Schools Forum January 2022: General Fund Budget Briefing 2022 to 2023

Meeting: Schools Forum

Date: 17 January 2022

Report of: Chief Finance Officer

Subject: General Fund Budget Briefing 2022/23

Wards Affected: All

1. Purpose of the report

1.1 This briefing provides the Schools Forum with headline information on the council’s draft General Fund budget proposals for 2022/23 including the outcome of the 3-Year Spending Review 2021 (SR21) and the financial challenges impacting on the council’s General Fund services. It also includes the first draft Families, Children & Learning savings proposals for 2022/23 for contextual information.

2. Recommendations

2.1 To note the overall draft General Fund budget position for 2022/23.

2.2 To note the council’s first draft General Fund budget proposals (savings) for the Families, Children & Learning directorate for 2022/23 (Appendix 2).

2.3 To feedback comments and queries to the council’s Chief Finance Officer for the consideration of Members and the council’s Executive Leadership Team (ELT).

2021/22 Financial Position

3.1  The council’s General Fund is currently (month 8, November) forecasting an overspend of £3.634m for 2021/22. This is a high overspend forecast at this stage of the year and therefore steps are being taken to ensure that non-statutory and non-critical spending is curtailed as far as practicable and safe to do so through spending controls, vacancy and contract management.

3.2  Some media attention was focused on the previous year’s outturn (2020/21) which appeared to indicate a £9.733m underspend. However, this was largely due to the timing of Covid grants and compensation, NHS funding and outbreak management funding. The £9.7m resources were effectively used as follows:

• £7.262m was used to balance the 2021/22 General Fund budget which, even so, still required a savings package of £10.687m together with borrowing from reserves of £1.521m to balance the budget;
• £1.680m was used to meet the projected 2021/22 pay award for which no provision had been made in the approved 2021/22 budget following the government’s announcement / expectation of a public sector pay freeze;
• Provision of £0.317m for the deficit on Moulescoomb Primary which fell to the council’s General Fund on academisation of the school;
• £0.474m to support delivery of Corporate Plan priorities delayed by the pandemic including SEND support (CVS), a commitment to an anti-racism initiative (‘The World Reimagined’), women’s safety (CVS), active travel and community wealth building.

2022/23 Budget Setting

3.3  As for last year, the General Fund budget setting process has followed a somewhat different (i.e. later) timetable due to a range of factors including the ongoing presence of the pandemic. However, the principle reason for the delayed timetable was the late announcement of the anticipated 3-year Spending Review which was not announced until the end of October and was not fully analysed until early November. Until this was received, local government was not in a position to determine or understand its budget challenges for 2022/23 or beyond with any accuracy, particularly given the government’s announcement in late Summer of substantial funding for social care reforms which the sector had hoped would provide significant additional funding to alleviate long standing and growing pressures.

3.4  In the event, the Spending Review 2021 (SR21), which included the Social Care reform funding announcements, did not provide any resources to redress the substantial additional demands and costs that have built up across the system over the last decade. The Social Care reform funding is purely to meet new cost burdens including a care cap and increased income thresholds. SR21 did provide an overall increase in funding (but see para 3.5 below) and also allowed councils to increase Council Tax by an additional 1% for each of the next 3 years by way of an Adult Social Care precept. If these precepts are agreed by the City Council, by 2024/25 Council Tax will have increased by 18% since 2016/17 in respect of Adult Social Care precepts, demonstrating that a substantial and increasing proportion of the burden of funding social care (over £21m pa) is falling on local taxpayers.

Spending Review 2021

3.5  As previously reported to the Forum, Local Government has been awaiting a longer term, multi-year Spending Review for some years, which it desperately needed to enable effective medium term financial planning. Due to, first, a general election and then the advent of the pandemic, Local Government has received only short term (1 year) funding announcements since 2019/20. This has made planning very challenging for local authorities, particularly given the high, well-publicised cost pressures that most authorities have been experiencing. In this respect, while Schools also continue to suffer cost pressures and have had years of challenging funding settlements, there was at least a longer term funding announcement made by the government, which has confirmed its commitment to the 3-year funding pledge originally announced by the previous Government in 2019.

3.6  The Spending Review 2021 has now been issued in detail to local authorities through the provisional Local Government Financial Settlement 2022/23 (LGFS) received on 16 December 2021. This provides each local authority with an indication of the specific resources it can expect for 2022/23, including annual grant allocations. It is a 1-year settlement which again leaves Local Government with a level of uncertainty about future years’ allocations from SR21.

