South Tyneside Council predicts massive £7.7million budget hole - but takes 'prompt action' to plug it

The figures were revealed to senior Labour councillors at a meeting of the local authority’s cabinet on October 2, 2024, as part of a budget monitoring update which looks at spend against budget.

The forecast revenue budget overspend was based upon net expenditure for the first three months of the 2024/25 financial year, between April and June, 2024.

The council’s revenue budget, which covers day-to-day services such as waste collection, street cleaning and children’s and adult social care, is projecting a £7.757 million overspend by the end of the financial year.

Key spending pressures include children and families social care, with a £3.5 million pressure on ‘out-of-borough placements’ alone, as well as pressure around agency staffing and support for young people with disabilities.

A report to cabinet noted that “there remains a shortage of appropriate placements for children with particularly complex needs” and that the “costs charged by external providers are very high”.

Other revenue budget pressures included pupil transport and adult social care services, including the “volume of patients discharged from hospital into residential care”, as well as highways cost pressures around winter maintenance.

Elsewhere, increased area management costs linked to the transfer of the ‘handy estates’ services from South Tyneside Homes into the council were listed as a pressure, along with beach and storm cleaning and open spaces.

A report to cabinet added that there was also an “underachievement of planning income” due to “reduced development related to the current economic climate”.

Councillor Jane Carter, Labour cabinet member for governance, finance and corporate services, gave a report on the budget and outlined measures the council was putting in place to reduce the overspend in-year.

A cabinet report said this included a “sustained reduction in the reliance of agency staff in key areas and recruitment of more permanent staffing”, as well as reducing the number of hire vehicles used, and “maximising” income and use of grant funding.

“Projections for the year indicate an overspend for the council of £7.8 million for its revenue budget,” Cllr Carter told the cabinet meeting.

“This projection takes into account continued increased demand in children’s and adult social care and home to school transport, and persistently higher levels of inflation, especially around pay award and contractual inflation across all budget headings.

“The main areas of spending pressures are in children’s and adult social care, learning and early help, place, transport and legal and governance.

“The pressures identified in social care and learning and early help reflect similar pressures being faced by many councils across the country.

“The [cabinet] report also notes the actions the council is implementing to ensure prompt action is taken to mitigate against and reduce the spending pressures identified, which includes reduction of agency staff, the introduction of vacancy management and fleet hire vehicle gateways and reducing discretionary spend and reviewing spend on our capital programme”.

Cllr Carter, who is also deputy council leader, added the council’s housing capital programme was projecting an overspend of £1 million in 2024/25, relating to additional costs to some schemes due to inflation and additional demand for disabled housing adaptations.

Elsewhere, the council’s housing revenue account was projecting a smaller overspend of around £100,000 compared to budget, a figure related to additional repairs and energy works.

The cabinet report said all cost pressures had been identified early in the financial year, which was said to be “critical to ensuring that action is taken on a timely basis and that spending pressures are addressed”.

A report to cabinet added: “We have prudently included all our known financial risks at this point so that plans can be put in place to manage pressures identified.

“The effects of the Covid-19 pandemic and cost of living crisis, particularly through increased social care demand, continue to impact some of our budgets in 2024/25.

“Collaborative work is ongoing across the system to identify mitigating savings to address identified pressures and support longer term financial sustainability.

“These will be closely monitored through the monthly performance management process and key decisions presented to lead members.

“Longer term projects include the development of extra care facilities for adult services and residential and assessment facilities for children’s services.

“Once operational these will provide improved outcomes for residents and will also reduce the need for more expensive placements.”

When signing off the 2024/25 budget, South Tyneside councillors were told the revenue budget was based on “efficiency savings targets” of around £7 million.

A report to cabinet this month said that it is forecast that this previous savings figure ”is certain or probable to be delivered in-year”.

The budget monitoring report forms part of the council’s regular quarterly cycle in relation to financial management and is available to view via South Tyneside Council’s website.