Agenda item

1.1  The Chair welcomed to the meeting Cllr Rennison Deputy Mayor and Cabinet Member for Finance, Housing Needs and Supply and Michael Honeysett, Director of Financial Management to the meeting.

 

1.2  The Chair referred to items 7a in the agenda and explained the Director of Financial Management in attendance was unable to provide any further update on the information provided in the agenda for Universal Credit (UC).

 

1.3  The Chair proposed they moved to item 7b and postponed item 7a until the next meeting. 

 

1.4  Members agreed.  The Chair will not leave the room for item 7a as this discussion was postponed.

 

1.5  The Deputy Mayor and Cabinet Member for Finance, Housing Needs and Supply informed a drop in about UC will be running in the spring.  This will provide an update on the position post the general election.

 

ACTION

Group Director Finance and Corporate Resources to provide an update on Impact of UC at the next SP meeting.

 

1.6  Member proceeded to item 7b finance update.

 

1.7  The Director of Financial Management referred to the report as set out in the agenda on pages 89-105.  The officer advised the Overall Financial Position (OFP) report is as laid out and assumed read.  The key points from the finance report highlighted to the Panel were:

 

1.7.1  The Council is forecasting an approximate £6 million overspend.  The major contributors to the overspend are adults and children’s services in the areas previously discussed e.g. adult social care and for children SEND provisions etc.

 

1.7.2  The officer pointed out they are managing the overspend in a couple of ways.  At the end of the year they use one off resources to apply to the overspend in addition to the planned reserves.  To manage the budget deficit they set up planned reserves know to have budget pressures.

 

1.7.3  In relation to the financial settlement set out in the report this has been confirmed for 1 year and this funding is the dame as the current year.

 

1.7.4  The Council had forecast a £30 million deficit of which savings of £13 million have been found for the 2020/21 budget.  The deficit has been pushed back by 1 year with the roll over financial settlement.  The officer explained the council has acquired extra funding but that changes to funding formula have been delayed by 1 year.  The Council is expecting the fairer funding review to come into effect for 2021/22 budget.

 

1.7.5  The main factors they are expecting to affect Hackney in the fairer funding review are: deprivation, area costs adjustments and population.  For Hackney the council is expecting to lose funding in the areas of deprivation and cost adjustments.

 

1.7.6  In relation to the deprived areas they do not have the same deprived areas they had back in 2014/15.  For area costs they are talking about including rurality and travel time.  This will go against areas like Hackney. 

 

1.7.7  The Deputy Mayor and Cabinet Member for Finance, Housing Needs and Supply advised this is expected to move more money out of big urban areas into the shires.  The Council is expecting to lose a substantial amount of funding.

 

1.7.8  The Director of Financial Management advised in relation to the fairer funding review the Council is estimating they will lose £17 million.  However one area of exempt funding is the better now social care funding.

 

1.7.9  The officer pointed out there is uncertainty in relation to the fairer funding settlement and key to this will be the transitional arrangements put in place between the new funding arrangements and the old regime.  From past experience changes to the financial system have been implemented over a 2 years transitional period.  The Council has assume this in their forecast but this has not been confirmed.

 

1.7.10The Capital update report in the agenda covers the Council’s investment and resources for future years linked to the manifesto commitments.  The report is provided as a monthly update to Cabinet on the programme of works.

 

1.7.11The report covers works such as Hackney museum refurbishment, London Fields learning pool, Stoke Newington library refurbishment etc. 

 

1.7.12The Cabinet Member pointed out the OFP report highlights the purchase of 2 properties previously sold under the right to buy.  Pointing out 2 properties have come back into council ownership.

 

1.8  Questions, Comments and Discussion

 

(i)  Members referred to the continued cost pressures and the need to continuously use reserves.  Members enquired about the sustainability of the current deficit and if the Council is using its full reserves?  Members enquired about the planning, preparation and estimates for worst case scenarios in relation to cost pressure areas like SEND, adult social care and other particularly high areas of spend.

 

(ii)  Members referred to the £4-5 million drawn down from the HLT reserves and enquired if they were from planned or unplanned reserves.  If unplanned how sustainable is this?

 

(iii)  Members referred to the care support commissioning and highlighted that the adult social care learning disabilities service was a regular overspend area but care support commissioning is a new area being highlighted in the report.  Members enquired what is the increase related to and if this was related to a loss of care support beds, local resources in terms of bed availability etc.

 

(iv)  Members asked if the gap assumption made by the Council for the fairer funding had this deficit built into the Council’s budget gap or if this will be and addition to the gap already identified.

 

In response the Director of Financial Management informed the Commission the reserves are a mix of planned and unplanned.  Some reserves were set up for areas known to have specific budget pressures and the resources are put in to smooth transition.  It was pointed out part of the gap in the budget forecast is for growth provision.  This is for a phased approach to growing the budget.  The officer agreed that sustainability was important and a key factor to take into consideration when setting the budget each year.  The officer confirmed the drawdown of unplanned reserves was not high and advised most reserves used were from planned reserves and used in a transitioned way.

