Agenda item

The Head of Financial Planning and Support presented the Board with information in respect of the Revenue Budget Outturn Year-End 2021/2022. The following points were made:

● As reported previously, the Covid-19 pandemic has had a significant impact on the Council’s financial position. This has also made the management of the Council finances more difficult in 2021/22 due to the constantly evolving situation and also the level of uncertainty regarding the financial effects of Covid-19 in 2021/22 and future years.

●Covid-19 financial pressures were being monitored separately from the normal non-Covid-19 financial position, and these were reported separately in paragraphs 84 to 111.

● The Council’s initial outturn position for 2021/22 for non-Covid-19 elements was an overspend of £2,462,000 (2.1%). One of the major areas of increased expenditure during the latter part of 2021/22 had been the level of inflation that existed in the economy.

●The Environment and Commercial Services Directorate outturn position had been substantially affected by the hyper-inflationary increases that existed in areas such as fuel, energy, utilities, and food, and also an increase in waste recycling costs. As highlighted to the Board in previous quarterly budget monitoring reports at year-end these had been funded in 2021/22 only from the Central Pay and Prices Contingency budget.

●The financial position of the Council had been improved by the implementation of the Flexible Use of Capital Receipts Strategy, which was approved by Full Council on 20 October 2021. Entries had been made in the Council’s accounts for this having due regard to the Local Authority Accounting Code of Practice, with the impact of this being that the Council’s financial position across a number of Directorates (mainly Children’s Services) had been improved by a total of £5,017,000 at year-end.

●The Council’s overall final year-end revenue outturn position for 2021/22 for non-Covid-19 expenditure was a £2,325,000 underspend. The underspend had been transferred to the General Fund Reserve.

● Covid-19 pressures of £390,000 at year-end 2021/22 were detailed in paragraphs 84 to 111. This was a reduction of £1,431,000 from the £1,821,000 total projected Covid-19 pressures reported at Quarter Three. This had been funded from the £4,512,000 Covid Recovery Reserve, which was created during 2020/21 to cover the potential costs arising from the Covid-19 recovery in 2021/22 and future years.

● On 14 June 2002 Executive had approved the transfer of £782,000 of the Covid Recovery Reserve to a new earmarked Car Parking Pressures Reserve and the remaining balance of £3,340.000 had been transferred initially to the General Fund Reserve.

● Due to the significant and continued transformation work taking place within the Council, principally within Children’s Services and that which would take place within Adult Social Care regarding the Fair Cost of Care and Social Care reforms a transfer of £5.665m was made to a new specific earmarked Social Care Transformation Reserve. The remaining balances on the Children’s Services Improvement Reserve (£175,000), Children’s Services Demand Reserve (£732,000) and the Social Care Transformation Reserve had been transferred into the new specific earmarked Social Care Transformation Reserve and combined with the amount above to make a total of £7,072m available for the required transformation.

● The level of Reserves remaining after the us and creation of these reserves was shown in the Reserves and Provisions Section of the report (paragraphs 158 to 163) and detailed in Appendix 2.

● Paragraphs 114-119 detailed the revenue budget spending controls, which included a vacancy control process; checks against expenditure over £5,000; and strong controls over staff travel, stationery and first class post. Agency staff was also being looked at, but there was a need in 2021/22 for the use of agency staff within Children’s Care, principally to support the Ofsted Improvement Plan and also due to the impact of Covid-19. The use of agency staff was likely to continue in 2022/23, however this would be minimised as far as possible. The Council was using additional recruitment and retention packages to support the reduction of use of agency staff in future years.

● The financial impact of the Covid-19 pandemic in 2020/21 was summarised in a table at paragraph 88, which showed that there had been a financial pressure due to Covid-19 of £4.5m in 2021/22.

● The 2021/22 capital budget final outturn was £56.899m against a revised capital budget of £59.035m. Full details were provided in the report.

● Regarding borrowing and reserves, the Council’s balance of borrowing had increased from £205.2m at 30 December 2021 to £208.8m at 31 March 2021. This increase of £3.6m reflected the borrowing of £15m for new capital expenditure needs offset by maturing debt on short-term borrowing of £10m, less repayment of principal amounts on existing annuity loans held by the Council at £1.4m. Cash balances did dip in the early part of 2022 which required the new borrowing but slippage on capital schemes and the new funding paid in advance for the government’s energy rebate scheme of £9m meant that cash recovered to a healthy level by the end of the financial year.

The Chair enquired as to how secure the Council was in terms of its financial position. In response the Head of Financial Planning advised that the Council’s position was as good as it could be given the challenges. It was emphasised that the specified reserves, as detailed in the report were significant and had these not been in place then there would have been some real concerns. However, Council’s approval in February 2022 to set aside around £4.6million for additional inflation meant that those pressure could be met, for now. It was evident that Council’s across the country were facing huge pressures and many were currently preparing emergency budgets including in year service cuts before next year’s budget. Middlesbrough Council was nowhere near that position however there would have to be some difficult decisions made in order to balance next year’s budget. It would be a difficult year ahead but that was no different to any other Council and everyone was preparing for the challenges ahead. 

On behalf of the Board the Chair wished to place on record its appreciation for the huge amount of work undertaken by the Finance Team this year to ensure the Council was in the strongest financial position possible. 

AGREED the information provided be noted.