To consider the report from the Head of Democratic Services that sets out the Council’s projected financial position at month 4 of the 2023/24 financial year.
The board agreed to consider Item 8 and Item 9 as one item given the clear links between the two and that the financial issues faced in 2023/24 will have an impact on the medium-term strategy and projections.
In attendance for this item were:
· Victoria Bradshaw, Chief Finance Officer
· Mariana Pexton, Director of Strategy and Resources (left to attend another meeting for part of this item).
The Board received a presentation on the following issues:
· The latest position on the financial challenge in 2023/24 and work underway to balance the budget.
· Detail on the budget gaps faced over the course of the Medium-Term Financial Strategy 2023/24-2028/29 (MTFS), the key risks and assumptions, work underway to address the budget position and next steps.
· Details on other key areas of the MTFS such as the Housing Revenue Account (HRA), Dedicated Schools Grant (DSG) and the Capital Programme.
· In respect of Children Looked After (CLA) budgets the board were informed of the ongoing challenges faced by the authority in terms of increased demand and higher costs of placements in recent years, this is reflected nationally and is not a position unique to Leeds. The budget pressure in 2023/24 for CLA external placements is £15.49m.
· To manage in year spending in 2023/24 only essential spend is permitted. This has been combined with other measures such as a recruitment freeze, maximising income, focussing support on services with the highest areas of spend, an asset review and bringing forward future years savings proposals to deliver benefits in year.
· Key messages being communicated internally to manage budgets are: stay within budget, absorb in year pressures, highlight budgetary issues early and continue with robust monitoring.
· The projected budget gaps for the next three years were presented as: 2024/25 - £59.2m; 2025/26 - £56.6m, 2026/27 - £47m. In terms of key risks these were identified as: impacts of global events on the UK economy, the overall funding envelope available for Local Government from the Government, fuel and energy inflation, increased interest rates, pay awards, demand and demography, possible changes to the political landscape and capital assumptions.
In response to comments and questions from the Board, discussion included the following:
· Members were interested to know more about plans for CLA budgets in future years given that costs for external placements have recently doubled. In response the Board were informed that the increased costs in this area have been built into the MTFS which is reflected in the budget gaps that formed part of the presentation. The overall approach to CLA placements has been to develop a mixed economy and to look to deliver more in-house placements through smaller living accommodation in Leeds. These plans are well underway along with detailed work to see if any external placements can be brought back into Leeds where it is suitable, and any move would not be disruptive for the children and young people concerned.
· It was noted that there needs to be a balanced approach to delivery of new in-house placements to not have accommodation that is either not used or staffed and not having enough of that type of placement and having to pay additional costs for external placements. The cost of placements as opposed to volume was stressed as the key concern in this area.
· In response to a query around the Little Owls nursery provision the Board were informed that the service is subject to a review which will be reported to Executive Board in the coming months.
· Members also noted the reduction in Government funding and whether that has been taken account of in the projections. The Board were informed that this is part of the projections, and it was also noted that there has been a shift from Government funding to more of a reliance on local taxation to increase the funding available to local government.
· Members were concerned about the projected overspend in the current financial year, 2023/24, and how the Council will be able to deliver the savings required to balance the budget as is legally required. The Board were informed that it is likely that the Council will have to use its reserves in 2023/24 to deliver a balanced budget. The impact of this will be a reduced level of resources in future years of the MTFS.
· The budget sustainability of the Council and the services provided were discussed. It was acknowledged that there is a need to re-base the council’s budget and carry out a thorough analysis of statutory services and those that are valued by Leeds residents to ensure that services are provided to those that need it the most.
· Given the scale of the challenge faced the Board emphasised the need for engagement with elected members to ensure that they can carry out engagement with residents and explore alternative solutions that could be delivered and for ward members to be part of the solutions that are developed.
· Members made enquiries around the speed of decision making and that sometimes it can take too long to make decision that can deliver savings. In response the importance of ensuring the right decisions are taken was emphasised. However, it was acknowledged that in some cases colleagues have other responsibilities and delivering transformative change can be difficult whilst also having a ‘day job.’ As a result, additional staffing has been invested in to deliver service transformation which should assist in terms of realising change and delivering savings.
· The Board were informed of the need to do more on budget accountability and the new financial systems being delivered through the Core Business Transformation approach will assist with this to ensure that real time information is available to budget holders.
· Responding to queries around possible staffing reductions the Board noted that to address the budget position the Council will need to stop or reduce services which will inevitably lead to reduced staffing. Reducing staff levels without changing services will ultimately lead to additional workload pressure and remaining staff being placed under more pressure.
· The staffing reductions that do take place will be delivered in a managed way through a voluntary leavers scheme and decisions will be based on the services that staff are working in and will be different to other schemes such as the Early Leavers Initiative that operated in previous years.
· The Board highlighted the section 114 notice that Birmingham has served in recent months. A key difference between Leeds and Birmingham is that the Council does not face equal pay claims like Birmingham does and has been proactive in addressing equal pay issues in the past. It was also believed that the open and honest approach taken in Leeds allied to close consultation with elected members has enabled decisions to be made and measures taken to balance the budget each year.
· The board put on record their thanks and appreciation for the work being done by the Council’s finance team to ensure balanced budgets and budget sustainability.
a) Noted the updated Medium Term Financial Strategy for 2024/25 to 2028/29
b) Noted that savings proposals will be considered at future meetings of Executive Board and the budget proposals for 2024/25 will be the focus of a Scrutiny Working Group in December 2023, following practice established in previous years.
c) Noted the Month 4 Financial Reporting Position for 2023/24.