Agenda item

Officers expressed gratitude to the Children’s Services directorate teams for their hard work in finding additional savings to balance the budget, noting that these were challenging times for local government due to significant funding reductions. Despite these challenges, the team, along with Cabinet Members, had worked diligently to create a budget.

It was a challenging budget, including significant savings targets of £30 million for 2025-26 and an additional £17 million for the following year. Officers noted the borough's relatively low Council Tax compared to other London boroughs, which kept more money in residents' pockets but limited the Council's available funds.

The budget included contingencies to mitigate risks. The recent grant settlement from central government had provided an additional £3.8 million, which was more than expected but still insufficient.

The Council faced enormous challenges in social care budgets, particularly for children and young people, as well as homelessness and temporary accommodation.

The Council had drawn on reserves over the years, and maintaining stability of reserves was crucial.

The government had promised a multi-year spending review, but only provided a one-year settlement this year. A three-year settlement next year would provide more certainty, but the actual funding levels remained uncertain. There were issues around balancing the schools funding block, particularly around SEND. A number of boroughs had asked for exceptional funding, but Hillingdon had not done so.

Revenue monitoring

There was a reported overspend of £8.9 million for 2024-25, with services within the remit of this Committee forecasting an overspend of £3 million, largely due to increased expenditure for looked after children. Early years centres also faced pressure, offset by underspends in staffing for the Children in Need service. The service area aimed to deliver £1.7 million in savings for 2024-25, with £1.2 million already banked or contracted for delivery, and £0.5 million recorded as either Amber 2 or Red. These savings were related to improving the foster offer and the Stronger Families Programme, which faced challenges this year.

Medium Term Financial Strategy

The consultation budget set out a savings requirement of £39 million for 2025-26, with £32.6 million identified so far, leaving a residual gap of £6.4 million. Over five years, the savings requirement was £62 million, with £65 million identified, resulting in a £3 million surplus by the end of the five-year period. However, reserves will need to be drawn down initially and then rebuilt in later years. Most of the savings requirement was driven by corporate items, including a £37.3 million increase in expenditure predominantly related to rebasing historic budget shortfalls and undelivered savings. An additional £16.9 million was attributed to demographics and inflation.

Children's Social Care and Savings

The increase in savings and spending requirements was driven by children's social care placements, with demographic growth accounting for a £0.4 million increase and inflation for social care placements at £0.5 million. A further £1.9 million was related to inflation for non-placements, mostly due to a pay award for 2025-26, estimated to be 3%.

Of the £5.2 million in savings related to services within the remit of this Committee for next year, key savings included £2.2 million from a review of semi-independent and shared accommodation, £1.1 million from a social care delivery model aimed at avoiding costly interventions, and £0.6 million from a new foster care offer, converting external foster placements to a lower-cost internally run service.

Capital Budget

The consultation budget set out a capital budget of £341.6 million over five years, with £13.6 million related to services within the Committee's remit. This included £11.3 million for increasing special education needs placements within identified school sites to support the DSG recovery plan, and £2.3 million for a programme of works to maintain school buildings and scout and guide group facilities.

Members noted that the DSG was forecasting an in-year deficit which was significantly lower than initial projections, and asked what provisions were in place if the statutory override should affect general reserves. Officers explained the DSG deficits were a national issue affecting many local authorities, not just Hillingdon. The likelihood of the statutory override ceasing was very low. If it did, this would become a national issue, requiring government intervention as local authorities could not be expected to cover these deficits immediately. Officers added that the Office for Budget Responsibility (OBR) had acknowledged the issue, stating that it can only be resolved by government. The team had worked hard to stabilise the position and maintain good service at schools. There was work ongoing on the target operating model.

Members asked about the confidence level in achieving the £32.6 million savings target, given past difficulties in meeting savings targets. Members sought clarity on the deliverability of the budget without negatively affecting services. Officers acknowledged the challenging nature of the budget and the significant savings required, and noted that there were contingencies in place. Officers emphasised the importance of robust monitoring and contingency planning. The Leader of the Council and the Cabinet Member for Finance & Transformation had ensured that all issues were on the table. The budget would be formally assessed via a Section 25 statement in February, which would provide a view on its robustness. There were national issues and Hillingdon was not unique in these.

Members raised concerns about the £5.2 million savings requirement in this Committee’s remit, particularly the reduction in semi-independent and shared accommodation. Members highlighted past issues with finding accommodation for looked after children and the pressure on general needs property, and sought confirmation that the savings target was realistic and robust. Officers explained that the Housing Revenue Account (HRA) was looking to increase housing stock, with a planned increase of approximately 1,700 new homes. This would help alleviate pressure. In Children's Social Care, three work streams were in place: commissioning more affordable lettings within the borough, establishing internal pathways with earlier intervention, and implementing a rent guarantor scheme. These measures aimed to provide assurance to the private sector and maintain rent within housing benefit limits, ensuring Universal Credit and housing benefit applications were in place to prevent rent issues and arrears.

