Agenda item

Cabinet Member: Cabinet Member for Croydon Renewal, Councillor Stuart King and Cabinet Member for Resources & Financial Governance, Councillor Callton Young

Officer: Interim Director of Finance, Investment & Risk, Chris Buss

Key decision: no

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To note

1. The General Fund is projecting a net nil variance as at Month 1. Service departments are indicating a £3.451m overspend with this being netted of against £3.451m underspend from a one off Covid Grant confirmed to Croydon Council for 21/22 by MHCLG as part of the Local Government Finance Settlement.

2. That a further number of risks and compensating opportunities may materialise which would see the year-end variance change and these are reported within Section 3 of this report. Should these risks materialise or the mitigations not be effective the Council could overspend by £3.659m.

3. The Housing Revenue Account (HRA) is projecting a £2.117m overspend for 21/22. If no further mitigations are found to reduce this overspend the HRA will need to drawdown funding from the HRA Reserve account.

4. The above figures are predicated on forecasts from Month 1 to the year end and therefore could be subject to change as forecasts are refined and new and updated information is provided on a monthly basis. Forecasts are made based on the best available information at this time.

5. That whilst the Section 114 notice has been lifted a, the internal controls established as part of the S114, such as the Spend Control Panel remain. However, restrictions have been lifted for ring-fenced accounts such as the Pensions Fund, Housing Revenue Account and Coroner’s Costs as these do not impact on the financial position of the General Fund. The Spending Control Panel which was set up at the beginning of November 2020 continues to meet on a daily basis.

The Cabinet Member for Croydon Renewal (Councillor Stuart King) stated the report was the first report for 2021/22 financial year and reflected the outturn for April 2021. It was noted that departments were reporting a variance of £3.4 million on the approved budget, most of which was not Covid-19 related, and that there was no indication of whether the variances were permanent or one offs which the Cabinet Member requested be added to future reports.

It was stated by the Cabinet Member that it was important that Members understood the impact of the costs of those variances and that the General Fund was projecting a net variance through the use of ring-fenced Covid-19 grant monies. It was noted that the use of reserves so early in the year could be seen as being premature.

The Cabinet Member noted that at paragraph 3.9 of the report that services had been instructed to find mitigations for all savings which could not be met and stated that he felt that this approach should be applied to all budget pressures and overspends rather than services looking to the corporate centre to meet shortfalls, for both the General Fund and Housing Revenue Account (HRA).

It was noted by the Cabinet Member that the report spoke of the role of the Spend Control Panel (SCP) and whether it should be applied to the HRA and Coroner Service. It was felt by the Cabinet Member that the SCP had a positive impact on spending within the council and in light of the £2 million overspend in the HRA he felt the rigours of the SCP should be applied to the HRA.

The Cabinet Member noted that at table 3 of the report that around £1 million of mitigations related to staffing and vacancies and queried why the amount was not reported as a saving but as a mitigation.

The Cabinet Member for Resources & Financial Governance (Councillor Callton Young) queried when the savings plan would be presented to Members as it was recognised that the financial year was passing.

In response to the query in relation to staffing mitigations, the Interim Director of Finance, Investment & Risk (Chris Buss) advised Members that the figures within the report were part year effects of when it was thought staff would leave as the figures were for staff who had been made redundant. Those figures would only move from being considered a risk or opportunity to the forecast once the staff members had left the organisation.

In terms of the HRA, the Interim Director advised Members that the HRA budget was set before the details of Regina Road were available and since that point a significant amount of work had been undertaken, including enhancing the staffing within Housing. Members were advised to carefully consider the possible implications before reintroducing controls on the HRA. They were further advised to wait a couple of months to understand the full picture of what spending was like as it was felt that the bulk of the overspend was a direct consequence of the conditions at Regina Road and over blocks.

In response to the query in relation to a savings plan, the Interim Director advised that a plan had been drafted and would be brought to Cabinet in due course when officers were confident that the savings identified could be delivered.

The Cabinet Member for Resources & Financial Governance queried how the SCP could be considered a hindrance to justified spending, if the Panel was working as it was intended. Furthermore, the Cabinet Member stated that it was important that Members saw the savings plan as early as possible to understand the proposals for the year ahead.

The Interim Chief Executive (Katherine Kerswell) drew Members attention to the report being for period 1 of the financial year and highlighted that such a report was unusual for a council, but was a reflection of the council’s commitment to openness and transparency. Members were advised that council’s often did not publish a period 1 report as so much often changed after the initial month.

Members were further advised that a written report could not convey the leadership which was taking place in the council to ensure managers were focussed on delivering the 2021/22 budget which included £44 million of savings, the budget delivery and revenue income. It was highlighted that the council had savings to deliver from 2020 to 2023 and beyond and that there was a significant amount of work still to be done. The culture of the corporate centre being available to mitigate any issues was reported to be leaving the organisation and the idea that because there was a budget it did not need to be spent was being taken on board.

The Interim Chief Executive advised Members that significant assurance work was being undertaken alongside identifying savings for coming years. Whilst it was recognised the council faced an incredibly challenging Medium Term Financial Strategy, with 2022/23 being the most difficult, Members were advised that officers were committed to achieving the budget.

The Leader of the Council (Councillor Hamida Ali) queried how the council was achieving the change in culture which was required. Furthermore, assurances were sought as to whether the council was actively working to achieve mitigations so that reserves or grant funding was not required.

It was noted by the Leader that within the Report in the Public Interest (RIPI) the council had been criticised for previously not accurately reporting the seriousness of the financial position to Cabinet and queried whether it was felt that the report was an optimistic assessment of the position the council was in.

In response, the Interim Chief Executive advised Members that the report was accurate and did not misrepresent the council’s position. It was felt that the Interim Director had correctly, in accounting terms, presented Members with the balance of the outcome for the year as it stood at month one. Members were advised that a recommendation could be included that mitigations be found not just for savings that were not delivered, but for all overspends.

It was noted by the Cabinet Member for Croydon Renewal that there was a greater level of transparency within the report, both with there being a period one report and the openness around variances, savings risks, mitigations and other risks on the General Fund. However, the Cabinet Member expressed concern that the grant funding had been used within month one when it may have needed to be used later in the year.

The Interim Director highlighted paragraph 3.11 of the report and advised Members that budget holders had been instructed to remain within budget. Furthermore, it was noted that often people were cautious in month one and did not always share the good news but did share the bad news; as such the Interim Director advised that he expected it to get better.

The Cabinet Member for Homes (Councillor Patricia Hay-Justice) stated that the HRA recording an overspend of £2 million was not a positive sign and noted that table 4 of the report listed what had made up that overspend. Cabinet were informed that she had gone through that table with officers to understand the reason for the overspend and the mitigations which had been put in place. In terms of responsive repairs, the Cabinet Member stated that this had been due to immediate repairs at Regina Road and outstanding repairs from the previous year. In light of the overspend, the Cabinet Member queried whether the account for 2020/21 had been finalised and whether an underspend from that year could be transferred to 2021/22 accounts.

In response, the Interim Director advised that the outturn from the HRA had not yet been finalised but that he was expecting the figures later that week. Members were advised that the normal process would be for an underspend to be transferred to the HRA reserves and that it was for Cabinet to decide whether to then transfer that money to the HRA account for 2021/22.

It was stated by the Shadow Cabinet Member for Croydon Renewal (Councillor Jason Cummings) that one of the areas which had characterised financial reports in previous years was for departmental overspends to be balanced off by corporate items. Questions had previously raised on the matter and it had been found that the situation had remained the same throughout the year. Due to previous experience, the Shadow Cabinet Member stated that he was concerned that the papers reported departmental overspends being balanced by corporate items and that previous years had not seen departmental spend improving through the year, however suggested that he felt inclined to believe the answers being provided as they were being provided by officers and not politicians. In light of the concerns, the Shadow Cabinet Member queried whether the quarter one report would show a better picture in terms of departmental expenditure.

In response, the Leader noted that the report was unusual in terms of local authority reporting and was set to demonstrate the financial control the council was seeking to establish. The Cabinet Member for Croydon Renewal stated that the concerns raised were sensible and valid, and were similar to the questions being asked by Cabinet in terms of departmental overspend. It was stressed, in response, that the Cabinet were determined to ensure accountability by working with officers to ensure everything was being done to deliver the budget, however it was recognised that setting a balanced budget and delivering the budget were two separate matters and there remained a number of unknowns. Such as unknown was whether the end of Covid-19 restrictions would take place on 21 June 2021 and whether actions to mitigate the impact would need to be put in place.

The Interim Chief Executive advised that there was a 100% commitment that the quarter one report would be open, honest and accurate. In terms of concerns, she advised that was anxious as to the impact of restrictions on income targets, however it was stressed that there was a culture being developed that should a department not achieve its income, or overspend then it absorb that within its budget.

The Cabinet Member for Croydon Renewal stated that upon reflecting on advice of the Interim Director that receiving a period one report was unusual due to volatility that can exist between months one and two, that he suggested that Cabinet review the need for the SCP for the HRA once the period two report was received. Furthermore, the Leader stated that mitigations be put in place for all budget pressures.