Agenda item

To consider the position at Quarter 3 (Period 9) of the 2024/25 financial year including General Fund (GF) Revenue, Capital, Housing Revenue Account (HRA) and Dedicated Schools Grant (DSG) budgets. The report focuses on significant budget variances including those arising from the forecast non-achievement of approved Medium Term Financial Strategy (MTFS) savings. 

To follow.

Cllr Dana Carlin, Cabinet Member for Finance and Corporate Services, introduced the report on the finance update for Quarter 3 noting that there wasn’t a substantial difference to the situation for Quarter 2, although there had been a slight deterioration in terms of the demand for and the cost of adult social care services and temporary accommodation. The Council was continuing with the measures previously put in place to reduce non-essential spending. Additional funds had been added to the Adult Social Care budget for 2024/25 but, due to the increase in demand, this money had not been sufficient. In addition, some savings had not been achieved over the course of the year and the detail of this was set out in the agenda papers.

Cllr Carlin, Taryn Eves, Director of Finance, other Council officers and Cabinet Members then responded to questions from the Committee:

• Cllr White commented that there appeared to have been some success in a number of areas but that the efforts to improve the financial situation had been more than offset by further deterioration in the adult social care position. Cllr Carlin responded that almost all local authorities had experienced increased pressures in Adult services, Children’s services and temporary accommodation. Taryn Eves explained that the position in the report was from December 2024 and that the impact of some of the spending controls might not be seen until Quarter 4 and would then have the biggest impact in the 2025/26 financial year as they became fully embedded. However, she added that there were still some areas of risk, including a rise in the figures for some demand-led services and for bad debt provision. The position set out in the report was before the use of corporate contingency and it was highly likely that it would be necessary to use Exceptional Financial Support from the government to balance the position for 2024/25.
• Cllr White commented that there could be further pressures caused by the increased global financial instability. Taryn Eves responded that the rates of inflation, interest rates and the cost of services were particularly relevant, particularly in relation to construction costs which could impact on the capital programme.
• Asked by Cllr White how much of the Exceptional Financial Support was likely to be needed, Taryn Eves said that it was not possible to put a precise figure on this until the outturn report had been produced, but acknowledged that it was highly likely that some Exceptional Financial Support would be required for 2024/25.
• Cllr Gunes requested an explanation of why a younger cohort of people required support from adult social care services. Cllr Lucia das Neves, Cabinet Member for Health, Social Care and Wellbeing, explained that a higher incidence of conditions such as autistic spectrum disorders had been seen in the Borough for some time and that some service development, such as the Autism Hub, had been in response to this trend. Other associated health conditions could add to complexity with recent estimates that there were 20% more people with two or more long-term health conditions in the Borough. She added that poverty and social exclusion could also impact on health and well-being. Sara Sutton, Corporate Director for Adults, Housing & Health, added that there had been an unprecedented increase in one or two areas, including physical disabilities in the lower age cohort, with a spike over the past three quarters. However, it was not currently anticipated that this would be a long-term trend.
• Cllr Gunes expressed concerns about the long-term impact of using Exceptional Financial Support, which would incur £72k of borrowing costs per year for every £1m of funds drawn down according to the report. Taryn Eves explained that Exceptional Financial Support could be funded by capital receipts or borrowing with an allocation in the revenue budget for a “minimum revenue provision”. The additional borrowing costs would therefore add to the budget gap for future years which was why it was important to limit the drawdown for 2024/25 and 2025/26 as much as possible.
• Cllr Connor asked whether figures could be provided on the additional borrowing costs of Exceptional Financial Support drawdown over 20 years. Taryn Eves responded that she could not provide a precise figure but that, with around £72k of borrowing costs per year for every £1m of funds, this would increase the budget gap in subsequent years. The working assumption for 2025/26 was that £27m would be funded through borrowing and £10m from capital receipts and this was factored into the five-year forecast in the Medium-Term Financial Strategy (MTFS).
• Asked by Cllr Connor for clarification on the reserve balance, Taryn Eves explained that this would be set out in the outturn report and that it involved reserves held for risks and uncertainties. These included the Services Reserve and the Unspent Grants Reserve which totalled £22m and would be reviewed to establish whether older balances were no longer required and could be released to reduce the 2024/25 overspend.
• Referring to paragraph 1.4 of the report, Cllr Connor noted the increased demand for services from clients aged 50 to 64 presenting with physical disability and mental health needs. She queried the reasons for this and how their needs were being met prior to that. Cllr das Neves commented that there was growth in demand and complexity in various age groups, so it was possible that the Council may not have been supporting some of these people prior to that. There were also challenges around healthy life expectancy which could mean that people were presenting in earlier age brackets than expected.
• Cllr Connor requested further details on the reasons for the increased acquisition costs for the capital schemes relating to Wards Corner and High Road West. Taryn Eves responded that there had been a pragmatic consideration of which capital schemes could continue and the changes from 2025/26 onwards reflected what was felt to be the most realistic timescale for delivery. This would be reviewed again for 2026/27 and there was a new capital board in place to review this work.
