Agenda item

The Executive Member for Finance and the Director for Finance and Transformation will be attendance to provide OSB with an update on the Council’s financial position at Quarter Two for 2025/26.

The Chair welcomed the Executive Member for Finance, the Director of Finance and Transformation and the Head of Financial Planning and Business Partnering to the meeting.

The Executive Member provided a brief overview of the attached report and advised OSB that the forecasted budget outturn at quarter two, without any additional mitigations, showed a £1.8 million overspend. This was an improved position on the quarter one position which forecasted £4.5 million overspend. It was also commented that such forecasted overspends were normal at this point the financial year.

The largest budget pressure was within Children’s Services however contingency planning was in place to reduce those pressures. All directorates were required to produce recovery plans.

The Council’s reserves continued to forecast growth despite the projected overspend of £1.8 million. Additional funds were being allocated to capital budgets.

The Executive Member invited questions from the Board.

It was reaffirmed that the Council’s reserves were growing, and Members’ attention was drawn to a graph located at figure one on page 48 of the report pack, which illustrated this. It was projected that by 2029 the Council’s reserves could reach approximately £40 million. It was also commented there had been improvements in the resilience index, and it was hoped the Council would emerge as average in this regard. Previously, the only Councils with lower reserves than Middlesbrough were those that sought financial assistance.

A conversation took place during which it was commented that a report seen by the Audit Committee had given a different impression of reserves than those identified by the Executive Member. It was clarified that Audit reports were retrospective in nature which may have given a different impression of the reserves status.

It was also stated that having sufficient reserves was beneficial for the Council, as it determined what the Council could and could not afford. Having low reserves often led to applications for additional financial assistance from government. It was also clarified that there was no ideal level of reserves that a Council should have.  

A conversation took place about the government settlement which had been announced prior to the meeting starting. It was stated that indications were Middlesbrough was a beneficiary of the settlement and that in such a process there would always be those Councils that gained and those that lost. 

A Member queried that, for Council services projecting an overspend, would reserves be used to cover the shortfall. It was clarified the actual budget outturn was unknown, but it was known that the reserves would be higher than they were in previous years. It was also clarified that overspending would need to exceed £6 million to prevent additional funding placed in the reserves. 

A Member referred to the graph at figure one in the report and commented that approximately £8.3 million of this total was from bad debt provision. This was acknowledged. It was clarified that the Council was satisfied with the levels it had for bad debt. It was also stated the collection fund process was doing well.

A Member drew OSB’s attention to paragraph 4.31 of the report which referenced a £700,000 saving relating to contractual spending reviews and how this was a double count of a 2024/25 saving.

It was clarified that this was a further expansion of the £700,000 saving which was too ambitious. One of the issues under examination was looking at contracts against revenue budges rather than capital budgets. It was commented that it would be preferable to remove the saving to prevent missing that target the following year. 

The Chair thanked the Executive Member and Officers for their information and asked the Board to note the information presented.

NOTED.