3.7  The government’s headline announcements indicated that SR21 would increase Local Government Spending Power by 3% in 2022/23. However, this includes the funding for Social Care Reforms which will be matched by new costs and burdens and does not therefore provide additional funding. As for Schools, SR21 also provided no additional funding to cover the Health and Social Care Levy (NI increase) which will cost approximately £1m across General Fund services. Adjusting for these and including the

Adult Social Care precept shows that Spending Power will only increase by 1.8% in 2022/23. This is not only some way short of current and anticipated demand and inflationary pressures in 2022/23 (a combined estimate of 7%) but also does nothing to redress the reduction of over £100m grant funding or the substantially growing social care pressures over the last decade.

3.8  The latest estimated demand and cost pressures expected to be incurred in 2022/23 are shown in the table below. These demands/costs are above inflation provision for pay, prices and pensions which amounts to a further £5.3m.

3.9  Including Adult Learning Disability services, Adult Social Care continues to be the most significant pressure as the population of the City grows and people live longer with limiting health conditions. Local Government has been lobbying for many years in the hope that central government would address the long term funding of Adult Social Care. Financially, the long-awaited Social Care reforms will do little, if anything, to address this situation and have potentially introduced even greater funding pressures as many experts, including the Local Government Association, believe that the funding for the reforms is insufficient to meet the projected costs of the care cap and increased income thresholds.

General Fund Budget Gap 2022/23

3.10  In summary, the draft General Fund budget proposals for 2022/23 include the following assumptions:

· a planning assumption of a 1.99% Council Tax increase and 1% Adult Social Care precept i.e. a total Council Tax increase of 2.99% for 2022/23;

· a substantial investment requirement to meet cost and demand-driven service pressures of £12.466m (as identified above), particularly in Adult Social Care including Adult Learning Disability;

· provision for predicted pay increases (i.e. increases for the Real Living Wage, NJC pay award 2022/23 and the council’s minimum pay spine), price inflation and contractual uplifts, and pension changes of approximately £5.3m; and

· provision for unavoidable contractual and capital financing commitments of £4.8m. This includes £2.3m for the 2021/22 NJC pay award for which no provision had been made following the government expectation of a public sector pay freeze in 2021/22. In the event, Local Government employers side offered 1.75% but this is still subject to final negotiation having been rejected by union side.

3.11  In July 2020, the council set out its planning assumptions for 2022/23 which included estimates of cost and demand pressures together with a prediction of the resources

likely to be provided by the anticipated Spending Review. A number of scenarios were considered and at that time, the best (midpoint) estimate was a predicted budget shortfall (gap) of £18.030m requiring savings or spending reductions (cuts) of the same value to balance the budget. This prediction included assumed additional resources from the Spending Review of £6.946m, including assumed continuation of Supporting (Troubled) Families funding.

3.12  In the event, SR21, via the provisional Local Government Financial Settlement, has provided additional resources of £9.194m, providing only £2.248m toward addressing the aforementioned budget gap, as shown in the table below:

3.13  Taking into account the resources provided by the Local Government Financial Settlement, including: an assumed 2.99% Council Tax increase; the additional service pressures identified above; applicable pay and price increases, and other unavoidable commitments (mainly financing costs of the council’s capital programme), the latest estimated budget shortfall or gap is £16.631m in 2022/23.

Addressing the Budget Gap

3.14  The Draft Budget Report to December Policy & Resources Committee set out ‘first draft’ savings proposals of £8.540m leaving a remaining gap of £8.091m to be addressed. This is the largest budget gap the council has ever experienced at the draft budget stage and will be very challenging to address in full, particularly coming on the back of savings of nearly £67m over the last 5 years including a challenging £10.7m savings programme in the current year (2021/22).

