Agenda item

1.    Mr. Oakford presented the monitoring report on the Council’s financial position at the end of quarter two.

2.    In answer to a question regarding the monitoring of spending, Mr. Oakford explained that much of the Adult Social Care portfolio was demand-led, with statutory responsibilities under the Care Act to meet individuals' needs. 81% of other Councils faced similar challenges to those at KCC in Adult Social Care. Mr. Oakford also recognised the excellent work in Children's services and SEND, which had started to come in under budget. This positive trend, along with some wise investments, had helped reduce the £32 million overspend to £26 million.

3.    Mr. Oakford commented that if the council was to do nothing there would be approximately 18 months before it would be necessary to consider issuing a Section 114 notice. 

4.    Mr. Gough reiterated that the 18-month timeline mentioned by Mr. Oakford was based on current trends, emphasising the need to address ongoing spending pressures to protect reserves. He noted that many authorities shared similar concerns about financial sustainability beyond 2025-2026. Previously, three areas faced significant spending pressures, but two were now on track or underspending due to realistic budgets. However, national spending trends  for Adults, Children's Services, and SEND were unsustainable. While there was progress in Children's Services, detailed reforms were still needed. Adult Social Care remained challenging, exacerbated by employers’ National Insurance changes. Achieving the necessary savings trajectory was essential, with some areas outperforming, but overall savings targets had not yet been met. The focus remained on balancing internal solutions with government reforms to ensure sustainable services.

5.    Mr. Oakford stated that if KCC had stayed on its previous overspending  trajectory, auditors would have questioned the levels of reserves. He noted the Council was on the right path with controls and budget adherence. The same focus was needed for Adult Social Care. The challenge was implementing savings and resisting service pressures.

6.    Mr. Oakford stated that next year's budget assumptions would remain until the settlement agreement was understood. The Government had allocated £1.3 billion to local government, with Kent County Council expected to receive £20 million—£15 million for Adults and £5 million for Children's Social Care. However, this was insufficient given the savings target of over £40 million for Adults alone, not accounting for inflation and other pressures. Incremental costs from increased employer National Insurance and the Living Wage posed further challenges. Providers had stated they face an 11% increase in staff costs, while the Council's budget allowed for only a 3% uplift, leaving an 8% gap. Despite the additional funds, significant challenges remained, though the Council was grateful for the extra support.

7.    Regarding Adults, and the Government recovery grant, Mr. Oakford stated that the total recovery grant was £600 million, which would be quickly exhausted. It was uncertain if it would be available for KCC. Although more funds were allocated to Adult Social Care, as in previous years, the methodology for distribution was still awaited. If the same methodology was used, KCC might receive £15 million, which would be welcomed but insufficient to address the £40 million savings needed for Adults next year. Mr. Watkins added as Adult Social Care grew, despite the savings package, the underlying demographic increase led to higher demand and spending. This year, total demand increased by approximately £100 million, while KCC’s savings were just over £50 million, resulting in a net increase of £50 million. Consequently, more care packages required more funding.

8.    Mr. Watkins addressed the issues regarding mental health services. It was a budget savings area KCC had missed and would likely miss again the next year. This was due to the joint effort required with the NHS. While there had been good referral pathways for immediate mental health crises, there was a lack of step-down care and long-term support, leading to high costs for KCC. The Council needed the NHS to help evolve community provisions for full recovery, which might have involved other community services as well as addressing homelessness issues. KCC planned to hold a summit on mental health to coordinate efforts and develop a plan and timeline. Despite some progress with the NHS, quick changes were unlikely, making it a long-term project. The summit was expected within the financial year to address these complex services.

9.    Mr. Watkins continued by addressing a question regarding beds. KCC had some in-house facilities providing care beds, but utilisation rates had not been met. This often resulted in adults being placed in more expensive external facilities. The reasons varied based on individual circumstances and specific needs that in-house beds could not meet.

10.Regarding the redesign, Mr. Watkins stated KCC was amid a significant project, working with consultants experienced in Adult Social Care across the country. They were redesigning the initial support process to better utilise community resources and avoid immediate full assessments for care home placements. This approach aimed to maximise community support, leading to better outcomes and budget savings.

11.Additionally, KCC was being more proactive and innovative with location-based therapists, focusing on therapy-based interventions to help individuals stay healthier and happier at home for longer. This was a crucial part of the redesign project.

12.Addressing the on the disability charging changes KCC had made this year, Mr. Watkins explained the decision to implement disability charging changes was difficult but necessary. Without it, the £31 million overspend would have been £34 million. This change, already adopted by most local authorities, was essential.

13.Mr. Watkins then addressed a point on prevention. Councillors frequently received emails from charities proposing projects that could save the Council money. In Adult Social Care, Children's Services, and SEND, early action could potentially save money in the long run. However, tracking the impact of preventive measures on demand for other Council services had been challenging. KCC had begun work on a prevention framework to better quantify these benefits for future years. This effort aimed to evaluate the potential care savings from preventive investments. The complexity was further increased by the fact that some savings might benefit other entities, such as the NHS or the Ministry of Justice, rather than the Council itself.

