Subject:
Targeted Budget Management (TBM)
2025/26 Month 9 (October)
Date of meeting:
Thursday, 12 February 2026
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 9 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
£4.861m.
2.2
Cabinet notes the forecast overspend risk for the separate Housing
Revenue Account (HRA), which is an overspend of £0.846m.
2.4
Cabinet approves deferring the planned reserve repayment of
£1.125m in 2025/26 (paragraphs 4.10 and 7.8)
2.5
Cabinet approves the release of unrequired Reserves and Provisions
of £1.109m (paragraphs 4.10 and 7.9)
2.6
Cabinet notes the forecast position on the Capital Programme which
is an underspend variance of £7.714m.
2.8
Cabinet approves the new capital schemes requested in Appendix
7.
2.9
Cabinet notes the Treasury Management update as set out in Appendix
8 and summarised in paragraph 8.
3
Context and background
information
Overview of
Position
3.1
The forecast outturn
‘risk’ for 2025/26 at this stage is an overspend of
£4.861m on the General Fund revenue budget, representing 1.8%
of the net budget. The forecast includes the application of
£3.981m of risk provision and one off reserves and provisions
resourcing decisions, without which, the forecast overspend would
be £8.842m.
3.2
The forecast outturn includes a significant level of savings to be
at risk; the report indicates that £5.558m (35%) of the
substantial savings package in 2025/26 of £15.789m is
potentially at risk.
3.3
The forecast overspend is £10.625m lower than the early Month
2 indications and £2.915m lower than the position reported at
Month 7. This 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. Most measures have been
detailed more fully in previous TBM reports, but in summary,
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.
·
Exploration and
implementation of additional financial recovery measures in
Temporary Accommodation, monitored by a Strategic Coordination
Group chaired by the Chief Executive;
·
A
review of earmarked reserves, resulted in the allocation of
£1.109m of previously earmarked reserves into a specific
General Risk Reserve from 1 April 2026;
·
Further
tightening of Spending and Recruitment controls in November 2025,
including delay of the majority of new recruitment start dates to 1
April 2026, pausing non-essential spend and increased monitoring of
spending and recruitment controls.
·
A
£1.747m risk provision was included in the 2025/26 budget on
a one off basis but had not yet been released into the TBM
position. The Chief Finance Officer has now released this into the
forecast.
·
Release of
unrequired reserves and provisions of £1.109m and deferral of
the contribution to reserves of £1.125m to help manage the
overspend position
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. Given the increase of the
overspend at this late point in the year, it is crucial that
further measures are considered and implemented to continue to
manage down the forecast overspend risk. Therefore, the following
further actions may be required:
·
Maximising the
flexible use of Capital Receipts to fund eligible revenue costs of
up to £3.200m
·
Further freezes
on spend and recruitment
·
Further review of
earmarked reserves & other funding sources to release one off
resources
Targeted Budget
Management (TBM) Reporting Framework
3.6
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)
3.8
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 update 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
7
|
|
Month
9
|
Month
9
|
Month
9
|
Month
9
|
|
£'000
|
Directorate
|
£'000
|
£'000
|
£'000
|
%
|
|
1,445
|
Families,
Children & Wellbeing
|
79,970
|
80,149
|
179
|
0.2%
|
|
8,232
|
Homes & Adult
Social Care
|
121,373
|
129,966
|
8,593
|
7.1%
|
|
(1,793)
|
City
Operations
|
50,794
|
47,758
|
(3,036)
|
-6.0%
|
|
388
|
Central
Hub
|
32,884
|
32,730
|
(154)
|
-0.5%
|
|
8,272
|
Sub
Total
|
285,021
|
290,603
|
5,582
|
2.0%
|
|
(496)
|
Centrally-held
Budgets
|
(9,048)
|
(9,769)
|
(721)
|
-8.0%
|
|
7,776
|
Total General
Fund
|
275,973
|
280,834
|
4,861
|
1.8%
|
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
7
|
|
Month
9
|
Month
9
|
Month
9
|
Month
9
|
|
£'000
|
Demand-led
Budget
|
£'000
|
£'000
|
£'000
|
%
|
|
1,018
|
Child Agency
& In House Placements
|
28,718
|
29,748
|
1,030
|
3.6%
|
|
4,352
|
Community
Care
|
80,706
|
85,526
|
4,820
|
6.0%
|
|
6,329
|
Temporary
Accommodation
|
3,141
|
9,102
|
5,961
|
189.7%
|
|
11,699
|
Total Demand-led
Budget
|
112,565
|
124,376
|
11,811
|
10.5%
|
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: £0.196m on Home
to School transport, In House Children's Disability Residential
Provision £0.200m, PFI £0.100m and £1.030m on
Children’s Placements. This together with Public Health
contributions of (£0.426m), Early Help (£0.304m) and
other underspends of (£0.617m) result in a Month 9 overspend
of £0.179m. 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 Home to School
Transport.
