The executive director for resources and s151 officer at West Berkshire Council explains how the authority reacted quickly to put right a financial forecast that could have seen it need to issue a section 114 notice.
Joseph Holmes
The challenge
Like many councils across the country, we have faced some major financial challenges. I don’t need to repeat all of the pressures we face, but like councils up and down the nation we have seen rising costs and demand in children’s and adult social care, home to school transport, and housing.
Like many counterparts, our underlying position was assisted with grants during the Covid-19 pandemic, but once these fell away, the rise in demand has been significant, especially in children’s social care. To provide some context, children in care numbers increased by 27% with a large number of vacancies filled by agency staff (34% at one point).
As at quarter one in 2023-24, the initial forecasts were an £8.7m overspend. To put this in context, the council’s general fund is £7.2m. If this forecast was to come to fruition there was a very real chance that a request for exceptional financial support would be required or a section 114 report issued.
As a council we needed to ensure that we reacted – and quickly. We also changed political administration for the first time in 18 years and being faced with such a financial challenge was probably not the first thing members had in mind to tackle!
What have we done?
We immediately established a Financial Review Panel (FRP). One of the massive benefits of working in local government is collaboration with colleagues and we are able to quickly get hold of other council’s approaches when faced with major financial challenges. This enabled us to rapidly deploy a set of ‘terms of reference’ and get the meetings up and running from July 2023.
The FRP included senior officers from finance, HR, legal, procurement and transformation teams to provide challenge, as well as senior members. The FRP was to focus its remit on exploring:
– reducing agency expenditure;
– approving all expenditure over £1k for an overspending service (with specific exceptions);
– reviewing all requests to recruit;
– reviewing accounting policies;
– reviewing the council’s capital financing costs; and,
– reviewing action plans to reduce spend.
From 27 July, we have met almost every single week, with a relentless focus on how to mitigate the overspend position and protect the council’s reserves as much as possible. There has undoubtedly been a lot of resource taken to enable the meeting to happen as well as the time taken every week in preparation, as well as during the meeting itself. But with such a threat to the council’s finances, time had to be made for this so that we did respond, and quickly.
What was the outcome?
It took a few weeks to establish a rhythm to the meeting, so that business cases justifying expenditure were clear, that suitable exceptions for areas of spend were established, and that the forms used were as slick as possible.
During this period our digital team worked closely with HR so that all requests for recruitment or agency staff used online forms, rather than separate emails and documents, which assisted in the compilation of information.
Compliance was absolutely critical as well; we have an overarching managed contract for agency workers. In 2022-23 the council spent almost £12m on agency staffing, with around 20% of this spend ‘off contract’. During 2023-24, the council spent almost £2.5m less on agency spend (FRP being in existence for eight months of the year), with almost every single agency worker coming through the core contract.
Communication, challenge and collaboration were keys to a successful outcome. Photo: Shutterstock.
This is a much better management position for the council as well as enabling greater oversight of agency costs and a significant reduction in costs. In year agency costs are forecast to be a further £900k lower than last year. Aside from the numbers, it is much better from a workforce stability and service provision perspective to reduce our reliance on agency staff; at present, children social care agency use has almost halved since its high point, which has taken a lot of work from HR and the service to encourage more people to join us permanently.
Through the above cost reduction, plus the review of expenditure, Minimum Revenue Provision (the council was an outlier on how high capital financing costs were) and the sale of a commercial property asset on the last day of the financial year, the year-end position shows an overall overspend of £3.1m.
This puts the general fund at just over £4m; lower than the s151 officer minimum of £7m, but still ensuring that the council has reserves for the year ahead. And with the budget for 2024-25 putting £1.9m into reserves, this is a much healthier financial position than at quarter one.
Earmarked reserves have also risen slightly, providing greater financial resilience. The Medium-Term Financial Strategy shows an increase to reserves over the next three years to build these back up to £10m.
Reflections
To be in the financial position that we are currently has taken an enormous amount of work. Colleagues across the council have diverted their time towards helping achieve an improved position and retain the council’s control over its financial future, yet at the same time we have continued to deliver so much.
The council was recently rated ‘Good’ in a CQC Adult Social Care inspection, while we have converted an office into housing for displaced people and delivered a large number of affordable housing units, and our transformation programme is starting to deliver.
There has been a need for us to communicate effectively, so that staff understand the position and know how they can play a part in assisting with the challenge.
We have had to challenge and make decisions. Pausing recruitment, pushing back on ‘non-essential’ spend, not recruiting agency staff, commencing the sale of commercial property – none of doing this every week has been easy, but the decisions have been made in the round, mindful of the need that we must continue to provide the services that our residents and businesses expect.
Lastly, and most importantly, we have needed to collaborate. The excellent finance team have worked closely with teams across the organisation, and at the same time we have needed to collaborate more effectively across teams; legal, human resources, procurement, transformation, digital, communications, projects, and ICT.
We have worked together, supported one another, and enacted change. Communication, challenge and collaboration…that’s what we will need to continue to do!
Joseph Holmes is the executive director for resources and s151 officer at West Berkshire Council.
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