Agenda item

This report provides an update on the in-year financial forecast position 2024-25 for review by the Resources & Public Realm Scrutiny Committee.

(Agenda republished to include this item on 20 February 2025)

Councillor Mili Patel (Deputy Leader and Cabinet Member for Finance & Resources)  was invited to introduce a report providing an overview of the financial forecasts for the general fund revenue budget, the Housing Revenue Account, the Dedicated Schools Grant, and the capital programme as of Quarter 3 for the financial year 2024/25. In presenting the report, members were advised that the forecast overspend stood at £17.6 million against the revenue budget, reflecting an increase of £2.8 million compared to the previous quarter. The primary area of overspend was identified within the housing service. It was noted that homelessness and temporary accommodation costs continued to rise, now reaching £15.2 million since the last quarter's forecast. Additional pressures had emerged within the Children and Young People Directorate and the Community and Health and Wellbeing Directorate. The Council had implemented several mitigation measures to control the overspend, with plans aiming to achieve in-year savings targets wherever possible. The current budget had additionally incorporated £8 million of savings agreed by the Full Council in February 2024, with the status of these savings detailed in Appendix A. Despite the Council's considerable efforts to manage its financial position, the wider economic context remained volatile, with small changes in demand disproportionately exacerbating financial pressures. This was particularly evident in the areas of children's social care and adult social care packages, both in terms of volume and complexity. Additionally, the costs associated with temporary accommodation and the loss of housing benefit subsidy from central government were highlighted. It was reiterated to the Committee that Brent was not unique in experiencing these financial pressures. Across London, the net deficit on homelessness services was projected at £101.5 million for 2024/25, higher than the previous year.

Having thanked Councillor Mili Patel for introducing the report, the Chair then moved on to invite questions and comments from the Committee in relation to the Quarter 3 Financial Forecast 2024/25, with the following comments and issues discussed:

• As an initial query, the Chair inquired whether there were any new concerns or serious risks to the Council that had not been discussed in depth over the past three to six months. Additionally, the Chair questioned if there were any measures being taken to reduce the deficits that were proving ineffective, indicating a potential shortage of viable options. In response, Councillor Mili Patel (Deputy Leader and Cabinet Member for Finance & Resources)   acknowledged the emerging issues within social care, particularly in terms of commissioning, which were on the rise. Minesh Patel (Corporate Director Finance and Resources) added that there were no additional risks beyond those already identified regarding Quarter 3 of 2024/25. The awareness of broader issues in the medium term was highlighted. It was noted that the financial forecast for 2025/26 presented significant challenges. The Committee was informed that the budget for the Full Council meeting on 27 February 2025, had been prepared, and updates on the medium-term financial strategy for the following three years had been provided. It was indicated that further challenges were anticipated to arise.

• With reference to paragraph 4.1.1, which highlighted a £1 million pressure on the strategic commissioning and capacity building budgets, marking an increase of £0.9 million since Quarter 2, members inquired whether it would be possible to improve forecasting models and early warning systems to better anticipate and manage fluctuations in home care demand moving forward. Rachel Crossley (Corporate Director Community Health and Wellbeing) affirmatively, stating that discussions had been ongoing across teams about moving to a more granular monthly forecasting model. The aim to transition to a monthly forecasting regime and to examine the root causes of fluctuations alongside savings was noted. It was acknowledged that current tracking of in-year pressures was inadequate and committed to implementing monthly forecasting going forward.

• Following up, members inquired whether there was any investment in preventative measures to reduce long-term reliance on home care. In response, Rachel Crossley (Corporate Director Community Health and Wellbeing) explained that work was being undertaken to rightsize care, particularly focusing on care packages that involved up to five hours a week. It was emphasised that such packages were largely about contact rather than care. The focus was on technological solutions for check-ins and supporting individuals through community offerings rather than home care. It was noted that the Council had a high number of placements in this area compared to other Councils and that efforts were being made to reduce home care interventions.