·
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 £0.100m. 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 £1.708m. 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 £2.388m. The DSG position is described in
more detail in Appendix 4 below.
4.7
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 in
future.
The 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 £6.413m achieved to date and
£2.447m 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 £2.266m achieved to date and £2,340m being
reported at risk. The current forecast 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.
·
Nightly
accommodation (spot purchased) The service has successfully
renegotiated some SPOT units onto Block Booked (BB) contracts at
more favourable rates, thereby decreasing reliance on spot
purchases. The current forecast now anticipates 438 households in
nightly SPOT at the year 31/03/2026, a reduction of 112. The
forecast overspend is £4.610m, an improvement of
£0.184m compared to last month and £0.372m better than
Month 7.
·
Block
Booked - Due to the above, Block Booked (BB) accommodation has
increased from the budgeted 303 units to 477 per night, leading to
an overspend of £0.960m. However, this is £0.043m
better than last month and £0.029m ahead of Month 7, as the
new units are being secured at reduced rates.
·
Private Sector
Leased (PSL) overspent by £0.793m, largely owing to the
successful renegotiation of leases. Whilst these leases are at
higher rates, they remain more cost-effective and stable compared
to alternatives such as hotel accommodation.
·
Other
areas of the service saw underspends totalling £0.393m, with
the main savings coming from staffing costs, which were
£0.314m below budget due to ongoing 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 9, the directorate is
forecasting a net underspend of £3.036m showing an
improvement of £1.244m compared to Month 7. Significant work
has been undertaken for Month 9 to further 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) 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) introduced are
now achieving improved forecasts and are now reflected in the
overall forecast. These include boosting Print & Sign income
from Month 5 through increased service visibility and 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, particularly in relation to
PCN income, an updated February position will provide greater
certainty around the final outturn. Financial recovery actions will
continue to be explored to mitigate potential income pressures,
combining income-boosting initiatives with cost-reduction
strategies.
4.9
Central Hub:
There is a forecast underspend
of £0.154m, representing an improvement of £0.547m
compared to Month 7. This improvement incorporates the estimated
financial recovery measures.
The Directorate has
significant budget pressures and primary driver of the budget
pressure is a £1.642m overspend within Estate Management. Key
factors to this pressure include £1.150m from lost rental
income due to the decanting of New England House, void costs
(including NNDR), and fire safety waking watch. Additional
pressures of £0.215m on the agricultural estate and
£0.098m 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 £0.149m at Phoenix House (voids and
rent-free periods) and £0.087m at Hove Technology
Centre.
Other significant
pressures include a £0.668m forecast overspend within
Welfare, Revenues & Business Support (WRBS), driven mainly by
Staffing pressures of £0.500m, including £0.266m to
clear the council tax backlog. Procurement costs for HR systems
(MHR iTrent), including the Datamart module, totalling
£0.305m as well as £0.090m shortfall on court cost
recovery.
These pressures have
been offset by forecast underspends:
·
£0.455m within Governance and Law, primarily from
overachievement of income (Local Land Charges and Registrars) and
staffing savings.
·
£0.492m 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 (£0.310m) and,
·
£0.487m from Cabinet office, mainly driven by underspends in
subscriptions to other organisations £0.104m, staffing
savings £0.135m as well as income generation other savings
£0.310m in economic development.
Financial Recovery
Measures (FRM) totalling £1.360m have been identified and are
incorporated into the service forecasts from which they are
expected to be achieved, these include:
·
£0.390m
expected contract recovery costs
·
£0.965m
redistributed funds following the closure of the Coast to Capital
LEP
·
£0.260m
savings in planned maintenance within Property Management
which
is at risk of not being delivered at this stage, though the service
continue to explore mitigations.
