The Budget and Finance Scrutiny Committee met to scrutinise the draft budget for 2026/27, which proposes a 3.8% council tax increase. Key discussions focused on managing the council's significant financial challenges, including rising demand for services, inflationary pressures, and the substantial deficit in the Dedicated Schools Grant (DSG). The committee also reviewed the council's capital programme and treasury management strategy, with particular attention paid to the management of a £519 million Very Long Term Investment Portfolio (VLTIP) and the creation of a Working Capital Enhancement Reserve.

Draft Budget 2026/27

The committee extensively reviewed the draft budget for 2026/27, which aims to balance the council's finances amidst significant pressures. The proposed budget includes a 3.8% council tax increase, comprising a 1.8% general increase and a 2% rise for the Adult Social Care precept. This increase is intended to help fund rising demand for services, estimated at £54 million, and inflationary pressures, estimated at £39 million.

A significant portion of the budget discussions centred on addressing the council's financial challenges, including:

• Special Educational Needs and Disabilities (SEND) Services: The budget allocates £29.954 million in 2026/27 to address demand pressures within SEND services, including £7 million for the Inclusion Service, £17.7 million for Home to School Transport, and £5.254 million for borrowing costs related to the DSG deficit.
• Dedicated Schools Grant (DSG) Deficit: The council faces a substantial deficit in its DSG, projected to reach £171.41 million by 2026/27. The budget includes provisions for borrowing costs associated with this deficit, with plans to develop a DSG Reduction Plan.
• Very Long Term Investment Portfolio (VLTIP): The council holds £519 million in government and commercial bonds with long maturity dates, acquired in previous years. While these investments generate £16.9 million annually, their market value has fallen, potentially crystallising a £350 million loss if sold. The strategy involves holding these bonds to maturity, managing working capital through borrowing, and establishing a Working Capital Enhancement Reserve (WCER) to mitigate future losses. The budget proposes transferring £57.5 million to the WCER over three years.
• Efficiency Review: The council has undertaken an efficiency review, identifying £21.9 million in savings over three years, with £6.7 million to be realised in 2026/27. These savings are to be reinvested in frontline services.

The committee also scrutinised directorate-specific budget proposals and savings plans.

Adults, Health and Wellbeing

The draft budget for Adults, Health and Wellbeing proposes savings of £25.261 million in 2026/27, rising to £42.736 million by 2028/29. Key proposals include:

• Prevention and Early Intervention: Reinvesting £3 million of Public Health Grant into preventative services to help residents stay independent for longer, potentially saving £10.3 million over three years.
• Contract Management: Improving efficiency in managing contracts with care providers, aiming to save £13.7 million over two years.
• Hospital Discharge: Redesigning pathways to support patients leaving hospital, with an estimated saving of £8.4 million over two years.
• Charging for Care: Ensuring care is appropriately charged for, with an aim to increase income by £2.7 million over two years.
• Workforce Roles and Resilience: Reducing workforce spend by £1 million over three years through improved planning and reduced reliance on agency staff.
• Public Health Grant: Reallocating £3 million of the Public Health Grant in 2026/27 for preventative services, with further savings identified through demand management and optimisation of commissioned services.

A significant discussion point was the decision not to close care homes and to invest in them. While no specific investment figures were detailed in the budget, the cabinet member indicated that this would be addressed through a business case and potentially complex partnership arrangements. The committee made recommendations to Cabinet to consider alternative not-for-profit models for upgrading care homes and day centres, establish a cross-party working group, and include an indicative capital sum in the budget for modernisation.

Education and Children's Services

This directorate's budget includes £6.342 million in savings for 2026/27, rising to £11.204 million by 2028/29. Key proposals include:

• In-house Provision: Expanding in-house children's homes and fostering services to reduce reliance on external, more costly provision, with projected savings of £2 million over three years.
• Early Help and Family Support: Redesigning early help services to provide more consistent and preventative support, aiming to save £3.4 million over two years.
• SEND Services: Investing £7 million in SEND services to improve timeliness and quality, alongside capital investment of £11.177 million in 2026/27 and £14.759 million in 2027/28 to expand local provision.
• Schools Services: Reviewing services purchased by schools to ensure cost-effectiveness and income generation, with projected savings of £600,000.
• Grant Utilisation: Reviewing government grants for school support and nursery provision to ensure efficient use, with projected savings of £4.3 million.