• The Chair raised questions around the role of the NHS in alleviating the financial pressures faced by the Council, particularly in relation to shared budgets. The Chair referenced previous Budget Task Group discussions concerning funds owed by the NHS and sought an update on progress made in recovering these funds. In response, Rachel Crossley (Corporate Director Community Health and Wellbeing) informed that consistency had been achieved in case-by-case management, and funds were beginning to be recovered. However, it was acknowledged that a few high-cost placements remained under debate. It was highlighted that the discharge funding moving into the Better Care Fund next year would enable more consistent planning. It was further mentioned that the challenge of pooling budgets with the NHS was largely due to their financial constraints, emphasising the importance of building relationships to ensure funds were allocated to teams that prevented hospital admissions. Optimism was expressed around increased efforts in admission avoidance.

• Additional questions were raised regarding the short-term and long-term targets set for reducing placement costs while ensuring high-quality care for children and young people. In response, Nigel Chapman (Corporate Director Children and Young People) addressed the targets for placement costs, focusing on supporting young people, particularly those who had left care. Targets aimed at transitioning young people from high-cost supported accommodation to more independent living arrangements were outlined. The importance of moving young people through the system at an appropriate pace rather than focusing solely on individual unit costs was also emphasised. Progress was reported in moving young people to less supported accommodation and successfully recouping local housing allowance, resulting in the post-18 provision being on budget or slightly underspent. It was further noted that independent fostering agency costs were also under budget. In continuing the response, Nigel Chapman identified residential children's home costs as the area under the most pressure, due to the high cost and low number of placements. The difficulty in predicting the number of children requiring residential care and the high demand for placements nationally was highlighted. The upcoming opening of a council-owned children's home, which would help manage costs and achieve savings targets starting next year was further mentioned. The importance of maintaining manageable numbers of children in care and managing demand effectively was also stressed. In concluding the response, Nigel Chapman noted the success in reducing the number of children in care to under 300, the lowest in over ten years, attributing this to early intervention and preservation of health services.

• Referring to paragraph 7.9.1, which stated that the revised budget for the schools project was set at £28.3 million, yet the current forecast had dropped to £20.7 million, reflecting a slippage of £7.9 million, members posed questions around the primary causes of these delays and the extent to which they were preventable. Additionally, members cited paragraph 7.9.3, highlighting communication challenges, and questioned how these issues had contributed to the slippage and what steps were being taken to improve coordination and ensure future projects remained on track and financially viable. In response, Minesh Patel (Corporate Director Finance and Resources) advised that the capital programme was managed within the Property Assets Department, overseen by Neil Martin, the Head of Service. It was noted that individual issues within the schools programme could have varied reasons. It was suggested that a written response be provided after the meeting to address the inquiry in detail. The Chair agreed to put forth an information request regarding this following the meeting.

• The Chair sought details around the projected estimates on the financial benefits of running a council-owned children's home, as well as ensuring high standards of care for young people through insourcing. In response, Nigel Chapman (Corporate Director Children and Young People) confirmed that modelling had been conducted and presented to the Cabinet for approval, resulting in the allocation of capital to build the children's home. It was reported that the latest estimates indicated that staffing costs and the cost of running the home were on track. Confidence was expressed that the provision would meet high standards, comparable to those in the private sector. Interest was noted from council staff in joining the home, which was viewed positively.

• Reference was made to the table in paragraph 1.6 within the committee report, which indicated no overspend or underspend, while paragraph 1.5 stated there were pressures requiring budgetary savings. Clarification was sought around how councillors could find out what the specific cuts to services were, as these were not itemised. In response, Peter Gadson (Corporate Director Partnerships Housing and Resident Services) informed that the savings for 2024/25 were approximately £1 million in staffing, resulting from a recent restructure of the housing service. This restructure involved shifting from a centralised approach to a model where area tenancy managers (ATMs) were placed back on estates. The new structure included 26 ATMs, each responsible for 300 to 350 units, handling rent collection, tenant liaison, and other estate-related services. The savings referred to in the committee report were primarily achieved through this staff restructuring. The allocation of the Housing Revenue Account (HRA) budget, the impact of government rent increase caps, and the challenges of balancing the budget while meeting environmental targets were also highlighted.

• Following up, the Chair questioned tenants and leaseholders were informed of the cuts. In response, Peter Gadson (Corporate Director Partnerships Housing and Resident Services) explained that rent setting consultations were a statutory requirement. Tenant engagement had been conducted over the summer on estates, discussing service limitations. Additionally, building safety regulator requirements necessitated engagement in larger blocks. A recent tenant and leaseholder event in the Grand Hall had over 500 attendees, addressing concerns, primarily around repairs.

