Agenda item

Resolved:

·         That the report be noted.

·         That further information would be provided (before the budget round in November) about the lobbying (mostly being carried out by the LGA) on funding for care services.

·         That additional written information would be provided about research on local government finance.

·         To note that Children and Young People Select Committee was due to hold a briefing on children’s social care finance and that the Chair would seek to have Public Accounts Committee members attend that as part of a joint briefing.

·         That the Overview and Scrutiny Committee be asked to consider the Council’s financial position post 2020.

7.1  Selwyn Thompson introduced the report, the following key points were noted:

·         The report presented the Council’s financial position at the end of May 2018 - projected to the year end. It set the tone for subsequent reports to members during the year.

·         The current reported overspend in the Council’s budget was £14.8m.

·         Forecasts early in the year tended to be worse than the final outturn.

·         Work would take place during the year to control areas of overspend.

·         The Council was currently transitioning to the new Oracle Cloud finance system, which would be used by budget holders to examine expenditure.

·         Officers intended to use the new Oracle Cloud reporting tool to re-examine expenditure and produce a new financial forecast report for the Committee (and Mayor and Cabinet) after the summer.

7.2 Selwyn Thompson responded to a question from the Committee about the Oracle Cloud financial system:

·         The new Oracle Cloud system would amalgamate financial and human resources information and provide more robust and accurate information about expenditure. The system was already being used but the reporting functions had not yet been rolled out across the organisation.

·         It was anticipated that the reporting tool would successfully be rolled out by the end of July.

7.3 Ian Thomas (Chief Executive) was invited to address the Committee with his thoughts about the Council’s financial position and to provide a summary of actions he had begun to implement since joining the organisation, the following key points were noted:

·         The Council had saved a great deal of money over the past eight years of austerity but more would be required.

·         It was understandable that, in order to protect frontline services, decisions had been made to reduce support services in the back office.

·         Reductions in human resources and finance (in particular) had diminished the support offer that was available for frontline service departments.

·         Specifically, the strategic corporate support from human resources, finance and organisational development needed to identify cost drivers in directorates and help deliver savings initiatives had not been available.

·         A major programme of transformation would commence. It was recognised that the most straightforward to achieve savings had been made. Further minor changes within the organisation would not deliver the £30m of reductions in the budget that would be required in the next two years.

·         Significant changes in the Council’s operating model would be necessary and would need to include: changes in the relationship between the Council and citizens; substantial ‘channel shift’ to promote digital services; further work on demand management; and a review of the relationship between spending and investment.

·         Work would also take place to deliver strong commissioning strategies for the medium to long term.

·         Nationally, many councils were struggling with the same issues.

·         Councils were lobbying through the Local Government Association (LGA) to ensure that local government would achieve a better deal from the comprehensive spending review in 2019.

·         The National Audit Office had reported that spending cuts in local government were in danger of damaging services to the most vulnerable in society.

·         The LGA predicted that by 2025 the gap in local government would increase to £7.8b.

·         He recognised the Committee’s concerns about children’s services. Gaps that had been created by managers leaving the organisation had been filled with interim management arrangements and interim support, whilst permanent appointments were being made.

·         Children’s services nationally were under pressure from increases in demand. Supply and demand factors in foster caring and residential care had led to significant increases in costs. National analysis suggested that by 2020 there would be a £2b gap in funding for children’s social care.

·         The Department for Education’s national analysis (Newton) found that 50% of spending in social care was outside of the control of local authorities and was linked to issues such as deprivation and the impact of welfare reforms.

·         Notwithstanding the national picture, the Council needed to ensure that it had effective processes in place to capture costs, particularly in children’s and adult social care.

·         A significant proportion of the Council’s expenditure was spent on social care, which provided services that were largely unseen by the majority of the public.

·         Some ‘spend to save’ investment might be required to delay social care interventions for children and adults.

·         Conversations were taking place with the Executive to meet the challenge of the Council’s finances.

·         The Council was taking a proactive approach to dealing with the challenge and was ahead of other councils in terms of its efforts.

·         Work was taking place to determine what could be communicated about the budget challenge, and how, to the public.

·         He welcomed challenge and oversight from Councillors about the management of the Council’s finances.

7.4  Ian Thomas responded to questions from the Committee, the following key points were noted:

·         Work on spend to save initiatives would take place in coordination with other areas of work to ensure that the assumptions being made were sound. It was important that both spending and saving assumptions were detailed, targeted and correct.

·         Information about this work would be reported before the end of the calendar year.

