Derby City Council

Executive Scrutiny Board examines the £12m budget gap: a different way of planning, or a total surprise?

In a previous article “The £12m gap in next year’s Council budget is more concerning than the A52 overspend. The financial planning system is “out of control”.”  I reported on the latest plan that showed that for 2019/20 a £12m “hole” had opened up in the budget. This was the subject of the Executive Scrutiny Board last night.

Don McLure, the Chief Financial Officer answered many questions that tried to understand why, so soon after the previous 2019/20 plan was presented, was there such a big difference.  In summary he said:

“I would suggest, me coming in, afresh, looking at what we’ve got in front of us….I’m presenting the numbers in a different way – my way, rather than a “previous way” “

The projected overspend splits into 4 main headings

Adult Social Care £4.9m

This £4.9m pressure was “managed” in 2018/19 by the use of specific reserves however the longer term position into 2019/20 was not addressed, satisfactorily

McLure confirmed :

“We always knew that the gap would need to be plugged”

Children’s Services  £4m

Cllr Russell, who was a Cabinet Member in the last administration said, relating to how the plan was set earlier in the year

” Children’s Services would be able to “consume their own smoke,” in effect. They would be able to maintain a zero baseline, so pressures could be absorbed through measures that would be put in place. But what’s been revealed since is that’s not really achievable due to increased demand”

Even for 2018/19 McLure confirmed that the Council is “….already forecasting significant overspend”

Staffing savings £2.43m

After just 3 months of the current financial year McLure stated

” We now know that we’re not going to get anywhere near that saving”.

The savings were going to come from improved attendance hours and dealing with poor performing staff.  McLure explained that the Council has ” a significant number of underperforming officers” and that the plan was to “take action to accelerate exits”.  The problem has been that the number has been considerably lower than expected, and that the underperforming staff have been in key posts ( ~ 10) which has meant that those posts have had to be re-filled resulting in no saving. ( Comment : The saving must have assumed that underperforming staff were in jobs that were not required so did not require back-filling) 

This gap for 2018/19 has been “plugged” by a number of one-off savings

  • £200k – staff “buying” additional holiday
  • £200k – savings in Adult Social Care as some services transferred to the private sector
  • £800k – early pension payment of Derbyshire County Council
  • £600k – Accounting adjustment ‘ accrual’ – no longer required.

1% additional Pay award £1m.

The original plan was for a 1% pay award. In Feb/March, the national agreement was for a 2% award. As Derby City Council fix the budget in January, which is unusually early, then this additional amount missed the plan setting deadline.

Comment

Some of the Labour members of the Board were trying to tease out that growth after the budget setting was the cause of the gap and therefore not known about. Cllr Eldret had said in a previous DT article that “The gap they’re talking about, we’d been predicting that. None of this was a secret, none of this can be a surprise.” And yet it seemingly was something of a surprise?

The Conservative and Lib Dem members did little to probe on this subject.

Don McLure was strongly implying that he was approaching budget setting from a much more prudent perspective,..”my way, rather than a previous way” which had resulted in this re-evaluation of the plan.

The staff savings sounded extremely ambitious and speculative – perhaps too high risk to be have been included.

Financial planning is not an exact science in any business. The major cost drivers in the Council are around Adult Social Care and Children’s services which are demand led ,can be volatile and therefore difficult to predict. Council’s have been criticised in the past for setting “loose” budgets so it is entirely appropriate that cost management is challenging.

When does “challenging” become “reckless”? When does it become political? When is it poor planning vs the benefit of hindsight? Difficult to say, and the Scrutiny Board got nowhere near clarifying that.

Legally, the Council only has to set a balanced budget for the immediate financial year ( 2018/19), thereafter it can show gaps which need to be closed nearer the time for future years. The last plan from earlier this year, showed a balanced position for 2019/20. Given the national concern over Social Care budgets then one would have expected that it would have been almost impossible to have contained the continued demand rise given relatively constant funding budgets; a prudent planning assumption would have been to have expected more growth.

In my opinion, the assumptions made in the plan, on these subjects, were unrealistic and did not reflect what could easily have been forecast at the time. As the new Chief Financial Officer is presenting the numbers in a “different way”, it is becoming more realistic. This gap does seem to have been a surprise, and that is not good for anyone.

Whether it was politically driven? Who knows?

Postscript

On reflection, I would change the title of my previous article to “The financial planning system was out of control”. However this is nothing to do with the change of political adminsitration.

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