4.10 Centrally-held Budgets: There
is a forecast underspend of £0.721m. 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.
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
because 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 the use of
internal reserves to meet its capital financing requirement. Whilst
this limits investment returns, it will delay the need to
externally borrow during a time of elevated borrowing rates and
therefore reduce in year borrowing costs.
There is an
underspend of £0.496m in Unringfenced Grants as a result of
the estimate redistribution of business rates levy surplus.
The 2025/26 budget
contained a risk provision of £1.747m. As described in
paragraph 3.4, this has now been released to support the in-year
position.
It is also
recommended that Cabinet approve the deferral the planned repayment
to Working Balance of £1.125m in 2025/26 in order to support
the in-year position. As a result an underspend of
£1.125m is included in the forecast.
The Budget Update
report to December Cabinet identified £1.041m of previously
earmarked reserves and provisions that could be released to support
the 2026/27 budget position. Due to the difficult in-year position,
it is now proposed to release this sum to support the 2025/26
position along with a further £0.068m identified as able to
be released from the ICT Investment reserve. This is assumed within
the forecast.
Monitoring Savings
4.11
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.
4.12 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 9
and shows that gross savings of £10.361m have been achieved
or are anticipated but that inflationary pressures (exceptional
price increases) have reduced these by £0.130m. Including
other unachievable savings of £5.428m, a total of
£5.558 (35%) of savings is forecast to be unachieved in
2025/26.
Housing Revenue Account Performance
(Appendix 4)
4.13 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
£0.846m, 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 9 the
general reserves balance is £7.7m – equivalent to
approximately 10% of income from rent and service charges).
HRA Risks
4.14 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
4.15 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 £2.388m 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 £7.714m which is
detailed in Appendix 6.
|
Forecast Variance Month 7
|
|
Reported Budget Month 9
|
Forecast Outturn Month 9
|
Forecast Variance Month 9
|
Forecast Variance Month 9
|
|
£'000
|
Directorate
|
£'000
|
£'000
|
£'000
|
%
|
|
(42)
|
Families, Children & Wellbeing
|
21,995
|
21,953
|
(42)
|
-0.2%
|
|
0
|
Homes & Adult Social Care
|
10,529
|
10,529
|
0
|
0.0%
|
|
0
|
City Operations
|
84,102
|
84,102
|
0
|
0.0%
|
|
0
|
Central Hub
|
21,481
|
21,481
|
0
|
0.0%
|
|
(10,921)
|
Homes & Adult Social Care - HRA
|
103,597
|
95,925
|
(7,672)
|
-7.4%
|
|
(10,963)
|
Total Capital
|
241,704
|
233,990
|
(7,714)
|
-3.2%
|
(Note: Summary may include minor rounding differences to
Appendix 6)
|
|
Reported Budget Month 9
|
|
Summary of Capital Budget
Movement
|
£'000
|
|
Budget approved at Month 7
|
244,569
|
|
Changes reported at other committees and already
approved, to be included for Month 9
|
1,500
|
|
New schemes to be approved in this report (see
Appendix 7)
|
1,563
|
|
Variations to budget (to be approved)
|
(77)
|
|
Reprofiling of budget (to be approved)
|
(5,350)
|
|
Slippage (to be approved)
|
(500)
|
|
Total Capital
|
241,704
|
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 7.
6.3
Appendix 6 also details
any slippage into next year. Project managers have forecast that
£0.500m of the capital budget will slip into the next
financial year.
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
9, is £17.081m which includes larger receipts expected for
Patcham Court Farm and the meat market in Hollingdean Lane. 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 £7.466m in relation to the sale
of properties at Freshfield Industrial Estate, Grand Parade Mews,
New Dorset St, East Brighton Park, Oxford St, Stanmer village and
Pickers Hill as well as some minor lease extensions and loan
repayments.
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 December, 57 homes
were sold for a total receipt of £9.474m.
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
£1.267m at year end, a decrease of £0.146m from TBM
Month 7. 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 £1.071m
(a decrease of £0.123m
from TBM7).
7.6
The collection fund
for business rates is forecasting an overall deficit position of
£2.911m (£1.910m brought forward and £1.001m
in-year), an increase of £0.591m from TBM Month 7. The
primary reason for the increase in the deficit is due to additional
empty property reliefs awarded. The cost of successful appeals is
the key driver 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 2 outstanding appeals as at the end
of December (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. 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 £0.697m (an
increase of £0.128m from Month 7).
