MIDDLESBROUGH COUNCIL

Budget and Balanced Scorecards – position at Quarter Two 2016/17

Executive Member for Finance and Governance: Councillor Nicky Walker

Strategic Director of Finance, Governance and Support: James Bromiley

15 November2016

PURPOSE OF THE REPORT

  1. To advise Executive ofexpenditure against the Council’s revenue and capital budgets, and its performance overall at Quarter Two 2016/17, and provide a position statement in respect of Treasury Management and General Reserves.
SUMMARY OF RECOMMENDATIONS
  1. That the overall revenue position at Quarter Two 2016/17, namely a forecast underspend of £0.078m(or less than 0.07%)is noted, and that the requested revenue budget virements at Appendices 1 and 2 are approved.
  1. That the overall capital position at Quarter Two 2016/17, namely a forecast underspend of £14.3m(or 29.4%)is noted.
  1. That the Council’s borrowing at 30 September 2016 of £139.6m is noted.
  1. That the Council’s forecast Reserves at 31st March 2017 of £23.1mare noted.
  1. That the performance of Outcome Areas at Quarter Two 2016/17, as reflected within Balanced Scorecards at Appendix 3, is noted, and the consolidated action plan responding to all issues identified in the report, at Appendix 4, is noted and agreed.

IF THIS IS A KEY DECISION WHICH KEY DECISION TEST APPLIES?

It is over the financial threshold (£150,000) / X
It has a significant impact on 2 or more wards
Non Key

DECISION IMPLEMENTATION DEADLINE

  1. For the purposes of the scrutiny call in procedure this report is:

Non-urgent
Urgent / X

1

BACKGROUND AND EXTERNAL CONSULTATION

  1. On the 2 March 2016, the Council approved its revenue and capital budget for 2016/17. Executive received the first post-quarter update on delivery of that budget on 6 September 2016, together with a position statement in respect of Treasury Management and General Reserves.
  1. On 7 October 2014, Executive approved the introduction of Balanced Scorecards across the Council, to replace the previous ‘top-down’ performance management framework for local government, prescribed by Central Government.
  1. Balanced Scorecards were piloted within 2015/16 and reported to Overview and Scrutiny Board. On 21 October 2016, the Executive Member for Finance and Governance approved a revised model for Balanced Scorecards for 2016/17, developed through consultation with Outcome Areas, Corporate Audit and Affairs Committee, and Overview and Scrutiny Board, and informed by feedback received in the Corporate Peer Challenge of early 2016.The Executive Member agreed as part of that report that in line with the Council Improvement Plan, a consolidated Finance and Performance report would be presented to Executive from Quarter Two 2016/17.This represents the first such consolidated report,summarising the overall performance of the Council within the preceding quarter, including:
  • a revenue budget forecast and progress update on savings delivery;
  • issues for the Medium-Term Financial Plan arising from the above;
  • a capital budget forecast and progress on capital schemes;
  • position statements in relation to the Council’s borrowing and its reserves;
  • overall performance, as reflected in Balanced Scorecards, and a consolidated action plan addressing performance issues; and
  • the Council’s current Strategic Risk Register.
  1. As this is the first consolidated report, it is expected that there will be significant refinements in future iterationsto ensure a fully-integrated overview of performance is presented to Executive.

Revenue budget forecast

  1. Based upon information available at the end Quarter Two, the full year forecast expenditure of the Council in 2016/17 is projected to be £115.834m, following the transfer of £1.511m of savings delivered early to specific reserves.This represents an underspend of £0.078m (0.07%), as summarised in the table below.

Directorate / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over/
(under) spend
£’000
Economic Development and Communities / 28,451 / 28,505 / 54
Children’s Services / 27,100 / 28,223 / 1,123
Adult Social Care / 40,548 / 40,374 / (174)
Finance, Governance and Support / 20,848 / 19,999 / (849)
Total Service outturn / 116,947 / 117,101 / 154
Central costs and contribution to Reserves / (1,035) / (1,267) / (232)
Revenue Outturn / 115,912 / 115,834 / (78)
  1. The explanations for the major variances have been agreed with Directorates, and are summarised below together with key issues or achievements.

