Agenda item

To consider the Budget report on the Council’s financial position at the end of Quarter 3 of 2025/26.

The report included with this item was first published as part of the agenda papers for the Cabinet meeting on 10th March 2026.

Cllr Dana Carlin, Cabinet Member for Finance & Corporate Services, introduced the report for this item, which provided an update on the Council’s financial position at the end of Quarter 3 of 2025/26, and made the following points:

·       The overall position had improved since Quarter 1 when a £34m overspend had been projected. This had fallen to £23.4m at the end of Quarter 2 and had now been reduced further to around £19m at the end of Quarter 3.

·       There were around £8m of historic parking arrears and, while this was disappointing, it was not a service pressure that would impact on the following year’s budget.

·       The improvements in the service overspend were mainly in the areas of Adult Services and Temporary Accommodation.

·       There had been an improvement in the Housing Revenue Account with reduced overall expenditure of £1.3m, due to improved contractor performance management and lower capital financing costs.

·       Capital spend had been reduced and this would mean reduced revenue expenditure in future years. Capital spend was challenged throughout the year to ensure that anitwould deliver savings or income or was essential/emergency work.

·       The government had recognised the need for additional funding for Boroughs such as Haringey with an additional £25m in core spending over the next three financial years. There had been increases in areas such as homelessness grants and the government had also committed to fully covering the cost of SEND services in future which would help.

·       It was understood that the monthly financial reports received by officers had shown further improvements in month 10.

·       She acknowledged the hard work of officers in achieving these improvements but noted that there was a lot more to do for the Council to get to a point of financial sustainability.

Taryn Eves, Corporate Director of Finance & Resources, added the following points:

·       The £19m of projected overspend was expected to be reduced further by £8m of uncommitted corporate contingency. She clarified that the projected overspend was in addition to the £37m of Exceptional Financial Support

·       Certain factors had been included at the Quarter 3 stage rather than at the end of the financial year in order to provide a more accurate forecast. These factors included bed debts provision, use of reserves and external finance.

·       The improvements in the 2025/26 position could be partly attributed to the additional controls that had been put in place, further details of which were provided in Appendix 10. There had also been less volatility in the second half of the year and more accurate forecasting.

·       The Council was still carrying some risks in areas including parking, adult social care debt and commercial property.

·       The delivery of savings was still not being fully achieved and so this needed to be the focus of attention next year.

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

·       Cllr White observed that much of the improvements in the 2025/26 position appeared to be due to the reduction in demand rather than reductions in price and asked about the future impact of price rises due to external factors. Taryn Eves addressed the three main demand areas and wider economic issues:

o   Children’s Services had remained steady throughout the year with the overspend due to the issues with the delivery of savings.

o   Adult Services was showing a further improvement in the most recent forecast and this was due to a combination of demand and price. A provision was made in the budget for inflation on adult social care contracts but negotiations were still underway. There had also been work on the contributions from health partners for joint care packages and Continuing Healthcare.

o   With Temporary Accommodation, numbers were steady but the prevention offer was strong which helped to manage demand. However, prices were higher than expected for nightly-paid accommodation.

o   Assumptions on interest rates for next year were based on a downward trajectory for inflation and there was a risk in this area due to global events, though this would be the same for every local authority.

o   The corporate contingency had been increased significantly for 2026/27 and now stood at £25m which helped to manage risk.

·       Cllr White asked about the realistic feasibility of reaching a financially sustainable position in the medium term. Cllr Carlin acknowledged that this would not be easy but that the trajectory was heading in the right direction, such as through the capital position, the improvement in government funding, income from the commercial portfolio and some reductions in pressures on services compared to previous forecasts. She added that a strategic approach would be necessary, potentially including investment in areas where longer-term savings could be achieved. Overall, she felt that financial sustainability was achievable.

·       Cllr Small queried why savings delivery appeared to have been more successful in Adult Services and Housing than in Children’s Services. Taryn Eves explained that the delivery of savings in Children’s Services was almost entirely related to the 5% staff savings target and there hadn’t been the scope to deliver this in 2025/26. Although this 5% target also applied to other Directorates, there had been a wider range of savings in areas such as Adult Services and Housing. It was assumed in the Budget for 2026/27 that these savings would be achieved in full. Asked by Cllr Small about the possible lessons of relying on an area of savings that could not then be delivered, Cllr Carlin commented that this depended on the service, noting that there was not as much scope for savings in Children’s Services compared to some other services. Taryn Eves added that the downside of setting targets across the Council was that it assumed that there was similar potential for savings across all services which was not necessarily the case. The focus of the Finance Recovery Board would be on the evidence for the deliverability of savings and so this process was expected to be stronger in 2026/27.

·       Asked by Cllr Small about the likely impact of SEND funding being covered by the government in future, Taryn Eves said that this would be quite limited. She explained that further details were still being awaited but that a grant would be received for 90% of the Council’s Dedicated Schools Grant deficits for 2025/26, which was largely driven by SEND. In addition, the government had confirmed that no local authority that was part of the Safety Valve Programme would be worse off. However, there were still question marks about the future funding for the 10% of the deficit.

·       Cllr Connor referred to Table 3 on page 30 of the agenda pack which indicated that 44% of the projected savings for 2025/26 would not be delivered and queried how financial sustainability could be achieved given that savings were not being fully delivered and that the deficit was becoming progressively worse. Taryn Eves acknowledged that, while some non-delivery of savings was typically expected, a rate of 44% was too high and this was a key reason why there was not a high level of new savings proposed for 2026/27 as the main focus was on delivery of agreed savings. This had been a challenge for some time as the budgets assumed that savings would be delivered, any non-delivery contributed to an overspend. She added that there was now more challenge in the run-up to the budget setting process while monitoring and reporting processes had also been tightened. She also felt that narrative reporting to Cabinet and the Overview & Scrutiny Committee should be strengthened in future and that there should be greater scrutiny of the RAG ratings. Josephine Lyseight, Director of Finance, commented that there could be more challenge on the profile of the savings as savings were sometimes delayed by the need for more lead-in time before the outcomes were achieved.

·       Cllr Connor queried the impact of scrutiny given that the Committee often scrutinised the papers after the decision making and whether this process could be improved, including through the closer tracking of recommendations. Cllr Carlin replied that, constitutionally, the Overview & Scrutiny Committee scrutinised the decisions of the executive and so ‘pre-scrutiny’ would require a constitutional change. Taryn Eves agreed that closer action tracking between the quarterly monitoring should be implemented in future. (ACTION)

·       Referring to the Disposals Policy on page 43 of the agenda pack, Cllr Connor noted that £800k of capital receipts had been received with up to £1.2m estimated by the end of the year and queried how positive this progress was against the overall total of £20m. Taryn Eves noted that the £20m figure had been agreed by Cabinet in June 2025 when the Disposals Policy was approved and an updated Disposals Policy would be provided to Cabinet in 2026/27. She noted that an accurate profile could not always be predicted and that the majority of disposals were now anticipated in 2026/27.

·       Cllr Connor referred to paragraph 6.6 which specified a reduction of £1.9m in forecast interest costs, but noted that this reflected slippage in the capital programme. Cllr Carlin replied that this was due to a combination of planning and profile but reiterated that the Council was continually challenging throughout the year about reducing spending and borrowing. In relation to the accuracy of the forecasts on capital spend, Taryn Eves said that new capital governance had been in place for almost a year which meant tighter profiling and timing of new capital schemes and there was a higher level of confidence around the 2026/27 figures. She noted that capital spend was less predictable than revenue and that much of the significant slippage related to the large regeneration schemes. A major cause of slippage was the delays to procurement processes and sometimes the forecasts about timescales had been too optimistic. Cllr White observed that it was important for Councillors to understand how long it could typically take for schemes to be implemented given the governance and procurement processes that needed to be completed.

·       Referring to paragraph 9.14 on page 42, Cllr Connor noted the slippage on capital support for digital outcomes and queried how this would impact on services for residents, the modernisation of the Council website and any associated savings. Taryn Eves explained that the service modernisation programme had been running for about 18 months but, because there was so much to do in the digital space, it couldn’t all be done at once. Areas with the largest impact on customer services, such as housing, had therefore been prioritised. An investment of £2m had been estimated but the plans on implementation in 2025/26 had been too ambitious so the unspent funding had been carried over to 2026/27.

·       Cllr Small then had to leave the meeting (8:02pm) and his remaining question was read by Cllr White which queried the large write-off of parking debts. Taryn Eves said that the service itself would be able to provide a detailed response if required, including on collection rates, but she explained that an extensive piece of work had recently been carried out to address the high level of debt that went back a number of years. This had looked at outstanding debt and PCNs up to March 2025 and, as a consequence of this, the bad debt provision for parking had been increased by £9.9m. Asked by Cllr Connor for clarification on the figures in paragraph 1.4 of the report, Taryn Eves explained that, as illustrated in Table 2, bad debt provision had reached £3.9m in Quarter 2 followed by a further £6.0m in Quarter 3 to make a total of £9.9m for the year. She clarified that bad debt provision involved an estimate of how much debt could be recovered, while the write-offs were a separate category as these were unrecoverable debts and had recently been approved by Cabinet. Cllr White noted that there were significant sums of money involved and suggested that a future piece of scrutiny work could be to compare the Council’s performance in this area to other Boroughs, including the collection rates, level of bad debt and write-offs. Cllr White proposed that parking debts should be included as an issue of concern in the hand-over report to the 2026/27 Overview & Scrutiny Committee. (ACTION)