Agenda item

This report presents the results of the second round of the Council’s revenue budget monitoring process for 2025/26. The Council’s summary position is presented in section 5, with sections 5 and 6 providing the detail for each service area.

Discussion:

The Head of Revenue Accounts introduced the report. He highlighted the round two monitoring projected an overspend of 9.48m, which represented an improvement of £1m from the round 1. The areas under the remit of the Committee had an underspend of £1.1m.

The following issues were discussed:

S114 Notice – a Member noted that the projected overspend represented nearly all of the general reserve, he asked whether it was possible that the Chef Operating Officer would be required to issue a S114 report. The Chief Operating Officer stated that the overspend at round 2 was generally higher than the final outturn due to management action to reduce spending, so there was a justifiable expectation that the overspend would fall during the year and the Council would have sufficient reserves in the event of an overspend. He added that a S114 report was a tool for Section 151 officers should they believe the administration was not fully taking account of the situation but he remained of the opinion that the administration recognised the financial situation and was taking action in response.

It was asked if the Chief Operating Officer expected the Council to have an overspend at the end of the financial year. The Chief Operating Officer stated that there was a significant risk that there would be an overspend against the budget. However, the Council had general reserves it could use to meet the gap, it also had earmarked reserves of £30m some of which could be reclassified if required, and the Council could request further assistance from central government in the form of Exceptional Financial Support (EFS).

In response to a question whether the Chief Operating Officer would be support of an increase in Council Tax for the next financial year, the Chief Operating Officer stated that he would advise Council Tax be raised at the maximum possible level below a the requirement to hold a referendum.

Universal Credit – a Member asked if the £350,000 overspend related to the shortfall in benefit subsidy would end when all claimants had moved to Universal Credit. The Chief Operating Officer stated that some claimants would never be moved over to Universal Credit, including recipients in non-registered supported accommodation placements which meant that the Council would never fully recover the cost of housing benefit paid, through the subsidy.

The Chief Operating Officer added that there was significant pressure this year on reactive budgets, such as social care and temporary accommodation. This additional pressure had been reflected in the budget for 2026-27.

Legal Services – further information was requested on the causes of the projected overspend in Legal Services. The Chief Operating Officer stated that the projection was a result of an increase in children’s care cases and some remaining vacancies in the division requiring the use of temporary staff.

Software Licensing Budgets -  a Member asked whether the projected overspend on licensing software related to additional licenses or increased cost of licenses and if the Council could be assured it received value for money. The Chief Information Officer stated that there had been both an above inflation increase in software licensing costs and development of licenses to provide additional services. In relation to value for money, licenses were scrutinised through the Procurement Board which included ICT representation to consider value for money, security and whether other in house solutions would be more effective.

Financing Budgets – further information was sought regarding finance costs. The Head of Corporate Accounts stated that the finance budget reflected the treasury strategy and projections of capital spending and future interest rates. The Council had a number of large projects with significant borrowing and interest rates had not fallen as the markets had expected increasing costs. The Council continued to receive regular advice from treasury advisors and would take opportunities to reduce costs where possible.

Vacancies – it was asked whether the vacancies in the Finance and Business Support Department had affected delivery of Medway 2.0. The Chief Information Officer stated that the vacancies were principally in CABS and delivery of Medway 2.0 projects was therefore unaffected.

EFS – It was asked whether recourse to further EFS to meet the projected budget gap in the 2026-27 was under consideration. The Chief Operating Officer stated that that a further round of budget meetings was scheduled in the near future and the government would announce the local finance settlement shortly before Christmas. This would provide the Council with further information to reduce the budget gap. At this stage there remained a significant risk that the Council would be required to seek further EFS in the budget next year. He added that in future a three-year settlement would be provided giving greater certainty as to budgets and improving the ability of the Council to plan effectively. 

SEND Budget – The Chief Operating Officer was asked for his opinion whether the SEND budget gap would need to met from the schools budget. The Chief Operating Officer stated that unlike other authorities the Council did not have a significant issue regarding SEND budgets, the SEND deficit had been reduced and the Council was projected to be out of deficit by 2028-29 in this area.

Fees and Chargers – it was asked whether there were plans to raise fees and chargers. The Head of Revenue Accounts stated that there were no plans to change fees and chargers in year, but discussion regarding the next financial year was ongoing. Performance in relation to fees and chargers was shown within the budget of the relevant service area and where there was a significant difference to expectations an explanation provided.

Decision:

a)     The Committee noted the results of the second round of revenue budget monitoring for 2025/26 and in particular the risk to interest and financing projections.

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.