In a Council Cabinet report to be presented next Wednesday, the Finance Team, headed by Simon Riley, will be reporting a forecast overspend of £12m just 3 months into the 2021/22 financial year.
The majority of which results from “Unbudgeted Emerging Pressures £8.219m” most of which relates to the cost of children in care.
Unpredictable events? No – incompetent budgeting!
The budget for 2020/21 for the whole of Children’s services ( exc schools) was set at £62m.
By 9 September 2020 (Qtr 1 report) , the forecast for the year had already jumped to £69.3m – a predicted overspend of £7.3m
Although the number of children taken into care is unpredictable there is a year on year growth trend. This chart is from the Cabinet papers for 8th September 2021:
At the Cabinet meeting on 16th December 2020, the draft budget for 2021/22 was presented. In para 4.6 it made 2 key statements:
- “The 2021/22 Budget incorporates growth of £8m for children’s social care…”
- “Early indications are that the increase in demand is plateauing as a result ( of demand management initiatives)”
The budget proposed in December 2020 for 2021/22 was £68m, which was increased to £69m by February 2021. A figure just less than the forecast spend in 2020/21 of £69.3m. In effect, no year on year growth!
The growth “incorporated” was calculated from the 2020/21 budget of £62m, not the forecast outturn for 2020/21which was known 3 months prior to the budget being set.
The forecast spend in 2021/22 is now ~ £77m! A growth against the actual spend for 2020/21 of £7m.
It is not unreasonable that Cllrs would have assumed that a budget incorporating £8m growth would be relative to the known, forecast position, for 2020/21 of £69.3m and not from an historical base which was known to be incorrect, of £62m. They would have expected the £8m to cover growth in 2021/22 – this was not the case – hence the reported “overspend”
Setting a more realistic budget of £77m would have meant that the Council would have had difficulty setting a balanced budget – something that the Tory leadership prided themselves on. They had already built in the maximum legal Council Tax increase of 4.99%, and drawing on £2m reserves. The Budget Risk Reserve was expected to be at £7.7m by 31st March 2021 ( as detailed in the report dated 10th February 2021 – just 7 weeks earlier) – a provision of an additional £8m for Children’s Services would have depleted this Reserve to zero – a politically unsustainable position!
[It is worth noting that the Budget Risk Reserve at 31st March 2021 was later reported at the Cabinet on 14th July 2021 to be £18.3m – a jump of £10.6m! There are no explanations in the report as to why there is such a difference and where the money came from.]
This 2021/22 overspend is being covered by raiding various “Covid reserves”, “NHS Income” and a “Business rates smoothing reserve” – all of which were there for other reasons, not to cover poor budgeting.
The budget assumed zero growth in the cost of Children’s Services for the following 2 years ( held at £69m) despite predicting a 4-5% increase in numbers of children requiring care. There will be inevitable overspends in those years.
The Council’s Finances are in a shambles!
The Chief Finance Officer, Simon Riley, and the Cabinet Member for Finance, Cllr Nicola Roulstone, need to explain to the Full Council, and the public, more transparently, the true financial situation of the Council and not rely on this “smoke and mirrors” accounting to hide a dire situation.
Categories: Derby City Council