Agenda item

Cabinet Member: Cabinet Memberfor Croydon Renewal, Councillor Stuart King

Cabinet Member for Resources & Financial Governance, Councillor Callton Young

Officer: Interim Director of Finance, Investment & Risk, Chris Buss

Key decision: No

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To

1.    Note the current general fund revenue outturn forecast at the end of the quarter 3 of 2020/21 of £64.7m overspend, after the inclusion of both anticipated and received Covid19 funding from the MHCLG of £41.9m;

2.    Note that there are a number of risks totalling £31.8m that could materialise which would see the variance increase further. These are within services due to the current pandemic, potential impact from finalisation of the 2019/20 accounts and in relation to groups structures particularly around interest income from Brick by Brick. Should all of these risks crystalise the total forecast overspend would increase to £96.5m by the year end.

3.    Note the details of the monthly Covid19 impact submissions being made to the MHCLG and the details of the financial support that is available to the council in light of Covid19 as outlined in section 6 of the report.

4.    Note the work being undertaken by the Spending Control Panel and Finance Review Panel to reduce the overspend this financial year.

5.    Note the HRA revenue position of a £0.5m forecast overspend against budget.

6.    Note the revised capital outturn projection of £187m for the general fund and HRA is forecast to be an underspend of £117m against the revised budget.

The Cabinet Member for Croydon Renewal (Councillor Stuart King) noted that the paper reported that there was a £64.7 million overspend by quarter 3 which was a concerning, but accurate, reflection despite the considerable efforts which had been made to improve management of the council’s finances. In addition to the forecast overspend, the Cabinet Member highlighted that £31.8 million of risks had been identified which could cause the total overspend to increase to £96.5 million.

It was noted that the report detailed movement between the quarter 2 and quarter 3 reports which had caused a worsening in position by £38 million as a result of corporate items and £14 million in departmental changes. The Cabinet Member, however, highlighted that £15 million of corporate items did include £15 million contribution to general reserves and that both children’s and adults departmental positions remained effectively unchanged between the two reporting periods.

The Cabinet Member stated that the changes within the Place department had arisen principally from over £4 million reduction in parking income associated with the lockdown and £2.7 million from the delay in receiving a decision from the Secretary of State on the council’s Selective Licensing Scheme. The proposed closure of Virgo Fidelis and St Andrews schools, it was highlighted, had also had a combined impact of £5 million on the council.

It was noted by the Cabinet Member that considerable work was underway to actively manage the in-year situation; including £27.9 million of savings which were being delivered. Furthermore, the impact of the Spend Control Panel, as a result of the Section 114 Notice, was also highlighted by the Cabinet Member. In addition, it was noted that significant amendments to the capital programme of £86 million had been made which would help reduce in-year costs.

The Cabinet Member concluded that there remained a great deal of uncertainty in terms of the in-year position and the following year’s position and the council continued to await the outcome of the Ministry of Housing, Communities & Local Government (MHCLG) decision on the council’s request for a capitalisation direction.

The Cabinet Member for Homes & Gateway Services (Councillor Jane Avis) noted that the council had applied for the Selective Licensing Scheme in summer 2020 as the council had felt it was important to ensure privately rent accommodation in Croydon met the required standard, but that a decision had not yet been received. In response, the Cabinet Member for Croydon Renewal reflected that the Scheme was an important tool for the council to protect renters across the borough but that the government had not yet granted permission for the new scheme. It was felt that the government had been focussed on responding to the Covid-19 pandemic and that MHCLG had not been able to direct resources to consider applications. However, due to this delay it was sensible to reflect the financial impact within the report.

The Cabinet Member for Sustainable Croydon (Councillor Muhammad Ali) noted that council tax collection had dropped by 2% and business rates by 7% and queried what projections had been put in place in terms of proposals for savings or growth. The Interim Director of Finance, Investment & Risk (Chris Buss) advised that in terms of future council tax collection rates the council had taken a prudent assessment for the following year which would form part of the budget report due to be considered by Cabinet the following week. In terms of business rates collections, the Interim Director advised that officers had guarded against optimism bias due to the risk of not achieving those levels; as such the council had taken a prudent approach to future collections.

The Cabinet Member for Culture & Regeneration (Councillor Oliver Lewis) noted that many residents would be surprised that the council was required to absorb the deficits of schools which were closed which had accumulated in £5 million in costs to the council. In terms of this, the Cabinet Member requested assurance that there were no further risks of schools closing and deficits being passed to the local authority. The Cabinet Member for Children, Young People & Learning (Councillor Alisa Flemming) confirmed that the council was working closely with Virgo Fidelis to proactively manage the school’s deficit in order to minimise the final amount. In terms of the wider context, the Cabinet Member stated the council was monitoring and working more closely with schools to ensure the systems in place to do the monitoring were robust. Discussions were taking place with some schools to ensure deficits did not increase any further.

