Agenda item

Cllr Carlin introduced the Q4 report and provisional outturn for 2023- 2024.

·         Cllr Carlin noted that throughout the year her department had predicted a considerable overspend in the corporate budget. This was due to the increased cost of adult social care, children’s social care and temporary accommodation. Also, there was additional spend that came in late in the year, after the budget setting process. Consequently, these factors combined to create a £19million overspend in the corporate budget.

·         The overspend was covered from reserves at the end of the year, however the council used more than anticipated. The predicted overspend earlier in the year was £11 million, however £19 million was the final total.

·         Cllr Carlin assured the committee that steps were being taken to ensure that directorates were delivering savings and processes were in place so that directorates could not overspend without detailing how the overspend could be reduced.

·         She also stated that the overspend had been predicted earlier in the year, so steps were taken to build in additional funding in the budget setting process last year. However, this means that there will be an additional £5 million gap this year.

The floor was open to questions from the Committee.

• Cllr White pointed out that he found this report very concerning. The additional spend had not been predicted accurately, which meant that reserves were significantly reduced. Their ongoing use will not be sustainable. He pointed out that the pressures that had led to the overspend in adult and children social care and temporary accommodation will continue. Although it was good to hear that there was a plan to recoup the reserves, he wanted to know how the council could accurately predict the demand-led service budgets considering that demand is growing greater every year and our reserves are dwindling.  Cllr Carlin responded that Haringey was not in an exceptional position. The government had provided 29 other boroughs with funds in exchange for the selling off of capital. Cllr Carlin added that in terms of demand-led services as an Outer London borough our demand is high, however it also means that our reserves are lower.  Cllr Carlin referred to Taryn Eves regarding the detailed plans to be put in place.

• Ms Eves then outlined that Haringey’s reserves are lower than other boroughs especially when looking at net spend.  She also stated that we would be facing significant uncertainty in the coming years, so her department had been planning for the worst-case scenario and no increase in government funding for 2025- 2026.  Over the next five years her focus was to get spending down, and to top-up reserves with small amounts to ensure sustainability in the future. More understanding was needed as to the risks that were faced when setting the budget and more scrutiny in understanding whether the pressures were ‘one-offs’ or reoccurring. She stated that she will be able to update the Committee in the autumn with regards to the progress being made in this and the work being done at department level to reduce spend and increase income.  ACTION

• She warned that it may not be possible in the short term to add to the reserves, however she felt that she could plan to not have to draw from the reserves to balance the budget. Also, longer term plans could be made to top up the reserves slowly.  She stated that there was a particular importance in doing this work now, as time can be given to mitigate issues that occur later down the line.

• Cllr White then asked about the total amount of reserves before the £19 million drawdown. He also asked whether the amount in reserves was fixed throughout the year. Ms. Eves stated that she would provide the Committee with the total amount of reserves prior to Q3 in the minutes. ACTION  

Response from Ms. Eves for the minutes: £97.234m Total General Fund Reserves at 31.3.2023. This compares to £67.449m at 31.3.2024.

• Ms. Eves then stated that there would be a review of reserves over the summer. She stated that it can be quite misleading to talk about the total amount of reserves. She was keen to measure the total amount of reserves that had already been committed. She also stated that a five-year forecast of reserves was necessary – making sure that future commitments were considered. She felt it was better to think of the reserves the council had, in terms of uncommitted funds.

• Cllr Gunes highlighted that Haringey was in a worse position than most local authorities in terms of reserves, however she appreciated that the new financial plan was trying to identify where the problems lay and solve it in an open and transparent way. She enquired about the kind of work that needed to be done in order to top up the reserves and asked Ms Eves whether she was confident that this could be achieved. Ms Eves replied that it was important not to look at the reserves in isolation but to view it as part of the medium-term financial strategy. She emphasised that the focus was to look at what was driving pressures on the budget and try to predict how this would affect the reserves for the coming years. In addition to the work on the budget reserves, and potential income that could occur- she emphasised that the council was looking at everything that was being spent and evaluating it in terms of efficiency. The work was being done over the summer and a clearer view would be brought to Committee in time for the November meeting.

• Cllr Connor commented that this amount that had been taken out had been a shock and she had not seen this high amount in years. She enquired whether the overall amount of savings that was required for 2024- 2025 was £20 million. She questioned whether this was realistic given the unanticipated overspent of this year. Ms. Eves responded that although Haringey would aim for 100% of savings forecast,  it maybe  that 77% or so will be in the higher end of expectations. Work was being done to look at the savings that haven’t been delivered for 2023 -2024 and ask whether the unachieved target was a timing issue or whether it was something deeper. She assured the Committee that quality assurance was being carried out by her team. She also stated that the estimated budget gap was assuming that all the £20 million savings would be delivered. She was looking at ways in which her team could monitor directorate savings in terms of the green, amber, and red scheme. She also gave assurance that she wouldn’t be building savings into the budget unless she was sure of delivery. Ms. Eves reiterated that there will be a review in autumn that will make things clearer.

• Cllr Connor then questioned whether Haringey’s position was worse than shown-given that an external audit of the accounts had not happened in a few years and was due to happen soon.  Ms. Eves agreed that this was a considerable risk. She explained that a new external auditor had been engaged with a view to reporting to the Audit Committee in autumn. Work had started now. She explained that when a new auditor was engaged – more scrutiny was given in all areas of accounts, including reserves and transactions. She assured the committee that work would be done in conjunction with the auditors and pointed out that all other local authorities were in the same position with regard to un-audited accounts.

