Agenda item

Purpose of Report

 

To present the first quarter’s performance (up to 30 June 2023) on the Council’s General Fund, Housing Revenue Account, Housing Repairs Service and Capital Programmes, and to seek approval for changes to the capital programmes.

 

Decision

 

1.    That the financial performance for the period 1 April 2023 to 30 June 2023 and the projected outturns for 2023/24 be noted.

 

2.    That the underlying impact of the pressures and underspends identified in paragraphs 3.3 (and Appendix B), 4.3 (and Appendix D), and 5.2 (and Appendix F) of the officer’s report be noted.

 

3.    That the changes to the General Investment Programme and Housing Investment Programme as approved by the Chief Finance Officer detailed in paragraphs 7.5, and 7.12 of the officer’s report be noted.

 

4.    That the changes to the Housing Investment Programme, as detailed in paragraph 7.10 of the officer’s report, be approved.

 

Alternative Options Considered and Rejected

 

None.

 

Reason for Decision

 

Financial Procedure Rules required members to receive, on a quarterly basis, a report prepared jointly by the Chief Finance Officer and Corporate Management Team commenting on financial performance to date. This report was designed to meet this requirement.

 

Whilst there were still a number of variables which were subject to a level of uncertainty, based on the latest set of assumptions as at the end of the first quarter (up to 30th June) the forecast financial position of the Council for 2023/24 was detailed at paragraph 2.2 of the officer’s report, together with the detailed financial position shown in sections 3-7 and the accompanying appendices.

 

Updates were reported as follows:

 

General Fund Revenue Account

 

For 2023/24 the Council’s net General Fund revenue budget was set at £14,402,660 including a planned contribution from balances of £191,110 resulting in an estimated level of general balances at the year-end of £2,228,739 (after allowing for the 2022/23 outturn position).

 

The General Fund Summary was currently projecting a forecast underspend of £157,137 (Appendix A provided a forecast General Fund Summary), resulting in general balance at the year-end of £2,385,876.

 

There were a number of forecast year-end variations in income and expenditure against the approved budget, both positive and negative; as detailed at paragraphs 3.3- 3.5 of the report, with the main variances provided in Appendix B to the report.

 

Whilst the level of uncertainty around inflation pressures was significantly reduced this year due to actions taken in the latest MTFS, there remained uncertainty surrounding pay assumptions and other budgets, particularly in terms of service demands and income forecasts. At quarter one, the potential for further variances during the year remained high, and as such the final outturn position for the year was still subject to further change. At this stage though there were no further mitigations recommended, however, as always, there would continue to be a need for strong budgetary control in this financial year to ensure expenditure and income remained balanced within the budget. 

 

Towards Financial Sustainability Programme

 

The savings target included in the MTFS for 2023/24 was £185,210.

 

Progress against this target, based on quarter 1 performance, showed that secured savings totalled £115,510 for the General Fund, with a further £69,700 identified, achieving the in-year target in full.

 

A summary of the specific reviews that had contributed to this delivery were shown in Appendix K.

 

Housing Revenue Account

 

For 2023/24 the Council’s Housing Revenue Account (HRA) net revenue budget was set with a planned contribution from balances of £58,970, resulting in an estimated level of general balances at the year-end of £1,125,517, after allowing for the 2022/23 outturn position.

 

The HRA was currently projecting a forecast overspend of £20,346, which would result in HRA balances of £1,145,863 at the end of 2023/24. (Appendix C provided a forecast Housing Revenue Account Summary). This position maintained balances above the prudent minimum of circa £1m.

 

Although the forecast position was an underspend, there were a number of significant variations in income and expenditure against the approved budget as outlined at paragraph 4.3-4.5 of the report, with full details of the main variances provided in Appendix D of the report.

 

As set throughout this report, there still remained a number of variables in the forecast assumptions, and as such the final outturn position for the year was still subject to further change. At this stage no additional mitigations, other than those currently being implemented in response to the issues faced by the HRS and in response to void levels were recommended. Strong budgetary control should continue to be a focus in this financial year to ensure expenditure and income remain balanced within budget.

 

Housing Repairs Service

 

For 2023/24 the Council’s Housing Repairs Service net revenue budget was set at zero, reflecting its full cost recovery nature.

 

At quarter 1 the HRS was forecasting a deficit of £828,671 in 2023/24 as detailed within the forecast HRS summary at Appendix E, with full details of the main variances provided in Appendix F of the report, together with a summary of the key variances provided at paragraph 5.2 of the officer’s report.

 

The main contributory factor for this deficit was the ongoing recruitment and retention challenges, which were being felt not just by the council but across the construction industry as a whole. This inability to attract and retain staff resulted in a greater reliance on the use of sub-contractors to ensure that service demands were met. The cost of using subcontractors was however more expensive than the HRS’s own workforce, due to the ongoing impact of Covid19, the current inflationary crisis and a reduced pool of contractors from which to secure services. These additional costs were therefore not fully offset by the vacancy savings achieved by not carrying out the work internally.