3.15  Options for dealing with the remaining gap are being explored including:

• Most importantly, further savings proposals (recurrent or one-off) are being considered and will be brought to the February Policy & Resources Committee and Budget Council as part of the final budget proposals for 2022/23. However, identifying additional savings or income generation proposals of over £8m is highly unlikely and other measures will almost certainly be needed.
• A further review of the tax base assumptions for Business Rates and Council Tax will be undertaken and reported to January Policy & Resources Committee. However, these are not expected to change significantly from earlier estimates and can go up or down.
• Service pressure estimates (demand and cost pressures) will be reviewed as at the end of December 2021 to determine whether or not trends are changing, however, at this late stage of the financial year there is not normally any significant movement from earlier estimates and assumptions.
• A key area relates to capital financing costs which may reduce due to both slippage on the council’s capital programme (i.e. delaying borrowing and financing costs) and increasing interest rates (which has a short term benefit on interest earned on cash balances).
• A limited level of Reserves could be used to address any remaining shortfall but this will need to be replenished over the Medium Term Financial Strategy (i.e. over 4 years) by achieving greater savings in later years

Savings Proposals

3.16  As in previous years, due to the large projected budget gap in 2022/23, each directorate was tasked with developing proposals for achieving savings that align with the council’s modernisation approach and Corporate Plan priorities as far as possible. However, as last year, the budget process for 2022/23 has been delayed due to the uncertainties over the Spending Review outcome. First draft savings proposals were presented to the 2 December Policy & Resources Committee but the full set of draft proposals, including any additional savings proposals, will be considered at the February Policy & Resources Committee and Budget Council. The report and agenda are expected to be published on the council’s web site on 2 February 2022.

3.17  First draft savings proposals totalling £8.540m were submitted to the 2 December Policy & Resources meeting but of most relevance to schools are the savings proposals for the Families, Children & Learning Directorate which are reproduced in summary form at Appendix 2 of this report for information. This shows savings proposals of £1.875m for the directorate, however, this includes £0.526m savings in relation to Adult Learning Disability Services which are also managed in this directorate.

3.18  As noted in paragraph 3.13 above, all services are exploring the potential for additional savings proposals to assist in closing the council’s budget gap in 2022/23. Potential additional savings possibilities are being considered across Families, Children & Learning including the following areas:

• Youth Services including the Youth Arts Programme
• Youth Employability Service
• Family Contact Service
• Children’s Agency Placements
• Partners in Change Programme
• Safeguarding IRO resources

If these additional savings proposals are confirmed, Equality Impact Assessments will be developed for consideration by members alongside earlier proposals.

4.1 Separate reports on this agenda set out the implications of the finance settlement for the schools and other blocks including High Needs.

4.2 It is recognised that the funding situation for schools has also been very challenging and many are experiencing pressures in much the same way that the council’s General

Fund public services are including additional pay pressures resulting from pay awards and the Real Living Wage. There remain a number of schools with licensed deficits, which are being monitored closely, and others that are having to take significant cost saving measures to achieve balance next year.

4.3 The additional resources announced in SR21 have now been confirmed through the Schools Settlement for 2022/23 and are incorporated in the indicative schools budget. The resources are substantial and should provide circa £7.5m additional resources in Brighton & Hove. There is also a significant increase of nearly 12% on the High Needs Block which may help to mitigate some of the significant pressures on this block.

4.4 More generally, the Schools Finance service will continue to help and advise schools in the development of financial plans to manage their finances including those with licensed deficits. Officers will continue to keep members informed of schools’ financial position through the General Fund budget report and on an ongoing basis through the periodic Targeted Budget Management (TBM) budget monitoring reports to Policy & Resources Committee.

Budget Strategy 2022/23 to 2025/26

Service context

The Families, Children and Learning Directorate brings together different services for children and young people from birth up to the age of 25, with services for both adults with learning disabilities and for skills and employment. Much of the education and special educational needs provision is funded through the ring-fenced Dedicated Schools Grant (DSG). This budget strategy is focused on General Fund spend.

The main area of General Fund spend relates to the placement costs for children and young people in care and adults with learning disabilities (LD). Spend on children’s placements is under pressure given placement sufficiency issues which have been exacerbated by the pandemic. This has resulted in children being placed in provision on the basis of availability rather than need. This has resulted in children being placed in more expensive residential provision. There are also significant pressures on the community care budget for adults with learning difficulties.

Nationally the number of children with child protection plans and children being brought into care has reduced slightly over the past 12 months. Over recent years the numbers in Brighton & Hove had been reducing in the context of national rises. During 2021 there has been a significant reduction in the number of children subject to a child protection plan. However, the number of children in care has started to increase. This is primarily due to the impact of the pandemic on the court’s ability to make timely decisions regarding children’s permanence arrangements; and the impact of lockdowns on family relationships, particularly in those families with adolescents. There has also been an increase in the number of children with disabilities and complex needs requiring special residential provision. Further pressure on these budgets is anticipated as the impact of Covid-19 manifests itself.