Economic Development and Communities: forecast budget pressure (£54k)

Economic Development and Communities / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over/
(under) spend
£’000
Economic Development / 7,335 / 7,481 / 146
Supporting Communities / 7,571 / 7,221 / (350)
Improving Public Health / (95) / (272) / (177)
Environment, Property and Commercial Services / 13,639 / 14,074 / 435
Revenue Outturn / 28,450 / 28,504 / 54

Economic Development

  1. There is a pressure of £87k relating to the provision of Orange Pip Market, which is supporting the successful regeneration of Baker and Bedford Streets. The Outcome Area has requested that provision is made within the Medium Term Financial Plan (MTFP) to cover costs in future years.
  1. Additional income (£100k) is anticipated within Development Control, mainly associated with major planning applications.
  1. There is a pressure of £193k within the Passenger Transport Service, due to an increase in demand for home to school and adult social care transport. Again, provision has been requested from the MTFP to cover costs in future years.
  1. Income within Transport and Infrastructure is significantly lower than budget, resulting in a pressure of £136k. This has been partially mitigated in 2016/17 by the use of one-off grants and developers contributions (£90k). However, unless other income streams are identified, this pressure will continue in future years.
  1. Over the remainder of the financial year 2016/17 Economic Development will endeavour to identify mitigating savings in order to balance off these pressures, and prevent the service overspending in-year.

Supporting Communities

  1. Staffing savings of (£397k) are forecast, of which £250k have been identified as the early achievement of 2017/18 savings targets. In addition, a further saving of (£130k) is forecast on supplies and services.
  1. Planned investment of £116k is forecast in relation to the Selective Landlord Licensing project, with the aim of improving local neighbourhoods, and which will be funded in 2016/17 from savings elsewhere in the Supporting Communities budget. Additional budget has been requested as part of the MTFP process from 2017/18 to cover this cost.

Improving Public Health

  1. Public Health: Capital costs for the Health and Wellbeing Hub (Dundas House) have increased by £130k and it is proposed that these costs befunded from the Public Health Grant, unless sufficient and appropriate resources can be identified from existing Economic Development and Communities capital budgets.
  1. The provider of the sexual health contract will refund the Council (£142k) for underperformance and penalties relating to the 2015/16 contract.
  1. There are a number of budgets projecting small-scale savings, which bring the total projected underspend within Public Health to (£80k). This saving will be transferred to the Public Health reserve at year-end.
  1. Public Protection: Savings totalling (£177k) are forecast, mainly on staffing costs. Of this, £108k relates to the early achievement of 2017/18 savings targets.

Environment, Property and Commercial Services

  1. Environmental Services:As reported at Quarter One, there was an 8% increase in overall waste tonnages during 2015/16, which has led to a forecast pressure of £200k on the Waste Disposal budget. It has been requested this pressure is reflected in the MTFP for future years. It has been indicated previously that tonnages were continuing to increase in 2016/17, however further detailed analysis indicates that this is no longer the case, and there will no further increase in the pressure in 2016/17.
  1. A pressure of £60k is forecast in relation to the annual maintenance costs of streetscene work in Middlehaven. Funding to cover this pressure in future years has been requested from the MTFP.
  1. Property and Commercial Services: There is a forecast pressure of £120k on the Ayresome Industries budget, due to a reduction in income. A full review of service provision is required to address this. The pressure is fully offset by increased income in the other areas within Property and Commercial Services (£120k).
  1. Leisure Trust: As detailed at Quarter One, there is an in-year pressure arising from one-off costs in 2016/17, due to timing issues relating to the transfer of Leisure Services to Trust status, and the requirement for investment to deliver future savings. The transfer is expected to deliver significantly more savings than the budgeted target over the life of the transfer. The projected in-year pressure has increased slightly from the figure reported at Quarter One, and is now estimated at £175k.This is a one-off pressure and will not reoccur in future years. Following a change in management responsibility, a virement is requested to transfer this budget to Public Health.
  1. During the remaining months of the 2016/17, Environment, Property and Commercial Services will attempt to identifyand deliver mitigating savings in order to balance off the forecast budget pressure and result in a balanced budget position at year-end.

