Lead Member – Cllr Roger Evans, Portfolio Holder for Finance

Lead Officer – James Walton, Executive Director (S151 Officer)

REPORT TO FOLLOW

RESOLVED:

A.    To ensure emergency action is continued by all Officers in the second half of the financial year to improve further the Quarter 2 forecast of a projected spend over budget of £47.069m (30th September 2025). Such action should predominantly focus on reducing spend, increasing income, delivering remaining savings and significant mitigating actions to control in-year spending pressures.

B.    To support the continued use of Operations Boards, which have been in place from August 2025, to challenge all in-year spending, and more recently have been further enhanced to bring greater Service Director scrutiny. Further details to be included in future Finance Monitoring reports.

C.    To consider the Period 6 position (as at the end of September) forecast indicative level of savings delivery of £21.304m (36%),

D.    To continue to review the projected General Fund Balance which is forecast to be negative (-£12.789m), indicating a potentially illegal financial position by the end of the financial year if proposed action does not improve this position.

E.    To continue to support, in light of the Council’s current financial position and ongoing engagement with MHCLG, the active discussions regarding Exceptional Financial Support (EFS) are continuing.

To scrutinise financial performance at Quarter 2 and identify issues that may require further investigation by an overview and scrutiny committee.

TO FOLLOW

The Chair invited the Executive Director (Section 151 Officer) to present the report. The Executive Director explained that the council faced a projected overspend of £47.1 million by year end, which was higher than previously estimated due to rising demand in Adults’ and Children’s Services and a significant shortfall in carried-forward savings. Without £15 million of exceptional government support, the council would be in breach of its legal duty to balance the budget. Even with this support, financial resilience would be limited to £2.2 million, which was considered risky given winter pressures. He also reported that the Dedicated Schools Grant deficit was forecast to rise to between £35 and £40 million, although this was much lower than some other authorities, it posed a major future liability when the statutory override ends in 2028.

Members questioned why budgets and savings projections had not been accurate. Officers explained that budgets were based on data available in February, but demand pressures escalated later in the year. The tight timetable for budget setting limited the ability to incorporate updated forecasts, and it was recognised that optimism bias assumed rapid delivery of savings through restructuring and new operating models. Strategies focused on short-term fixes rather than sustainable solutions, had led to recurring gaps. Future budgets would be based on more realistic assumptions, credible savings plans and transparent reporting.

To improve budget setting, the Portfolio Holder for Finance reported that a deep dive review had been undertaken at Quarter 2 to validate figures, and a task-and-finish group was proposed for early 2026 to review budget-setting methodology and strengthen foundations for 2026/27 with accurate demand modelling and robust financial planning.

Officers confirmed that the Period 7 review in December would be critical in confirming the position. Fifteen million pounds of exceptional financial support had been requested from MHCLG, with a decision expected in late February. Further support would likely be needed for 2026/27 and beyond, tapering down over time to avoid long-term reliance.

Members asked about the smaller variance between favourable and adverse scenarios, and officers explained this was due to tighter modelling based on recent trends. Non-essential spending was being reviewed by the recently established Boards, with most requests justified but decisions based on essential need.

Demand management initiatives were discussed, and examples were provided such as the “Two carers in a car” scheme in Adults’ Services and the “Stepping Stones” programme in Children’s Services. Last year, all planned demand mitigation savings were delivered, and this year delivery was tracking at eighty-one percent.

Concerns were raised about staffing, morale, service capacity and future redundancies. The Interim Chief Executive stated that no compulsory redundancies were planned, but benchmarking was underway for critical teams and modernisation would be required in some services.

Income generation and Council Tax were also discussed, with the Leader noting that a maximum permitted rise of 4.99 percent would yield only around £10 million, which was insufficient against social care pressures. Winter pressures were also highlighted, and it was noted that the severe weather  ...  view the full minutes text for item 28