Agenda item

Officers introduced the budget proposals report. This was the second time that officers had attended the Select Committee for the new budget cycle, and this report contained detailed budget proposals within the remit of this Select Committee. The feedback from the Committee would be included in the budget report to be presented to the February Cabinet to approve the proposals to Full Council.

In terms of revenue monitoring for 2023/24, there was an underspend of £2,000, with the services within the Committee's remit forecasting an underspend of £236,000. The underspend was primarily driven by a reduction in the cost of supporting Looked After Children alongside a staffing underspend.

There were £1.44 million of savings to be delivered in 2023/24, with £415,000 recorded at Amber II, indicating potential issues in delivering the savings. £123,000 of this related to the adult education review and the remaining balance related to fees and charges.

Officers discussed the Medium Term Financial Forecast (MTFF) and the Council's budget strategy. The savings requirement up to 2028/29 was estimated to be £51 million, with a savings program of £33.4 million, leaving a residual gap of £17.6 million. Exceptional inflation was the single largest factor, forecast to add £48.1 million over the five-year period.

Of the £33.4 million, £15.8 million was required in 2024/25. Within this program £3.8 million fell within the remit of this Committee, with £1.7 million of that balance being required next year. The largest savings included in next year's proposals included:

·         £0.8 million for realigning Staffing budgets based on the current occupancy rates;

·         £0.5 million for improving and modernizing the fostering offer; and

·         £0.3 million for related to prevention work from the stronger families program with the balance coming from a number of smaller items set out in the report.

Children's social care placements continued to drive much of the inflationary requirement with a forecast uplift of 4.2% in 2024/25 before reducing down to 3% in the medium term. The total requirement for the remit of this Committee was £1 million for inflationary uplifts against the £48 million included in the overall strategy with children's social care placements accounting for £5 million of this value; forecast pay award accounting for a further £6 million; £2 million for other contracted expenditure and this is being offset by forecast increase of gross income of £2 million. Officers highlighted uncertainties beyond 2024/25, as Central Government had only provided funding up to that point.

Service pressures were forecast to add £24 million. This was predominantly from the impact of demographic growth. Services within the remit of this Committee accounted for £1 million of that balance. There was roughly £2.2 million from increases in demand for children's social care, being offset by a reduction in the funding required to support Asylum Seeker Services.

Corporate items added £14 million of the savings requirement, £7 million of which was driven by the Council's borrowing requirement for the capital program and a further £5 million related to TfL concessionary fairs as a result of travel returning to pre-pandemic levels. These two areas sat outside of the remit of this committee.

The capital program proposed by the Council was £218 million up to 2028/29. Within this Committee's remit, there was a program of £42 million, with £1.7 million allocated to increasing special education needs places and £2.7 million for Scout and Guide group facilities.

Members asked about capital receipts and officers noted there were £75 million within the capital programme. Officers were reviewing assets, and looking into disposing of any assets that were deemed surplus to requirements. It was reiterated that the capital programme budget was over £218 million and so more assets were being put in than taken out, and by selling surplus assets, officers would be able to reduce the Council’s potential borrowing for the future and to fund transformation work to deliver the £33.4 million of savings within the MTFF.

Members expressed concern that this Committee was the only one receiving the budget report after the public consultation with residents had concluded.

Members noted the importance of balancing the budget and noted concerns relating to the savings programme being sufficient only if £4.9m funding allocated by the Government in core Adult Social Care spending was retained. Members further noted concerns about the current MTFF strategy being dependent on the achievements of around £75 million in asset sales. Members asked how certain officers could be at these scenarios being achieved.

Officers responded by explaining the Council's reserves, low-risk budget strategy, and the uncertainties in central government funding beyond 2024/25. Officers emphasised the prudence of using a cash-flat strategy and discussed the challenges and legal requirements in setting a balanced budget.