Children’s Services: forecast budget pressure £1.1m

Children’s Services / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over/
(under) spend
£’000
Learning and Skills / (800) / (635) / 165
Safeguarding and Children’s Care / 27,708 / 28,666 / 958
Revenue Outturn / 26,908 / 28,031 / 1,123

Learning and Skills

  1. A pressure of £142k is projected, linked to support service based savings targets dating from 2015/16 that have been identified as no longer deliverable following review. It will be proposed that this pressure be addressed through the MTFP for future years.
  1. The appointment of an interim Director of Children’s Services has created an expected pressure of £53k, andwill be funded by savings totalling (£55k) on staffing and supplies and services budgets.
  1. The service will continue to identify and implement mitigating savings to reduce the budget pressure in Learning and Skills and deliver a balanced budget position at year-end.

Safeguarding and Children’s Care

  1. Delays in the implementation of proposals to achieve 2016/17 savings targets, linked to the recent OFSTED review, are expected to result in a budget pressure of £689k.
  1. There has been an increase of 20 Looked After Children and one new secure placement since Quarter One. All of these children have been placed in the Independent sector, and a pressure of £384k is forecast for the year. At the current time, in-house fostering provision is at capacity, so the service is developing strategies to address this pressure. Active budget monitoring of these areas will continue throughout the year to ensure that the effects of this trend are monitored, and possible mitigating actions implemented.
  1. The above pressure is partially mitigated by a reduction in the costs of Connected Persons, Residence Orders and Special Guardianship Orders placements, creating a projected saving of (£112k). A saving is also projected on social worker salary costs (£227k).
  1. There is a projected pressure of £318k on the Resources Service, including a pressure on in-house Children Homes. There has been an increase in staffing costs to support an increase in the number of Children with Disabilities and Looked After Children to maintain placements,alongside preventative work with families.
  1. A saving of (£173k) is projected within Specialist Services due to staff vacancies and contract savings. This is partially offset by a pressure of £79k on the Adoption service, resulting from an income shortfall on the sale of adoption places.
  1. The Outcome Area is implementing a new model of practice, based on a ‘believe in families’ approach. This will take time to implement, but the service is committed to this and is investing in staff development to drive this change through. This will be achieved by focusing on the development of a Children’s Hub, increasing the use of a Family Group Conferencing Approach, improving the commissioning of placements to improve choice and reduce costs, remodelling the Resources Service, and investing in a foster carer recruitment strategy to increase in-house capacity.
  1. It is proposed that a panel be instituted, chaired by the Strategic Director of Finance, Governance and Support, to monitor and scrutinise spending decisions within Safeguarding and Children’s Care. It is intended that this panel will assist the service in reducing expenditure and formulating savings proposals, with the aim of reducing the budget pressure in 2016/17 and delivering balanced budget positions in future years.

Adult Social Care: forecast budget underspend (£0.174m)

Adult Social Care / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over/
(under) spend
£’000
Revenue Outturn / 40,757 / 40,583 / (174)
  1. (£469k) of recurring budget savings that had not been reflected at budget setting were identified as part of the analysis of the 2015/16 underspend. These will produce a budget saving in 2016/17 and then be removed from the budget as part of 2017/18 budget setting.
  1. Early delivery of savings associated with the closure of the ASPIRE service has resulted in a projected saving of (£140k).
  1. A saving of (£612k) is expected on purchased care budgets as a result of updated practice guidance, improved quality assurance processes and an increased focus on reablement and reviewing. This is an early achievement of the 2017/18 savings target.
  1. Work has taken place to update the Council’s assessment of the potential impact of the National Living Wage on care costs up to 2020. An up-to-date assessment is reflected in the MTFP section this report.
  1. Early delivery of 2017/18 budget savings identified above totals £1.221m. It is proposed that these early savings be transferred into the Change Fund, in order to support future service transformation.

