A meeting of the authority’s cabinet heard that while the overall budgetary position of the authority remains stable – with sufficient reserves to cover any shortfalls for the next three years – individual departmental spending levels were “all over the place”.
That was the assessment of County Hall’s deputy leader Alan Vincent, who is also the cabinet member responsible for resources.
He said that he remained confident that the county council would deliver the savings required for it to balance the books in the coming years – but that the impact of Covid meant it might take longer than previously expected.
The authority’s budget deficit is predicted to stand at £63.9m by 2024/25 under the latest medium-term financial forecast. That is up by £13.9m compared to the last update on the council’s coffers back in February – but the increase is largely due to the inclusion of an additional year in the forecast period.
The authority expects to have £180m in reserves at the end of the current financial year – more than enough to cover the identified budget gaps through until 2024/25.
However, an in-house report assessing the authority’s finances reveals the complexities underpinning the contrasting underspends and overspends in different service areas in the wake of the Covid crisis – such as a drop in spending on some residential care placements, but a beyond-budget increase in the money needed to fund care within people’s own homes.
The relationships between the roller coaster figures are often further clouded by the fact that the county council – like local authorities across the country – has received a plethora of emergency government grants since the onset of the pandemic.
While that cash has covered short-term pressures, it will not form a recurring pot of money on which County Hall can come to rely – meaning any long-term demand caused by Covid would have to be funded from the authority’s usual budget.
County Cllr Vincent said that a forecast underspend of £5.2m for 2021/22 at this stage in the financial year would normally be a cause for celebration for the man who holds the authority’s purse strings – but not in the current climate.
“That’s too simple an approach, simply because if you look at the figures behind the figures…they’re all over the place. We have overspends in some areas, underspends in other areas.
“It’s a very mixed picture – and so mixed that we can’t pin it down at this stage, it is too soon to do that. Obviously, we’re monitoring the figures on a regular basis.
“[In] some areas where you wouldn’t expect to have additional spending, we’ve had it, and in other areas where you wouldn’t expect an underspend, we’ve had that, too,” County Cllr Vincent said.
He added that the realisation of savings long-planned by the authority had been interrupted by the pandemic and that it could be the end of the year before there was more clarity about the financial situation – but he told the meeting that it was a case of “so far so good”.
“It looks as if we can get back on track – I’m confident that we will deliver the savings, but [not] as quickly as we initially intended because of the pandemic – it’s as simple as that."
The county council is aiming to make £42m in savings in the year to March 2022 – around £30m of which has been carried over in spending reductions that it intended to achieve last year, but which went undelivered as a result of the onset of the pandemic.
The medium-term financial strategy states that the level of reserves held by County Hall means that it is in position to bridge the broader underlying structural deficit over the next three years in a “considered and sustainable way”.
However, the volatility in spending in some areas – brought about by Covid – has presented a fresh poser for the authority’s bean-counters – in addition to the pre-pandemic pressure that they were already facing. Cabinet members were also told that the potential impact of “pent up demand” for council services was yet to be felt.
Nowhere are those twin challenges likely to hit harder than in adult services – which absorbs 44 percent of the county council’s annual £881m budget.
A document assessing the authority’s position at the end of the first quarter of the current financial year reveals that “care at home” services for older people are forecast to overspend by £7.1m during 2021/22. That figure is largely as a result of the abandonment of some previously-planned savings, given that supporting people within their own home became a priority during the pandemic.
Concern amongst families over the risk of Covid transmission and restrictions on visiting loved ones has seen care home occupancy reduce since Covid struck – including in county council-run facilities. In the authority’s own homes it now stands, on average, at 473 residents – or 78 percent of their maximum combined capacity.
That is forecast to generate a £3m shortfall in expected income this year and while demand for places has increased again in recent months, it is reported as remaining “significantly below pre-pandemic levels”.
Similarly, continued limited opening of day centres has meant that the facilities have yielded £1.2m less than was expected – although increases in occupancy are expected as more of the services gradually reopen and return to more usual operation.
Meanwhile, use of agency staff to cover sickness absence in the residential and day care sectors has fuelled a forecast £1.6m overspend on staffing this year.
However, in a measure of the vagaries of the budget pressures brought by Covid, an anticipated overspend of £6.5m on domiciliary care for people with learning disabilities is expected to be largely offset by a reduction in the use of residential and nursing care.