 

As the increased subcontractor costs were not reflected in the service hourly rate and overhead recovery was not recouped on sub-contractors, this resulted in an under recovery of full costs from the HRA.

 

Whilst last year high vacancy levels, and the use of sub-contractors rather than our own workforce, resulted in an underspend on materials for the Council, this year higher than anticipated inflation levels, an industry wide issue, and an expected increase in repairs jobs had resulted in an overspend on materials further compounding the HRS forecast position.

 

The forecast deficit also included the impact of the proposed national pay award, which was significantly over and above the assumptions included within the MTFS, as outlined in both the General Fund and HRA variances.

 

It should be noted that due to the interconnection of the HRS and HRA, the consequential costs in the HRA were ordinarily reduced, and therefore offset any repatriated deficit. However due to the increased usage of more expensive sub-contractors and materials, and an increased volume of works, this was not the case this financial year as detailed above, and there was a significant additional cost for repairs and maintenance of the housing stock being incurred by the HRA. This additional cost was being set against the overall HRA position.

 

Earmarked Reserves

 

The Council held a number of earmarked revenue reserves over both the General Fund and HRA. These reserves were sums set aside for specific purposes and to mitigate against potential future known or predicted liabilities. Key reserves included income volatility, business rates volatility, IT investment fund, asset sinking funds for future refurbishment etc. A number of these reserves were budgeted for use over the period of the MTFS.

 

The details of all the earmarked reserves and their forecast balance as at 31 March 2024 were attached in Appendix G, and summarised at paragraph 6.2 of the officer’s report, with further details in the MTFS 2023-2028.

 

General Fund Investment Programme

 

The original General Investment Programme for 2023/24 in the MTFS 2023-28 amounted to £14.1m which was increased to £21.3m following quarter 4 approvals and year end re-profiles from 2022/23. At quarter 1 the programme had been increased by £3.4m to £24.7m, as detailed at paragraph 7.2 of the officer’s report.

 

There were no changes over the approved limit requiring approval by the Executive for the first quarter.

 

New projects added to the GIP, having been considered recently by the Executive or by delegated Portfolio Holder approval were detailed at paragraph 7.4 of the officer’s report.

 

The financial changes delegated to the Chief Finance Officer for approval for the third quarter 2023/2024 were detailed at paragraph 7.5, with a summary of the projected outturn position provided at paragraph 7.6 of the officer’s report.

 

The overall spend on the General Investment Programme for the first quarter of 2023/24 was £1.9m, which was 7.3% of the 2022/23 active programme (excluding externally delivered schemes), as detailed further at Appendix I of the report.

 

Although this was a low percentage of expenditure at this stage of the financial year, further expenditure was expected in quarter 2 on Better Care Fund (DFG’s), Western Growth Corridor, Central Market, Town’s Deal Schemes, and various capitalised maintenance schemes.

 

Housing Investment Programme

 

The revised Housing Investment Programme for 2023/24 amounted to £22.174m following the 2022/23 outturn report. At quarter 1 the programme had been decreased by £4.205m to £17.969m, as detailed within paragraph 7.9 of the officer’s report.

 

All changes over the approved limit required approval by the Executive. Following an extensive review of the stock condition survey and existing new build and acquisition budgets a number of changes had been made to the Housing Investment Programme. These changes formed part of the ongoing work on the 30-year business plan and would align the budgets to reflect planned acquisitions and scheduled works on the existing housing stock for the length of the MTFS. The financial changes over the approved limit requiring Executive approval for the first quarter 2023/2024; were detailed at paragraph 7.10 of the officer’s report.

 

All new projects were subject to Executive approval. There had been one new project considered recently by the Executive during Quarter 1 as detailed at paragraph 7.11 of the officers report.

 

The financial changes delegated to the Chief Finance Officer for approval for the first quarter 2023/2024 were detailed at paragraph 7.12 and a summary of the projected outturn position for the Housing Investment Programme at paragraph 7.13 of the officer’s report.

 

The overall expenditure on the Housing Investment Programme for the first quarter of 2023/24 was £1.222m, which was 6.80% of the 2023/24 revised programme. A further £1.203m had been spent as at the end of July 2023. This was detailed further at Appendix J.

 

Although this was a low percentage of expenditure at this stage of the financial year, works had been constrained by the availability of contractors and materials however new contracts were in place and spend was expected to increase in future periods. In addition, schemes such as Hermit Street and Western Growth Corridor had not yet commenced and a number of the LAHF acquisitions were currently in progress but not yet complete.