 

The Deputy Mayor and Cabinet Member for Finance, Housing Needs and Supply added there are layers of contingencies within the financial framework.  The Cabinet Member explained there are contingencies within the project, directorate and formal reserves.  They also add any forecasted increased in income like council tax.  This impacts on the amount available for flexible spend at the end of the year to balance the budget.  The Cabinet Member explained it was getting more challenging to achieve a balanced budget but they are currently managing.

 

(v)  Members enquired about the Council’s net reserve position now compared to last year and asked if it was decreasing.

 

In response the Director of Financial Management advised the net reserves did decrease slightly but it was marginal.  Most of its use was on capital spend.

 

The Deputy Mayor and Cabinet Member for Finance, Housing Needs and Supply clarified this was not the Council’s formal corporate reserves they were still untouched.  The Director of Financial Management explained the council still held the formal amount recommended for local authorities to hold in reserves.  This was £15 million.  However the council is finding it harder to manage with increasing costs.

 

The Cabinet Member highlighted it was getting harder to manage the costs and with each OFP the overspend was increasing.  The Council is starting to see the impact of austerity through increased demand.  Explaining the Council is trying to manage costs and cope with increasing demand at the same time.  The Cabinet Member cited the housing needs service an example of a service area with an increasing number of overcrowded families.  The Cabinet Member pointed out they needed to consider the long term impacts from this service on other services areas.  This could lead to the children needing to access children services or the family requiring access to other types of support due to pressures like debit, universal credit etc. 

 

The Cabinet Member pointed out they can consider prevention but there will be areas of increasing spend that the Council is unable to stop such as children services.  In some cases the Council may not have the power to stop the increase in spend, therefore they need to find the budget and resources to meet the demand.

 

The Cabinet Members acknowledged there may be different ways to do things and more efficiently but this will not fully address the scale of demand.

 

In response to the question about HLT reserves this was planned reserves for that year, but it was the last year of planned reserves.  The forecast overspend in HLT is £9 million for this year.  HLT have found some savings from other services areas to fund some of the budget increase but work is continuing to look at how they can support this budget going forward.

 

The Deputy Mayor and Cabinet Member for Finance, Housing Needs and Supply pointed out the SEND position is not unique to Hackney, other local authorities are facing the same challenges.  This budget is from Government the flexibility with spend has been reduced.  This is a ring fenced budget that sits separate to the local authority’s main grant funding.  Currently the Government is providing just enough funding to keep the system afloat and local authorities are waiting for a steer from Government.  In the meantime the Council will have conversations about contingency because SEND is not a service they will allow to fail or not operate.  The SEND budget is not their budget it’s a government budget and they have no clarity if it can run at a deficit.  It is also unclear where responsibility lies if the funding runs out, if it is it with central government or the local authority.

 

In discussions Members commented the service covers some of the boroughs most vulnerable children and all indicators point to a trend of increasing demand for this population. 

 

(vi)  Members asked about representations from the Local Government Association (LGA) and other bodies to seek clarity on this issue with SEND services.  Members commented the anxieties for families across the country will be profound and the Government has an obligation to reassure everyone that the funding will be there to meet needs.  All local authorities with this responsibility need a clear steer from central government.

 

(vii)  The Chair of Audit Committee highlighted that the Audit Committee did a review of SEND Services in Hackney.  This review highlighted the Council was managing to control services to the best of their ability.  The second conclusion was that SEND has a deeply unstable future because demand is increasing whilst resources are stable but diminishing.  There is a time bomb in the system and councils needs to think about how to manage the funding over the next 3 years.

 

(viii)  The Chair of Audit Committee commented the last Capital update report shows the cost scheduling and cost estimates are continuously moving and capital costs are shifting from quarter to quarter and year to year.  There is a systemic problem with estimating, scheduling and costing.  The Chair of Audit Committee pointed out raising and managing capital is becoming a more important activity.  The Chair was of the view the Council needed to think about how they can manage capital in a more effective way.

 

In response the Director of Financial Management informed the LGA alongside other bodies like the Society of London Treasuries was constantly lobbying.  The officer pointed out there has been a large amount of lobbying which may have attributed to the extra one off funding received.  The challenge for councils is the level of SEND provision.  It was highlighted some council have opted to change their level of provision but the legal ramification from this type of decision have not concluded.

 

In reference to the capital update and budgeting he confirmed some budgets are moved from one year to the next for some capital programmes.  The officer acknowledged the Council needed to get better at estimating capital spend because it does affect the budget position and borrowing activity.  The officer confirmed to date the council has not borrowed in advance of need.  This is closely monitored by the Director of Financial Management and he has ensured the council has not been in the position of borrowing ahead of need.

 

ACTION

Group Director Finance and Corporate Resources to provide an update on the key challenges in relations to SEND provision including an update on the national position.