Agenda item

To consider a report from the Head of Democratic Services providing the Board with an update on the in year financial health monitoring position and the Medium Term Financial Strategy with a particular focus on rising inflation and the impact of this both in year and over the medium term.

The report of the Chief Officer, Financial Services provided an update on the in year financial health position and the Medium Term Financial Strategy. There was also a focus on inflation and cost of living crisis and how that has impacted on Council budgets and Leeds residents as requested by Board Members.

In attendance for this item were:

·  Neil Evans – Director of Resources

·  Richard Ellis – Deputy Chief Officer Financial Services

·  Cllr J Pryor – Executive Member for Economy, Culture and Education

The Board was informed of the following points:

• Since the budget for 2022/23 was agreed in February 2022 inflationary pressures have increased exponentially with the Council and Leeds residents facing significant cost pressures linked to fuel, energy, food costs and in the general cost of living.
• The Council has also seen a further pressure linked to the staff pay offer which was higher than assumed in the 2022/23 approved budget.
• Members were advised that the report projected an overspend of £20.4m. However, savings had been identified which reduced the overspend to about £17.98m. The overspend was due to inflationary pressures on fuel, energy and included additional costs of the now agreed pay award where each employee will receive £1,925 per annum.
• It was also noted that there were further pressures through increased costs in goods and services procured, increased demand on welfare services from Leeds residents and reduced income as residents choose to spend their income differently to take account of the cost of living. It was noted that there had been a reduction in council tax collections.
• Members noted that the Council was awaiting the Autumn Statement due on 17^th November which may change some of the figures in the Medium Term Financial Strategy.

In response to questions from Members the following was noted:

·  The Council has always delivered a balanced budget position and is required to do so by law. It was noted that if the council was to overspend it would need to use reserves in the current year to balance the budget, which would affect future years and could lead to the need for additional savings based on the overspend in the previous year. Members were advised that the Council has strong financial management arrangements which are recognised by the external auditors. The External auditors have commented in their reports that despite the significant financial challenge the Council has a track record of delivering a balanced budget.

·  It was still the plan to go to Executive Board in December with a budget based on the assumptions set out in the papers provided to Members. It was noted that the proposed budget would go out to consultation with Scrutiny Board being the main part of that consultation process. The Autumn Statement would affect the Medium Term Financial Strategy if it varies significantly from the assumptions set out in the papers.

·  The plan is to ensure that MRP does not increase during the period covered by the Medium Term Financial Strategy. Any new borrowing will be equivalent to MRP that is being paid, so as not to increase MRP. It was also noted that a capital programme review is currently taking place and the outcome of this will be reflected in any implications on the Councils future borrowing. The outcomes of the review will be included in the Budget Report which comes to the February Executive Board and full Council so it will be known what the implications of the review are in terms of MRP.

·  There are a number of pressures in Children and Families which are national pressures in terms of costs for external placements and foster care which are pushing prices up across the country. The Council is focusing on how Children’s Services are managed and there is a lot of work taking place in relation to preventative work, more residential care coming back into the city and more highly skilled foster carers to avoid external placements. It was noted that given this is a national issue it may not be avoided in entirely but Leeds is working on preventative approaches to mitigate these costs.

The Chair suggested that the issues raised in relation to preventative work may form part of an item for a future Scrutiny Board.

The Chair thanked the officers for attending and it was recognised that officers are working with a very challenging budget.

RESOLVED – To:

a)  Note the content of the report and appendices within the wider remit linked to financial sustainability and long-term budgetary robustness.

b)  Highlight any future areas of scrutiny work should any arise during discussion of the item

c)  Note the plan for a Working Group to take place in December 2022.