Agenda item

This report presents the results of the third round of the Council’s revenue budget monitoring process for 2025/26. The Council’s summary position is presented in section 4 of the report, with sections 5 and 6 providing the detail for each service area.

Discussion:

The Head of Revenue Accounts introduced the report. He highlighted that the Council projected an overspend against a budget of £15.6m in quarter three prior to migration via capital receipts and declassification of reserves which meant the budget projected an overspend of just under £10m. The areas under the remit of this Committee projected an overspend of £3.6m.

The following issues were discussed:

Timeliness - Members commented that the report for quarter three was received shortly before the end of the financial year. The Committee requested that the report be brought to Committee at an earlier stage next year to promote effective scrutiny. The Head of Revenue Accounts acknowledged that the report was considered by the Committee at a later stage, he explained that it was the first meeting following consideration of the report by Cabinet.

Capital Receipts – it was asked whether funding the transformation programme through capital receipts was sustainable. The Chief Operating Officer stated that whilst capital receipts had been used for investment, this could not be used as an ongoing source of funding, but he was confident that the 2027/28 budget would not require the use of EFS or capital receipts to build a balanced budget.

Benefit overspend – in response to a question whether the overspend on benefits would continue, the Chief Operating Officer stated that under migration to universal credit the Council retained responsibility for complex cases, which did not attract 100% funding from government for Council costs, so there would always be a funding gap. The Council was part of a pilot programme which had led to government’s impending legislative changes in respect of supported accommodation.

Medway 2.0 – it was asked if the Council was on target for savings as part of the Medway 2.0 programme. The Chief Operating Officer stated that the Council had invested in automation and AI, so it had invested in the right areas to make savings. However, investment in prevention and demand management within adult social care remained the most obvious way of delivering long term financial sustainability. He reiterated that the multi-year settlement was positive and savings were being made through the Medway 2.0 programme. He was confident that the 2027/28 budget would be balanced without recourse to EFS.

Capitalisation Policy – further information was requested regarding the flexibility over capital receipts. The Chief Operating Officer stated that the government’s policy had been extended to 2030 to increase flexibility so he was not concerned.

Council financial position - the Head of Revenue Accounts was asked for his view on the Council’s financial position. The Head of Revenue Accounts stated there had been significant pressure on demand led services over a number of years which had caused the current financial pressures.

It was asked whether the Council’s financial position was a risk to front line services, specifically the weekly bin collection. The Chief Operating Officer explained that prior to the EFS, the Council commissioned a report from CIPFA on its financial resilience. The report stated that the administration had made tough decisions, and the government accepted the Council was on the right path to financial sustainability. The Chief Operating Officer added that he expected a further CIPFA assurance review would be undertaken in the summer and the Council would then consider the recommendations. CIPFA had cited the ending of weekly bin collections as an example of a tough decision the Council could consider, but concluded the Council was progressing in the right direction and service delivery remained a decision for the Council.

Accuracy of projections – in response to a question how accurate previous quarterly monitoring reports had proven and had any changes been made as a result, the Chief Operating Officer stated that following the CIPFA review the Council had moved to a monthly budget monitoring process. This had created more accurate projections, however, it also created a tension between the frequency of monitoring and its impact on resources. Finance was currently reviewing how it could use its resources most effectively to deliver all of its functions.

Decision:

a)     The Committee noted the results of the third round of revenue budget monitoring for 2025/26.

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

c)     The Committee noted that officers had submitted an Exceptional Financial Support request to the Government seeking a further £9.9million in respect of 2025/26, in addition to the £18.184million incorporated into the budget.

d)     The Committee noted that Cabinet had recommended that Full Council approves the use of £2.783million of Capital receipts under flexibilities to fund transformational activity in Adult Social Care and Business Support.

e)     The Committee noted that Cabinet had recommended that Council declassified the following amounts currently held in earmarked reserves and transfers them to general reserves:

• £1,597,513 held in the Collection Fund reserve;

• £450,000 held in the severance reserve;

• £750,000 held in the SELEP reserve;

• £27,000 held in the unpresented Cheques reserve.

f)      The Committee recommended that the quarter three monitoring cycle be reviewed to enable the Committee to consider the monitoring report at an earlier stage.