In addition, both locally and nationally there has been an increase in the number of adolescents requiring intensive support, including high cost residential placements. In part, this is related to the greater focus on meeting the needs of young people who are vulnerable to exploitation. There is currently a significant national issue regarding foster placement sufficiency, resulting from the significant rise in the number of children in care. The impact locally is that when placements are required, the lack of options means that placements can sometimes be made on the basis of availability rather than need.

Our vision is for a Directorate that is ambitious and works closely with partners. We want all of the City’s families and children to be happy, healthy and safe, fulfilling their potential. Over the last few years, services have been redesigned in order to improve efficiency and reduce costs and this will continue in future years. Inevitably, this requires difficult decisions in balancing untargeted, non-statutory support with preventative, statutory and safeguarding provision.

There are three key branches in the directorate together with a performance and safeguarding service that ensures that we meet our duties and provides quality assurance. The key branches are as follows:

Education and Skills £8.446m

This service area includes:

• Early Years, Youth and Family Support (including Children’s Centres)
• School Organisation and Access to Education and Hidden Children
• Education Standards and Achievement
• Skills and Employment
• Virtual School for children in care and those previously in care
• Stronger Families (Troubled Families programme)
• Ethnic Minority Achievement Service and Traveller Education Service

Health SEN and Disability Services £46.157m

This service area includes:

• Inclusion Support Services for Schools including Education Psychology services and Schools Wellbeing services
• Special Educational Needs services
• Social work and early help support for children with a disability
• Residential, short break and respite provision for children with a disability
• Assessment, social work, behaviour support and health services for adults with learning disabilities
• Council residential and day activities services for adults with learning disabilities

Children’s Safeguarding and Care £40.410m

This service area includes:

• Fostering, family placement and permanence services
• Children in need and child protection social work services
• Children in care and leaving care services
• Unaccompanied asylum seeking children services
• Adolescence and youth offending services
• Front Door for Families which includes MASH (Multi Agency Safeguarding Hub)
• Multi-disciplinary Partners in Change Hub including Early Parenting Assessment Programme
• Contact and Family Group Conference Services

Users of Families, Children and Learning Services

The directorate provides a range of different services from universal to those targeted at small groups of people with very high levels of need and/or where we are required to fulfil a statutory duty. Some of the key groups of users we interact with are as follows*:

• 31,978 children attend city’s school (May 2021)
• 16,814 contacts were received by the Multi Agency Safeguarding Hub/Front Door for Families during the year ending August 2021, of these 2,897 were safeguarding concerns that required follow up work;
• 7,658 Parents/Carers applied for school places (2020-21);
• 5,792 children receive SEND support in maintained schools (including 1,305 children who have an Education Health & Care plan) (May 2021);
• 6,568 children are eligible for free school meals (May 2021);
• 778 individual unique children attending children’s centre nurseries throughout the year. This is a reduction on previous years due to the Covid -19 pandemic.
• For children’s centres, a total of 1392 case work interventions were started by BHCC staff in 2020/21, for 856 children aged five and under (compared to 2019/20: 891 started, 737 children).
• In addition to this a total of 6,505 unique contacts through delivering food parcels and essential items were delivered via the food bank for 274 families
• 2,096 families supported by Early Help teams April 2020 to March 2021
• 1,540 children are supported by social work to be safe August 2021
• 250 children are on a child protection plan (as at 31st August 2021);
• We act as Corporate Parent to 399 children in care and 387 care leavers aged between the ages of 18 and 25 (August 2021);
• We help support 40 unaccompanied asylum-seeking children (August 2021);
• 453 pupils in Brighton and Hove are educated at home (as at 30/06/2021);
• There are 174 in–house Foster Care Households as at 31st August 2021 including 18 Supported Lodging Households;
• 10 children have been adopted in the last 12 months;
• 743 Adults with a Learning Disability aged 18-64 in receipt of Adult Social Care as at 30th June 2021.
• Please note these figures are a mixture of snapshots in time or usage over a set period and are shared with the intention of being illustrative.