The Cabinet Member for Children, Young People & Learning noted that there had been an increase in support from government in relation to schools managing their budgets. In terms of the Dedicated Schools Grant funding, the Cabinet Member highlighted that this had increased by £4.8 billion in 2021/22 and £7.1 billion in 2022/23 which would support schools to adequately deliver services within budget. 

Clarity was also sought by the Cabinet Member for Culture & Regeneration as to the net cost of the pandemic to the council after taking into account the money provided by the government. In response, the Cabinet Member for Croydon Renewal confirmed that the financial impact of Covid-19 on the council at quarter 3 was in the region of £40 million.

The Cabinet Member for Business Recovery (Councillor Manju Shahul-Hameed) welcomed the support from the Chancellor of Exchequer with the business grants which had been available, but noted the business rates collection had fallen by 7.28% due to the impact of Covid-19. The Cabinet Member queried what the impact of the government announcement of its intention to allow local authorities to spread the 2020/21 collection funds deficit over three years should there be a business rates holiday also. In response, the Interim Director advised that the council would have to wait for an announcement from government as to whether support to businesses would be directly to businesses or via local authorities. It was noted that businesses with a value below £50,000 were receiving full relief and the council were being recompensed. Members were advised that the issue arose when businesses were taking advantage of the opportunity to defer future payments of business rates which was one of the reasons why the council had seen a fall in collections. The balance would arise when the council sought to recover those rates and protect income whilst not forcing a company to go out of business.

The Leader of the Council (Councillor Hamida Ali) noted that within the report there was a contribution to reserves and whilst the overall position was concerning, she noted that it was positive that children’s social care spending remained steady whilst still requiring improvement and reductions. It was noted that the work was still to be completed on 2019/20 accounts, but the Leader queried what work remained outstanding and when the accounts may be finalised.

The Interim Director advised that there were a number of issues which remained outstanding which were matters of fact which officers hoped would be resolved shortly, whilst others were matters of accounting opinion. In terms of the latter, the Interim Director noted that these sometimes took longer to resolve. Members were informed that officers would work on resolving the matters of fact quickly and would seek to provide information to the external auditors as to why they felt their view of accounting opinion was correct so as to finalise the accounts as soon as possible. In terms of when the 2019/20 accounts may be finalised, the Interim Director advised that he hoped they would be concluded before summer 2021.

The Cabinet Member for Resources & Financial Governance (Councillor Callton Young) queried whether the Interim Director felt that the Spend Control Panel was effective; especially in relation to the costs for external placements in adult social care and looked after children. In response the Interim Director advised that there would be a lag between implementing control measures and seeing the effect of those measures, but that it was felt that the control were becoming effective and should remain in place even without a Section 114 Notice. To that end, the Interim Director advised that he would recommend as part of the budget report that spend control measures remained and extra controls be put in place in relation to social care spending.

In terms of children placements, the Interim Director noted that care packages were reviewed by professionals within children’s and adult’s social care to ensure the care package met the needs of the client and there was a review that the cost of the package was within the overall financial envelope for that services budget. The Executive Director Children, Families & Education (Debbie Jones) provided assurance to Members that there was a series of systems in place to ensure placements were monitored on a weekly basis and that any requests were reviewed by a panel and authorised by a Director. In addition to the systems, Members were advised that a lot of work was ongoing to ensure that costs were monitored and reduced. Members were informed by the Cabinet Member for Families, Health & Social Care (Councillor Janet Campbell) that a similar process was taking place within adult social care and that all expenditure was being monitored and scrutinised closely.

In the context of the discussion relating to the Spend Control Panel, the Leader stated that the Administration would want such measures to be maintained into the following year as it was recognised that such controls were necessary and needed to be embedded into the organisation.

The Shadow Cabinet Member for Finance & Resources (Councillor Jason Cummings) stated that for a number year’s quarterly finance reports had shown significant overspends, and whilst it was recognised that the previous year had been challenging for a number of reasons the figures contained within the report were alarming. The Shadow Cabinet Member welcomed the intended significant contribution to reserves and the recognition of Cabinet Members that without the impact of Covid-19 the council would still have been a position of requiring government support in order to balance the budget. He stated that he had queried for a number years at the quarter 3 position what the situation of the departmental overspends would be on quarter 1 of 2021/22. In previous years, he stated, he had received assurances that overspends would not be seen in quarter 1 but that these had appeared. With this in mind, he queried whether the budgets set would be met in 2021/22.

