The Scrutiny & Overview Committee met on 16 January 2024 to discuss the council's financial performance, the 2024-25 budget setting, and the capital programme. Key decisions included noting the projected year-end overspend for 2023-24 had reduced and reviewing the progress on the 2024-25 budget, which faces a significant gap.

2023-24 Financial Performance Reports

The committee reviewed the 2023-24 financial performance reports up to Period 6 (September 2023). It was noted that the projected year-end overspend across service directorates had decreased from £5.7 million in Period 6 to £1.5 million in Period 7. Specific movements included a shift from a £0.2 million overspend to a £1 million underspend in Adult Social Care & Health, and a reduction in the projected overspend for Children's services from £5.8 million to £5.4 million. The Housing service's budget forecast moved from a £2.2 million overspend to a balanced position due to fund transfers. The committee agreed to defer its conclusions on this item until it could review the full Period 7 report at its next meeting.

Discussions also touched upon the council's debt burden and ongoing conversations with the government regarding potential solutions, including restructuring and lower interest rates, though no definitive solution had yet been identified.

2024-25 Budget Setting Update

A presentation was given on the progress of setting the 2024-25 budget, highlighting a challenging national context and a £75 million budget gap for Croydon in 2024-25. This gap is proposed to be addressed through £38 million of extraordinary financial support from the government, £4 million from asset sales to reduce debt costs, and £26.9 million in savings. A remaining gap of £6.1 million is to be addressed following confirmation of the Local Government Finance Settlement.

The committee was informed that the government's advice to use reserves to manage financial difficulties was not considered applicable to Croydon due to its severe financial challenges. The proposed council tax increase for 2024/25 is 4.99%, comprising a 2.99% general increase and a 2% adult social care precept.

The committee concluded that the council's financial challenges would remain concerning until a solution for its £1.3 billion debt was found. They supported the administration's stance that government advice on using reserves was not applicable to Croydon and were reassured that officers and the Cabinet Member for Finance were aware of the £6 million budget gap and exploring options to close it.

Capital Programme and Capital Strategy 2023-29

The committee reviewed the Capital Programme and Capital Strategy for 2023-2029. The principal driver for the capital programme is cost reduction, with investment only being made if it delivers a saving. The capital budget for 2023-24 and 2024-25 is planned to be balanced through asset disposals, with subsequent years projected to require additional borrowing.

Concerns were raised about the council's compliance with the Prudential Code, which was acknowledged as difficult to achieve without a solution to the debt burden. Approximately 49% of the capital budget was noted as being spent on capitalisation, with potential long-term impacts yet to be fully foreseen. The Housing Revenue Account (HRA) capital budget was considered healthier, with a proposal to use reserves rather than borrowing for capital works in 2024-25.

The committee concluded that while transparency and governance processes had improved, the financial situation remained dire, with the £38 million budget gap unresolved without further capitalisation and the council being in breach of the Prudential Code. They acknowledged the healthier financial situation of the HRA capital budget and supported the proposal to use reserves.

Recommendations were made to approach organisations like the LGA or London Councils to explore untapped external funding sources for capital projects and to explore the business case for extending the existing Growth Zone or establishing a new one.

Quarterly Procurement Plan Update

The committee reviewed the quarterly update on the Procurement Plan. Progress had been made, but significant work remained. A key focus for the Procurement service is ensuring officers have the necessary skills and that the end-to-end procurement process is joined-up.

Concerns were raised about the quality of data available to ensure a clear understanding of contract requirements at the outset of the procurement process. The committee was reassured that officers and the Cabinet Member for Finance were aware of the issues and taking steps towards improvement, but concluded that they could not yet provide reassurance that the procurement process was as good as it should be.

Recommendations included exploring methods for publishing further information on agreed contract variations. The committee agreed to revisit procurement later in the year to check on progress.

Scrutiny Recommendations

The committee reviewed the Mayor's response to previous recommendations made by the Scrutiny & Overview Committee. They noted their disappointment that two recommendations relating to the Asset Disposal Strategy, concerning the notification of ward members and community groups ahead of asset disposals, had been rejected. The reason given for rejection was that a process was already in place, although the committee noted that community groups had previously indicated this was not the case. It was agreed that communication around future disposals would be revisited.

Scrutiny Work Programme 2022-23

The committee noted the most recent version of the Scrutiny Work Programme. A request was made for a review of the Borough of Culture programme to be brought to the committee later in the year. An additional meeting in March 2024 to specifically look at crime and disorder was also mentioned.