Agenda item

Zena Cooke, Corporate Director, Finance was in attendance for this item.

1) Mr Oakford introduced the report. The report was based on the position in December 2021 and the forecast revenue position, excluding schools and Covid-19, was a £13.9 million overspend. This was an improvement from the previous monitoring report presented to Cabinet. There was decrease of £4.6 million as there was a forecast underspend from Growth, Environment and Transport directorate. Both Adult Social Care and Children’s Young People and Education directorates continued to forecast significant overspends. £10 million had been set aside in a specific reserve for expected pressures; anything above this would need to be met from other reserves, which would add to the pressure on the 2022-23 Budget and would weaken KCC’s financial resilience. Reserves would need to be replenished in future years. Continued urgent action was required to address the overspend to ensure a ‘breaking even’ point by the end of the financial year.

The reported Covid-19 position showed a forecast spend of £36.7 million. There was a corporately held Covid-19 budget of £16.1 million and the remainder of the spend was to be met from the emergency Covid-19 reserve. Work was ongoing to establish which costs were to continue into future years.

KCC set a savings target of £39.4 million to be delivered in 2021-22, of which £30.3 million were forecast to be delivered. This was approximately a £9 million shortfall of savings forecast for the financial year.

KCC’s earmarked and general reserves were forecasting a net draw down of £59.1 million. The draw down reflected the use of the emergency Covid-19 reserves and impact of the forecast overspend if it was not reduced by the end of the financial year.

The capital forecast showed an underspend of £144.3 million, of which £146.3 million was related to re-phasing. It was hoped with the 10 year programme, the re-phasing would not be seen in such numbers. There was a £2 million real overspend in capital spending.

The schools’ delegated budgets had reported a £54 million overspend which reflected the impact of high demand for additional SEN support and high cost per child for high needs placements. The predicted deficit for the High Needs Budget had increased by £49 million during 2021-22.  The high needs deficit was the single most significant financial risk for KCC.

The Treasury management position was consistent with regular reports made to the Governance and Audit Committee.

2) Mrs Cooke said KCC’s gross expenditure is £1.8 billion, of which £1.3billion related to directly procured goods and commissioned services. Therefore, KCC was exposed to inflation risks arising as part of general inflation rises but also as a result of world affairs. KCC already had some challenging targets in the Budget in relation to inflation and the further impact of inflation would need to be watched carefully. KCC’s financial resilience had been strengthened to withstand inflationary increases and other price pressures. KCC had around £8 million spent on energy costs on KCC’s estate and highway infrastructure.  KCC was to continue exploring options around short-term stability on energy prices, with some progress already made via LASER (part of KCC’s Commercial Services) and would continue working on activity to manage energy price increases in the future. Less than £500,000 was spent on fuel. While KCC’s direct spending on energy was relatively small, there would be an impact on supply chains from rising energy and fuel costs. This would include social care providers, bus companies, waste haulage contractors and highways contractors.

Inflation would have a significant bearing on KCC’s capital costs. In terms of financial resilience, KCC’s general reserves were 5% of the net revenue budget (approximately £60 million) and these were required to be held for unforeseen circumstances. Just an additional 2% on £1.3 billion on the procured and commissioned services would increase spending by £26 million. If prices were to escalate there were areas of spending that would need to be looked at to constrain the impact of prices. KCC had a strong record of sound financial management and close monitoring would be continued.

3) In response to a question from the Leader, it was noted:

·         The reduction in the overspend from the previous report to Cabinet was as a result of an underspend in GET due to favourable recycling prices and additional permit and street-work income.

·         Any projected reduction in outturn was welcome but unfortunately, in other areas the overspend had remained static.

4) RESOLVED to note and agreed the recommendations as outlined in the report.