14.Mr. Betts added that KCC might receive nothing from the Recovery Grant due to its allocation based on deprivation levels and average Council tax across all bands. The only recovery options for any local authority in significant financial distress would be borrowing and raising cash and tax revenue thresholds. These options were confirmed in a statement issued by the Minister last week.

15.Regarding the rapid review of ASCH savings, Mr. Oakford stated that there were two elements. Firstly, a review of the undelivered savings for the current year to understand the reasons and mitigate the overspend by 31 March 2025. Secondly, the savings planned with a third party for the next year, targeting over £40 million in Adults savings. The Council awaited details on how these savings would materialise and the implementation plan. Each meeting and review emphasised the need for clear explanations on how and when the savings would be achieved, as stating a savings target without a plan was insufficient.

16.Mr. Oakford emphasised that responsibility and accountability were inseparable. Discussions revealed that current structures made it difficult to pinpoint individual accountability. The third party's work aimed to align responsibility and accountability, ensuring those committed to delivering next year's savings could be held accountable. Currently, accountability primarily rested with senior leaders, but it needed to extend to middle managers responsible for delivering results. While senior leaders, including Mr. Oakford, were ultimately responsible for the budget, accountability must also be distributed throughout the organisation.

17.Mr. Watkins highlighted issues regarding the £22.7 million savings shortfall. The directorate had committed to £54 million in savings and income increases for the year. If achieved, this would add £54 million to the Council's funds compared to business as usual. The BRAG system, an evolution of the RAG rating system, provided monthly reports on these targets. Currently, the Council was on track to not meet £23 million of the £54 million target, achieving only £31 million.. Some projects, like technology-enabled lives and enablement home services, were above target, slightly offsetting the shortfall. However, the net shortfall remained at £23 million. Reasons for the shortfall varied by project. For example, savings in mental health, reliant on NHS collaboration, had not been achieved. Additionally, some local teams did not meet their savings targets. Factors outside managers' control, such as unexpected cases with high care needs, could significantly impact budgets. The Council planned to ensure that locality teams were on track and responsibly recommending care packages.

18.Mr. Baker noted that the ENCT bus pass budget details were received after KCC had already set its budget, making alignment impossible for this year. The DfT determined the amount, which KCC was obliged to pay. There was also an overspend due to emergency work required under the Highways Act.

19.In answer to a question regarding the forecast for the third quarter, Mr. Oakford stated that based on the last two months' data, the forecast suggested stability, though final data, approximately 85% accurate, would be available at the end of the quarter. The new Oracle system, currently being implemented, would provide quicker and more accurate data, allowing for more frequent reviews. Currently, monthly data was reviewed with a  three week delay.

20.Mr. Watkins noted that staff were a fixed cost, with about 80% of the directorate's spending being commissioned. Spending on contracts varied with the number of people and the complexity of their needs, presenting the biggest challenge. Although the number of supported individuals hadn't increased, costs remained high. Regular reports would continue to clarify how much of the spending increase was due to the number of people versus the complexity of their needs.

21.The Chair then requested a brief progress report from each Cabinet Member:

a.    Mrs. Bell - Over the past eight years, nearly 50% had been cut from the Arts budget, and Community Ward budgets had been halved. Despite these reductions, essential services such as Coroners, Trading Standards, Community Safety, the Registration Service, domestic abuse-related death reviews, and public rights of way still required funding. These were statutory duties, leaving limited scope for further cuts.

b.    Mr. Thomas – The position for quarter two remained the same as quarter one. Most of the budget was allocated to waste management. Four key government changes were expected to impact the sector over the next three years: Simple Recycling (focused on food waste collection and separation for significant savings), Extended Producer Responsibility (with a provisional settlement received but requiring future investment), Emissions Trading Schemes (related to energy from waste), and the Deposit Return Scheme (providing monetary incentives to return bottles).

c.     Mrs. Chandler – There had been significant success in reducing costs for the eighteen to twenty-five cohort, partly due to negotiations for continuing healthcare funding from the NHS. This funding was crucial as it continued when individuals transitioned to Adult Social Services. Despite the team's commendable efforts, there had been budget slippage for Looked After Children. Even a small change in the number of placements had caused considerable budget variations, and high placement costs had impacted performance. There was an underspend due to the recruitment of social workers. However, the overall situation was much better than the previous year.

d.    Mr. Love reassured members that the Education Department had done everything possible to get back on course and make savings. He took accountability for the overspend within his department along with nearly £3.5 million in savings delivered.

e.    Mr. Baker - A significant overspend resulted from the Chestfield Tunnel work closure, with ongoing efforts to cover this from the Corporate Contingency Reserve, impacting the high-risk and transport budget. The overspend has been reduced from £4.1 million to £3.8 million since quarter one. Safety-critical work remained a priority. Early signs of stability were now evident, allowing for long-term planning and strategy rather than reactive measures. Despite the overspend, Highways and Transport, was approaching a stable position. Increased income for highways is crucial to align with delivery goals for essential services. 

f.      Mr. Watkins – All efforts were being made to reduce the overspend, with a strong emphasis on achieving further savings in future.

RESOLVED that the Scrutiny Committee note the report.