The committee also discussed concerns regarding children's mental health provision, noting that this largely falls under NHS responsibility but that the council works closely with partners.

Place Directorate

The Place Directorate's draft budget proposes savings of £4.8 million in 2026/27, increasing to £19.607 million by 2028/29. Key areas include:

• Highways and Transport: A comprehensive review of highways services to improve efficiency and effectiveness, including greater use of technology and a review of service levels, aiming to save £10.1 million over three years.
• Waste Management: Investing in anaerobic digestion technology and improving transfer station efficiency, with projected savings of £4.7 million over three years.
• Property Estate Rationalisation: Reviewing the council's property estate to reduce running and maintenance costs, with potential savings of £2.5 million.
• Public Health: Identifying efficiencies in public health contracts, saving £900,000 by 2028/29.
• Winter Maintenance: A proposal to adjust the gritting trigger temperature to save £100,000 annually.

The committee raised questions about the potential impact of food waste collection changes on transport costs and the feasibility of setting up a council-owned company for home-to-school transport. Discussions also touched upon the role of town and parish councils in service delivery and the implementation of previously approved road safety schemes.

Resources Directorate

The Resources Directorate's draft budget includes savings of £6.911 million in 2026/27, rising to £10.764 million by 2028/29. These savings are primarily driven by:

• Service Reviews: Redesigning support services, including People Services, Digital Services, Finance, Law and Governance, and Customer Access, to improve efficiency and utilise technology, with estimated savings of £1.6 million in 2026/27. This is projected to lead to approximately 100 full-time equivalent (FTE) staff reductions over three years, offset by existing vacancies.
• Income Generation: Increasing income targets for services such as the Lancashire Teaching Agency and governance functions, contributing £0.382 million in savings in 2026/27.
• Technology Savings: Simplifying IT systems and transitioning to cloud-based solutions to reduce costs, with savings of £2.5 million in 2026/27.
• Budget Adjustments: Centralising savings from salary sacrifice schemes and reviewing insurance budgets, contributing £2.5 million in savings in 2026/27.
• Corporate Efficiency: A 1% saving across all supplies and services budgets, generating £1.7 million in savings in 2026/27.

The committee received reassurance regarding the management of cloud transition security risks and the council's commitment to reuse of resources.

Recommendations to Cabinet

The committee made the following recommendations to Cabinet:

1. Care Homes and Day Centres:
   • Urge Cabinet to explore different not-for-profit models for upgrading care homes and day centres, considering value for money.
   • Recommend that Cabinet establish a cross-party working group on the modernisation of care homes and day centres to report to the relevant scrutiny committee.
   • Recommend that Cabinet includes an indicative capital sum in the budget for the modernisation of care homes and day centres.
2. Mental Health Provision: Urge Cabinet to consider concerns regarding mental health outcomes for adults and children, ensuring timely assessments and adequate funding, including the use of the Public Health Grant and other available funding streams.
3. Care Quality Commission (CQC) Improvement Plan: Recommend that Cabinet considers the funding required to implement the improvement plan resulting from the CQC report on adult social care.
4. Social Care Support Officers (SCSOs) Dispute: Ask Cabinet to intervene to encourage a resolution to the dispute involving SCSOs, acknowledging the financial and productivity costs of the ongoing strike action.
5. Council Tax Precept Clarity: Urge the Leader to write to the relevant Secretary of State to seek written clarity on whether setting a council tax precept below the maximum 4.99% cap would result in future financial penalties.
6. Treasury Management Information: Request officers to provide a breakdown of borrowing costs per service, noting that this information is not typically analysed in this way but can be provided.
7. Efficiency Review and Budget Savings Alignment: Request a summary clarifying how the efficiency review savings align with the budget savings proposals.
8. MTFS Assumptions and In-Year Savings: Request that assumptions in the Medium-Term Financial Strategy (MTFS) are updated biannually, with summaries of changes provided to the committee. Also, request clarity on the oversight of in-year savings delivery, suggesting quarterly updates.

The committee also noted the council's draft budget for 2026/27, the capital programme, the treasury management strategy, and the non-treasury investment strategy. The meeting concluded with a discussion on the work programme for the committee.