Agenda item

This report presents the results of the first round of the Council’s revenue budget monitoring process for 2024/25.

Discussion:

The Chief Operating Officer introduced the report. He highlighted that the round one monitoring forecast an overspend of £16.5m, with an overspend of £1.6m within the remit of this Committee.

The overspend within the remit of this Committee related principally to projections in savings related to Medway 2.0, where work was progressing and officers were confident that savings would be achieved, however, until those savings had been delivered they would not be included in the forecast.

The following issues were discussed:

Revenue – in response to a question whether there were plans in place to utilise Council assets such as commercial use of the data server, the Chief Operating Officer replied that it was planned to make greater commercial use of the Council’s assets but this had been delayed due to the safety works which were required to Gun Wharf.

Legal Services overspend – concern was raised in relation to the overspend in Legal Services despite recent investment in the service. The Chief Operating Officer stated that the restructure of Legal Services had yielded improvements, however the full benefits of the investment would take time to be realised.

He added officers were reviewing its legal costs and other costs in relation to Children Services to ensure that the Council had the correct resources available to progress cases more quickly and effectively.

Medway 2.0 – A Member commented that the reported overspend was in addition to the £14.7m emergency financial support. He asked if the projected savings from Medway 2.0 represented permanent savings. The Chief Operating Officer explained the projected £2m in savings did represent permanent savings but would not be included in the forecast until they the changes to services had been delivered.

Cost of Debt - in response to a question what had caused the increased cost of debt repayment, the Chief Operating Officer explained that £42m had been earmarked in the Capital Programme to purchase housing for Temporary Accommodation. There were costs to service the borrowing, however, savings would be made in the temporary housing budget which had not yet been realised.

Emergency Financial Support – it was asked whether there was concern that further emergency financial support would be required to meet the overspend in the current financial year. The Chief Operating Officer explained that the Council had received a letter from the then Secretary of State that they were minded to approve capitalisation of up to £14.7m, in 2024/2025, however the Council had also stated in its application for exceptional financial support that it would need further capitalisation directions in 2025/26 and 2026/27.  An assurance review would be undertaken by CIPFA and following the publication of final accounts and sign off by auditors the capitalisation direction for 2024/2025 would be agreed. Separate applications would need to be made in future years.

The Chief Operating Officer added that the Council currently held £10m general reserves, however, this was an arbitrary figure. If reserves were set at 5% of the Council’s annual budget, they would be in excess of £20m, but until the Council received a multi-year settlement from central government medium term financial planning to achieve this was difficult.

Strategy – in response to a question what plans did the Council have in place to reduce the overspend, the Chief Operating Officer explained that the results of quarter one highlighted that action needed to be taken, but there was a lack of data at this stage. In terms of the budget, the treasury forecast would be subject to change as there would be natural slippage in the capital programme which would bring down the cost of servicing borrowing.

The Chief Operating Officer added that the Council had received an assurance review by CIPFA which confirmed the Council’s unit costs were below the average for unitary authorities, there were no areas of governance failure, and the Council did provide value for money. CIPFA had made recommendations which included the Corporate Management Team monitoring the budget on a monthly rather than quarterly basis and that progress against savings targets were specifically reported. The Council had put this in place with monthly monitoring of budgets and fortnightly monitoring of the Financial Improvement and Transformation Plan which includes progress against savings targets.

Decision:

a)     The Committee noted the results of the first round of revenue budget monitoring for 2024/25.

b)     The Committee noted that Cabinet instructed the Corporate Management Team to implement urgent actions to bring expenditure back within the budget agreed by Full Council.