• Cllr Buxton queried the changes made to the budget, such as through in-year savings, without the approval of Full Council or Scrutiny. Taryn Eves responded that savings proposals were agreed each year when setting the Budget, but that spending could be reduced in-year in relation to non-essential spends that did not impact on service delivery. This could include, for example, printing costs or agency spend, and were referred to in the papers as management actions.
• Cllr Worrell queried the implications of using Exceptional Financial Support in 2024/25 for the Budget in 2025/26 and what options would remain in circumstances where even Exceptional Financial Support was not sufficient to balance the Budget. Cllr Carlin commented that there was some discussion nationally about what Exceptional Financial Support was originally intended to be used for and that a large number of local authorities now required this support due to the current financial pressures. It was recognised that Haringey was in this situation due to demand-led pressures and not because it had been profligate with spending. She added that the Leader of the Council had been in correspondence with the Minister of State for Local Government who had responded to reassure the Council that funding from central Government would be based on factors including deprivation and ability to raise income through Council Tax. Taryn Eves explained that the ‘in-principle’ agreement with the Government on Exceptional Financial Support was for £28m in 2024/25 and £37m in 2025/26 but that the amount of this that would be needed for drawdown would not be finalised until the final outturn position had been established. In circumstances where this was not sufficient to balance the Budget, there would need to be a further conversation with the Government. The Council aimed to improve forecasting which would assist with the ongoing conversations with the Government.
• Cllr Worrell requested clarification on how the savings delivery for 2024/25 impacted on savings targets for 2025/26. Taryn Eves clarified that the 2025/26 Budget did include some write-off of undelivered savings from 2024/25 which had been clearly documented in the Budget report. An assumption had been made in relation to the Amber savings of £3.2m set out in Table 2 of the report that these would be delivered in full in 2025/26 so it would be necessary to keep on close eye on this. It was recognised that a significant level of risk was being carried and so the corporate contingency for 2025/26 had been increased to manage this.
• Cllr White queried whether any further improvements to the position for Children’s Services and Housing was anticipated in Quarter 4. Cllr Zena Brabazon, Cabinet Member for Children, Schools & Families, said that figures for Quarter 4 were not yet available. However, she added that the number of children in care was down at 316, but the market costs from private providers were rising and the complexity of cases was also increasing. She added that rising costs in this area was a national issue. Ann Graham, Corporate Director of Children’s Services, commented that she was not anticipating the financial position to worsen in Quarter 4, although there would be an overall overspend as set out in the report. On Housing Demand, Sara Sutton reported that the position had been relatively stable in Quarter 3 and it was anticipated that it would remain stable in Quarter 4. However, the market remained volatile in terms of costs temporary accommodation. Jahedur Rahman, Director of Housing, added that the housing demand acquisition programme was expected to deliver a saving but, while properties had been acquired, there was a slight lag between doing so and people moving in. Therefore, a significant proportion of the savings would be delivered in 2025/26 rather than 2024/25.
• Asked by Cllr White about bad debt provision and Housing Benefit overpayments, Taryn Eves said that the forecast had been fairly consistent throughout the year and there remained an overspend for 2024/25. There had been some detailed work on this, including the recovery of overpayments.
• Cllr Connor referred to the savings for Adults, Health & Communities set out from page 48 of the agenda pack and noted that resource constraints within the commissioning teams appeared to be causing delays to these savings. Sara Sutton explained that, on transitions, additional budget had been approved for the commissioning team for 2025/26 and recruitment would follow which would provide a significant increase in resources to deliver savings profiled over the next few years. She also clarified that the savings for Adults, Health & Communities also now included housing demand due to the recent reorganisation of Directorates in the Council. On transitions, Cllr Brabazon added that the red rating could be slightly misleading because this was a new service and the staff team had needed to be assembled in the first year so there had been an enormous amount of work to get this underway. Ann Graham added that, with hindsight, the business case could have been structured differently with more lead-in time before the savings could be achieved. She noted that the project and the recruitment did not begin until April 2024 but that around half the projected savings had still been achieved. The reprofiled targets would take into account the unachieved savings.
• Cllr Connor requested clarification on the source of funding for the new capital scheme “Tottenham Parks”, referred to in paragraph 3.8 of the report. Cllr Carlin explained that, through a reorganisation of costs, it had been possible to find around £1.8m from the Down Lane Park budget to put into other Tottenham parks that hadn’t received investment for some considerable time. She emphasised that there would still be substantial investment in Down Lane Park.
• Cllr Connor referred to Strategic Procurement, which involved £600m spent on contracts according to paragraph 11.5 of the report, and requested further details of how efficiency was being achieved in this area. Taryn Eves explained that the majority of Council spending was on contracts and staffing so it was necessary to tighten contract spend. The £600m figure was approximately £450m on revenue and £150 on capital and the aim from 2025/26 onwards was to save £3m per year. A new Procurement Board was in place to support this process by examining all contracts at an early stage. Cllr Connor suggested that it would be useful for key papers, for example from Audit Committee on significant items on procurement, to be flagged to the Committee in future. (ACTION)
• Cllr Connor proposed that the Adults section of the finance information in the report should be added as an agenda item to the next meeting of the Adults & Health Scrutiny Panel in order to scrutinise this in greater detail. (ACTION)