Agenda item

The Commission considered a report of the Director of Corporate Resources, the purpose of which was to set out the provisional revenue and capital outturn for 2025/26.  A copy of the report marked ‘Agenda item 11’ is filed with these minutes.

Introducing the report, the Lead Member for Resources advised that the outturn position represented good stewardship of the Council’s finances and provided some headroom, an underspend now having been achieved.

Arising from discussion, the following points were made:

(i)               The Dedicated Schools Grant (DSG) comprised of three separate funding blocks; funding for schools, early years and high needs.  It was noted that whilst the high needs block had a forecasted deficit of £99m as at the end of the financial year, the other two were underspent.  As each funding block was ring fenced, the underspends could not be used to address the high needs deficit. 

(ii)              Members noted with concern that the Government’s methodology would use the net DSG deficit when calculating the level of funding the Council would receive.  This would mean that underspends in other blocks would reduce the level of grant support received and so would not address the deficit but in fact, make the position worse.  Members noted that lobbying was taking place through bodies including the County Councils Network and County Treasurers to seek to amend this.  It was suggested that, if Government intended to use underspends in other blocks to offset the deficit, there should also be greater flexibility to enable those underspends to be applied where pressures existed.

(iii)            Members asked what would happen to future high needs block deficits, in the context of local government reorganisation. It was explained that Government support had been confirmed in relation to the deficit as at 31 March 2026, but further guidance had not yet been received regarding future deficits, other than indications that support would be ‘fair and proportionate’. The Commission noted that the statutory override was due to remain in place until 2028 and that if local government reorganisation proceeded, any deficit would need to be apportioned between successor authorities in accordance with Government guidance issued at that time.

(iv)            In response to a question, members were advised that reserves of approximately £60 million were held against the forecasted high needs block deficit of £99 million.

(v)             Regarding the use of unregistered placements to house children in care, it was explained that these were used only when no other suitable options were available. The costs reflected issues of supply and demand within the care market and the limited availability of placements for children the complex care needs, including where intensive individual care was required.

(vi)            Members discussed recruitment-related underspends and whether the use of agency staff and temporary contractors might be more expensive. It was explained that a range of approaches were used to manage vacancies. Where roles were essential, agency cover might be required, although this did not carry all of the same employment costs (e.g. holiday and sick pay and pension costs). In other cases, services might manage vacancies through other arrangements, including overtime or honoraria payments to existing staff, where appropriate.

(vii)          In response to a question regarding the Pan Regional Transport Model operated by the Growth, Environment and Transport Department, it was explained that the model was used to understand traffic flows when developing road schemes and that the Council could generate income by making it available to other councils. Funds were held to support future refreshes of the model.

(viii)         Members queried delays in the SEND capital programme where land was Council owned. It was explained that, even where land was owned by the Council, site investigations, planning and other procedural requirements still had to be undertaken and often subject to timescales outside the Council’s control.

(ix)            Members questioned the extent to which savings identified in the Efficiency Review relied upon demand in high-cost services naturally reducing or stabilising. The Lead Member for Resources stated that the review did not rely on a natural flattening in demand but included initiatives designed to specifically reduce demand and to better support people in lower-cost provision. It was acknowledged, however, that the measures proposed would take time to deliver and so savings would be spread across the full period of the MTFS.

(x)             Members expressed concern regarding delays in the delivery of the Lutterworth East Strategic Development Area scheme, noting the growing need for housing and infrastructure in the area.  It was explained that the development process was complex, and future infrastructure would be dependent on delivery of the B8 employment land forming part of the site.

(xi)            A member suggested that large capital projects should be reviewed once completed, particularly the Melton Mowbray Distributor Road (MMDR), given the rise in costs over the life of such a long term scheme. The Director advised that a review had already been initiated and that consideration would be given to how the findings could be shared with members. It was noted that previous reports to the Cabinet had set out the reasons why additional funding had been required at each stage and that factors such as weather, inflation and site conditions had all contributed. It was suggested that a report to scrutiny bringing this information together to identify lessons learnt for future schemes would be helpful. The Chairman of the Growth, Highways and Transport Overview and Scrutiny Committee reported that it had also recently considered a report regarding the delivery of the MMDR which could be shared with Commission Members.

(xii)          A member asked about the lack of use of the allocated central contingency of £8m and if it was being suggested that this would no longer be needed. It was explained that the proposed use related only to possible risks in 2025/26 which had fortunately not come to fruition.  However, whilst not needed in 2025/26, it did not remove the need to retain risk contingencies for future years.

(xiii)         Members discussed the Leicestershire County Council Investment Portfolio, particularly exposure to the office market and voids. The Lead Member for Resources advised that the Council was aware of changing market conditions, including lower than expected office use, and was looking to move away from over-reliance on that sector. The Director confirmed that the Strategy was reviewed regularly as part of the MTFS. The Commission noted that, although office sector performance had been weaker than anticipated, the overall portfolio had performed ahead of expectations.  The Lead Member further emphasised that returns did not show the whole picture, and that other benefits, particular relating to the rural estate were delivered through the portfolio.

(xiv)        Members queried demand-led overspends and the level of confidence officers had in future forecasts. It was explained that demand and future growth were considered as part of the MTFS planning process, and that demand management activity in adult social care and children’s services was beginning to have an impact.

RESOLVED:

(a)  That the provisional revenue and capital outturn for 2025/26 be noted;

(b)  That consideration be given to how the lessons learned from the delivery of long term, large scale capital schemes, including the Melton Mowbray Distributor Road, with particular focus on the financial progression of the scheme, should be reported to scrutiny.