Agenda item

To receive the information, consider the risks arising from the forecast expenditure against the budget, and scrutinise the decisions to be presented to Cabinet regarding budget management by the Council and its departments

DECISION:

 

1.    To accept the report and note the situation and relevant risks in the context of the budgets of the Council and its departments.

2.    Agree with the recommendation for the Cabinet to use:

·         School Balances to fund the increase in electricity prices in schools

·         £4.5 million from the post-Covid recovery arrangements fund established to fund the associated financial challenges that face the Council

·         The rest to be financed from the Financial Strategy Reserve.

3.    That a progress report of the actions is submitted to the Committee following discussions with the Chief Executive and the Highways and Municipal Department regarding the Department's overspend (the report to include a response to the recommendations submitted to the Department by WRAP Cymru).

 

a)    Submitted - the report of the Cabinet Member for Finance, Councillor Ioan Thomas,  requesting that the committee scrutinises the position and relevant risks in the context of the Council's budgets and its departments, and submit observations to the Cabinet for approval on 25 October 2022.

 

The Cabinet Member for Finance set out the context for the report, noting the following:-

·         That the Adults, Health and Well-being Department was overspending, which is a combination of factors, including the failure to realise savings

·         That the Economy and Community Department was seeing the impact of increasing energy costs

·         That the Highways and Municipal Department was highlighting the lack of realising savings in the field of waste

·         That the Housing and Property Department was seeing an impact in the homelessness field as a result of an amendment to Covid-19 legislative arrangements

·         That it was intended to look at school balances to fund the overspend anticipated on electricity costs this year as the schools had saved energy over the Covid period 

 

The Senior Finance Manager referred to a summary of the final position of all departments and highlighted the fields where there had been significant differences. Attention was drawn to the impact of the increase in inflation, particularly the costs of electricity, which were above the budget and to be seen most prominently in the Education, Highways and Municipal, and Economy and Community Departments - on the leisure centres of Cwmni Byw'n Iach.

 

·         In the context of Covid, although the impact was not as substantial in 2022/23 in comparison with the two previous years, the additional costs, income losses and slippages on savings schemes as a result of Covid, continued in some fields.

·         The Adults, Health and Well-being Department - anticipated overspend of £1.9 million this year, this being a combination of factors, including a failure to realise savings to the value of £930k. Very obviously this year, pressure was seen on supported accommodation and direct payment packages, as well as staffing costs and a lack of income in the Community Care field.

·         Education Department - an overspend of £1.3m was anticipated as a result of the impact of higher electricity costs for a six-month period from October 2022 onwards at the schools. Considering that the schools had already benefited from almost a million in energy savings which had derived from Covid and the associated lockdowns, it was therefore considered appropriate to use school balances to fund the additional pressures this year.

·         Byw'n Iach - as a result of the impact of Covid, the company received financial support from the Welsh Government's hardship fund (to the value of £1.4 million in 2021/22 and £2.7 million in 2020/21). Such support was not available from the Government this year, but the impact of Covid was continuing in 2022/23 and was disrupting the ability to generate income. As a result, the Council confirmed necessary financial support to sustain Byw'n Iach services by extending the period of assurance given to the Company up to the end of 2022/23, which was £842k this year.

·         Highways and Municipal Department - annual trend of overspend in the municipal field continued, with the most prominent problems in the waste collection and recycling field.  The department was also experiencing difficulties to realise savings to the value of £533k.

·         Housing and Property - the implications of legislative changes relating to Homelessness leading to substantial financial pressures. Although an allocation of £1.5m from the Council's post-Covid arrangements fund was provided to assist the situation, a net overspend of £3.2 million is anticipated this year.

·         Corporate - prudent projections when setting the 2022/23 budget responsible for additional taxation output and contributing to the underspend on Council Tax Reductions - a reduction in the number of claimants. The latest increase in interest rates means that the projections of receiving £1.1 million interest is more favourable.

 

It was reported that use would need to be made of the Council's reserves and School balances to fund the £7.1 million financial deficit anticipated for 2022/23. An explanation was given of two of the Council's reserve funds, namely 'Balances' (reserve funds not earmarked), and 'Funds' (money in specific funds for specific purposes that can protect and assist with the future's challenges).

 

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

 

Gratitude was expressed for the detailed and clear report.

 

b)    During the ensuing discussion, the following observations were made by members:

·         That inflation was the big enemy - the recommendations to deal with a difficult situation were wise

·         That the homelessness situation was commonplace across the country - a call was made to lobby the government to fund the costs of legislative amendments

·         That the balances could only be used as a one-off - this needed to be considered when setting the budget for 2022/23

·         That the existing economic position placed additional pressure on the Council - there would be a need to search for solutions when setting the budget

·         That schools should not be placed under pressure to reach an arbitrary point when forward planning

·         To accept an update on interest returns at the next meeting

·         That the reasons for the ongoing overspending of the Highways and Municipal Department should be scrutinised

·         That there was a need to submit a progress report / action plan to the Committee in response to the discussions between Highways and Municipal and the Chief Executive, as well as the response to the recommendations received from WRAP Cymru

·         A suggestion to draw up a timetable / work programme of the Council's savings realisation scheme - this would be a means to present the information needed to better understand the situation

 

c)    In response to a question regarding using the second homes premium to address the increase in costs in the homelessness field, it was noted that this would need to be considered when planning for 2022/23.

 

In response to a question regarding challenging the Byw'n Iach Service to consider savings and hold discussions on reducing costs, it was reported that the company had a savings scheme for 2022/23 and that a bid application had been submitted.

 

In response to the proposal to use school balances to fund the increase in electricity prices at the schools, it was noted that the schools' balances had increased immensely over the past two years and that due to the increase in grants and profit from energy savings - therefore it would be appropriate to use this year's balances to assist with the funding of energy costs.

 

DECISION:

 

1.  To accept the report and note the situation and relevant risks in the context of the budgets of the Council and its departments.

2.  Agree with the recommendation for the Cabinet to use:

·         School Balances to fund the increase in electricity prices in schools

·         £4.5 million from the post-Covid recovery arrangements fund established to fund the associated financial challenges that face the Council

·         The rest to be financed from the Financial Strategy Reserve.

3.  That a progress report of the actions is submitted to the Committee following discussions with the Chief Executive and the Highways and Municipal Department regarding the Department's overspend (the report to include a response to the recommendations submitted to the Department by WRAP Cymru).