Agenda item

Purpose of the report:

To provide details of the draft budget and medium-term financial strategy for scrutiny.

Witnesses:

Julie Iles, Cabinet Member for All-Age Learning

Mary Lewis, Cabinet Member for Children, Young People and Families

Liz Mills, Director – Education, Lifelong Learning and Culture

Jacquie Burke, Director – Family Resilience and Safeguarding

Rachel Wigley, Director – Financial Insights

Mark Hak-Sanders, Strategic Finance Business Partner – Corporate Finance

Key points raised during the discussion:

1. The Strategic Finance Business Partner gave an overview of the corporate budgetary position and strategy, focussing on the 2021/22 budget gap and a view of the funding position from 2021/22 to 2025/26.

2. The core planning assumptions that informed the draft Budget were established using the PESTLE Framework for considering political, economic, social, technological, legal, environmental and climate factors. Future demand, inflation and funding were also considered.  Thus, the draft Budget and Medium-Term Financial Strategy were based on an assessment of the likely operating environment for the county council in 2021/22 and over the medium term. The draft Budget was developed in an integrated way across the organisation and was linked with the council’s four new priority objectives and the community vision 2030. The immediate priority for 2021 was to stabilise the council’s finances following the COVID-19 crisis.

3. The Strategic Finance Business Partner stated that the draft Budget contained an £18.3m funding gap for 2021/22.The main areas of the funding gap were £5m in Adult Social Care, £5.9m in Children, Families, Lifelong Learning and Culture, and £5.9m in Environment, Transport and Infrastructure. Funding estimates were to be iterated with the further clarity that was expected before Christmas in the local government finance settlement following a government spending review in November 2020; there was relative confidence that the £18.3m gap would be closed without further directorate efficiencies. Fulfilling the council’s statutory duty of setting a balanced budget for each financial year was to be achieved by refining core planning and funding assumptions, reviewing directorate gaps, and finalising efficiency and transformation proposals. The 2021/22-2025/26 capital programme also needed to be finalised. A final budget was to be presented to Cabinet in January 2021, following the conclusion of a public consultation in December 2020 and equality impact assessments for proposed efficiencies, and approved by Council in February 2021.

4. The medium-term estimates assumed that the Government Fair Funding Review would reduce the council’s funding – estimates suggested that the funding gap would rise to £170.1m over the 5-year period to 2025/26.
5. The Director – Financial Insights gave an overview of the Children, Families, Lifelong Learning and Culture Draft Budget. There were seven strategic priorities for 2020/21, alongside ongoing business-as-usual responsibilities within the Directorate. The Directorate budget, excluding the Dedicated Schools Grant, was £251m, the largest part of that being allocated to Corporate Parenting, followed by Education, Lifelong Learning and Culture.

6. The Medium-Term Financial Strategy for 2021-26 (MTFS) was focused on the key areas of transformation and financial pressures within the Directorate. The Ofsted rating of children’s services continued to be a priority, but there were other financial issues such as expenditure on placements, including Special Educational Needs and Disabilities, and changes within integrated commissioning to deliver and develop the Integrated Care System.

7. Pressures for 2021-22 were £61.6m and efficiencies proposed amounted to £55.7m.  Reductions that still needed to be found over the 2021-26 MTFS period totalled £22.6m and this figure assumed that there would be a spike in Looked After Children referrals caused by COVID-19, which were then expected to reduce from 2022/23.

8. The High Needs Block was a key area of financial risk for the Directorate. For 20/21, there was a grant of £160m, an approved overspend of £24m. This is the budgeted contribution to an offsetting reserve, equivalent to the cumulative deficit to provide resilience in the balance sheet, and an unapproved overspend of £8m. The Directorate’s Capital Programme totalled £3m over five years, for schemes directly delivered by the Service. There were also Directorate schemes of £270.4m over five years included in the Property Capital Budget.

9. The Chairman asked what the key risks and financial challenges faced by the Directorate were in the short and medium terms. The Director –- Education, Lifelong Learning and Culture explained that the main risks were caused by rising demand and the cost of meeting that demand, particularly unit cost. Across the system there were discernible impacts of COVID-19 - such as increased levels of anxiety in children and changes in young people’s needs - all of which impacted unit cost. The best approach to meet challenges was to strengthen the systems already in place: family resilience; the Learner’s Single Point of Access; the SEN strategy; the work on reducing absence and exclusions; and the community family resilience network.

