Agenda item

Purpose of the report:

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

Witnesses:

Becky Rush, Cabinet Member for Finance and Resources

Clare Curran, Cabinet Member for Children and Families

Denise Turner-Stewart, Cabinet Member for Education and Learning

Mark Nuti, Cabinet Member for Communities

Rachael Wardell, Executive Director for Children, Families and Lifelong Learning

Marie Snelling, Executive Director for Customer and Communities

Susan Wills, Assistant Director for Cultural Services and Registrations

Rachel Wigley, Director – Finance Insights and Performance

Daniel Peattie, Strategic Finance Business Partner – Children, Families and Lifelong Learning

Nikki O’Connor, Strategic Finance Business Partner – Improvement and TPP/Resources

Mark Hak-Sanders, Strategic Finance Business Partner – Corporate

Key points raised in the discussion:

1. The Cabinet Member for Finance and Resources explained that the council’s draft Budget for 2022/23 contained a gap of £19.5 million, including a £2.2 million gap in the Children, Families and Lifelong Learning (CFLL) Directorate and a £8.6 million gap in the High Needs Block. There was a focus on self-funding opportunities within the Capital Programme, as well as those which would deliver revenue savings in the future. 
2. The Strategic Finance Business Partner – Corporate explained that the budget setting process was underpinned by core planning assumptions developed under the PESTLE Framework (political, environmental, social, technological, legal and economic factors). Funding projections were based on expected council tax, business rate and government grant income. The Local Government Finance Settlement was expected later in the week, which would establish central government funding and provide clarity on the council’s funding position. Each directorate had been asked to identify efficiencies to contribute towards closing the gap for 2022/23 and the medium-term. The Capital Programme was described as being at the limit of what the council could afford. Consultation with residents and stakeholders on draft proposals and Equality Impact Assessments would conclude at the end of December. The final budget was to be presented to Cabinet in January 2022 and approved by Cabinet in February 2022.
3. The Strategic Finance Business Partner highlighted that the budget setting process was built around the Community Vision 2030 and the council’s priority objectives. The draft corporate budgetary position presented net pressures of £71.1 million, which was expected to be offset by an assumed funding increase of £2.4 million and efficiencies of £49.8 million, leaving a net gap of £19.5 million to close. The pressures were largely associated with pay and contract inflation and increased demand for services. Efficiencies which had been rated as red (achievable but challenging and/or complex to deliver) accounted for £11.1 million of the overall efficiencies, similar to the £10.8 million in the 2021/22 budget.
4. At month seven of 2021/22, an overspend of £17 million for the directorate budget envelope was forecast. The overspend was largely across Adult Social Care (£3 million), CFLL (£7.1 million), and the DSG High Needs Block offset (£8.8 million). These were offset largely by an underspend in Environment, Transport and Infrastructure due to an improvement in waste prices. The overall council position at the end of the 2021/22 financial year was expected to be balanced, with reserves supplemented with unused contingency.
5. The Medium-Term Financial Strategy (MTFS) for 2022-27 was based on the same core planning assumptions. The assumed funding gap over the 5-year MTFS was £157.4 million, which reflected the anticipated budget requirement and spending pressures and the expected funding reduction from 2023/34.
6. The Select Committee was informed that the total contingency available for 2022/23 was approximately £58 million, which would be supplemented by any used amounts from the 2021/22 budget.
7. Consultation had found that protection of funding for services that support vulnerable residents, including adult social care and services for children, was of high importance to residents, as were joining-up services to improve outcomes, putting vulnerable people at the heart of decision-making, and greater involvement of residents in decision-making and delivery affecting local places. Residents also supported the shift to early intervention/prevention, wanted guidance on how they could make a difference in their areas and wanted the council to lobby Government for support for the county to transition to a greener future. A call for evidence which was open to all stakeholders would run until the 28 December and its findings would be included in the final budget report.
8. The Director – Finance Insights and Performance outlined the Twin Track approach to budget setting to be used by the council going forward.