Finance, Governance and Support: forecast budget underspend (£0.8m)

Finance, Governance and Support / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over/
(under) spend
£’000
Revenue Outturn / 20,745 / 19,896 / (849)
  1. Capital Financing:A pressure of £814k is forecast due to unachievable savings targets set in the 2016/17 budget. This has been addressed in the MTFP for future years. A further pressure of £517k is expected as a result of the need to borrow an additional £10m (following a further review and re-assessment of the short term/long term borrowing portfolio), paying a higher interest on borrowing than forecast (owing to the interest rate changes prior to the BREXIT referendum), additional minimum revenue provision (MRP) costs, budgeting errors, and lower than expected income from the Street Lighting Invest to Save scheme. However as part of an on-going review into the profiling of MRP costs, it has been calculated that the council can reduce the charge in 2016/17 by (£1.5m). Detail on the revised approach to the MRP will be brought forward as part of the Prudential Indicators report to Council on 1 March 2017.
  1. Welfare & Benefits: There are projected savings within this budget due to an increased level of recovery of Housing Benefit overpayments (£136k), increased income from Council Tax court cost recoveries (£390k) and staff savings within Community Support (£50k). As reported at Quarter One, (£531k) of these savings are recurring and these have been included in the MTFP. There is also a projected saving of (£290k) on the Community Support budget, which it is requested be transferred into a new Hardship Fund for Council Tax.
  1. Marketing and Communications: A pressure of £100k is forecast. The Council has subsequently reviewed its requirements for the Marketing and Communications service and reduced the savings target for this area by £100k from 2017/18 onwards. This has been reflected in the MTFP.
  1. Legal Services:An additional pressure of £250k is projected due to a further increase in the number of child care cases and subsequent court costs. It is requested that provision is made in the MTFP to provide funding to allow remodelling of the case management approach over the next 18 months.
  1. Senior Management:There is a projected saving of (£121k) on this budget, mainly due to the post ofExecutive Director of Commercial and Corporate Services being held vacant following the senior management review.
  1. Other savings:Further savings totalling (£333k) are anticipated across Finance, Governance and Support. These are mainly one-off staff savings in 2016/17 through posts being held vacant, pending implementation of reviews, and savings on supplies and services.

Central costs: forecast budget underspend (£0.2m)

Central costs / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over/
(under) spend
£’000
Revenue Outturn / (1,035) / (1,267) / (232)
  1. Savings have been identified as a result of the receipt of unbudgeted top-sliced New Homes Bonus Grant (£96k), and lower than expected contingency-backed Concessionary Fares costs (£119k).There is also a projected saving of (£61k) on the Added Years Pensions Increases budget, due to the decrease in the numbers of ex-employees.

Savings Delivery

  1. The following table summarises the success achieved in delivering agreed savings targets required to deliver a balanced budget in 2016/17. The overall performance demonstrates the ability of Directorates to respond to challenging targets. Where savings shortfalls are forecast, alternative savings have been identified so that there will not be an overall budget pressure in 2016/17.

Directorate Savings Delivery / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over/
(under) spend
£’000
Economic Development and Communities / 6,043 / 6,043 / 0
Children’s Services / 2,454 / 1,765 / (689)
Adult Social Care / 1,859 / 3,080 / 1,221
Finance, Governance and Support / 3,731 / 2,917 / (814)
Total savings delivery / 14,087 / 13,805 / (282)
  1. The savings which will not be delivered in Children’s Services and Finance, Governance and Support have been analysed and identified as unachievable. They have therefore been written out of the MTFP in future years.

Medium-Term Financial Plan

  1. The following issues have been identified by Directorates for inclusion in the forthcoming update of the MTFP, which will be included within the first refresh of the Strategic Plan 2016-20 to be considered by Council on 30 November 2016, and the effect on the overall budget gap reconciled.

