Report of Councillor Malcolm Longley Cabinet Member for Finance Date

FINANCE

At the Cabinet meeting held on 23 September quarterly reports were received on:

Revenue monitoring

Capital monitoring

Treasury Management

There was lots of detail contained within these reports and their content is summarised below:

Quarter 1 – Revenue Monitoring

The report highlighted the key pressures, caused by external factors, that have emerged since the budget was set in February 2022. The report highlighted the following areas of particular pressure:

Inflationary and cost of living pressures impacting directly on the cost of providing services.

Ongoing financial impact of COVID allied with the withdrawal of significant COVID funds previously received

Demand led and inflationary pressures within the Children’s Trust

Demand led pressures within the Adult Social Care

Cost of living pay award expected to be significantly greater than the amount included at the time of setting the budget based on the latest national pay award offer made by the employers’ organisation

The report then highlighted the cumulative impact of this and other services pressures and made reference to the mitigating actions that management were taking to reduce the financial impact.

After taking into account the mitigating actions and the use of the contingencies built into the budget there was an in-year forecast overspend of £7.6m which represents 2.2% of the total net budget and is therefore within acceptable tolerances.

In spite of the forecast overspend being within acceptable tolerances the report then highlighted further steps being taken by management to seek to alleviate further the pressures being faced including the implementation of Spending Review Panels for all spend over £500.

The full report can be found at the following link:

https://westnorthants.moderngov.co.uk/documents/s7950/Revenue%20Monitoring%20Quarter%201%20-%20Financial%20Year%202022-23.pdf

Since the report was published in September there have been further updates received on the financial position and it is pleasing to report that the forecast variance has reduced since the report was published.

There is always the risk that demand for services will continue to increase and there is concern about the financial impact that this will have, particularly as we approach the difficult winter months, but the fact that the latest position shows some improvement on the position previously publicly reported is a cautiously welcome development.

Quarter 1 Capital Monitoring

The report monitors spend against capital budget and highlights how the budget has changed since it was originally set in February 2022.

The cost of raw materials is experiencing significant increases and whilst we expect these to have an impact on capital projects we are not yet seeing this in significant overspends on capital although there is an expectation that these will begin to emerge over the course of the year.

The report also reports on the HRA capital programme which has been re-profiled to more accurately reflect the timing of capital expenditure in this area. The total capital programme budget envelope remains the same but is just profiled more accurately over the five-year life of the capital programme.

The full report can be found at the following link:

https://westnorthants.moderngov.co.uk/documents/s7954/Quarter%201%20General%20Fund%20and%20Housing%20Revenue%20Account%20HRA%20Capital%20Monitoring%20Report%202022-23.pdf

Treasury Management Quarter 1 Report

The report highlights the economic outlook and focusses on inflation and interest rate changes. The report recognises that there will be some financial benefit to the council in the increasing interest rate environment but is currently forecasting that this will be offset by increased bank charges. As interest rates continue to rise this will be an area that is monitored very closely and reported back to the committee as required.

The report forecast what interest rates could do over the next period of time and concludes that the rates could be 2.75% by March 2023.

The full report can be found at the following link:

https://westnorthants.moderngov.co.uk/documents/s7953/Treasury%20Management%20Update%20Quarter%201%202022-23.pdf

Since the report was published there has been well publicised turmoil in the financial markets and therefore, as the report was at a moment in time things will have moved on significantly.

Revenue Budget 2023-24

The revenue budget process for 2023-24 started a lot earlier this year and ‘star chamber’ budget sessions have already been held for all services (with the exception of the Children’s Trust). Officers are pulling together the outcome of these sessions and Cabinet are considering options for the formulation of the detailed budget for next year.

Given the external factors that are affecting all local authorities it is clear that it will be a challenging process and some difficult decisions may have to be taken. However, these are yet to be determined.

The draft budget proposals will be considered by Cabinet at their meeting in December.

ASSETS & ENVIRONMENT

Councillor Malcolm Longley

Cabinet Member for Finance