Agenda item

As the first step in its Budget Scrutiny the Committee is to be given an introduction to the broader budget-setting context, specifically in relation to the pressures and the Council’s approach to savings. Cllr Dan Levy, Cabinet Member for Finance, Lorna Baxter, Director of Finance, and Kathy Wilcox, Head of Financial Strategy have been invited to present this item.

The Committee is recommended, having considered the report and responses to questions, to AGREE any recommendations it wishes to make to Cabinet arising therefrom.

Cllr Dan Levy, Cabinet Member for Finance, Lorna Baxter, Director of Finance, and Kathy Wilcox, Head of Financial Strategy were joined by members of the Senior Leadership Team to present a report regarding the budget pressures faced by directorates and the Council’s approach to savings for 2024/25 – 2026/27.

Cllr Levy began by recognising the very significant pressures on the Council’s budget arising from external factors, particularly the rate of inflation and the expected rise in the National Living Wage. The severity of these pressures made decisions over prioritisation necessarily difficult.

Before allowing directors to introduce the pressures in their budgets, Kathy Wilcox, provided a number of important contextual details:

-        Without confirmation from central government that Council Tax rises could remain at the current level of 4.99% the budget had had to revert to the previous ceiling for its budgeting, of 1.99%. This worsened the Council’s financial position for 2025/26 by £7m.

-        Planned changes to directorate budgets of £30m were had already been confirmed in the previous budget, largely driven by inflation forecasts and demographic changes.

-        Directors had over the summer been asked to identify the budget pressures they were currently facing and explain plans around how to manage them within current budgets. The pressures put forward to the Committee represented those which could not be fully managed.

-        Pay inflation in 2023/24 was higher than expected than in the Council’s previous forecast, the balance of which was paid from contingency. The level of contingency was deemed to be in need of replenishing creating a pressure of £4m. Further, for 2024/25 an additional £2.4m would be required to cover pay inflation.

Karen Fuller, Corporate Director of Adults and Housing, introduced the Adults budget. A large directorate budget, the primary pressures arose from demographic pressures and population growth, and the effect of inflation on the cost of care packages provided by the Council. The Council’s approach was to implement the Oxfordshire Way, supporting individuals to receive care in their homes for as long as appropriate, which had done much to mitigate the challenges posed. The growth in the National Living Wage had a particular impact on adult social care costs. However, the Council had previously been generous to providers in terms of the inflationary uplifts provided, and conversations were to be held to decide whether, given this, scope existed not to continue with the same generosity. Equally, opportunities existed to support capacity development in the voluntary sector for those individuals who did not require statutory intervention to continue to live well in their communities.

Anny Coyle, Interim Director of Children’s Services, introduced her directorate with the support of Jean Kelly, Deputy Director of Children’s Social Care.. Children, Education and Families likewise held a large budget, covering multiple areas. Key pressures related to the increased investment in SEND provision following the recent inspection, and school improvement investments following the Education Commission. Elevated demand levels for social care, SEND services and Home to School Transport remained a pressure, compounded by inflation. Although a money-saving measure in the medium term, the Recruitment and Retention Strategy required investment and thus presented as a pressure in the interim. Having been subject to significant turbulence and change, a comprehensive Financial Strategy was being developed for Children, Education and Families to incorporate savings into the wider issues of managing the market for care, finding and developing permanent staff, managing the increase in care home costs, and partnership working into a renewed vision and strategy for the directorate.

Bill Cotton, Corporate Director of Environment and Place, presented next. An important factor to understand was that the directorate generated almost as much as its £74.6m budget in income from sources such as parking charges and charges to utility companies. Parking charges, for instance, presented as a pressure because the Council was extending this across the County, but it would also bring in additional income. Key pressures related to a failure of the Shepherd system to achieve its planned savings in Home to School Transport, The weather had caused a need for increased funding for potholes, with some months having double the average number reported. A change in the law on how persistent organic pollutants were disposed of had made the process more complex and costly. A number of urgent repairs, including those necessary to remain health and safety compliant or maintain the service.

Ansaf Azhar, Director of Public Health introduced the Public Health pressures. Public Health received a ring-fenced grant for the majority of its income, within which the Council needed to deliver a number of statutory services such as drug and alcohol and sexual health services. The non-ringfenced contribution primarily related to Domestic Abuse services. Budget pressures primarily related to improvements to services, funded mainly by grant increases, around Health Visiting, increased demand for drug and alcohol services, and research. Though being pressures, each was an investment in preventing additional demand downstream, which was the primary approach being taken to manage costs.

Community Safety was also introduced by Ansaf Azhar. The main pressure related to an increase in the cost of replacing expired fire service vehicles owing to inflation. Again, the primary focus was on ensuring demand was prevented wherever possible.

Lorna Baxter, Director of Finance, and Kathy Wilcox, Head of Financial Strategy, spoke to the pressures on Resourcing and Law and Governance. The change to the structure of the Senior Leadership Team meant a pressure, though the budgetary provision being made for it was the maximum it could be, and it was expected that other budget changes could help mitigate the cost. Temporary post-Covid increases in capacity to the Finance team were being made permanent to reflect the demands on the service. A significant pressure derived from the Schools Catering Service, which faced steep food-price inflation. This service was supposed to cover its own costs, and business plans were under development to chart a path to doing so. However, significant price increases to parents could undermine demand, thereby making it harder to break even. This was made harder by the fact 60% of demand was from free school meals, to whom costs could be passed on to. As such, a pressure needed to be borne in the interim.

In response, the Committee raised a number of question and observations, including:

-        The differing approaches to market management in adult and children’s social care, in-housing in children’s and outsourcing for adults, and whether one approach was sub-optimal. In reply, it was explained that the markets were very different, particularly in terms of scale. The number of adults in need of care far outweighed those of children. Furthermore, the Council was bound by decisions made historically, to outsource much of its provision to the Order of St John’s Trust, meaning there was simply not the capacity to in-house for adults to the same extent as children. A national shortage of children’s home placements made developing in-house provision more viable than for adults, where the same shortage did not exist.

-        Whether pothole provision also included maintenance of pavements and cycleways, which is was confirmed it did.

-        Whether, given the level of unmet savings in the previous year, the figures for pressures were actually sound. It was recognised that in the current year saving-realisation rates were below expectations and there would be a renewed focus on in-year monitoring to ensure this was not replicated.

-        Whether, and when the Council would be informed of any ability to raise Council Tax beyond 1.99% in 2025/26. The expectation of officers was that this information would not be known for at least another year.

-        The sunk costs of the Shepherd project and the alternatives which had been investigated. The sunk costs were estimated to be at around £100k. Alternative suppliers tended to be focused at much larger organisations than the Council’s requirements, Transport for London, for example. One of the key aims of the Shepherd project was to know where vehicles were and which pupils were on them at any point, enabling accurate charging and accountability for service delivery on providers. Alternative means of addressing this would be considered instead.

-        The extend of contingency. In relation to the pressures, challenge was put to the figures to ensure that the right figures were used with no contingency. There was, however, a corporate contingency held, which the S. 151 officer determined the necessary level of based on the risk profile of the budget, savings and forecasts of demand.

-        The rationale behind the increased Parking Service operational costs. These were explained owing to the expansion of Parking Services across the county, more operatives and infrastructure were necessary, along with increased maintenance costs.

-        Coverage of future pay awards in light of inflation expectations. It was confirmed that the budget had previously covered 2.5% pay rises, but that further inflation increases were now budgeted for also. It was noted, however, that the outcome of any future pay negotiations was very difficult to predict.

-        The scope to make below-inflation rises for social care. So far as the Council was not limited by Fair Cost of Care requirements, it did so through its joint commissioning unit in Adults. Learning from the Fair Cost of Care exercise was also very valuable in informing this commissioning. In Childrens it was more difficult because of the lack of places nationally, which weakened the Council’s hand when negotiating.

No recommendations or observations were agreed by the Committee at this stage.

Actions: It was AGREED that:

-        Members would be provided with the sunk costs of the Shepherd project and the stages at which they were incurred.