Agenda item

Cath Head (Head of Finance Operations) and Joe McKay ( Acting Chief Accountant) were in attendance for this item.

1.    Mr Collins, Deputy Leader of the Council, introduced the report on the Council’s 2025–26 financial outturn position. It was reported that the revenue budget had overspent by £22.7 million (1.5% of the total budget), representing an improvement of £13.8 million from the Quarter 3 forecast. The outturn included £1.1 million of roll forwards, including £0.3 million of unspent Member Grants.

The year was described as financially challenging. Underspends had been achieved within Growth, Environment and Transport, the Chief Executive’s Department, the Deputy Chief Executive’s Department and Non-Attributable Costs. Adult Social Care and Health had overspent by £42.9 million due to continued demand pressures, complexity and undelivered savings, while Children, Young People and Education had recorded an overspend of £0.9 million.

Capital expenditure for the year totalled £260.8 million, representing 69% of the approved budget. The underspend included £135.5 million rephased into future years. The report also included a review of the capital programme and proposed amendments to capital cash limits. The position on Schools’ Delegated Budgets continued to reflect pressures arising from Special Educational Needs demand and would be managed through the Dedicated Schools Grant Adjustment Account.

2.    Cath Head (Head of Finance Operations) noted that this was the fourth consecutive year in which the Council had recorded an overspend, and each overspend required drawdown form the reserves,  therefore impacting the Council’s future Medium Term Financial Plan. The importance of managing and mitigating any forecast overspends during 2026–27 was emphasised in order to support the development of the 2027–28 budget and maintain the Council’s financial resilience. Mr Collins noted that the forecasts inherited for 2025–26 had been developed under the previous administration. He emphasised that the administration was now working closely with officers on financial forecasting and delivery, and stressed the importance of each directorate achieving its agreed savings targets to support the Council’s financial position and resilience.

3.    Mr Watts (Deputy Chief Executive) noted that, between Quarter 3 and the end of the financial year, considerable work had been undertaken across the Council, supported by spending controls, to improve the financial position. While a number of directorates had delivered underspends and the Adult Social Care position had improved from that reported at Quarter 3, he emphasised that the effort had been shared across the whole organisation. It was further noted that these measures had not been without consequence. Capacity pressures within the organisation remained significant, as highlighted in the Annual Governance Statement, particularly given the range of initiatives, statutory duties and expectations placed on the Council alongside ongoing financial challenges. Nevertheless, he recognised the substantial work undertaken across the authority to improve the outturn position, while noting that any overspend continued to present challenges for future years' financial planning and resilience.

4.    Further to questions and comments from Members the discussion included the following:

(a)  The Leader highlighted the reported £9 million underspend on Home to School Transport as a positive indicator that improvement measures were having an impact. The Leader also noted that, although general reserves remained below the preferred level, forecasts indicated that they would exceed 6% during 2026–27, providing reassurance that the Council’s financial management was moving in the right direction despite ongoing challenges. In response, Mr Collins noted that the target range for general reserves was between 5% and 10%, ideally towards the upper end of that range. He reported that reserves were currently above the 5% threshold and that budgeted plans were in place to replenish them gradually over the year. It was further noted that strengthening reserves formed part of the wider financial strategy, alongside the reduction of long-term debt, with both contributing to the Council’s overall financial resilience.

(b)  Reference was made to the DOLGE Strategy, which included a principle of avoiding unnecessary growth of the authority and maintaining an appropriate balance between priorities, resources and service delivery. It was noted that the administration had sought to achieve this balance during its first year, contributing to improved financial stability. In response, Mr Collins agreed that the focus should be on delivering efficiencies rather than reducing services wherever possible, emphasising the importance of providing the same services in a more efficient and sustainable manner.

(c)  In response concerns raised regarding the costs associated with unaccompanied asylum-seeking children, it was noted that KCC bore costs relating to former unaccompanied asylum seekers beyond the age at which government funding ceased. Mr Collins commented that it would be fair for the Government to recognise these ongoing costs and provide appropriate financial support to the Council in meeting its responsibilities.

5.    It was RESOLVED that Cabinet agree to:

a)    NOTE the revenue and capital outturn position for 2025-26 detailed in the report, and accompanying appendices

b)    AGREE that £0.8 million (£800,000) is rolled forward to fund existing criteria (per Appendix)

c)    AGREE that £0.3 million (£300,000) is rolled forward to fund member grants (per Appendix)

d)    AGREE the drawing down from General Fund reserves to fund the 2025-26 overspend

e)    AGREE the capital slippage / re-phasing from 2025-26 will be added to the 2026-27 and later years’ capital budgets (per the report)

f)     NOTE the review of the capital programme

g)    AGREE the proposed capital cash limit changes (per Appendix)

h)    AGREE the changes made as a result of a reserves review (per the report)