Council budget: savings too ambitious and too many uncertainties
The first of two reports from the Local Government Association co-ordinated independent financial review team, commissioned jointly by Birmingham city council and the Birmingham Independent Improvement Panel, was published earlier this week. It does not represent a 100% vote of confidence in the Council’s budget plans for 2017/18 and beyond.
The report starts by putting the financial challenge faced by Birmingham city council into context: local government experiencing major reductions in funding over the past six years with more to come. Birmingham City Council has delivered almost £600m of savings since 2010 and is now planning for further significant savings over the next three years, as well as dealing with the Kerslake Review and its aftermath.
The report states:
The 2016/17 financial year has been a particularly challenging one for the Council with a number of budgeted savings plans not materialising, especially in the People Directorate. As a result the Council is likely to overspend its general fund revenue budget by more than £30m this year.
The Review says that the “Council has responded seriously to the financial challenges of the current year and has set about reassessing its financial base to more realistic levels,” but says it is: “quite understandable that questions should be asked about their robustness and deliverability.”
However there are a number of areas where the plans appear to be ambitious and challenging. It would be prudent for the Council to consider appropriate contingency plans including the identification of more savings options and a review of its reserves strategy. A number of key savings proposals are in need of particular attention, for different reasons, to ensure that the profile of forecast savings is reasonable and achievable given the current stage of development of these plans.
The delivery of savings in 2017/18 and beyond will require robust and focussed management, with clear accountabilities and delivery plans in place. There is some good evidence that these arrangements are in place but not consistently across all service areas. The Council therefore has work to do to strengthen this important aspect of their governance.
The first stage of the Review took place in mid-December 2016 over five days and looked at the way the council had developed its 2017/18 savings proposals. The review team will be returning to the council at the end of January to look at delivery plans and a final report will be published in early February.
The Review team is made up of Cllr Nick Forbes (pictured), Leader of Newcastle City Council, and experienced local government senior officers from across the country. It is tasked with providing external assurance and due diligence on the 2017/18 budget plans of the council.
The report says that the Council now accepts “a number of savings plans budgeted for in 2016/17 were very ambitious and in hindsight were unlikely to be achieved.” This “acceptance” has not always been clear in the Council’s public comments on its budget and financial management.
The report says:
The review team has concluded that the financial gap identified for 2017/18 of £78m, net of a planned contribution from reserves of £46m, is a robust and realistic assessment. Crucially the previously identified significant savings arising from health and social care integration have now been removed from financial projections.
However, Cllr Forbes and his colleagues are not yet able to provide full confidence in the savings plans:
Overall the proposals would appear to be a reasonable and appropriate response to the financial challenge the Council faces. However the review
team did not feel sufficiently assured at this time that the magnitude of savings in 2017/18 can be delivered in full.
Chamberlain Files understands that senior Council figures believe the Review team can be assured with more details this month ahead of the second report in February. Senior sources suggest that the Review team has delivered the “first tick” to the budget-making process and the council leadership will now concentrate on the deliverability of the budget.
But the report says:
There are a number of specific proposals where the review team feel that the level of savings planned for 2017/18 appears too ambitious and the
Council needs to urgently review these to ensure they are set at an achievable level.
Key risk areas highlighted include:
- Future Operating Model
- Adult Social Care
- Supporting People
- Children’s Services
- Service Birmingham Contract.
The report states:
…there is now a clear collective determination amongst Cabinet members and senior officers alike to ensure that the 2017/18 budget is delivered. There is a thorough understanding of the challenges facing the Council and there is a good understanding within Cabinet and the Corporate Leadership Team of the proposals put forward.
The Council leader is making it known that he is personally leading from the front on the Budget. Cllr Clancy wants everyone to know that he won’t be taking his eyes off the finances when the budget is approved in February, describing it as a live budgeting situation, reviewing progress on a daily basis and responding quickly to any difficulties.
The Review team says:
…a Performance and Transformation Board is being established under the joint leadership of the Deputy Leader of Council and Chief Executive which should provide greater focus on financial management and delivery actions. These arrangements are not yet fully established and whilst we identified some good approaches to delivery planning, these are not yet universally in place nor are they embedded. The review team feel that the Council needs to focus on this approach and make sure that these arrangements are in place as soon as possible.
The Review team broadly endorses the reserves strategy, at least until 2018.
The Review teams says that the “overall narrative on ambitions and desired outcomes” in the Budget Consultation 2017+ document needs “more development and communicating further.” Council leader John Clancy will be appearing at public consultations on the 2017/18 budget tomorrow – let’s see how that narrative is coming along.
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