While the overall adult services budget is forecast to overspend by 0.84 percent – £3.2m – members were reminded that it had been supported by £15m in government grants – including for infection control – whose “scale and duration [this year] may be more limited compared to last year”.
The authority expects £33m worth of increased demand for adult services between 2022 and 2024/25 – arising from a combination of growing numbers of people requiring support and that support being of greater complexity.
The other main demand-led area within the county council – children’s services – is actually forecast to underspend by £5.8m during 2021/22 after a significant drop in the number of youngsters entering the care system in the county over the past year.
Between September 2020 and this June, there was a ten percent fall in the number of children – excluding those with disabilities – being “looked after” by Lancashire County Council, down from 2,085 to 1,880.
Members were told that the reduction was likely to have resulted, to a degree, from reduced referrals and assessments during the pandemic – but also early benefits from the new “family safeguarding” model now being deployed by the authority in attempt to keep more children and their parents together under the same roof where it is safe to do so. The scheme began to be rolled out in January and the majority of the reduction in children coming into the authority’s care has occurred since then.
It is expected that £6.6m less than was budgeted for this year will now need to be spent on placements for children and young people.
However, the pandemic has also seen reductions in usually reliable income sources for County Hall – which the authority is expecting to continue. It predicts that bus lane and parking penalty charge notices will generate £1.7m less this year than would otherwise have been expected, although officers note that the exact figure “is difficult to forecast due to uncertainties around volumes of traffic and the behaviour of the public”.
Cabinet members were told that the authority faces “ongoing and unprecedented uncertainty” over its finances – not only because of the yet-to-be-established long-term impact of Covid on demand for services – but also as it awaits the outcome of two delayed government reviews which will have an impact on the coffers of all councils.
A three-year government-wide comprehensive spending review – which was last year truncated to cover just 12 months – is now due this autumn, but a broader “fair funding review” specifically into how councils are financed has yet to emerge. Papers presented to cabinet state that County Hall is not expecting any new funding models to be in place for 2022/23.
A spokesperson for the Ministry of Housing, Communities and Local Government said in response to the issues brought before Lancashire County Council’s cabinet: “We have allocated more than £12 billion directly to councils since the start of the pandemic, with more than £6 billion of this unringfenced recognising that council are best placed to deal with local issues.
“Lancashire County Council has received over £76 million in emergency funding and we have made available a further £26 million this year
“In the coming months, we will take stock of the demands faced by councils and the resources available to meet them and will decide on the timetable for future funding reform.”
COULD COUNCILS BE PENALISED FOR HAVING HEALTHY RESERVES?
It emerged last month that the government plans to collect more detailed data about the reserves held by councils – leading to concern in some quarters that authorities like Lancashire County Council – with significant levels of cash in the bank – could be in line for less support under any new funding arrangements.
The Local Government Chronicle quoted an anonymous local council finance source as warning that minsters could misinterpret reserve totals.
“The way some of the accounting is done, it may look like there is more money available in the reserves than there really is,” the source told the publication.
Speaking about the issue to the Local Democracy Reporting Service, Lancashire County Council’s deputy leader Alan Vincent said he hoped that his authority’s reserves – forecast to stand at £180m by the end of the current financial year – would stand it in good stead with Whitehall and not see it disadvantaged.
“We would hope that the government will take into account the council’s good stewardship of our finances when looking at any future settlements – and ensure we are not penalised for the hard work which has been done to ensure we remain on a good footing.
“For example, as a result of the impact of Covid on staff attendance last year, we had an underspend on highway repairs – but this year, by working hard to catch up, we have overspent our budget by £3m, which is coming from our reserves from last year. To penalise us for having those reserves would be unfair,” County Cllr Vincent said.
COUNTY COUNCIL’S POST-COVID COFFERS
£63.9m – forecast budget deficit by 2024/25
£180m – forecast reserves at the end of 2021/22
£102m – government non-ringfenced Covid grants provided to Lancashire County Council to date
£7.1m – expected overspend on “care at home” services in 2021/22
£1.7m – forecast reduction in income from parking and bus lane fines in 2021/22
Sources: Lancashire County Council cabinet papers and Ministry of Housing, Communities and Local Government