Outcome Area / Issue / 2017/18
£’000s / 2018/19
£’000s / 2019/20
£’000s
Economic Development / Integrated Transport Unit - Demand / 200 / 200 / 200
Orange Pip Market / 113 / 113 / 113
Supporting Communities / Selective Landlord Licensing / 142 / 142 / 142
Learning and Skills / Unachievable Savings / 142 / 142 / 142
Adult Social Care / Additional capacity to improve Social Work practice / 120 / 120 / 120
Confirmed demand estimate for 2019/20 / 0 / 0 / 322
Estimated pressure for National Living Wage / 1,055 / 1,956 / 2,844
Potential pressure re: Night Working legislative change / 50 / 48 / 47
Environment, Property and Commercial Services / Investment in Suez Plant / 179 / 179 / 179
Streetscene work in Middlehaven / 60 / 60 / 60
Finance, Governance and Support / Legal – Child Care Cases / 250 / 150 / 150
Workforce Development / 139 / 139 / 139

Capital budget forecast

  1. The Council continues to invest in the development of Middlesbrough to create a Fairer, Safer, Stronger Middlesbrough by 2025. The budget for 2016/17 set out a planned investment of £48.5m in the town through the Council’sown resources and external funds, continuing to support the development of the town as the vibrant centre of the Tees Valley.
  1. Expenditure at Quarter Two 2016/17 is summarised below, together with a full-year forecast, based upon the position at 30 September 2016.

Outcome Area / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over/
(under) spend
£’000
Economic Development / 27,021 / 19,445 / (7,576)
Supporting Communities / 17 / 17 / 0
Improving Public Health / 750 / 930 / 180
Learning and Skills / 4,502 / 1,975 / (2,527)
Safeguarding and Children’s Care / 425 / 5 / (420)
Social Care / 2,705 / 2,559 / (146)
Environment, Property and Commercial Services / 6,563 / 5,967 / (596)
Finance, Governance and Support / 6,535 / 3,340 / (3,195)
Total / 48,518 / 34,238 / (14,280)
  1. Delivering the Investment Strategy to programme is a crucial part of the Council’s MTFP, and will deliver both physical benefits to the Borough and an improved financial position through increasing the town’s economic base and efficiency savings. The forecasted level of underspend against the agreed Investment Strategy at Quarter Two is therefore concerning. The Council will formally implement a revised programme and project governance structure in November 2016 that will in future ensure that all projects adhere as far as practicable to agreed targets for scope, time, cost and benefits. As part of this, the newly-established Project Management Office will co-ordinate a review into the current position to identify the reasons for and impacts of delays, particularly in respect of the MTFP position. The key areas of underspend are shown in the table below.

Outcome Area / Project / Full Year Budget
£’000 / Full Year Forecast
£’000 / Over /
(under) spend
£’000
Economic Development / Gresham Phases 1&2a / 4,386 / 2,301 / (2,085)
Middlehaven Dock Bridge / 2,953 / 2,599 / (354)
Gresham
Street Lighting (Invest to Save) / 2,500 / 1,300 / (1,200)
Town Hall Venue Development / 3,260 / 2,017 / (1,243)
Housing Delivery Vehicle / 800 / 180 / (620)
Learning and Skills / Devolved Formula Capital / 405 / 204 / (201)
Supported Capital Expenditure / 1,188 / 159 / (1,029)
LA Capital Maintenance / 775 / 241 / (534)
Basic Need Allocation / 763 / 0 / (763)
Safeguarding and Children’s Care / Children’s Care Capital Investment / 425 / 5 / (420)
Finance, Governance and Support / IT Strategy / 5,391 / 3,117 / (2,274)
IT Investment in Partnership Services / 630 / 157 / (473)
Tees Valley Broadband / 264 / 66 / (198)
Centre Square Investment / 250 / 0 / (250)
  1. A revised Investment Strategy will be included within the first refresh of the Strategic Plan 2016-20 to be considered by Council on 30 November 2016. This will be used as the base for future control and monitoring of the capital programme and its impact of the Council’s revenue budget.

Treasury Management