Members asked for clarification about the one-off £4 million adverse movement in the DSG due to previous years. Officers explained that a deep dive review of the balance sheet had revealed an income target that was no longer achievable. This income, previously held on the balance sheet, had to be written off of the balance sheet, resulting in a £4 million one-off impact on the current year's revenue position. The income was related to funds expected from the Department for Education (DfE).

Members asked about the confidence in achieving the target of using local foster carers instead of out-of-borough placements, given the difficulty in recruiting sufficient foster carers. Officers acknowledged this challenge but noted some success in increasing in-house fostering through ongoing campaigns. The service area planned to continue these campaigns and explore different models to achieve the target. The work has already started, providing some confidence for future success.

Members noted that earmarked reserves for this Committee were at zero and asked if there should be concerns about this, given inflationary pressures and the need to cut expenditure. Officers clarified that the table in the agenda showed the use of reservices in the financial year (and that the Committee had not drawn down any reserves) which was a positive. Officers added that contingencies had been built into the budget to address unforeseen pressures. Officers highlighted the challenges posed by changes in National Insurance and the need for government compensation. Officers emphasised the importance of maintaining services without absorbing all fiscal decision costs.

Members asked about assessments to ensure that the changes in social care delivery models do not compromise safeguarding standards. Officers explained that savings proposals went thorough review in Star Chamber sessions, involving social care, finance, legal, and other relevant groups. It was ensured the proposals were based on robust estimates and aimed to maintain service quality. The focus was on more appropriate settings rather than compromising safety. Officers added that services leaders were passionate about their work and would not propose changes that put children at risk. The goal was to deliver strong services more cost-effectively through innovative approaches.

Members asked about the impact of the Council’s zero-based budgeting on the work covered by this Committee. Officers explained that this process had been helpful in understanding the budgets, noting that this should not be a one-off exercise but an ongoing targeted effort. Officers highlighted the importance of examining prices and volumes in areas such as adult care, children's care, and temporary accommodation. The exercise had fostered collaboration between Cabinet Members and officers, resulting in the current budget. Future budget sessions would continue to involve both Members and officers to address challenging issues.

Members commended officers for delivering a balanced budget and asked about mechanisms to monitor and ensure accountability for the ambitious savings plans. Officers stressed the importance of continuous improvement and monitoring to avoid significant shocks. Officers also emphasised the need for Corporate Directors to own their budgets and be accountable for them. There was good engagement with Cabinet Members in creating the budget and officers noted the importance of leadership and accountability in maintaining a balanced budget.

Members asked how reductions in service budgets would impact frontline services, particularly for children with complex needs and those in alternative provision. Officers clarified that the savings were not intended to reduce the amount of service provided but to maximise efficiencies by targeting the most appropriate setting for each child. The goal was to maintain the same level of service while optimising resource allocation.

Members inquired about contingency plans if anticipated efficiency savings failed. Officers explained that the budget strategy included increased contingency funds for the next year. The general contingency had been increased from £0.5 million this year to £5.5 million, and an additional £4 million contingency had been set aside, totalling £9.5 million in contingency funds. This provided a level of protection for the Council. Officers added that the Council would protect the contingency funds to rebuild reserves, and emphasised the importance of holding people accountable for their commitments while being realistic about potential variances. Contingency funds would be used sensibly, with strong cases required for their release.

Members suggested it would have been useful to have more officers in attendance to explain how cost reductions in social care delivery and fostering could be achieved. This could be brought back to the relevant officers. Officers added that they were continuing to look at different models and different ways of working to see how they can deliver more efficiencies across their services. It was noted that the Corporate Director had sent her apologies for the current meeting.

Members sought clarification on ‘smaller proposals’ noted in the report and asked what these included. Officers explained that the smaller proposals were detailed in the consultation budget's Appendix A6. These included a review of the early years operating model, a staffing review in early years centres, and a review of catering in care delivery settings.

The Chair highlighted the recommendations to note the report and comment on the proposals. The Labour Group provided their own draft comments to the clerk for consideration by the Chair. The Chair explained that, generally, the Labour Group would submit comments which the Chair would consider before agreeing on the Committee’s final comments to Cabinet. Labour Members suggested that, previously, there had been an occasion whereby Labour Group comments had been included in a Cabinet report alongside those from the Conservative Group and confirmed that they wished to submit additional comments on this item. This would be checked.

RESOLVED: That the Committee:

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

2. Delegated comments to Cabinet to the Democratic Services Officer in conjunction with the Chair, and in consultation with the Opposition Lead