10. A Member questioned how the Directorate could continue to find efficiencies in the same areas over consecutive years. The Cabinet Member for All-Age Learning stated that 90% of Local Authorities were in a comparable position to Surrey with regard to overspends and required efficiencies. The Director – Education, Lifelong Learning and Culture explained that the Directorate was building on the strategies introduced in recent years, e.g. family resilience and the Graduated Response. The Director – Family Resilience and Safeguarding emphasised that the efficiencies to keep within the budget envelope were in line with what the service believed was best for children and what was set out in the initial strategic vision, i.e. children should be helped at the lowest level of need and those who became looked after should be cared for within  the county. The Service was attempting to increase the proportion of permanent staff to improve the experience of looked-after children and contribute to efficiency savings. The Director – Corporate Parenting stated that securing more foster carers was also key to providing service efficiencies. Recruitment had slowed during the pandemic, however there was an aim to return to pre-COVID-19 levels, and this would reduce costs and improve the situation for young people.  The Cabinet Member added that there were restrictions on how the Dedicated Schools Grant could be used, however the council was continuing to lobby the Government for increased SEN funding. The average unit cost in the non-maintained and independent sector was £52k per placement and did not necessarily generate better outcomes for young people. The Service was seeking to increase the capacity of its own specialist settings, which had placement costs of, on average, £16k - £23k, and were therefore more financially efficient. The Cabinet Member emphasised that, as a demand-led service, the Service needed to reduce unit cost whilst guaranteeing outcomes.

11. A Member asked how confident the Directorate felt that the planned savings were achievable, given the repeat need for savings in the same areas of pressure and overspends of the High Needs Block, transport, and family resilience. The Director – Education, Lifelong Learning and Culture stated that a detailed planning stage for the delivery of each of those savings was underway, and each saving was to have a robust plan sitting underneath it.  

12. A Member was concerned about the high value of planned efficiencies in the High Needs Block. The Director – Education, Lifelong Learning and Culture stated that the Directorate was reliant upon a systemic response to ensure savings were achieved. The RAG (red, amber or green) ratings reflected the complexity of the task, however it was anticipated that the ratings would start to improve. A group formed from the school community was working with the Service around inclusion and was aiming to ensure that in September 2021 every child could have their need met within a mainstream or maintained school environment. The Director assured Members that there were large-scale delivery plans sitting behind planned efficiencies.

13. Members asked how confident officers were that the Directorate would find the efficiencies required of it and whether earlier expressions of confidence that the council would close the remaining £18.3m funding gap  assumed that the further £5.9m of efficiencies would be achieved by the Directorate or if the gap could otherwise be closed. The Director – Financial Insights stated that there was a government spending review at the end of November 2020 that provided a high-level provisional overview of likely local government funding. The Director, however, expressed confidence that sufficient funding to close the gap would be provided and thus directorates would not have to find further efficiencies for 2021/22.

Barbara Thomson left the meeting at 11:38.

14. A Member asked what “additional management action” meant and for officers to provide an example of this. The Director – Education, Lifelong Learning and Culture, explained that wider ongoing work was focusing on meeting needs earlier and reducing the need for statutory plans; a fall in requests for statutory plans over the previous 9-12 months indicated that management actions were effective in resolving issues. Further examples were emotional literacy support systems that were being put into schools and the expansion of pathways to employment for post-16 students (the Service was anticipating 100% increase in the number of placements of those schemes by September 2021).

15. A Member asked how the UK’s future relationship with the European Union (EU) was expected to impact the draft Budget and MTFS. The Strategic Finance Business Partner stated that the impact of leaving the EU was one of the legislative and economic factors that was considered in core planning assumptions.  Clarity on the future relationship would be a guiding impact and thus this may need to be revisited. The Director – Family Resilience and Safeguarding stated that staffing was the biggest concern for children’s social care. The Service had engaged with the existing workforce earlier in the year to ensure that staff from the EU had the correct paperwork in place to continue working for the service. In terms of children’s homes and receiving supplies, there was contingency planning in place. Work was underway to ensure that families had the right paperwork in place going forward.  

16. Councillor Clare Curran – declared non-pecuniary interest as non-executive director of Surrey Choices.

Recommendations:

I.              That, subsequent to this meeting, the Children, Families, Lifelong Learning and Culture Select Committee will agree wording for inclusion in the report regarding the draft Budget and Medium-Term Financial Strategy which is to be prepared jointly by the council’s four select committees.

Meeting suspended at 11:55

Meeting recommenced at 12:00