
council’s Treasury Management Strategy.
8.3
The key treasury management activities undertaken in the
period include:
·
New
PWLB borrowing of £20.000m was undertaken in April 2025 at a
rate of 4.17% for a term of two years to support the
councils’ HRA under borrowing position and to take advantage
of a temporary reduction in borrowing rates.
·
New
short-term borrowing of £15.000m was undertaken at the end of
September 2025 to fund temporary reductions in liquid
cash.
·
The
highest risk indicator during the period was 0.002% which is below
the maximum benchmark of 0.050%.
·
The
return on investments has exceeded the target benchmark rate in the
first 6 months of 2025/26 by 0.16%
·
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.
9
Analysis and consideration of
alternative options
10
Community engagement and
consultation
10.1
No specific consultation has
been undertaken in relation to this report.
11
Financial
implications
11.1
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 Cabinet and the management and treatment of strategic
financial risks is considered by the Audit, Standards & General
Purposes Committee.
Finance Officer consulted: Jeff
Coates
Date: 20/11/2025
12.1
Decisions taken in relation to
the 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: 28/11/2025
13.1
There are no direct equalities
implications arising from this report.
15
Health and Wellbeing
Implications:
15.1
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.
16.1 The forecast
overspend risk of £7.776m at Month 7 represents 2.8% of the
net General Fund budget. This forecast indicates a number of demand
and cost pressures across homelessness and Adult Social Care as
well as a number of income pressures across City Operations. There
is evidence of the continuing impacts of demand pressures on social
care and in particular temporary accommodation which are coming in
above budget assumptions. These are also impacting the achievement
of some savings programmes. The projected overspend set out in this
report is unsustainable for the Council given the low level of
reserves. Corrective action will have to be successful over the
coming months if the Council is going to be able to balance its
in-year budget and set a balanced budget for 2026/27.
16.2 As set out
earlier in the report, understanding the level of forecast risk is
important to inform decision-making and recovery actions.
Given the scale of the projected overspend, urgent work is being
undertaken by all Directorate Leadership Teams to develop recovery
plans, alongside a cross Council Savings Delivery Board, which is
focusing on the most significant areas of financial pressure across
the organisation. It is imperative that plans to reduce spend in
areas of high demand, particular temporary accommodation, are given
significant organisational attention over the coming months.
16.3 Enhanced vacancy
management and spending control processes have been put in place
across the council to contribute to in-year financial management
and the option remains to tighten these further if monthly TBM
reports do not continue to indicate a downward trajectory of the
forecast risk.
Supporting Documentation
Appendices
1.
Financial Dashboard Summary
2.
Revenue Budget Movement since Month 5
3.
Revenue Budget Performance RAG Rating
4.
Revenue Budget Performance
5.
Summary of 2025/26 Savings Progress
6.
Capital Programme Performance
7.
New Capital Schemes
8.
Treasury Management Update
