Agenda item

To consider the Third Financial Review 2025-26.

The Committee considered the Third Financial Review (FR3) for 2025/26, which reported a forecasted balanced outturn position for the year, representing a £2.345m improvement since FR2 (achieved after applying £25.261m of Exceptional Financial Support (EFS)).

Members noted continued significant pressures, particularly the £8.195m overspend in Children and Families driven by placement and staffing costs, alongside a £12.037m shortfall in cross?directorate Transformation savings. It was reported that the pressures were partially offset by a £7.412m favourable variance in the Place Directorate, mainly due to vacancy management and one?off income.

The Capital Programme had forecasted to spend £148.093m, an underspend against the revised programme, while the Council’s reserves were projected to reduce to £26.632m, with the planned £1.304m contribution to the General Fund not achievable.

Key financial risks noted included rising placement costs, winter pressures in Adults’ Services, agency staffing, and the scale of the Dedicated Schools Grant deficit (£147.966m forecast).

The Committee welcomed the balanced budget but noted that it depended on Exceptional Financial Support and an accounting override related to the DSG.  Consideration was given to service performance in relation to the delivery of transformation savings and the importance of transformation management, resource and delivery planning.

The Committee questioned the effectiveness and cost of the transformation programme and the accuracy of FR3 forecasting; concerns were raised in relation to ongoing capital underspending.  Members requested a standalone review to understand the more long?term impacts of this.  Officers supported the suggestion of a separate member working group of the capital programme, noting the significant link between capital delivery and revenue planning, and would look into this.  Officers confirmed FR3 forecasts used the best available information, with improving accuracy later in the year.  Updated capital figures had been shared and would be further refined for FR4.

The Committee referred to Adults and Health and highlighted winter?related increases in Adult Social Care demand and asked whether this and NHS financial pressures were factored into forecasts.  Officers confirmed that seasonal pressures were included in the forecasts and that NHS and Council responsibilities remained clearly defined.  Any issues around cost allocation would be addressed with partners.

The Committee raised concerns that although there had been improvements, significant pressures remained across the piece.

The Committee welcomed the reports and thanked the officers for their ongoing work.

RESOLVED (unanimously):

That the Finance Sub-Committee:

1.    Note

a)    the factors leading to a forecast balanced position

b)    the contents of Annex 1, Section of the report

c)    progress on the delivery of the MTFS approved budget policy change items

d)    the RAG ratings and latest forecasts

e)    the actions to be taken to address any adverse variances from the approved budget.

2.    Note the in-year forecast capital spending of £148.093m against an original capital budget (at out-turn) of £208.491m.

3.    Recommend to Council to approve the Supplementary Revenue Estimate Request for Allocation of Additional Grant Funding over £1,000,000 as per Annex 1, Section 3, Table 1 of the report.

4.    Note that the Children and Families Committee will be asked to approve the Supplementary Revenue Estimate Requests for Allocation of Additional Grant Funding over £500,000 and up to £1,000,000 as per Annex 1, Section 3, Table 1 of the report.

5.    Note the approved Supplementary Capital Estimates and Capital Virements up to £500,000 as per Annex 1, Section 4, Table 3 of the report.

6.    Note that Service Committees will be asked to approve the Supplementary Capital Estimates above £500,000 and up to £1,000,000 as per Annex 1, Section 4, Table 4 of the report.

7.    Note the Capital Virements above £500,000 up to and including £5,000,000 to be approved in accordance with the Council’s Constitution as per Annex 1, Section 4, Table 4 of the report.

8.    Recommend to Council to approve the Supplementary Capital Estimate Request over £1,000,000 as per Annex 1, Section 4, Table 5 of the report.

9.    Approve the Capital Virements above £5,000,000 as per Annex 1, Section 4, Table 5 of the report.

10. Note the Capital Budget Reductions as per Annex 1, Section 4, Table 6 of the report.

11. Note the available reserves position as per Annex 1, Section 5 of the report.