Agenda item

This report outlines the forecast financial position of the organisation at the end of 2024/25 based on the information known at the end of the first quarter.

Cabinet Portfolio Holder – Councillor Peter Butlin

Councillor Peter Butlin (Deputy Leader and Portfolio Holder for Finance and Property) explained to Cabinet that the quarter 1 position reflected a concerning overall picture due to ongoing demand and financial pressures in four key areas, which were also the cause of financial strain on this council last financial year – Adult Social Care; Children’s Social Care; SEND and Home to School Transport.  Cabinet was asked to note the £47.5m overspend which one-off resources reduced to £27m and the 43% shortfall in forecast savings delivery largely relating to these four areas.   Councillor Butlin noted that these four areas were areas of significant financial strain for all upper tier councils across the country and whilst mitigations were being put in place, national policy change and/or additional resources were essential.  There was tension between the Council’s statutory duty to set a balanced budget, and the statutory requirements to provide services in these demand-driven areas to those who were eligible.   However, as a well-run organisation, the Council had acted swiftly to mitigate the pressures in line with pre-existing plans and trigger points, and the long-term financial resilience which meant that there were resources set aside to assist efforts to deal with some of these pressures.  Councillor Butlin advised that the Council had responded quickly and well to the additional controls. 

In the current climate, Councillor Butlin informed Cabinet that the Medium-Term Financial Strategy (MTFS) would be more challenging for current year and it was expected that additional savings of £10m above those set out in the previous paper to Cabinet (July 2024) would be required.  The Chancellor’s Spending Review and Autumn Budget would provide more clarity on the available resources and potential policy changes to fund and address the pressures identified as the Council progressed its preparations for setting the 2025/26 Budget and MTFS in February 2025.

Councillor Isobel Seccombe (Leader) commented that the Council had already engaged in lobbying the previous government and would continue with those efforts going forward.  She noted that the Local Government Association (LGA) had met with the Minister for Housing, Communities and Local Government to stress the need for funding settlements that were longer than one year but this would not wholly remedy the situation and emphasised the need for legislative change to enable the sector to manage and deliver all the services provided by local government, not just those which were demand-led.  She noted the impact of a growing and aging population on demand for adult social care and welcomed conversations with the government to address these funding issues. 

Councillor John Holland emphasised the need for political parties to work together on this issue and considered that the problem was not the result of budgets being exceeded, rather that they were not big enough.  He noted that the sector was working with a budget set by the previous chancellor and the ability to make in-year changes was somewhat difficult.  He observed that the new government had outlined plans for more house building and an increase in homes was aligned with an increase in population and demand for services.  He therefore considered it would be essential to work within the district and borough’s existing local plans.

Councillor Jerry Roodhouse considered that this was the most challenging situation he had observed since he was first elected to the County Council.  He noted that the trajectory of an aging population had been identified some years ago but the level of frailty and need was not and this was now combining with the demand for support for Special Educational Needs and Disabilities (SEND) to create significant budgetary pressure.  This was a concern across the whole local government sector and the County Councils Network (CCN) would continue to lobby on this issue.  Despite evidence that the government was listening, his experience was that it would be at least 2 years before additional funding was provided.  Additionally, he echoed statements that additional funding would not fix the structural and systemic issues associated with an aging population.  It would be important to consider how services could be provided more in the community.  Councillor Roodhouse asked for clarity on the phrasing “more flexible medium term financial risk reserve” in relation to the High Needs Block and Councillor Butlin agreed that officers would provide a briefing note on this.

Councillor Sarah Feeney echoed Councillor Holland’s comments regarding the political groups working together to ensure the continuation of services for those who needed them.   She noted the overspend on children in care placements, and whilst she was aware that there was a lengthy inspection process to bring the council’s own homes into use, she considered that there was a need to press and support the County Treasurer’s position for regulation of the children’s care market.  Noting the underspends in foster care, Councillor Feeney was aware of excellent work that had taken place around the recruitment of foster carers, but she considered that the current budget position suggested that there was still work to do.  She also expressed surprise regarding the overspend on the Special Educational Needs and Disabilities Assessment & Review Service (SENDAR) together with increased legal fees and mediation work and queried if this needed further review.

Councillor Seccombe noted the comments from Councillors Roodhouse and Feeney, sharing the view that children had better outcomes when they remained with their family support since the impact of breaking up families was significant and the life impact should not be underestimated.  To this end she stated that the Council had commenced a programme of developing its own children’s homes which were residential properties rather than institutions which supported the children in a family-feel environment.  The opening of these homes not only provided an opportunity to keep the children in the county, but also provided choice in the market at a time when demand nationally was driving inflation. Councillor Seccombe recounted her recent experience of canvassing for the general election and the concerns that residents shared about increased house building.  She explained that the impact of an aging and growing population coupled with Warwickshire’s successful economy with low rates of unemployment was driving demand for more housing. The cost of care placements for older people and SEND remained a significant pressure whilst government funding was diminishing.  The report presented a very challenging situation but she applauded officers for the work they were doing to drive down costs.

Noting Councillor Holland’s comments regarding budget provision, Councillor Butlin responded that the Dedicated Schools Grant did not provide enough funding with SEND being the most significant area of demand which had an associated effect on home to school transport.   He reiterated that the problem was related to a combination of poor legislation and an increase in demand which the government had not been able to quantify and therefore was failing to provide adequate funding for.  Noting Councillor Roodhouse’s comments regarding demographics, he considered that this was again an issue with the absence of adequate legislation and reform in this area was very much needed.  Building on the comments of Councillor Seccombe, Councillor Butlin explained the protracted process of bringing forward a children’s home in terms of planning, inspection and certification by OfSTED.  Councillor Butlin advised that more mainstream provision was needed for SEND and £20m was being made available for this across the county but again this took time to bring to fruition with schools and partners.  Councillor Butlin noted that the adult social care precept was a “sticking plaster approach” to provide funding but due to the increase in demand this was no longer sufficient.  He welcomed lobbying by CCN and the LGA.  A long term solution was needed and he was hopeful that the new government would address financial concerns in the local government sector.

Councillor Seccombe thanked those present for their comments, noting that staff were being asked to do more with less and she was keen to ensure all universal services required by a growing population were retained.  The Cabinet would be monitoring the situation.

Resolved:

That Cabinet:

1.     Notes the forecast net service overspend of £26.998m (6.7%) that would need to be funded from reserves at the end of 2024/25;

2.     Notes the forecast delivery of savings for 2024/25 of £9.255m (57%), and the consequent shortfall against the target;

3.     Notes the forecast capital spend for 2023/24 of £161.759m;

4.     Notes and approves the movement in the forecast spend on the capital programme of £26.404m from 2024/25 into future years;

5.     Approves the drawdown of £0.472m from the Revenue Investment Fund as detailed in Section 6 of the report; and

6.     Notes and endorses the financial recovery strategy to mitigate the emerging 2024/25 financial position, as outlined in Section 2 of the report.