9. A Member asked how much of the current financial year’s red ragged efficiencies were in the CFLL Directorate Budget and how much of that sum was likely to be saved. The Strategic Finance Business Partner – Corporate stated that there was a correlation in the distribution of the red-rated efficiencies between the two financial years, as in 2021/22 they were also predominantly found in adult social care and the CFLL Directorate. It was highlighted that a lot of the in-year overspend pertained to the ongoing impact of the COVID-19 pandemic, which had not been anticipated when that Budget was agreed – adequate contingency was available to meet that pressure. The Strategic Finance Business Partner – CFLL stated that £3.6 million of undelivered efficiencies were expected within the Directorate in the 2021/22 financial year, mostly associated with levels of social care demand.
10. A Member queried how much of the adult social care precept had been levied already and how much remained. The Strategic Finance Business Partner – Corporate stated that the 2022/23 draft Budget assumed no use of the adult social care precept. In the 2021/22 Budget, of the available 3%, a precept of 0.5% was used; the Spending Review earlier in 2021 provided a further flexibility of 1% per year over the course of the three-year Spending Review period, making an adult social care precept of 3.5% available for the 2022/23 Budget.
11. The Member asked to what extent a reduction of the government grant funding over the medium term had been factored into the budgets for 2022/23 and 2023/24. The Strategic Finance Business Partner explained that for the 2022/23 budget there was no such funding reduction expected, but from 2023/34 onwards there was a high-level assumption that government funding for the council would disappear altogether over the course of a five-year transitional period. This was suspected to be somewhat offset by an increase in the council tax base.
12. A Member asked how the council-wide draft Budget and MTFS would affect the delivery of the Community Vision 2030 and the council’s four priority objectives. The Strategic Finance Business Partner – Corporate stated that the council set its budget with regard to the Community Vision 2030 and the four priority objectives. This was shown through decisions regarding whether directorates were required to close budget gaps in their entirety or whether additional funding could be directed to those services. Thus, it was unlikely that the budget gaps for 2022/23 for Adult Social Care, CFLL and DSG High Needs Block would be closed through further efficiencies. The Member queried how the draft Budget and the MTFS took account of the resident’s priorities. The Strategic Finance Business Partner stated that the consultation with residents which took place prior to the draft Budget being presented to Cabinet reflected resident’s key priority of protecting the services that delivered to the most vulnerable residents. The total investment into such services had increased at a higher rate than the council’s total funding.
13. The Member asked how the future funding had been estimated in the draft Budget, the level of confidence in those estimates, the accuracy of previous estimates and whether any further clarity around the Local Government Finance Settlement had been received since publication of the draft Budget report pack. The Strategic Finance Business Partner said that the final funding position of the previous financial year was as had been assumed, the one exception was the additional COVID-19 funding included in the Settlement. The current financial year was difficult to predict due to the varied mechanisms central government could utilise to distribute the £1.6 billion of additional local government funding included in the Chancellor’s Autumn budget.
14. The Executive Director for Customer and Communities introduced the Customer and Communities draft Budget for 2022/23. The net budget for the Directorate was £10.8 million, including income in excess of £10 million. Directorate pressures, largely associated with pay inflation, were £0.7 million, adding this to the Directorate’s share of the corporate funding gap resulted in an overall gap of £0.9 million. The Directorate had, as a result, identified £0.8 million of efficiencies, which left £0.1 million of the overall gap left to close. The draft Budget assumed service income was to return to pre-COVID levels, this remained a risk and challenge which would be closely monitored. The draft Capital Programme contained £34 million of investment into the Libraries Transformation Programme – a five-year programme to modernise libraries had been agreed at Cabinet in November 2021.
15.  A Member enquired about the basis of the assumption that service income would return to pre-COVID levels and the degree of confidence in that assumption. The Strategic Finance Business Partner – Improvement and TPP/Resources highlighted the challenge of this assumption and highlighted that there had already been positive movements in the latter half of the 2021/22 financial year, especially in the Registration service, although £500,000 of COVID funding had been used to support the Directorate in the 2021/22 financial year due to a sustained loss of income.
16. The Member asked about the terms, methodology and the objectives of the comprehensive review of the Heritage Service. The Assistant Director for Cultural Services Libraries and Registration explained that the review was based on ensuring value for money within the service whilst improving the offer, such as through digitalisation.