·         He had put a moratorium on non-essential spending, it was important that everyone across the organisation recognised the sense of urgency needed to manage the Council’s budget.

·         The issue of comparing overspends in the delivery of services between authorities was somewhat ‘academic’ and depended on the initial setting of budget levels. A comparison of spend per capita might prove more accurate.

·         Across local authority children’s social care budgets there was: a lack of information about delivery of services; variation in financial coding; discrepancies in income levels; differences in contributions from the dedicated schools grant and clinical commissioning groups between authorities – all of which could account for different levels of funding and expenditure.

·         Based on existing analysis, the Council was not in a position where it would be required to issue a section 114 notice (to prohibit non-essential spending and set an emergency budget). However, should the Council do nothing (which would not be the case) it would be -like most other councils- in a precarious positon over the next three to five years.

·         Lewisham’s section 151 officer (ED for Resources and Regeneration) produced a section 25 notice each year to assure the Council about its finances.

·         Before he took up the role of Chief Executive he commissioned an analysis on the work that was carried out in Northamptonshire following its recent financial problems. Lewisham was not in a comparable positon. Northamptonshire County Council had relied on the use of reserves to maintain spending and had made some reckless decisions about the financing of adult social care and the use of its estate.

·         Difficult decisions had been made in Lewisham in the past – but the Council was in a relatively strong positon to meet the budget challenge.

·         The National Audit Office had issued a warning about Council finances nationally, with particular focus on England’s shire counties.

·         Significant and serious changes and modernisation would be required at the Council to balance future budgets.

·         Members would be required to make some difficult decisions in the coming years.

·         Savings could be made through streamlining processes. There would also be an income generation programme, which might carry forward projects such as a local government energy company or shared/traded services.

·         He would provide a written update for Councillors about the Council’s finances.

·         He was assured that the Mayor and Cabinet were taking the Council’s financial positon seriously and that there was a recognition that difficult decisions needed to be made whilst protecting the most vulnerable citizens.

·         Lobbying needed to continue for both adult and children’s social care. The Council could not rely on the better care fund to continue to support the delivery of adult services.

·         Most of the changes that would be made at the Council would require consultation so they could not wait.

7.5  Ian Thomas, Janet Senior and Kevin Sheehan (Executive Director for Customer Services) responded to a question about the shared IT service with the London Borough of Brent, the following key points were noted:

·         Five years ago Lewisham’s IT service had a budget of £10m. It was now roughly £5m.

·         £1m had been saved by the move to the shared IT service with LB Brent.

·         A thorough review of IT services was taking place with a view to ensure that stronger performance and management processes were in place.

7.6  Councillor Amanda de Ryk was invited to address the Committee, the following key points were noted:

·         She shared the Committee’s concerns about the pressures on the Council’s budget.

·         Her discussions with lead members at other authorities highlighted that Lewisham was not in a unique positon in terms of the pressures on its budget and the challenges associated with making cuts.

·         A steady and important piece of work had to take place to: keep oversight of budgets; improve performance management and; develop stringent business cases for any new spending.

·         The next few years would be difficult.

·         Work would take place to review the corporate approach to the annual review of fees and charges, which was not as robust as it could be. Initial discussions had taken place with officers about how this work might be carried out.

·         Officers had been tasked with carrying out further work on the Council’s sources of income.

·         Consideration was also being given to reviewing the potential social value of Lewisham’s contracts.

·         She would be happy to attend future Committee meetings, when invited and believed that it was an important ‘sense check’ for her to hear Members’ views about the budget reports.

·         As a previous Member of the Overview and Scrutiny Committee she’d considered it discourteous when Executive Members did not attend Scrutiny meetings.

7.7       In the Committee discussions, the following key points were also noted:

·         The Committee would welcome information and support over the coming years to help meet the challenge of scrutinising the Council’s finances.

·         Lewisham had invested heavily in public services to provide high (but sometimes costly) levels of support for the most vulnerable, this wasn’t the case at all authorities.

·         The move to digital services had increased Councillor casework from people who were unable to access services online.

7.8  Resolved:

·         That the report be noted.

·         That further information would be provided (before the budget round in November) about the lobbying (mostly being carried out by the LGA) on funding for care services.

·         That additional written information would be provided about research on local government finance.

·         To note that Children and Young People Select Committee was due to hold a briefing on children’s social care finance and that the Chair would seek to have Public Accounts Committee members attend that as part of a joint briefing.

·         That the Overview and Scrutiny Committee be asked to consider the Council’s financial position post 2020.