There were reserves of £26.8 million and there were also earmarked reserves. In February Cabinet each year the Section 151 Officer assessed the level of balances that the Council needs and the risks it is exposed to. For 2023/24 this was set at £22 million, and the Council was currently at £4.8 million above this. Then there were earmarked reserves which were held for specific risks. Officers went with a low-risk budget strategy, and so could operate with a low level of reserves. It was reiterated that central government had only provided funding up until the end of 2024/25. The Council’s budget strategy was predicting cash flat settlements from 2025/26 onwards. Legally, the Council had to set a balanced budget, but would not look to balance the whole five-year budget at this stage given the uncertainty of the funding position.

Members asked about the high needs deficit, and about forecasting to have greater confidence in this expenditure area for next year. There had been a lot of work and a lot of resources put into that area now so systems were improving. There were a lot of staff that were new to the area so they were working hard to improve those systems.

Members asked if the funds available to schools would increase or decrease in real terms. There was a 1.7% increase in terms of the schools’ block DSG allocations for 2024/25. In addition, there was a Teachers Pay award specific grant outside of the DSG set to be confirmed in April, with provisional figures of 1.7%. There would also be a specific teachers pension grant, for which there was no provisional figure but also due to be announced in April. When asked about these matching forecasts for inflation, it was noted that the CPI forecast was 7% in 2023, 3% in 2024, and 2% from 2025, and so the increases were above the CPI position.

Members then asked about the Dedicated Schools’ Budget deficit of £26.4 million, £187,000 due to high needs. Members inquired about the Council's Plan B if the Government did not extend the override and the deficit needed to be paid back from general balances. The Council had submitted a DSG (Dedicated Schools Grant) management plan in December to bring the deficit back into balance over five to seven years. This was partly reliant on contributions from the DfE (Department for Education), and feedback was awaited on this. The statutory override was a national issue, and the sector did not expect it to end in the medium term.

Members noted concerns around the budget, particularly with regards to the DSG, and noted the possible need to sell assets quickly to meet commitments. It appeared that delays in the capital building programme, particular for SEND places had meant that there were now high transport costs.

Members asked what other mechanisms the Council had in its approach to ensure that there was resilience. In terms of mitigating against low reserves, officers noted the low-risk approach. 7% inflation was forecast for 2023, and when approaching for inflation uplifts on contracted expenditure, this ran a year behind and so officers had gone with 7%. In terms of the rate of the sales of the capital receipts, officers noted that Hillingdon had sufficient headroom in the capital receipt position to fund the DSG safety valve agreement as it currently stood and the transformation work being deployed throughout the Council to deliver the savings program. Furthermore, Hillingdon was a low-debt authority and officers would not be proposing to increase the debt.

Members highlighted the redesign of the Harlington site and the potential restriction on EHCPs. In terms of the impact on mainstream schools, one of the key objectives of the DSG management plan was to step down high-cost placements.

Members commended the underspend of around £236,000 for services within this Committee’s remit and asked how these funds might be reallocated or utilised in other service areas within the portfolio. Officers re-iterated that the overall underspend was £2,000 and it was explained that the underspend was managed across the entire Council and helped balance out financial positions. Savings programmes were carefully planned, and if there are any issues in delivery, underspending in other areas helped manage the overall financial strategy.

Members expressed concerns about using earmark reserves and asked for clarity on investments and associated risks. Officers explained that Hillingdon historically has had low debt and followed a low-risk approach, not engaging in high-risk commercial investments. Most capital investment was for service delivery and so Hillingdon had not exposed itself to commercial risk.

Members asked about the reduction in Looked After Children costs in 2024/25 and the growth in 2025/26. Officers explained that the reduction was due to a change in service delivery, stepping down residential clients into semi-independent placements, achieving lower unit costs. Officers had built the underspend into the budget strategy for next year and so while there was a projected 2% increase in the number of children being looked after, the overall budget could still be reduced.

The Chair noted that the Committee would submit comments to Cabinet. Labour Members noted that they had concerns around the budget, with specific reference to high-needs and gave to officers their own draft comments.

RESOLVED: That the Committee:

1.    Noted the budget projections contained in the report; and

2.    Delegated to the Democratic Services Officer in conjunction with the Chairman (and in consultation with the Opposition Lead) to agree comments to be submitted to Cabinet.