• The Chair (as a request arising from the discussion) recommended that housing teams enhance their support for Tenants and Residents Associations (TRAs), which should include, but not be limited to, providing suitable arrangements for their meetings and ensuring that TRAs can operate efficiently. Given the crucial role of TRAs in receiving feedback from tenants and the importance of tenant and leaseholder involvement in discussions, it was felt that housing teams should further contribute to improved communication and engagement with tenants and leaseholders. In response, Peter Gadson (Corporate Director Partnerships Housing and Resident Services) agreed that supporting TRAs was important. It was noted with interest that a new Tenant Engagement Strategy had been agreed upon, and the Tenant Engagement Service would be moving back into the Housing department from Regeneration and Environment, as of 01 April 2025. Optimism was expressed that this change would improve the process.

• Members commented on the issue of temporary accommodation, noting that such accommodations often consisted of rundown houses classified as hotels, charging exorbitant rents for rooms that were sometimes rat and mouse infested and entirely unsuitable. Deep concern was expressed that this was unfair to tenants, the council, and council taxpayers, and called for measures to stop this practice.

• As a further issue highlighted, members inquired about the identification of an emerging risk associated with supported accommodation, initially estimated at £6 to £9 million, and questioned if this figure had changed. In response, Minesh Patel (Corporate Director Finance and Resources) confirmed that the current forecast for the end of the year was approximately £4.5 million. It was explained that initial forecasts were based on worst-case scenarios, but as more information became available and schemes stabilised, the figures were adjusted accordingly. Additionally, Laurence Coaker (Director Housing Needs and Support) addressed the standard of temporary accommodation, noting that Brent was part of a London Council Scheme called Setting the Standard, which involved an inspection regime grading properties from A to E. Properties graded D or E were not used, and enforcement actions were taken against unsuitable providers. Regarding supported exempt accommodation, it a two-pronged approach was explained involving both providers and tenants. Efforts were made to tighten the criteria for new providers joining the exempt accommodation status, and better data was obtained to identify providers abusing the system. Meetings were arranged with identified providers causing the majority of subsidy loss to address the support they were providing. Furthermore, assessments were conducted to determine the ongoing support needs of individuals in such accommodations.

• The Chair sought details around the capacity to enforce standards and prevent the identified providers from applying for additional rent money if the provision was not fit for purpose. In response, Laurence Coaker (Director Housing Needs and Support) clarified that the identified providers were not necessarily failing to provide support but were causing the most subsidy loss. Upcoming legislation that would introduce a licensing scheme for providers, ensuring regulation and appropriate inspections was also highlighted.

• Views were sought around the confidence in the placement of individuals into supported exempt accommodations, given the pressures on placements and housing. The Chair questioned whether these individuals would have been placed in commissioned services under better circumstances, but due to current demand, they were being placed in supported exempt accommodations, which at least offered some form of rolling support. In response, Laurence Coaker (Director Housing Needs and Support) conveyed that the majority of these placements were not made by the Council but by voluntary sector organisations. Individuals often approached organisations like Crisis for housing support, and Crisis officers sourced the supported exempt accommodation themselves. Part of the review process would involve meeting with voluntary sector partners to discuss the criteria they applied when identifying the support needs of individuals.

• Members inquired whether Brent could reclaim funds if providers were found to be overcharging for services in relation to both supported exempt accommodation and temporary accommodation. In response, Laurence Coaker (Director Housing Needs and Support) comprehensively explained that regarding temporary accommodation, reclaiming money was not possible as placements were made at agreed prices due to the need for accommodation. Concerning supported exempt accommodation, the situation was similar, as prices were agreed upon by housing benefit or the rent officer, and referrals were made at those agreed prices by various organisations, including other Councils and voluntary sector organisations.

• As a separate issue, members questioned whether properties were inspected prior to individuals moving into them. In response, Laurence Coaker (Director Housing Needs and Support) confirmed that properties were inspected for temporary accommodation but not for supported exempt accommodation. It was noted that upcoming legislation would introduce regulations for exempt accommodation providers.

