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Agenda item

Scrutiny Review of Croydon Council Finances

The Committee is asked to review the Cabinet report along with any further information provided at their meeting and decide whether they wish to make any recommendations.

Minutes:

The Committee received two reports previously considered and approved by the Cabinet on 20 July 2020 which set out proposals for managing the financial uncertainty facing the Council in light of covid-19 expenditure. The Committee also received a presentation delivered by the Cabinet Member for Finance & Resources, Councillor Simon Hall, and the Section 151 Officer, Lisa Taylor, a copy of the presentation can be found on the following link –

https://democracy.croydon.gov.uk/ieListDocuments.aspx?CId=166&MId=2152&Ver=4

During the presentation the following information was noted:-

  • Croydon Council had already been facing a challenging financial position due to underfunding which had been significantly exacerbated by the covid-19 crisis.
  • The Revenue Budget Outturn for 2019-20 had ended with a £186,000 overspend which had been met from general fund reserves.
  • Responding to covid-19 had created a huge increase in expenditure driven by a lot more residents requiring support as well as managing a range of new duties and responsibilities.
  • As a result of the covid-19 crisis the savings originally planned for 2020-21 had been placed on hold. There had also been a significant loss of income from areas such as parking fees and rents.
  • The Council had submitted three returns to MHCLG setting out all additional expenditure, missed savings and lost income resulting from the covid-19 crisis which totalled £85m. To date funding of £23.5m had been received from the Government which left a shortfall of £65.4m to be found.
  • The Administration had been addressing this shortfall by looking at how the Council could deliver the same outcomes for residents with less expenditure. To achieve this a Financial Review Panel had been established which included external members to provide an independent challenge.
  • A staff review was being implemented as staffing represented £174m of costs annually. There was also plans to introduce a capitalisation objective to address one off costs.

Following the presentation the Committee was given opportunity to ask questions about the information provided. The first question concerned the staffing restructure and whether any such restructure had been planned prior to the pandemic. In response, it was advised that a targeted review had been planned to look at how the Council could be more efficient. However, no restructure had been planned on the scale required as a result of the pandemic.

As a follow-up, it questioned whether there were likely to be any decisions taken that would affect service provision and if so whether these should be in the public domain. In response it was highlighted that the staffing review was currently in its consultation phase which meant that no final decisions had yet been made. There may be certain teams affected which would lead to services being delivered differently, but the current plan was to continue to deliver all services.

It was questioned whether it would be possible to deliver the same outcomes with less staff or financial resources. The Cabinet Member confirmed that service outcomes would be maintained, although services may not be delivered in the same way.

The rationale behind the decision to have a 15% target for staff reduction was queried; in particular, whether this was being applied equally across all services or not. It was highlighted that the Chief Executive, as Head of Paid Service, had authority over staffing matters. It had been decided that it was important to strike a balance between minimising the impact upon services and also sending a clear message to MHCLG that the Council was trying to achieve its budget shortfall. At the start of the process the Cabinet had outlined a number of principles which included minimising the impact upon frontline services, minimising compulsory redundancies, consulting with the unions during the process and having a flexible consultation process. It was agreed that a summary of the staff proposals would be shared with the Committee following the meeting.

It was highlighted that the budget originally set by Council in March 2020 included provision for contributing £5m to the general reserve fund, as such it was questioned whether this still achievable. It was confirmed that although it would be challenging to achieve without further funding from MHCLG the capitalisation objective would contribute towards achieving this aim.

In response to a question about whether the budget changes would be brought to a meeting of the Council, it was highlighted that Cabinet would be receiving reports at every meeting on the proposals as they were developed. At present it was forecasted that £20m of savings had been identified from the work carried out to date. An updated Medium Term Financial Strategy was likely to go to the Council in November and would be published in the public domain at the earliest possible time.

Regarding the previously identified savings of £31m in the 2020-21 budget which were no longer achievable, a breakdown of these savings was requested. It was agreed that further information would be provided to the Committee.

An update on the current status of discussions with the Government about the Council’s predicted budget shortfall was requested. It was advised that discussions with the MHCLG had been proceeding on an informal basis, but were now becoming more formal. Croydon was also joining together with other London Councils to lobby the Government on behalf of local government to fill the large hole in council finances created by covid-19 expenditure.

It was confirmed that the key decisions contained in the two Cabinet reports related to recommendations 1.2 and 1.4 in the ‘Responding to the Finance Challenge’ report and recommendations 1.1 to 1.5 in the ‘July Financial Review’ report.

