Decision:
Cabinet RESOLVED;
2.1 to note the General Fund revenue budget outturn is forecast to overspend at financial year end by £15.6m at Period 2, after the budgeted utilisation of £38m capitalisation directions requested from the Ministry of Housing, Communities and Local Government (MHCLG), utilisation of the £5.0m risk contingency budget and utilisation of £13.0m corporate earmarked reserves.
2.2 to note that all service directorates have been asked to reduce their net expenditure so that the annual budget can be balanced at the end of the year. It should not be underestimated what a challenge this will be against the background of increased demand pressures which are continuing to build across local government and increased market prices. Forecast overspend pressures are also demonstrated in the Month 2 and Quarter 1 reports published by other London councils. However, the Council will still strive to bring its 2024-25 budget into balance including through the in-year Financial Recovery Plan as set out from para 4.8.
2.3 to note the progress in Medium Term Financial Strategy (MTFS) savings achievement of £20.8m (75.1%) against the total savings target of £27.7m as set out in paragraph 4.118.
2.4 to note the work that has commenced on the Council’s Transformation Programme as set out from paragraph 4.115.
2.5 to note the Housing Revenue Account (HRA) revenue budget outturn is forecast to overspend by £2.0m.
2.6 to approve the net budget increase in 2024-25 General Fund capital programme budgets resulting from 2023-24 net slippage of £19.7m.
2.7 to note the General Fund capital programme 2024-25 forecast underspend of £1.0m against the revised capital budget of £110.0m.
2.8 to note the HRA capital programme 2024-25 forecast underspend of £4.9m against the capital budget of £57.2m.
2.9 to note the Council’s historic borrowing and subsequent debt burden continues to be critical to the non-sustainability of the Council’s revenue budget. Dialogue with MHCLG continues around options of further financial support from Government in regard to the level of structural indebtedness to ensure the Council can deliver sustainable Local Government services.
2.10 to note that the Council continues to operate Spend Control Panels to ensure that tight financial control and assurance oversight are maintained.
2.11 to note that current forecasts are based on the best available information at the time and will be subject to review and change during the financial year.
Minutes:
The Executive Mayor introduced the Period 2 and Period 3 Financial Performance Monitoring reports and advised they would be taken together. Croydon's financial challenges due to the council's £1.4 billion debt burden costing £62 million annually and the significant challenges in key areas of homelessness, children's social care and transport for children with special educational needs were noted. Councils across London faced similar issues due rising costs and increasing demand. Intervention strategies to address Croydon's projected overspend had started to show positive results and specific issues were being tackled, including an in-depth review of children's expenditure, tighter spend control mechanisms and the development of recovery plans for homelessness, children’s placements and SEND transport.
Cabinet Member for Finance, Councillor Jason Cummings confirmed the council was forecasting an overspend of £23.9 million at Period 3 due to demand led costs. A whole council approach had been adopted to address the overspend and any additional savings available via the council's transformation work were being explored.
Section 151 Officer and Corporate Director of Resources, Jane West reassured Cabinet that the council did not anticipate issuing a Section 114 Notice and noted the £27.5 million currently held in reserves, which the council was working to ensure it did not need to utilise.
Leader of the Opposition, Councillor Stuart King noted their concern regarding Croydon's financial position so early in the financial year and advised of their disappointment that information had not been shared with Scrutiny and Overview Committee or opposition councillors sooner. Concerns were raised regarding the departmental overspends and subsequent corporate budget adjustments, issues which had been highlighted in the Report in the Public Interest (RIPI) in 2020.
Councillor King questioned the nature of the £13 million earmarked reserves deployed, whether anymore were available and asked the Section 151 Officer to advise if the council could close the £23.9 million overspend gap and how likely the need to utilise general fund reserves was.
Cabinet Member for Finance, Jason Cummings confirmed the council did not wish to use reserves however they were there if needed, for that purpose. It was the intention to close the gap within the financial year and therefore not use general fund reserves.
Section 151 Officer, Jane West explained the concerns raised within the RIPI report had been regarding a lack of transparency around adjustments and budget management. Budget monitoring reports were now published monthly and there was transparency around any adjustments. Due to the scale of the departmental overspends, corporate adjustments had to be made and there was reasonable confidence that the budget could be brought back to a balanced position. The Corporate Management Team was focussed on achieving this without utilising the council's £27.5 million reserves.
Deputy Section 151 Officer, Allister Bannin advised the council's reserves had been £74 million, less the £13 million, the current total was £61 million. This was separate to individual service's earmarked reserves and to the general fund reserves of £27.5 million. The £13 million had been drawn from reserves for demographic demand and market increases. It was noted that the council's reserve balances were subject to the completion of audited Financial Statements for years 2019/20 onwards.
Deputy Leader of the Opposition, Councillor Callton Young requested further information regarding Croydon's overspend position in relation to other local authorities noting the report cited unprecedented overspend of £600 million as reported by London Councils. It was also queried how the 2023/24 24% increase in children's social care cases had been factored into the 2024/25 budget setting.
The Executive Mayor responded that the increases in demand were an issue across London and the council was working to mitigate the situation.
Cabinet Member for Finance, Jason Cummings advised there had been a step change in the anticipated rates of demand across several other London local authorities and regarding children's social care cases, all known increases had been included within the budget modelling.
Section 151 Officer, Jane West clarified the £600 million overspend estimate reported by London Councils was for 2024/25 and provided examples of other London local authorities overspends: Newham £46 million, Barnet £38 million, Redbridge £34 million, Bromley £18 million.
Cabinet RESOLVED;
2.1 to note the General Fund revenue budget outturn is forecast to overspend at financial year end by £15.6m at Period 2, after the budgeted utilisation of £38m capitalisation directions requested from the Ministry of Housing, Communities and Local Government (MHCLG), utilisation of the £5.0m risk contingency budget and utilisation of £13.0m corporate earmarked reserves.
2.2 to note that all service directorates have been asked to reduce their net expenditure so that the annual budget can be balanced at the end of the year. It should not be underestimated what a challenge this will be against the background of increased demand pressures which are continuing to build across local government and increased market prices. Forecast overspend pressures are also demonstrated in the Month 2 and Quarter 1 reports published by other London councils. However, the Council will still strive to bring its 2024-25 budget into balance including through the in-year Financial Recovery Plan as set out from para 4.8.
2.3 to note the progress in Medium Term Financial Strategy (MTFS) savings achievement of £20.8m (75.1%) against the total savings target of £27.7m as set out in paragraph 4.118.
2.4 to note the work that has commenced on the Council’s Transformation Programme as set out from paragraph 4.115.
2.5 to note the Housing Revenue Account (HRA) revenue budget outturn is forecast to overspend by £2.0m.
2.6 to approve the net budget increase in 2024-25 General Fund capital programme budgets resulting from 2023-24 net slippage of £19.7m.
2.7 to note the General Fund capital programme 2024-25 forecast underspend of £1.0m against the revised capital budget of £110.0m.
2.8 to note the HRA capital programme 2024-25 forecast underspend of £4.9m against the capital budget of £57.2m.
2.9 to note the Council’s historic borrowing and subsequent debt burden continues to be critical to the non-sustainability of the Council’s revenue budget. Dialogue with MHCLG continues around options of further financial support from Government in regard to the level of structural indebtedness to ensure the Council can deliver sustainable Local Government services.
2.10 to note that the Council continues to operate Spend Control Panels to ensure that tight financial control and assurance oversight are maintained.
2.11 to note that current forecasts are based on the best available information at the time and will be subject to review and change during the financial year.
Supporting documents: