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Agenda item

Revenue Budget 2022-23 and Capital Programme 2022-2052

Report of the Executive Director, Resources



The Committee received a report of the Executive Director, Resources, attaching the Revenue Budget 2022/23 and Capital Strategy for 2022-52, which were to be considered by the Co-operative Executive at its meeting to be held on 16th February 2022.




In attendance for this item were Councillor Cate McDonald (Cabinet Member for Finance and Resources), Eugene Walker (Executive Director, Resources), Ryan Keyworth (Director of Finance and Commercial Services), Dave Phillips (Head of Strategic Finance) and Tim Hardie (Head of Commercial and Business Development).




Revenue Budget 2022/23




The Committee received a report of the Executive Director, Resources, setting out the 2021/22 budget position, the initial budget position for 2022/23, the medium-term financial position up to 2025, the outstanding work still required and the timeline for the budget-setting process.




Ryan Keyworth introduced the report, indicating that the Council was currently facing an overspend of around £30m, which mainly referred to Adult and Children's Social Care.  The pressures facing the budget were mainly due to the loss of £20m in Government grants, together with the ongoing impact of the overspend from 2021/22.  Mr Keyworth stated that the Council had been forced to use £14.5m reserves to enable it to achieve a balanced budget for 2022/23.  He highlighted the serious problems facing the Council in terms of setting a balanced budget for 2023/24, given the level of savings required, specifically in terms of Adult and Children's Social Care.




Members of the Committee raised questions, and the following responses were provided:-




·        Budgeting for the Social Care Services was extremely difficult, mainly due to the potentially very high costs of looking after an individual child or adult, and the difficulty in terms of predicting the numbers of such high cost cases, as well as the complexity of their needs.  Whilst some authorities were experiencing pressures in either Adults’ or Children’s Social Care Services, generally they were not experiencing problems with both.  A considerable amount of work was being undertaken with both Adults’ and Children’s Services, with a significant change process having been planned for Adult Social Care, with the aim of redesigning the way the Service was provided.  The aim was to ensure that services were provided where required, but the manner in how this was done would be challenged, with a clear objective of maintaining the necessary service standards, but at a lower cost where justified.  In terms of Children’s Services, work was being undertaken to look at having more in-house provision in order to manage the risk of the high costs, as  out of area care can be very expensive, as well as generally not being as beneficial for the child.




·        In terms of resilience, the Council was looking at a whole-system approach with regard to Adults’ and Children's Social Care.  The Council was working with partners, particularly the Health Service, in connection with the improved integration of health and social care, which would result in an improved use of resources, and would benefit the people of Sheffield.  With regard to Children's Services, a whole-Council approach had been adopted in terms of looking at the needs of children and young people, including the accommodation needs of care leavers.  The Council was facing such problems due to a lack of Government funding in this area.




·        The Council would also try and budget sensibly, and would be monitoring next year’s social care costs very carefully, which would allow time for any issues of concern to be identified and dealt with.  Going forward, the Council was planning to manage within its budget and not rely on reserves which, it had been acknowledged, would be very difficult.  There would be a big responsibility on the new Council policy committees, which were to be established in May 2022, in terms of sticking to the budget.




·        The Government had made additional funds available for social care, but this was mainly for new activities, and did not make up for the cuts made over the last 10 years.  The Council had allocated all Government funding specific to 2021/22, with some grants, where there was more flexibility, being carried forward to 2022/23.  The Council had been trying for years to ensure that the Government funding was passed down the supply chain, to frontline workers.  Workforce issues in social care, particularly the level of wages, represented a major issue for the Council.  The Covid-19 pandemic had made the situation worse, and the Government funding was not sufficient to enable the Council to address this issue, or to achieve its aspirations in terms of the foundation living wage.  Social care staff were not adequately rewarded for the excellent work they undertook.  The Council was looking at changing the way Adult Social Care was procured in the future, which would provide the Council with an opportunity to target more funding to frontline staff.




·        The Council had only received a one-year budget settlement from the Government, which was frustrating as it made it difficult to plan for future years.




·        The Council was still relatively financially strong, although if the required savings in 2022/23 were not met, the situation could change.  Other local authorities were experiencing similar problems, and as a result of a lack of adequate reserves, some authorities were having to undergo mass staff redundancy exercises following the pandemic.




·        One of the strategic reviews the Council planned to undertake this year related to the customer experience.




·        A strategic review was also planned in respect of the Council’s Depot Strategy.  There were a number of depots around the city, and the review would look at their number and location.  There was also a lot of work required in terms of backlog maintenance on the depots.




·        The Council would be reviewing its cleaning and catering provision in order to identify where savings could be made.  It was likely that there would be an increase in the costs for the catering provision.