• Clarification was sought around the criteria used to assess temporary accommodation properties. In response, Peter Gadson (Corporate Director Partnerships Housing and Resident Services) explained that 15 years ago, Supporting People funds were used to commission supported accommodation. For individuals with chaotic behaviour who would not meet the statutory homelessness duty, these individuals might be placed by organisations like Crisis, receiving limited support that qualified them for exemption from Local Housing Allowance (LHA) and higher rents. The Council funded this amount, as the government did not cover it. It was additionally noted that legislation introduced nearly two years ago had not yet been implemented but was now under consultation. Once enacted, it would provide a framework for managing these placements properly.

• The Chair highlighted concerns regarding the ongoing issue of the subsidy gap in housing-related expenditures, and questioned whether there was any indication that this gap would be addressed, allowing Councils to reclaim the full amount of money spent, rather than having to cover the shortfall. Laurence Coaker (Director Housing Needs and Support) responded that it was highly unlikely that the subsidy gap would be fully addressed. It was noted that extensive lobbying efforts were being made through London Councils, the Greater London Authority (GLA), and various advocacy groups to highlight this issue to central government. Despite these efforts and revisions to the Local Housing Allowance (LHA) a few years ago, doubt was expressed that the government would resolve the subsidy gap. The Committee was assured  that lobbying efforts would continue.

• The Chair additionally raised concerns about void management in Council properties, noting that despite reports of year-on-year improvements, there were still properties left unused for extended periods. The Chair cited anecdotal evidence from Councillors in various wards, including their own, about properties void for up to five years. The Chair questioned why properties were still falling through the gaps and emphasised the importance of prioritising void management and turnover. In addressing the concerns raised, Peter Gadson (Corporate Director Partnerships Housing and Resident Services) acknowledged the issue and requested specific addresses of properties that had been void for extended periods to follow up on them. It was explained that long-term voids were often due to structural problems, insurance issues, or other significant obstacles. It was noted that efforts had been made to reduce the number of long-term voids. Issues with general voids, such as absconding tenants or those handing in keys, and identified inefficiencies in the initial stages of void management was also highlighted. Iy was further mentioned that the centralisation of teams had led to too many handoffs, causing properties to be lost in the system. The introduction of Area Tenancy Managers (ATMs) responsible for 350 units each was intended to improve void management. The challenges with squatting in void properties, which prolonged the void period was further noted. Members were also reassured that rent loss was decreasing each year, although it remained higher than desired.

• Members acknowledged the success of the I4B initiative in remaining self-financing and delivering over £4 million in annual savings on temporary accommodation costs, and inquired whether this success justified an expansion of the program and asked about other similar cost-saving measures being pursued. In response, Peter Gadson (Corporate Director Partnerships Housing and Resident Services) registered an interest in the question, noting his current role as a Director of I4B and First Wave Housing, along with Councillor Muhammed Butt. It was explained that a prudent approach had been taken with the companies, avoiding significant developer risk. Dissimilar to places such as Croydon and Brick by Brick, which borrowed heavily to buy and develop properties, I4B operated on a turnkey basis, purchasing properties and quickly turning them around for rental. This approach ensured financial stability. Limitations due to the rent charged, which was based on Local Housing Allowance (LHA) rates, and the need to cover all expenses over the 50-year business plan while still turning a profit was highlighted. Market conditions affected by high interest rates and potential opportunities with developers looking to offload turnkey properties was further mentioned. Upcoming acquisitions and ongoing efforts to identify opportunities within the constraints of the business model was also highlighted.

• As a final point, Chair inquired about concerns regarding the Council's underperformance in recycling and its financial impact, to which Minesh Patel (Corporate Director Finance and Resources) expressed significant concern around the financial pressures caused by underperformance in recycling. The Chair requested that Alice Lester (Corporate Director Neighbourhoods and Regeneration) address the Committee on the issue of recycling during the next financial report presentation, with the medium-term strategy, in light of its importance to the budget.

In seeking to bring consideration of the item to a close, the Chair thanked officers and members for their contributions towards scrutiny of the Quarter 3 Financial Forecast 2024/25 Report.

The Committee took the opportunity to thank Peter Gadson (Corporate Director of Partnerships, Housing, and Resident Services) for his numerous contributions to the Resources and Public Realm Committee meetings, in light of his impending departure, and extended their best wishes for his future endeavours.