Agenda item

To receive financial information in preparation for the budget scrutiny meeting scheduled for Monday 20 January 2025 – to include:

·  Current Medium Term Financial Strategy approach

·  Process to date

·  Summary of December cabinet paper (enclosed)

·  Update on November ‘Policy Statement’ and impact of Provisional Local Government Settlement

The Chair explained to the committee that recommendations made at this committee’s past meetings are forwarded on to relevant officers/cabinet members to action. In addition, as a part of the overall scrutiny improvement review the aim is to bring back the topics of these recommendations for an update to this committee’s future meetings. However, this is subject to the time taken to implement these recommendations and cabinet member/officer availability during the year.

The committee first received a presentation from Councillor Stephanie Cryan, Cabinet member for Equalities, Democracy and Finance and Tim Jones, Director of Corporate Finance on the Policy and Resources Strategy 2025/26 (Budget Scrutiny Scene Setting) covering the following points

• Multi-year budget settlement and 2-year budget settlement details.
• Progress and current position on the 3-year General Fund (GF) and Housing Revenue Account (HRA) recovery Plan; Southwark’s Core Spending Power; 12.1% more cash in 2025-2026 compared to 2010, however 20% less spending power per person than in 2010
• Council Tax, Settlement Funding Assessment (SFA), ring fenced and un-ring-fenced funding grants; Current Medium Term Financial Strategy (MTFS) approach GF and HRA.
• HRA recovery Plan and savings, Process to date (Timeline) for Budget monitoring and Capital Bids, Summary December Cabinet paper on budget, Policy Statement and Provisional Local Government Financial Settlement (PLFGS).
• Homelessness and rough sleeping prevention grant funding allocations, restrictive conditions and its impact on the HRA. Social Care Grant funding. National Insurance Contributions (NIC) increase compensation. Rural Services Grant and Better Care Fund and Discharge Fund.

It was agreed with Tim that the percentages on pg. 4 of the presentation did not seem to add up to 100% and this will be reviewed and reported back to the committee at a future meeting.

The committee then asked questions on the following topics

• Risks associated with the increase in NIC for organisations providing social care in the context of the Social Care Grant.
• Financial feasibility of the additional £200m Social Care Grant than what was originally set out in the Local Government Fund (LGF) Policy Statement to cover social care costs.
• Details on the under half (49%) of the Homelessness Prevention Grant to be ring-fenced for prevention and not to cover Temporary Accommodation costs.
• Increase in NIC and its impact on the Adult Social Care and 3-year Budget; HRA Recovery Plan - 8m overspend considering housing repairs issues and its costs.

Tim explained to the committee that councils’ go through an annual price review with social care providers to mitigate any inflationary costs such as increase in NIC to establish the pay rates that are appropriate in the current financial conditions.

Cllr Cryan informed the committee that PLFGS which includes £200m more in funding for social care is a provisional settlement which would be undergoing consultation with Local authorities nationally, and other major authorities like Greater Manchester might have higher needs, however in Southwark’s context the levels of funding in this statement is close to what officers had modelled and expected. On the allocation of Homelessness Prevention Grants, the specific details on whether this applies to whole fund or just the increase in the grant in this provisional settlement is unclear. London councils are feeding back into the consultation highlighting the issue with private rented landlords in London moving to nightly accommodation which increase costs in temporary accommodation (TA).

Tim explained to the committee that the increase in allocation of an extra £2.8m in NIC compensation will offset the increase in NIC to some extent, in addition the overall increase in adult social care grant will help cover the rest of the increase in NIC. Furthermore, inflationary budgets will be delivered to cover the pay for care providers to cover the NIC increases. The HRA recovery plan originally set out to save £19m to recover the overspend and this year the overspend is down to £8m. For Major works in housing repairs there was a borrowing of £59m which this year will be close to zero.

The committee then asked further questions on the following points

• Transformation programme targets in context of the budget and timeliness of this review by the Overview and Scrutiny Committee (OSC) early in the next council year.
• Rising cost of borrowing and its impact on the council budget; Impact of the ring fencing of budgets by the central government.

Cllr Cryan informed the committee that OSC will have a chance to review the progress of the transformation programme, the programme is not designed to deliver budget savings specifically on a corporate level. The programme aims to find cost-savings and efficiencies at a department level to increase revenue. Public engagement on the budget will be included in the report to the council assembly.

Tim explained to the committee on the earlier raised question on pg.4 of the presentation on percentages not adding up, figures of other grants such as Rural Services Grant have not been included in the presentation. On ring-fencing of budgets almost all Local Authorities are lobbying the government to have greater flexibility in allocating the funds of the GF and the HRA. The rising cost of borrowing affects the council in its efforts to secure loans from the Public Works Loans Board (PWLB) for New Council Homes, the interest rates have gone up from 1.5% to 6%.