The Overview and Scrutiny Committee met to discuss the Council's Budget Strategy for 2024/25 to 2026/27, alongside reviewing the Council's work programme. Key decisions included the approval of recommendations for in-depth scrutiny reviews into the Council's Investment and Acquisition Strategy and the spending on Adult and Children's care, as well as a commitment to quarterly budget monitoring reports and a member briefing on the Council's companies.

Budget Strategy 2024/25 to 2026/27

The committee reviewed the Council's Budget Strategy, which outlined a projected budget gap of £23.335 million for 2024/25. This figure, after accounting for proposed savings of £10.618 million, leaves a net saving of £8.327 million. The Council is facing significant financial pressures due to inflation, rising interest rates, and increased demand for services, particularly in social care. To address this, the Council is proposing a 4.99% increase in Council Tax and is exploring significant expenditure reductions, which may include service cuts and redundancies.

Councillor Dominic Toomey, Cabinet Member for Finance, Growth and Core Services, explained that the Council's financial situation necessitates difficult decisions to ensure a sustainable budget. He highlighted that the projected budget deficit is subject to change, but assured the committee that it would not rise substantially. A key concern raised was the potential risk of not receiving a £10.3 million dividend from Be First, the Council's regeneration subsidiary. While assurances were given that the dividend would be delivered, the timing remained uncertain, and a failure to receive it would increase the budget deficit to £33 million.

The committee discussed the Council's borrowing levels, which stand at £1.275 billion, significantly higher than neighbouring councils. While some of this borrowing has funded housing development, generating income for the Council, the current financial climate means new building schemes are not viable. The Council has committed to paying above the London Living Wage, and while borrowing levels will not impact employee wages, the Council is reviewing its supply chains and outsourced contracts.

The report also highlighted the underperformance of some of the Council's 11 community hubs. While four hubs partnered with faith or voluntary organisations are performing well, others are struggling due to factors such as size, location, service range, and marketing. A proposed saving of £100,000 from the consultancy budget within Community Solutions was noted, with the overall consultancy budget exceeding £3 million.

Concerns were raised about the financial management of the Council's subsidiaries, including Be First. While Be First made a profit of £35.6 million from the sale of the Muller site, some of this profit was used to cover previous dividend shortfalls. The remaining profit was placed in a Be First reserve. The committee explored alternative growth areas for the Council, with Be First investigating commercial development and asset reviews. The committee was assured that the Council's assets, if sold, would be sufficient to cover its debts, but this would also mean losing revenue generated by those assets.

The committee discussed the value for money derived from the Council's subsidiaries, which operate autonomously. While the Council is the sole shareholder and would bear the cost of any losses, the subsidiaries' performance is monitored through Key Performance Indicators (KPIs). Some subsidiaries, like Reside, are moving away from using Council services.

Regarding potential redundancies, a strategy is in place and being discussed with trade unions. A £2 million reserve and a central budget of over £1 million are available to cover redundancy costs.

The possibility of the Council issuing a Section 114 notice in the next financial year was discussed. While no definitive answer could be given, officers stated that all efforts were being made to mitigate circumstances and deliver a balanced budget. The Council is looking to resize itself to reduce overall spending, with a focus on reducing demand for services, particularly in social care, which accounts for a significant portion of the budget and has an overspend of £14 million.

The committee also discussed streamlining the procurement process to ensure value for money and reduce costs. Legacy budget issues were clarified as a review of recharges between the Housing Revenue Account (HRA) and the General Fund, rather than errors. The HRA itself experienced an overspend, which has been reduced by cutting capital works.

Recommendations

Following the discussions, the committee proposed and resolved to approve the following recommendations:

• An in-depth scrutiny review into the Council's Investment and Acquisition Strategy to assess its effectiveness, returns, and associated costs, and to determine if further borrowing is advisable.
• An in-depth scrutiny review into the spending on Adult and Children's care, following a benchmarking exercise that indicated Barking and Dagenham's spend is excessive compared to other boroughs, to ensure the expenditure is justified.
• Budget monitoring reports to be presented to the committee quarterly from the new municipal year.
• A Member Briefing to be held to provide councillors with a more in-depth understanding of the Council's companies and their operations.

Work Programme

The committee noted the work programme for 2023/24.