Fiona White left the meeting at 11:15.

17.  A Member raised the issue of a broken lift at Weybridge Library that had been out of order for over a year, preventing hire income. The Cabinet Member for Communities told the Member this would be followed up and he would respond to the Member directly. There had been a similar issue with a lift in Guildford Library and there was great difficulty obtaining the correct parts in order to fix the lifts. The Executive Director for Customer and Communities added that there had been a backlog of maintenance issues at the council’s libraries, which were being addressed with Land and Property colleagues. A Member asked for an update on the broken lift in Guildford Library. The Cabinet Member for Communities explained that there had been a number of issues associated with fixing this lift and in the long-term, it would need to be replaced. The Cabinet Member agreed to provide an update to the Member later that day, which would include an estimated timeline. 

Fiona White rejoined the meeting 11:22.

18.  The Cabinet Member for Children and Families introduced the CFLL directorate pack by highlighting the increased demand for the Directorate’s services. Significant pressures arose from staffing costs, recruitment and retention of social workers and children’s placements in the 2021/22 year, which had been factored into the 2022/23 draft Budget. The Cabinet Member for Education and Learning explained that there was rigorous monitoring of the progress of the transformation programme aiming to bring High Needs Block spending back into balance within the next five years. There had been discussions with the Department of Education (DfE) regarding a Safety Valve agreement. A review was underway to reduce home to school transport spending and increase independence for young people and was to be taken to Cabinet on 14 December 2021.
19.  A Member asked what impact government’s SEND review could have on the assumptions around funding for the 2022/23 budget and the MTFS. The Strategic Finance Business Partner – CFLL explained that the current assumptions around ongoing funding for the High Needs Block included an 8% year on year increase in funding, which was based on previous years and was likely to be broadly correct for the next couple of years. Following this, the indications suggest that it could then reduce from the current level.
20.  A Member brought attention to a number of cases where eligible children were still yet to have been provided with home to school transport for the current academic year, which has resulted in children missing their education. The Executive Director for Children, Families and Lifelong Learning acknowledged the situation and recognised the impact this was having on some families. The number of eligible children without transport was lower than in previous years and the commissioning team continued to work hard to try and resolve the issue on a case-by-case basis. The issues were usually due to negotiations with providers or families about suitable provision. The Cabinet Member for Education and Learning added that the review was considering the council delivering some provision itself and utilising community vehicles and was to ensure parents were well informed about the home to school transport offer.
21.  A Member asked how the draft Budget and MTFS would meet the needs of the Directorate’s service users by improving outcomes whilst addressing its key financial challenges and the council’s strategic priorities. The Executive Director highlighted that the approach taken was about working differently to better meet families’ needs at a lower cost, such as through the prior introduction of the new Family Safeguarding Model and the creation of more in-county placements. The Member asked officers to explain the main drivers of pressures in the draft Budget and MTFS. The Executive Director stated that children’s services were yet to witness the reduction in demand expected as a result of practice changes implemented prior to the pandemic, although they had mitigated demand; during the pandemic, the council had more children in care, as well as an increase in the number of children with additional needs supported in education and with Educational Health and Care plans. The Member highlighted the challenge of the high number of agency social workers and the financial pressure this created. The Executive Director stated that agency workers cost around £23,000 more than permanent staff and some of the planned efficiencies  aimed to reduce this pressure in a number of ways. An improved OFSTED rating would likely improve the recruitment and retention of permanent staff. The Member asked what changes to the level of need and demand were expected in the next financial year and MTFS. The Executive Director explained that the Directorate had experienced an increase in the level of need and demand as a result of the pandemic.
22.  A Member sought further clarity and context around the efficiencies rated red and amber and which would result in service reductions. The Member questioned the Service’s readiness of delivering the substantial efficiency related to the No Wrong Door programme, as well as many other efficiencies related to looked after children. The Executive Director explained that efficiencies had been focused on areas where the Service was facing the greatest financial pressures. The Director – Corporate Parenting shared that through the shadow-form/pilot No Wrong Door service, a significant number of children had been diverted from entering care. The planned efficiencies were described as challenging and ambitious, but there were some which were more likely to be achieved than the table suggested, such as quality and performance staffing. The Executive Director shared that the placement costs for Unaccompanied Asylum-Seeking Children (UASC) were covered by the Home Office, but the increased demand on social workers was unmet.
23.  A Member asked about the numbers of children who had secured placements in non-maintained independent school settings and the resulting cost to the Education Service. The Executive Director stated that there was a significant cost difference between a non-maintained independent setting and a maintained special school of around £30,000 per placement. At the pre-16 stage, the Education Service had over 1,000 children in non-maintained independent settings and a further 277 young people at post-16. The Cabinet Member for Adult and Learning added that the Service had a stepping down policy to move children into Surrey schools where appropriate.
24. A Member asked how many 18-25 year olds could be impacted by the planned efficiency of no longer funding housing provision which had originally been commissioned for care leavers but was not being allocated accordingly by District and Borough Councils, and in what way they might be impacted. The Executive Director explained that this would reduce the housing options for some young adults, but these were young adults to whom the council did not such duties as it did care leavers.
25. The Member asked how the planned efficiencies related to the home to school transport review might adversely affect learners. The Executive Director explained there were statutory requirements, such as in respect of the length of journeys, which were always complied with. The planned efficiency was focused on exploring alternative transport options for these children which could reduce costs, whilst ensuring suitability and building independence.
26.  A Member asked which of the efficiencies directly impacted on areas of delivery where performance was significantly below target. The Executive Director stated that performance should not be impacted in any of those areas, as there would be no reduction in staffing. The Member questioned whether there was a need for additional staffing in these areas, especially Educational Health and Care plan caseworkers. The Executive Director stated that stability and training of staffing was more important than an increase in the number of staff.

Actions:

i.              Strategic Finance Business Partner – Children, Families and Lifelong Learning to share the number of children with SEND placed in non-maintained independent settings with the Select Committee.

ii.            The Executive Director for Children, Families and Lifelong Learning to provide the number of 18-25 year olds with no prior Surrey County Council contact that would be affected by the planned efficiency.

Recommendation:

i.              After the meeting, the Committee shall agree wording for inclusion in a joint report from the council’s Select Committees to the Cabinet in respect of the draft Budget 2022/23 and Medium-term Financial Strategy to 2026/27. That wording shall be drafted under the oversight of the Chairman and Vice-Chairmen and then shared with the Committee for agreement.