Middlesbrough Council already predicting overspend
Middlesbrough Council is already on course to go over its agreed 2024/25 budget by some £3.7m according to a year end forecast from the first financial quarter.
A report agreed by members of its executive said there was a “need to take management action” to control spending.
The report was compiled before the announcement on Monday that the council would no longer be subject to a so-called ‘best value’ notice, with the Government previously requesting evidence of the capacity to transform how it is run “at pace”.
Progress that had been made since the notice – which came with a threat of statutory intervention – was issued in January last year was recognised, although it was noted that “significant financial risks remain”.
The council was only able to produce a balanced budget worth a total of £143.1m – so ensuring outgoings are matched by incomings – for this current financial year with the aid of exceptional financial support from the Government.
The report by interim director of finance Debbie Middleton said £1.87m of savings had been identified, which if fully delivered, could reduce the year end overspend forecast.
It said the overspend forecast included almost £2.5m net of savings and warned that the exceptional financial support – essentially permission to borrow – may have to be further utilised.
The remaining element of the forecast would have to be funded from reserves as things stand – a warning having been given previously about allowing the balance to fall to a lower than recommended amount, its level of reserves already being regarded as “critically low”.
The Ministry of Housing, Communities and Local Government previously approved in principle up to £13.4m worth of borrowing by the council, of which £4.7m went towards the 2024/25 budget.
The report said the council’s financial position remained “critical”, adding: “The council has achieved significant improvement in its financial position from that which existed at the start of the 2023/24 financial year.
“However, it continues to spend above its available income sources as reflected by the forecast year end overspend of £3.742m for 2024/25, after using £4.7m of EFS to balance the budget.”
Interim chief executive Clive Heaphy said: “The message for this year is the picture remains extremely challenging and it will be a challenge for members and officers to make sure we come in as close to budget as we possibly can do.”
Mr Heaphy told a meeting of the executive transformation plans for the local authority involved using “slicker processes” and changing the way services were delivered to residents.
He added: “We are making really good progress, but let’s not kid ourselves there is still a long way to go and there are tough decisions to make.”
Separately, a Medium Term Financial Plan (MTFP) report suggested the budget gap could rise to £7.8m in 2025/26 and £8.7m in 2028/29, without mitigating measures, due to service demand spending pressures, pay and contractual inflation.
The report forecasting the 2024/25 overspend said: “Containing expenditure within the approved budget remains a critical priority for the leadership management team and the executive for the remainder of the financial year in order to protect critically low reserves and provide an opportunity to start to rebuild them over the period of the MTFP as set out in the approved reserves policy.”
The council is aiming to make £15.3m worth of savings in total in 2024/25, a further £5.1m in 2025/26 and £1.96m in 2026/27.
Some £2.94m of savings included in the 2024/25 figure have been deemed as “high risk” in terms of their successful delivery, 19% of the overall sum.
Meanwhile, the council said its approach to recovering debt would be “firm, but fair”.
It said additional resources were being placed into pursuing debts with the approach at first being to provide welfare advice and support followed by exercising legal powers where problem debt remained and then finally writing debt off if it was deemed unrecoverable.
A document associated with the executive report said: “Whilst overall collection rates over a period of time are respectable, a stronger focus on in-year debt and aged debt is fundamental in ensuring the council optimises cash collection thus further supporting the reduction in the provision which is assigned to bad debt.”