In response, the Leader stressed that an important principle would be not just setting the budget but ensuring there were strong financial controls in place and monitoring throughout the organisation would take place to ensure the council remained on track. It was stated that whilst in future year’s assurances had been provided, it was felt that the resolve was very clear and that the Administration was focussed on living within its means. The Cabinet Member for Croydon Renewal stated that he was confident that the council had the right people in place to deliver the required change in addition to the political determination to deliver the budgets.

It was highlighted by the Cabinet Member that there would be different circumstances in place at quarter 1 of 2021/22 including; the end of the eviction ban and the end of the furlough scheme which would increase demand of council services. It was felt that those risks were inherent given the situation in terms of the pandemic but that the council were seeking to mitigate the risks within budget plans. Whilst plans were in place, the Cabinet Member stressed that it would not be possible to provide absolute confidence that the budget exactly as forecasted but assurances were provided that everyone was working to deliver the budget and to ensure the council lived within its means. 

Concerns were raised by the Shadow Cabinet Member for Culture, Leisure & Sport that £32 million of risks could still materialise and should those risks materialise the Shadow Cabinet Member queried how confident the council was in balancing the budget and what measures had been put in place to mitigate against those risks. The Leader noted that the council had been transparent as the risks had been consistently reported. It was further stated by the Cabinet Member for Croydon Renewal that should the council be successful in securing a capitalisation direction then the council would be able to balance the in-year budget. In terms of risks related to Brick by Brick the Cabinet Member noted that a report had been agreed by Cabinet the previous month which set out a clear plan to address the problems faced by the council.

Councillor Jeet Bains stated that there had been large variances at each quarter and queried how confident the Cabinet were that further variances would not occur. The Cabinet Member noted that some of the variances had been discussed earlier in the meeting, such as the reduction in parking income due to the lockdowns and that there were understandable reasons that variances existed. Assurances were provided that due diligence was taking place with Members and officers and it was felt that there was more confidence, following the work which had been undertaken, that the report reflected the likely outcome for the year.

The Shadow Cabinet Member for Families, Health & Social Care (Councillor Yvette Hopley) noted that at table 8 of the report that there were a number of variance in relation to residential care, domiciliary care, nursing care, care costs and direct payments and stated that it was disappointing that the Spend Control Panel had not yet made an impact on overspends. Concerns were raised in relation to care packages as there were around 7,000 residents in receipt of packages with around 2,500 in receipt of specialist complex care, as it was the Shadow Cabinet Member’s understanding that complex care packages would be reduced.

It was stated by the Leader that it was felt that the suggestion that the Spend Control Panel had not been effective in stopping spending was inaccurate. Furthermore, she highlighted that in previous years quarterly reports had shown greater variances in social care spending. In response the Cabinet Member for Croydon Renewal also noted that the table referenced by the Shadow Cabinet Member was in relation to variances over £500,000 and those cited were within 25-65 Disability which had shown improvement between quarter 2 and quarter 3.

The Cabinet Member for Families, Health & Social Care highlighted that the council was working to correct its financial position and was awaiting a decision on its request for a capitalisation direction. Concerns were raised that the Shadow Cabinet Member was suggesting that vulnerable residents would be at harm as the council was not putting residents at harm. It was stressed that every placement was being reviewed as it was recognised that the council spent in excess of the London average on placements.

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To

1.     Note the current general fund revenue outturn forecast at the end of the quarter 3 of 2020/21 of £64.7m overspend, after the inclusion of both anticipated and received Covid19 funding from the MHCLG of £41.9m;

2.     Note that there are a number of risks totaling £31.8m that could materialise which would see the variance increase further. These are within services due to the current pandemic, potential impact from finalisation of the 2019/20 accounts and in relation to groups structures particularly around interest income from Brick by Brick. Should all of these risks crystalise the total forecast overspend would increase to £96.5m by the year end.

3.     Note the details of the monthly Covid19 impact submissions being made to the MHCLG and the details of the financial support that is available to the council in light of Covid19 as outlined in section 6 of the report.

4.     Note the work being undertaken by the Spending Control Panel and Finance Review Panel to reduce the overspend this financial year.

5.     Note the HRA revenue position of a £0.5m forecast overspend against budget.

6.     Note the revised capital outturn projection of £187m for the general fund and HRA is forecast to be an underspend of £117m against the revised budget.