Budget Strategy direction of travel

We work as one Families, Children and Learning directorate and with others in the city to deliver safe and whole family services, improving outcomes, developing inclusive and accessible provision and developing our staff. To achieve this, we:

• Promote, support and deliver high quality educational and skills provision;
• Promote whole family working with a focus on reviewing Early Help provision and improving outcomes for disadvantaged and vulnerable people;
• Deliver a safe and effective social work service which responds to changing needs of children and their families;
• Work to support adults with learning disabilities to live independent and positive lives;
• Work with young people and other partners to deliver high quality youth services across the city;
• Co-produce and continue to improve SEND provision and services in the city;
• Manage effective budget arrangements across the directorate;
• Improve the diversity of the workforce.

The voice of children, young people, their families and those of adults with learning disabilities is at the heart of everything we do. We commission and deliver services with partners to ensure children, young people and adults with learning disabilities live happy, safe and positive lives, achieving their potential. This is achieved within the context of high demand and reducing resources.

Areas of Focus for Savings

The Directorate is exploring options for savings on Adults with Learning Disabilities through a number of targeted strategies including:

• Continuation of the 'Move On' project supporting adults with LD to move on from high cost placements into new living arrangements which promote independence.
• Appropriate joint funding arrangements to be pursued i.e. Continuing Health Care funding.
• Improved transition arrangements for young people. The Specialist Community Disability Service 14-25 pod will seek to provide a greater focus on this high cost area.
• Review of existing block contracts for outsourced services, to address any over provision and more effective utilisation of voids.
• Expansion of Shared Lives capacity.

The project to increase the number of in-house foster placements and reduce reliance on more expensive independent provider provision is ongoing. This will enable further savings in Children’s Agency Placements:

• Ensuring value for money is obtained when using external providers; this is supported by the children's services framework contract arrangements and preferred provider guidelines.
• Relationship based social work practice and the specialist adolescence service continues to contribute to diverting children from the care system by meeting need and managing risk within the home.
• For those already in care, there is a focus on stepping down to in house and/or less expensive placements, in line with assessed need, and on returning children to their families where this is safe to do so.

An increase in grant funding available from the Home Office for Unaccompanied Asylum-Seeking Children (UASC) leaving care will enable a saving to be considered in Care Leavers funding.

Elsewhere, a review of all lines of the FCL budget took place to identify other savings and efficiencies.

Investment in services

The following investment in services is planned to meet demographic and other cost increase to maintain investment in priority services and meet statutory requirements:

• Adults with Learning Disabilities £1.805m;
• Home to School Transport £0.440m;
• Support for Looked After Children, Nurseries and Children with Disabilities £3.509m

Supporting the council’s priorities

The budget position is challenging. In undertaking the review of budgets to identify savings, those services supporting the most vulnerable in the City have been protected and it has been ensured that all statutory obligations can be met. Systems for managing demand led services within FCL are well established and robust. A review of Early Help services is planned to ensure that preventive work is effective at reducing the need for high cost interventions at a later stage.

Horizon scanning, modernisation and planning for future needs is a priority. Work is underway to explore in-house options for children with a disability; this is an area where we currently experience high unit costs.

Below is a summary of work we have planned over the next three years that supports council’s priorities as set out in the city’s council plan and the administration’s priorities.

A city to call home

• Work to ensure care leavers and adults with a Learning Disability have suitable accommodation.

A City Working for All

• Lead on apprenticeship work.
• Support the education and skills city plan.
• Develop plans for youth employment hub with Department for Work & Pensions.
• Youth and disability employability support.

A Stronger City

• Coordinate development of anti-racist schools’ strategy.
• Support to schools in delivering equalities curriculums.
• Continued development of anti-racist social work practice.
• Implementing a coproduced all ages SEND Strategy, including improving access for disabled people.
• Continuing our investment in and partnership working with the local voluntary and community sector.

A growing and learning city

• Supporting high quality early years and education provision in the city, supporting ongoing improvement.
• Coordinating the city’s Education Partnership.
• Retaining a focus on disadvantaged families, supporting the development of a multi-agency city wide strategic approach.
• Delivering and supporting high quality youth support in the city and further developing youth engagement opportunities.
• Supporting lifelong learning and a positive transition into adulthood for all.

A Sustainable City

• Ensuring sustainability is a priority factor in all delivery and contract management.
• Further exploring environmental education.

A Heathy and Caring City

• Delivering a strongly regarded social work service for children and adults with disabilities.
• Delivering on the prevention focussed Starting Well priority in the city’s Health and Wellbeing Strategy.

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