7.7
The Councils combined
share of the Collection Fund deficit for both Council Tax and
Business Rates (after applying Section 31 adjustment reserve) is
£1.768m, which will be
funded as part of the 2026/27 budget as laid out in the general
Budget Report elsewhere on this agenda.
Reserves, Budget Transfers and
Commitments
7.8
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.
7.9
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 paragraphs 3.4 and 3.5. Failure to sufficiently do
so will risk having to draw down a significant proportion of the
General Fund working balance, which currently stands at
£7.840m and is expected to remain so following the proposed
deferment of 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
|
7,840
|
|
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
|
5,614
|
|
Total
General Fund Usable Reserves
|
31,164
|
28,036
|
15,237
|
(*) 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.
7.10
A review of the level of
reserves has been undertaken as part of the actions agreed in the
Month 5 report (paragraph 3.4). This has identified balances of
£1.041m that can be released to a new General Risk Reserve.
It is now proposed to release this sum, along with a further
£0.068m from the ICT Investment Reserve, to support the
2025/26 in year position. This is reflected in the estimated
reserve balances above.
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. This includes quarterly reporting incorporated in the
TBM process. Appendix 8 provides a summary of treasury activity to
the end of December 2025 (Month 9) measured against benchmarks and
the key indicators in the council’s Treasury Management
Strategy.
8.3
The last Treasury Management update was the 2025/26
Mid-Year report presented to Cabinet at its meeting of 11 December
2025. The key activities undertaken in the period since the
Mid-Year report include:
·
The
return on investments has exceeded the target benchmark rates due
to Money Market Fund (MMF) rates lagging behind the falling base
rate.
·
The
highest investment risk indicator during the period was 0.002%
which is below the maximum benchmark of 0.050%.
·
Two
new tranches of PWLB borrowing totalling £30.0m were
undertaken in October 2025, with £15.0m undertaken for a term
of 1 year, and £15.0m for a term of 2 years.
·
Short-term
borrowing of £12.0m was undertaken at the end of December to
fund temporary reductions in liquid cash.
·
The
two borrowing limits approved by full Council have not been
exceeded.
·
The
Annual Investment Strategy parameters have been met throughout the
period.
9
Analysis and consideration of
alternative options
9.1
The forecast outturn
on General Fund budgets is an overspend of £4.861m. Any
overspend at year-end would either need to be carried forward or
potentially met from available one-off resources. Paragraph 3.5
outlines the actions that may need to be considered to balance the
position at year end.
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: 22/01/2026
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 £4.861m at Month 9 represents 1.8% 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 additional Housing benefit subsidy
loss of £4.725m has significantly added to the in-year
pressure but has been mitigated by the release of the £1.747m
risk provision, the proposed deferment of £1.125m Working
balance repayment and the proposed release of £1.109m
unrequired reserves and provisions.
16.2 The projected
overspend set out in this report is unsustainable for the Council
given the low level of reserves, with the current forecast relying
on the use of reserves to manage the position. Corrective action is
therefore required over the coming months. Further steps that can
be taken to reduce the overall pressure include:
·
Maximising the
flexible use of Capital Receipts to fund eligible revenue costs of
up to £3.200m
·
Further freezes
on spend and recruitment
·
Further review of
earmarked reserves & other funding sources to release one off
resources
·
Application of
the council’s working balance
16.3 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, a number of measures
have already been implemented during the year, which are summarised
in paragraph 3.4.
16.4 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.
16.5 Failure to
manage the position puts the council at risk of needing to draw on
its working balance to balance the 2025/26 position. Whilst the
council has not requested Exceptional Financial Support (EFS) to
support a legally balanced 2025/26 position, the General Fund
2026/27 Budget report elsewhere on this agenda notes that the
council has requested up to £15 million of EFS from the
government to support the 2026/27 budget position. The strategy
towards financial sustainability includes the expectation of using
some of the EFS requested to replenish the working balance and
general risk reserve used to assist the 2025/26 position.
Supporting Documentation
Appendices
1.
Financial Dashboard Summary
2.
Revenue Budget Movement since Month 7
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
