Nottingham City Council is currently facing a significant budgetary challenge, with a gross forecasted overspend of £12.595 million for the 2024/25 financial year, according to the latest Budget Monitoring Report (Period 4) which will bepresented to the Executive Board on September 17, 2024.
Key Figures:
- Gross overspend: £12.595 million
- Net overspend: £2.822 million
- Adults’ social care overspend: £9.276 million
- Children’s services overspend: £4.936 million
- Exceptional Financial Support (EFS): £41.143 million
- Housing Revenue Account (HRA) underspend: £0.304 million
- Capital programme variance: £2 million
The net overspend, after management interventions, stands at £2.822 million, against a budget of £356.8 million.
The council attributes these financial difficulties to rising demands for services, especially in adult and children’s social care, compounded by inflationary pressures and the ongoing cost of living crisis. These factors have put additional strain on the council’s resources, mirroring the situation faced by many other local authorities across the UK.
Social Care Services Under Pressure
The largest contributor to the overspend is social care. Adult social care is forecasted to exceed its budget by £9.276 million, driven by the growing complexity of care needs and a significant reduction in health funding contributions towards the cost of care. Despite management’s efforts to reduce costs, adult social care is expected to end the financial year £2.754 million over budget.
Similarly, children’s services are under strain, with a gross overspend of £4.936 million predicted. This overspend is largely due to the high cost of external placements for children in care, including unregistered care facilities where weekly costs can exceed £21,000 per child. The transformation programme, which aims to reduce the number of children in care, has seen progress, but the council continues to face challenges in managing the profile and mix of placements.
Exceptional Financial Support
In an effort to manage these budgetary pressures, the council is relying heavily on Exceptional Financial Support (EFS) from the government, with £41.143 million of EFS flexibility included in the 2024/25 budget. This support, funded through capital receipts and short-term borrowing, is essential for balancing the council’s budget, but it highlights the temporary nature of the current financial solutions.
The council’s financial position remains precarious, with further reliance on EFS likely in future years unless significant savings are realised. The Medium-Term Financial Plan (MTFP) outlines savings targets of £88.335 million between 2024/25 and 2027/28, with £35.852 million of these savings required for 2024/25 alone. To date, 78.8% of the savings for this financial year have either been delivered or are on track.
Housing Revenue Account and Capital Programme
On a more positive note, the Housing Revenue Account (HRA) is forecasted to end the year with a £0.304 million underspend, which will be used to increase the council’s reserves. The capital programme, which includes both General Fund and HRA projects, is also on course to meet its revised target of £327 million, a slight variance from the £329 million budget.
Financial Intervention Strategy and Future Outlook
In response to the financial challenges, Nottingham City Council has implemented a Financial Intervention Strategy since June 2024. This strategy includes a combination of management actions, spending controls, and reviews of discretionary spending. However, if these measures fail to close the budget gap, the council may need to draw on its reserves or further EFS to maintain financial stability.
The report emphasises that the council must continue to find ways to balance its budget, warning that failure to do so could lead to service reductions and potentially further government intervention. The council is already subject to a Section 114 notice, issued in November 2023, which restricts spending on non-essential services.
As the financial year progresses, Nottingham City Council’s leadership is working closely with government commissioners and the Local Government Association (LGA) to navigate these challenges and secure the long-term financial health of the city.
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