• Cllr Worrell enquired about the change in policy on flexible capital receipts and what affect that would have on the council. Ms. Eves explained that capital receipts were used to fund capital expenditure. The flexibility on the use of these receipts allowed the council to fund revenue expenditure related to transformation.  However, this is due to end in 2025 and there is currently a government consultation being carried out about extending its use to 2030. The government had proposed that this was a way for local councils to address pressures and overspends, so hopefully this was an indication that it may be extended. She added that planning would be done to address the scenario if the policy should end in 2025.

• Discussion then turned to expenditure. Cllr Worrell wanted an explanation of why £5 million had been taken out of the HRA budget in order for the council to make a surplus of £5 million. Ms. Eves explained that the accounting of the HRA was slightly different to the general funding. It is completely ringfenced as the income that the council generates must fully fund the expenditure. Therefore, a surplus is always budgeted for. She explained that the report acknowledges that because of the legal costs associated with the disrepairs, the surplus was not as high, and the council had to draw down on reserves. The surplus for the HRA is always budgeted for because there's also a contribution towards the capital programme. She emphasised the importance of finding out where in the overspend there were ‘one -off’ or reoccurring costs, and also tracking what has turned from a liability to a provision.

• Cllr Worrell asked whether they could have an explanation as to the overspend on leisure. As she understood it this was partly as a result of New River Leisure Centre not making the required income. She enquired whether it boded well for council finances now that leisure services were coming in house. Ms. Eves then requested to reply to the Committee once she had spoken to her team about the risks in that area. ACTION

• Cllr White asked Ms Eves to clarify further the Parking and Highways budget stated in the report. He explained that this budget is overspent by £880,000, but the Q3 position was that it was under budget by £880,000. Ms Eves wanted to clarify that part of end of year accounts was to look at bad debt provision. She had two areas that were of particular concern – and that was Parking and Adult Social Care. Ms Eves stated that she would investigate and give a full response for the minutes. ACTION. 

Response from Ms Eves for minutes:At Q3 the forecast underspend of £883k within Parking & Highways was mainly attributable to lower concessionary travel costs, lower staffing costs within this area and lower costs on reactive works than budgeted for. At Q4 (Outturn), the overspend of £880k was mainly attributable to the Bad Debt Provision (BDP) required on Penalty Notice Charge (PCN) income which is difficult to forecast accurately until the end of the year.  Additionally, there were salary costs in the business hub not covered by Flexible Use of Capital Receipts as previously assumed and the budget provided for to cover the impact of increased utility costs was kept centrally rather than allocated to each Directorate.  This meant that the street lighting budgets were shown as overspent but offset by a corresponding under spend in the corporate budget area.

• Cllr White sought clarification from Ms Eves around the budgeting profile error that had led to an overspend in Operational Facilities Management as listed in the report. Ms Eves asked to return a response to the Committee in the form of the separate note or minutes. ACTION

Response from Ms Eves for the minutes: This was incorrectly described as a budget ‘profiling’ issue.  The cost pressure leading to the overspend relates to security costs and staffing costs. The service advises that a full review of the future levels of security required and associated costs will be undertaken with a view to reduce costs and avoid the 2023/24 pressure continuing.

• Discussion then turned to Housing Benefit. Cllr White wanted clarification on why there was an overspend in light of the fact that Housing Benefit was paid by central government. Ms Eves explained that Housing Benefit should be thought of in terms of a grant received each year from central government that Haringey administers to its residents. She stated that her team had discovered that historically there had been some overpayments which had meant that the council have had to pay this back to government. She explained that this was only discovered in Q3 and that her team was still carrying out work to find out how much the overpayment actually was.

• Cllr White then reiterated that in the report there was a disparity in budget between Q1 and Q3 in Children’s Services due to an integrity of the data. He asked Ms Eves to explain why this was. Ms Eves explained that both Children’s and Adults Social Services had moved from Mosaic to Liquid Logic IT system. As part of the project there had been some data cleansing exercises – and that had thrown up some issues that had to be recorded in Q3 that may have happened earlier in Q1 one.

• Cllr White then discussed the Planning Building Standards and Sustainability budget and indicated that it looked like there was some kind of accounting error. Ms Eves said that she would look into it and detail a response either in the minutes or in a separate note to the Committee ACTION.

Response from Ms Eves for the minutes: The accounting error was that in 2022/23 financial year, income of £161k due to Schools was inadvertently allocated to Planning Building Standards and Sustainability budgets.  This was identified but the reversal of the credit did not take place until the following year (2023/24).  This was a one-off and has no on-going implication for either service area.

• Cllr Diakides then asked what the final figure for the overspend was and the reasons behind the massive differences in Q1 and Q4 and subsequent overspend. He asked whether it was down to bad financial planning or management that had led to this situation. Ms Eves pointed Cllr Diakides to page 17 of the report and stipulated that the final figure was indicated in a table presented together with the HRA ring-fenced budget. She suggested that the two budgets were sometimes presented together, which could lead to confusion as to the overall figure. She agreed that there was a strong need to get budget profiling right and review the capital programme due to high levels of slippage. She said also reducing agency staff would be a priority in the coming months.

Cllr Diakides then asked whether the Cabinet would be risking again signing a budget that would be millions outside what was agreed or whether financial management should be looked at to avoid this. Ms. Eves replied that there is significant work underway to understand where the overspend happened and why, as well as the assumptions that were made during the budget setting process. She stated that assumptions would be constantly under review until the budget would be locked down in December. As this work was occurring early in the year, mitigating actions could be taken by her team to rectify the situation.