Agenda item

To accept the report on the end of August 2022 review of the Revenue Budget, and consider the latest financial position regarding the budgets of each department/service.

 

To note that the financial impact of Covid on some fields continued in 2022/23, although the impact is not as substantial in 2022/23 compared to the last two years, which are a combination of additional costs, income losses and a slippage in the savings programme.

 

To note that significant overspend is anticipated in the Adults, Health and Well-being Department, Education Department, Economy and Community Department, Highways and Municipal Department and the Housing and Property Department this year. The specific reasons that affect departments are detailed in section 5 of the report, but the impact of increased inflation and electricity prices is a particularly prominent factor.

 

Given the substantial overspend anticipated by the Adults, Health and Well-being Department and the Highways and Municipal Department, the Chief Executive’s intention to convene a meeting with the relevant officers was noted in an attempt to get to the root of the overspend, to ensure that definitive steps are taken in an attempt to bring the situation under control before the end of the financial year, and to report to the Cabinet on the response plan.

 

Although it was premature to transfer money from funds until the financial position is finalised at the end of the year, it is recommended that the procedure in terms of using funds to fund the financial deficit at the time will be:

¾    firstly, use School Balances to fund the increase in electricity prices in schools

¾    secondly, use £4.5 million from the post-Covid recovery arrangements fund established to fund the associated financial challenges that face the Council

¾    finally, finance the rest from the Financial Strategy Reserve.

 

 The report was submitted by Cllr Ioan Thomas. 

 

DECISION

 

To accept the report on the end of August 2022 review of the Revenue Budget, and consider the latest financial position regarding the budgets of each department/service.

 

To note that the financial impact of Covid on some fields continued in 2022/23, although the impact is not as substantial in 2022/23 compared to the last two years, which are a combination of additional costs, income losses and a slippage in the savings programme.

 

To note that significant overspend is anticipated in the Adults, Health and Well-being Department, Education Department, Economy and Community Department, Highways and Municipal Department and the Housing and Property Department this year. The specific reasons that affect departments are detailed in section 5 of the report, but the impact of increased inflation and electricity prices is a particularly prominent factor.

 

Given the substantial overspend anticipated by the Adults, Health and Well-being Department and the Highways and Municipal Department, the Chief Executive's intention to convene a meeting with the relevant officers was noted in an attempt to get to the root of the overspend, to ensure that definitive steps are taken in an attempt to bring the situation under control before the end of the financial year, and to report to the Cabinet on the response plan.

 

Although it was premature to transfer money from funds until the financial position is finalised at the end of the year, it is recommended that the procedure in terms of using funds to fund the financial deficit at the time will be:

• firstly, use School Balances to fund the increase in electricity prices in schools
• secondly, use £4.5 million from the post-Covid recovery arrangements fund established to fund the associated financial challenges that face the Council
• finally, finance the rest from the Financial Strategy Reserve.

 

DISCUSSION

 

The report was submitted, noting that the report detailed the latest review of the Council's revenue budget for 2022/23, along with the projections for the end of the financial year.  It was expressed that the report had already been submitted to the Governance and Audit Committee and they had been very supportive of the recommendation. 

 

It was noted that the current projections suggested that the Adults, Health and Well-being; Children and Families; Education; Economy and Community; Highways and Municipal and Housing and Property Departments were overspending by the end of the financial year. It was highlighted that the impact of an increase in inflation, particularly the electricity costs above the budget was to be seen most prominently in the Education, Highways and Municipal and Economy and Community departments.  It was noted that the rest of the Council's departments were operating within their budget.

 

It was expressed that the impact of Covid could not be seen as substantial as what had been seen over the past two years, but that additional costs, income losses and slippages on savings schemes continued in some fields. It was highlighted that a delay in realising savings was evident in the Adults, Health and Well-being Department with a value of up to £930k, whilst the Highways and Municipal Department had schemes to the value of £553k.

 

The main issues facing the departments that were overspending were highlighted individually as follows:

 

Adults, Health and Well-being Department

It was expressed that an overspend of £1.9m was anticipated for this year, and that this is as a result of a combination of factors, including a failure to realise savings. It was highlighted that increasing pressure on supported housing and direct payment packages was to be seen in the Older People Services, and staffing costs and a lack of income were problems in Community Care.

 

Education Department

It was noted that an overspend of £1.3m was anticipated by the Education Department as a result of the impact of higher electricity prices for a period of six months from October 2022 onwards to the schools. It was explained that the schools had already benefited from almost a million of energy savings deriving from the pandemic and lockdowns, therefore, it was considered appropriate to use school balances to fund the additional pressure for this year.

 

Byw’n Iach

As a result of the pandemic, Byw'n Iach received financial support from the Welsh Government's hardship fund to the value of £1.4m in 2021/22 and £2.7m in 2020/21. It was explained that such support was not available for this year, but that the impact of the pandemic continued to disrupt the company's ability to generate an income. It was noted that the Council had confirmed the necessary financial support to maintain services by extending the guarantee period up to the end of 2022/23, which was approximately £842k this year. It was highlighted that higher electricity costs were responsible for the remainder of the overspend.

 

Highways and Municipal Department

It was expressed that the annual trend of overspending in the municipal field continued with the most obvious problems to be seen in the waste and recycling collection field. It was also explained that the department was experiencing difficulties in realising savings to the value of £553k in a number of fields.

 

Housing and Property Department

It was highlighted that the change in legislation relating to Homelessness had led to substantial financial pressures this year. It was added that despite an allocation of £1.5m from the Council’s post-Covid arrangements fund having been provided to assist with the situation, a net overspend of £3.2m was anticipated this year.

 

Corporate

It was noted that prudent projections had been made when setting the 2022/23 budget responsible for additional taxation output and contributing to the underspend on Council Tax Reductions, with a reduction in the number of claimants. It was expressed that a recent increase in interest rates meant that the interest receipt projections were £1.1m more favourable.

 

It is anticipated that use will need to be made of the Council's reserves and School balances to fund the financial deficit of £7.1m that is anticipated for 2022/23. It was explained that by using the specific reserves, general balances will be protected and available to help face the challenges of the future.

 

Observations arising from the discussion

¾    It was expressed that this report was serious and raised the curtain on the worse reports to come. It was highlighted that it would be an immense challenge to create a budget for next year. It was highlighted that half of the Council's overspend derived from the homelessness field and that this emphasised the crisis that could be seen in the field. It was noted that it was now irresponsible not to consider money from the Council tax premium to fund the expenditure in the homelessness field.

¾    It was noted that the current situation was a crisis and that no support would be forthcoming from the Westminster Government. It was emphasised that inequality lay at the root of the homelessness problem. It was explained that in a county where a huge increase in homelessness had been seen, one could also see thousands of second homes.

¾    It was explained that the increase in homelessness had led to overspending in the department, but that this had been overspending in order to ensure that individuals and families had a roof over their heads and to respond to the situation.

¾    It was enquired why the impact of inflation could be seen more prominently in departments such as Economy and Community and Education? It was noted that the increase in electricity costs were to be seen in these departments because of locations such as schools, museums, libraries and leisure centres.