It was highlighted that the Institute for Fiscal Studies had stated that 7% of expenditure within the Croydon Council budget was currently spent on interest and debt repayment. As such, it was questioned whether the reserves were manageable with the escalating debt and how the risks around this were being managed. It was confirmed that the level of reserves held by the Council needed to be increased which was an aim over the next few years, although as previously stated it would be challenging to do so this year without the Government reimbursing the covid-19 related shortfall. It was also confirmed that almost all of the Council’s debt was set at a fixed rate and would not be impacted by any rate increase. Although the Croydon Park Hotel had entered administration, income continued to be received from the majority of Council rents and the income outweighed the interest paid on the Council’s investment properties.

In response to a question about the support available for Council suppliers who may be experiencing difficulty during the crisis, it was advised that a Supplier Relief Programme had been put in place as a result of covid-19 which allowed suppliers to contact the Council to explore options should additional support be needed. It was confirmed that a number of businesses had already benefitted from this programme.

As a follow-up, it was questioned whether the Council was in a position to step in to continue a service should a supplier go under. It was advised that although it would depend on the individual circumstances of the service, as a general principle the Council would look to continue services where possible. As an example it was highlighted that plans were already in place to continue services should a care provider collapse.

It was confirmed that the Corporate Risk Register would be circulated to all Members by the end of July and discussions were underway to bring the register to Cabinet meetings alongside the quarterly finance reports.

In response to a question about how the budget setting process had been strengthened it was confirmed that greater officer ownership had been included starting with the work of the Finance Review Panel. The budget setting process would involve all of the Corporate Leadership Team to help identify cross-departmental savings rather than identifying savings individually. A process was also being put in place to hold managers to account for the delivery of their budget proposals.

It was also confirmed that Cabinet Members had been involved throughout the process with regular joint meetings of the Cabinet and Executive Leadership Team (ELT) being scheduled. There had also been a push to improve the availability of data with monitoring moving from a quarterly to a monthly schedule. It was emphasised that Scrutiny had an important role to play in the process, but given the uncertainty this year it was unlikely to be able to get involved any earlier in the process than the end of 2020. It was suggested that the Medium Term Financial Strategy could come to the Committee prior to Council, should the Committee wish to review it.

It was explained that the budget development process started with meetings between the Cabinet Members and ELT that would lead to a set of proposals that would continue to be refined before going to a meeting of the Cabinet for approval. Processes were being put in place to ensure that key drivers came to Cabinet a few months prior to the actual budget.

To ensure that the savings and service reconfigurations identified were delivered programme management methodology was being used with ELT reviewing progress made on a weekly basis and Political Cabinet providing regular oversight. A fixed term resource had been allocated to the Finance department to enable the production of data to identify quickly when anything went off track, allowing action to be quickly taken to address as needed. As well as savings, options to maximise income including regeneration opportunities were being considered.

It was confirmed that there was no plan to sell assets as local government account rules prevented the proceeds from the sale of assets being allocated to the general fund. 

In response to a question about continuing to allocate new revenue funding it was advised that this would only be the case where the service involved could not stop. Discretionary spending had been halted and brought under greater control.

At the conclusion of the item, the Chair thanked the Cabinet Member and the Section 151 Officer for their attendance at the meeting and their engagement with the questions of the Committee. The Chair highlighted that as the two Cabinet reports included key decisions it was within the remit of the Committee to exercise the call-in function if they were not satisfied with the information provided.

Information Requests

The Scrutiny & Overview Committee requested to be provided with the following information:-

  • A summary of the staffing proposals arising from the Staffing Review
  • A breakdown of £31m savings outline in the 2020-21 Budget.

Conclusions

Following the discussion of this item the Committee reached the following conclusions:-

  • There was much to commend in the reports, particularly the improved budget monitoring processes, strengthening the Finance department and additional support for Cabinet Members in their roles. As such the Committee was reasonably reassured about the direction of travel and key principles informing the process.
  • The Committee was surprised to learn that the savings identified in the process so far amounted to £20m which left a significant shortfall still to be found.
  • Although there had been an effort to provide information and it was clear that officers were working hard at a fast pace, it was concluded that there was not the level of detail available to allow greater scrutiny.
  • The Committee concluded they required more information to be reassured about the judgements being made on the savings proposed and as such agreed that the key decisions contained in the two reports would be called-in. The call-in form would outline the additional information required by the Committee to provide the reassurance needed.

Supporting documents: