Agenda item

To consider the Budget report on the Council’s financial position at the end of Quarter 1 of 2025/26.

The report included with this item was first published as part of the agenda papers for the Cabinet meeting on 16^th September.

In opening the discussion on this item, Cllr White noted that the report in the agenda pack was on the financial position of the Council at the end of the first quarter of 2025/26 and had also been discussed at Cabinet earlier in the week. He added that the Scrutiny Panels would also be considering the report at their next meetings, including through the scrutiny of the relevant Cabinet Members and Corporate Directors.

The report was then introduced by Cllr Dana Carlin, Cabinet Member for Finance & Corporate Services and Taryn Eves, Director of Finance. Cllr Carlin explained that the Budget for 2025/26 had been set in March 2025 and had been increased based on the anticipated increased costs in various service areas. Unfortunately, the projections at the end of Quarter 1 (which estimated the position at the end of the financial year) showed that the increased funding had been outstripped by rising costs, particularly in adult social care and temporary accommodation. In addition, it was proving difficult to realise all of the ambitious savings proposals as there had been various savings and cuts over the past 15 years and so the newer proposals were typically ones that were more difficult to achieve. However, around 70% of savings proposals were currently on target.

Cllr Carlin noted that the pressure on adult social care was increasing as the number of people still requiring care packages continued to rise. With regards to temporary accommodation, Haringey was generally very effective in preventing people from becoming statutorily homeless which meant that the numbers hadn’t risen as much as in some other Boroughs. However, the shortage of suitable private accommodation meant that landlords were charging more and this was contributing to the overspend. Around 80% of the Council budget was used to provide statutory services.

Cllr Carlin said that the Council was doing everything it could to reduce costs as part of its financial recovery plan, including the use of spending control panels of senior directors to consider all non-essential spending of £1,000 or more. Non-essential recruitment was also limited where possible including by holding vacancies for longer and managers were looking at how to streamline procurement projects to use finances more efficiently. There was therefore some optimism that the overspend could be brought down.

Cllr Carlin and Taryn Eves then responded to questions from the Committee:

• Cllr White reiterated the high proportion of the Council budget that was for the delivery of statutory services and quoted paragraph 1.4 of the report which referred to a forecast overspend of £34.1m and the part mitigation of this through the use of £6.1m of uncommitted corporate contingency. He commented that this was only a short-term mitigation which would not be available in future years and queried how feasible it would be to resolve the structural financial issues. Cllr Carlin, responded that, while 80% of the budget was dedicated to statutory demand-led services, it was still possible to achieve reductions and streamlining within this. There needed to be a whole-Council approach towards raising money, an example of which was the new advertising banner on River Park House. The conversations with the government over the Fair Funding review were also an important element of moving towards a more sustainable financial situation. Taryn Eves emphasised that borrowing needed to be a last resort and that efforts were needed to reduce the reliance on Exceptional Financial Support (EFS) as far as possible. Referring to Table 2 in the report, she noted that over £9m of the proposed savings were projected not to be delivered and so there needed to be a strong focus on turning that around in the remaining months of the year. The reserves position was that there was still just under £20m remaining in the services reserve and the unspent grants reserve and so this was being examined to bring out uncommitted funds to reduce the need for borrowing.
• Cllr Gunes asked for reassurances that the budget overspend would not continue to rise in Quarters 2 & 3. Cllr Carlin responded that the current projections were based on a series of assumptions on the financial situation at the end of the year. Taryn Eves added that there were no guarantees that the overspend would not worsen as there were factors beyond the Council’s control, such as the nature of the winter period which could increase demand on adult social care services. However, scenario planning was carried out to estimate a range of possible outcomes which were kept under review. Levels of demand and the cost of placements were also monitored on a monthly basis. There were a range of factors and risks that could impact on the figures by the end of the financial year and these were set out in the report.
• Cllr Connor requested clarification on the capital financing costs set out in paragraph 6.18 of the report. Taryn Eves confirmed that the costs were based on £10m of EFS borrowing in 2024/25 added to the assumed £37m of EFS borrowing in 2025/26 which it was assumed would be repaid over a 20-year period. However, were circumstances to change, there would be an opportunity to repay this earlier. In addition, while it was necessary to budget to borrow, the borrowing would not actually take place until other options for reducing the budget gap had been explored.
• Referring to paragraph 6.12 of the report, Cllr Connor noted that £6.8m of reductions over three years was expected through investment into digital tools and services. However, some savings had already been carried over from the previous year and were red rated on the RAG KPIs so Cllr Connor queried how realistically these savings could be achieved. Taryn Eves explained that the savings associated with digital had been allocated out to the individual directorates so there were elements of these savings in each of the portfolios. However, the targets were then stretched and the additional amount was held corporately. Digital provided opportunities to do things differently, improve processes and save money. While there had been a slight delay, which was reflected in the RAG ratings, there had been a significant restructure of the digital services team which took effect from February 2025 and the work had now progressed. This was being managed through the Service Modernisation Board which prioritised projects that would have the largest impact. She acknowledged that the full amount of savings was not expected to be delivered in 2025/26 but, as the programme had only recently started, there was more confidence that savings could be delivered over a longer period.
• Cllr Small commented that, while he was assured about the spending constraints that were being put in place, he was less assured about the assumptions that were being made in terms of budget setting and that they were realistic. He also asked for assurances that services were not implementing savings that could cost the Council more in the long-term. Cllr Carlin reiterated that the 2025/26 budget was set at a specific point in time (November 2024) based on the best assumptions and forecasting available at the time. Some costs had been worse than anticipated, with rising cases in Adult Social Care, higher costs faced by suppliers and higher rents charged by landlords. Taryn Eves added that, while assumptions would never be 100% correct, the Council was getting better at forecasting through improvements in data, scenario planning and identifying pressures. However, the financial projections were also based on a judgment call on the levels of corporate contingency available and on delivering the savings proposals. She added that, as well as monitoring finances, the changes were also being monitored which allowed an analysis of granular detail which looked at the long-term impact.
• Asked by Cllr Small about the Council’s ability to finance the capital programme, Taryn Eves referred to Table 3 in the report which showed that the General Fund capital budget had been adjusted downwards by £28m for 2025/26 from £212m to £184m. This was due to reprofiling £32m by pushing this out to future years, offset by £4m of additional grant coming in. The table now showed that, after Quarter 1, the projected overall spend was around £178m which was a good position to be in and a positive level of investment. However, there was always a risk in how quickly capital schemes could be delivered, with an average of around £120m being delivered in previous years. The next annual review of the capital programme would involve challenges on whether they were essential and on minimising the new levels of borrowing. There was also now new capital governance in place with business cases and a review of factors such as inflation in order to ensure that the capital programme was affordable and deliverable.
• Asked by Cllr Small about the outcomes of the Fair Funding review, Taryn Eves explained that the Council’s response to the review was quite technical but that there were many different factors and formulas to consider. The modelling showed an overall impact of a £40m loss of government grants if all proposals went ahead, but there was uncertainty about transitional arrangements. The key drivers that were important included the changes to the children’s formula and the exclusion of housing costs from the deprivation calculation. While adjustments to these could improve the situation for Haringey, they would not be sufficient to solve the current financial problems. Cllr Carlin added that Haringey’s underlying financial problems were not being caused by the Fair Funding review and it was also not possible to cut or borrow our way out of the situation, so it would instead be necessary to look at how the Council was operating and how to delivery services differently. The ‘floor’ proposed through the Fair Funding review would ensure that no local authority received less money over the next three years, but inflation and cost pressures would increase the financial pressures in real terms.
• Cllr Lawton noted that one saving titled ‘income generation’ was not being delivered due to a shortage in resources to drive this forward. Cllr Lawton commented that this was an ongoing issue across the Council and that it often took some time to assemble the resources required to carry out changes. She added that some areas of the Council already had great practice and expertise while other areas did not have that resource and there were the areas where the Council needed to improve. It was also important not to lose expertise through cuts and that change then costing more money in the long-term. Taryn Eves added that income generation was an important tool in helping to protect services. She noted that a team in her area worked on change and transformation and there were ongoing conversations about how to direct that resource to the areas where it would have the largest impact.
• Referring to paragraph 6.24 of the report, Cllr Lawton noted that 33 schools were in deficit, even after some closures of schools with the worst deficits and asked if this was a systemic problem in the school system. Taryn Eves commented that this area hadn’t been discussed in detail enough given that it represented a significant financial risk. She noted that there would be an expanded section on schools finance in the Quarter 2 finance update and that it may also be useful for the Children & Young People’s Scrutiny Panel to scrutinise this at a Panel meeting with the relevant Directors and Cabinet Member. (ACTION)