·        The main reason for the planned increase in capital financing was due to an increase in the minimum revenue provision ( this provision was a statutory annual charge towards the cost of repaying borrowing), in relation to newly constructed assets, such as the Heart of the City. These costs were offset by the rents receivable from the new buildings.




·        The Council had a long-term borrowing strategy and managed its cash position.  There was a clear difference between its cash and revenue positions. At present, the Council was relatively high in cash balances, but its financial position was based on the statutory requirement to balance its revenue position, rather than its cash position.  Whilst the Council can borrow cash to fund capital spending, it was not able to borrow to fund its revenue budget.  The Council's current cash position means that it has not needed to borrow as much, but has been able to use its internal cash reserves to fund some of its capital spend, as opposed to borrowing, hence the reference to “under borrowing” in the report.  The Council therefore used some of its cash reserves first as opposed to borrowing and having to pay interest charges. These charges would be higher than the interest it would receive if it retained higher cash balances.




·        In respect of funding for pay rises, there was both a cost of pay increments and cost of living rise.  The Council had operated by requiring the respective Portfolios to fund the cost of living rise, whereas the Council, corporately, had funded the cost of increments.




·        The Council considered itself to be in a relatively strong financial position to enable it to deal with the problems facing the Adult and Children's Social Care Services.  The Council had more reserves than many other local authorities to deal with these issues. Whilst they were only one-off reserves, they provided the Council with a bit more time to deal with the issues in a prudent manner.  The Directors of Adult Social Care and the Children and Families Services were currently looking at how they could deliver the required budget savings and, as part of this process, would look at how other local authorities, who had already been through this process, had done this.  Specific work would be undertaken to look at how savings could be made in the Early Intervention Service, without reducing the level of service provided.




·        In terms of the major sporting facilities, the Council's reserves deal with the timing of the expenditure it needed to make on the facilities’ debt, and would help with the transition of the facilities from Sheffield City Trust.  The Council was currently working closely with the Trust on a clear business plan and financial settlement that would see the Council through to the end of the present arrangements, in 2024.  The Council was satisfied with the current position regarding this issue.




Capital Strategy 2022-2052




Tim Hardie introduced the Capital Strategy 2022-2052, referring to the strategic priorities for 2022/23, together with the longer-term priorities up to 2052.




Members of the Committee raised questions, and the following responses were provided:-




·        In addition to the schemes set out in the Strategy, officers were also undertaking investment pipeline planning work regarding the district heating system, and also talking to the Sheffield City Region on how the Council could access the funding coming through that organisation.  Details of some of this work were set out in the Council's 10-Point Plan for Climate Change Action.




·        It was acknowledged that there was more ambition in terms of the Capital Strategy than funding to enable the delivery of all the projects.  It was important that the Council had a clear vision in terms of what it wanted regarding capital projects, as this would make it more viable to be able to obtain the funding required.  The 30-year Strategy had been requested by the Chartered Institute of Public Finance and Accountancy (CIPFA) to help local authorities demonstrate that they had a prudent approach to their budgetary process.  The Council had a good record in terms of investing in the city, such as the heart of the city project.




·        As part of the investment pipeline work, a lot of work was being carried out with Homes England, which was also engaging social landlords, and proposals following this work would be shortly submitted to Members.




·        The Council had suffered cuts of up to £225m per annum in Government funding from 2010 to 2020.  The figure currently stood at around £180m due to some funding increases during the pandemic. A cumulative figure of £3b had been quoted in terms of a reduction in Government funding to the city since 2010.




·        There had been a considerable amount of pressure on the Council in terms of its finances over the last few years, which had been exacerbated by the Covid-19 pandemic.  It was considered that the Council would not be in its current position without being so well-run, in terms of its prudency.




·        Whilst there was still a considerable amount of work to be done, having good levels of reserves had enabled the Council to proceed carefully.




RESOLVED: That the Committee:-




(a)      notes the contents of the report of the Executive Director, Resources, now submitted, on the Revenue Budget 2022/23 and Capital Strategy 2022 to 2052, together with the comments now made and the responses provided to the questions raised;




(b)      expresses its thanks and appreciation to all those Council officers and Members involved in the budget-setting process for the excellent work undertaken by them in achieving a balanced budget, particularly in such difficult circumstances;




(c)      places on record its thanks and appreciation for the excellent work undertaken by Dave Phillips (Head of Strategic Finance), who was retiring from the Council in March 2022 after seven years’ service, in connection with the Council budget; and




(d)      recommends that the report of the Executive Director, Resources, on the Revenue Budget 2022/23 and Capital Strategy 2022 to 2052 be approved by the Co-operative Executive without amendment.



Supporting documents: