Agenda item

This report sets out the financial forecast for the General Fund revenue budget, the Housing Revenue Account, the Dedicated Schools Grant and the Capital Programme as at Quarter 3 2025/26. It also includes a separate in?depth overview of the Housing Revenue Account, providing further detail on the financial position and the key risks and challenges facing the fund.

Councillor Patel (as Deputy Leader and Cabinet Member for Finance and Resources) introduced the report, which set out the financial forecast for the General Fund revenue budget, the Housing Revenue Account (HRA), the Dedicated Schools Grant (DSG) and the Capital Programme as at Quarter 3 2025-26. In outlining the report, she advised that the forecast outturn showed a net overspend of £12.5m against the approved budget, and the Council’s revenue budget was revised to approximately £431.4m. She advised that the report detailed the demands and service pressures causing an overspend, particularly highlighting Adult Social Care (ASC) as an area that continued to be a major cost driver as the number of complex cases increased, Housing which was significantly above budget expectations due to the increase in housing demand and reduced supply of affordable housing, the DSG which was projecting an overspend due to increased demand in the High Needs Block, and children’s residential care and secure placements which had emerged as additional pressures.

Councillor Nerva (as Cabinet Member for Adult Social Care, Public Health and Leisure) provided an update on the Adult Social Care funding challenges. He advised many of these challenges were not limited to Brent but experienced across the country, with the Association of Directors of Adult Social Care signalling a £300m overspend across England. He advised that Adult Social Care budgets were not static, and often savings plans were written into future years that required actions during the reporting year to achieve. As a demand-led service underpinned by the Care Act, the local authority was under an obligation to provide support, but also wanted to ensure good value for money and the promotion of prevention and early intervention where possible to avoid escalating costs.

Having thanked Councillor Patel and Nerva for introducing the report, the Chair then moved on to invite questions and comments, with the following comments and issues discussed:

• The Committee acknowledged the significant Adult Social Care (ASC) overspend of £8m, but felt that throughout the years very little progress had been made to address recurrent overspends. Rachel Crossley (Corporate Director Service Reform and Strategy, Brent Council) responded that ASC closed the year on budget in 2024-25 and built additional growth into next year (2026-27) to account for additional spend, meaning the years either side of 2025-26 had more positive positions and next year had a more realistic position in terms of growth. She advised that 2025-26 had been difficult in relation to the care analytics work and, through benchmarking across London with the West London Alliance, a £20m pressure was forecast based on inflation and the changes to National Insurance, meaning there were a number of savings that ASC was required to make to hold its placement costs within a smaller growth envelope. Much of the pressure was also driven by the cost of care, and the department was looking at changing some commissioning models to address those challenges. For example, where ASC had not traditionally used block contractors, there were some new providers coming on stream which may lead to opportunities to do block contract work and reduce costs. In addition, the Council was looking to do more in the prevention space and with tech enabled care which would reduce costs for ASC.

• Claudia Brown (Director of Adult Social Care, Brent Council) added that the Council was working on recouping some money, with the majority of money owed from NHS the previous year now recouped and some funding for the current year. There had been work with NHS partners around Section 22 of the Care Act, in terms of the sharing of ASC responsibilities across the Council and NHS, with a joint policy now developed which was clear about the dividing line between who should provide what, particularly considering social care was a chargeable service and the NHS was free. That policy was due to be presented to NHSE and ADASS for approval.

• The Committee asked whether there were any structural or systemic levers the Council could employ to improve the budget position of ASC. Claudia Brown informed members that there was a significant focus on prevention going forward. For example, ASC was working with Public Health to develop prevention at the front door for adults coming in following a fall. The reablement service also tried to capture individuals as early as possible to prevent deterioration, with new equipment providers in place to support that. More therapies had been introduced into the Reablement Service, and this was seeing an increase in the numbers approaching ASC who no longer required care, resulting in cost avoidance. ASC was also starting to review those clients requiring an increase in ASC to see if they could benefit from going through reablement first to prevent that increase in ASC.

• As Lead Cabinet Member, Councillor Nerva assured the Committee that he consistently challenged and queried the overspend to understand what was driving it, particularly the increase from £2.1m in the first quarter to £8.1m mid-year. He advised that the budget had been affected by a series of practice and service issues, and as Lead Member he wanted to be confident that the portfolio was receiving robust financial reporting that enabled ASC to work with the data and make the best use of it, highlighting a need for unity and closer working between finance colleagues and ASC. In discussing the overspend with colleagues, he had learned that the savings not delivered this year were hoped to be delivered in future years. He also reminded members of the challenges with the equipment contract which significantly delayed work on telecare, and which could be attributed to just over £1m of the projected overspend. The local authority had also been impacted by the changes to National Insurance, which the local authority had not automatically received 100% recompense for, meaning the year started worse off due to the need to respond to providers seeking large cost increases to cover their National Insurance increases. Despite the challenges faced, he felt Brent had done well in approving a viable budget for ASC, and the next steps in improving the position would be to ensure robust and accurate reporting mechanisms were in place and encourage senior managers to work in the most collaborative way possible to ensure frequent reporting that was easy to understand by all relevant stakeholders.

• In noting the comments regarding financial reporting both by the Lead Member and during the Budget Scrutiny Task Group discussions, the Committee asked why this had not been identified sooner and what was structurally preventing good reporting from happening.  Rachel Crossley advised that ASC undertook an external review of how the local authority was making use of its data, including around budget monitoring, as there were a number of different systems in use for the monitoring of data, and Mosaic was now being reviewed to understand the data and activity happening within that system. Traditionally, detailed budget monitoring had taken place quarterly, but she felt that ASC needed to do this on a monthly basis. Due to turnover of Heads of Finance for ASC this had not been possible, but a new Head of Finance for ASC was due to start which she hoped would bring about that regular reporting regime. In response to when ASC might see the impact of improved monthly monitoring, Councillor Nerva assured the Committee that he had stressed the importance of moving away from the current position, and he was reassured that there was improved budget monitoring and scrutiny with high level meetings for senior managers that involved Lead Members as appropriate. There would also need to be tracking mechanisms in place to review other savings programmes that were planned to enable future forecasting. He hoped to be in a position to have those mechanisms in place by April 2026.

• Noting the significant national risks from recruitment and retention challenges within ASC, the Committee commended the work done in converting agency staff to permanent and ‘grow your own’ initiatives through apprenticeships which they felt was a good long-term approach to addressing staff shortages. They asked how those roles were being funded and whether there was scope to do more of that. Claudia Brown explained that apprenticeships were partly funded by the apprenticeship levy, and 8 Assessed and Supported Year in Employment (ASYE) social workers were funded by vacant posts. Due to the complexity of cases, there was a limit on how many learners ASC could take, as there was a need for experienced practitioners to manage some of that complexity, so ASC was keeping to a quota of new practitioners to there were still experienced practitioners in post.

• The Committee asked to what extent ASC was considering using AI in homecare and how much of the approved budget was committed to AI efficiencies. Rachel Crossley advised that £250k of the ASC budget had been allocated to digital, including tech enabled care. The savings made the previous year were made through Magic Notes which recorded ASC assessments and made notes and assisted with the production of care plans. There were other opportunities that had been identified for automation including triaging through the front door, wearable tech, and upgrades to the website, as well as improving complaints work through the use of technology and streamlining email systems. She advised that there was more to do in that space over the next year to design a full plan for digital and technology and bring on board a partner in that space.

• In response to the information provided on digital and technology, the Committee highlighted a preference for the Council to build capacity and capabilities in-house wherever possible as opposed to outsourcing, working on the relationships between different services and the Council’s overall capabilities. Rachel Crossley confirmed that digital skills were a priority upskilling area in-house, with the Digital Technology Roadmap recently brought to Cabinet having a big focus on investing in the automation team and getting structures in place for the future. She highlighted that reference to partners was in relation to larger strategic partners, such as Microsoft, where the Council could maximise opportunities.

• The Committee emphasised their recommendation to ensure social value spend was invested in prevention opportunities and community-led work, with the upcoming homecare contract highlighted as a good opportunity to do some of that work. The Committee was pleased to hear that departments were thinking about social value opportunities for upcoming contracts at an early stage, instead of as an ‘add-on’ at the later stages of commissioning.

The Chair moved on to the housing budget, and invited Councillor Donnelly-Jackson, as the Cabinet Member for Housing, to comment on the current strain in the HRA. In outlining the pressures, Councillor Donnelly-Jackson highlighted the self-referral to the Housing Regulator and the subsequent rating of C3 for Brent Council, which identified issues with compliance and governance, and the project in place to address improvements projecting around £1m in spend. Some of the pressures to the HRA were offset by income due in from new housing coming onstream, but she highlighted the importance of balancing the different areas of pressure. Another strong focus for Housing was on reducing void turnaround times to ensure minimum void rent loss which was due to be scrutinised at the next Community and Wellbeing Scrutiny Committee. The Chair then invited members to contribute to the discussion on the HRA, with the following points raised:

• The Committee queried whether a HRA Business Plan would be presented. Spencer Randolph advised that the Council had a 30-year Business Plan for the HRA, which was updated every year to provide a forecast for the next 30 years, including projected rent levels, void levels, and predicted income over that 30-year period to provide a budget.

• The Committee asked what the investment plans for the future were within the business plan, and what might need to be re-prioritised to balance the budget. Spencer Randolph confirmed that there were capital investment plans for new builds but there were balances to consider. For example, in the Capital Programme there had been some high-rise refurbishments carried out in Kilburn Square, with the second phase of that focused on refurbishing Windmill Court, but there was a decision to be made on whether to pause that plan and scale it back to allow investment into the current housing stock to carry out capital repairs and improvements needed elsewhere. He emphasised that there was a constant balance needed within the HRA budget, particularly in light of the interest rates paid on borrowing for building, which had increased compared to what had been forecast at the start of the year. He added that the forecast was not too far from the original forecast at the start of the year and so no drastic changes had been made to the budget, with the majority of expenditure going towards repairs and maintenance. The Council was also prioritising compliance and Fire Risk Assessment (FRA) actions which had been possible within the existing budget.

• Noting the comment that most expenditure had gone towards reactive works, the Committee asked whether the budget allowed for any proactive planned works. Spencer Randolph advised that most of the proactive works until recently had been on specific large blocks rather than investment in the entire portfolio, but an analysis of the Council’s programme had recently been completed in order to address repairs to existing stock. Councillor Donnelly-Jackson drew members attention to the figures detailed within the report, allocating £18.3m to major repairs and fire safety, £2.9m to energy efficiency works which she highlighted as proactive works to support the longevity of buildings and the Council’s commitment to climate action, and £500k towards Lynton Close which she detailed as a long overdue spend to ensure the site supported the growth of residents there.

• The Committee asked what checks and balances were in place to ensure the HRA Business Plan was being delivered. Minesh Patel advised that the HRA 30-year business plan was a financial model setting out assumptions for expenditure and income over a 30-year period, and encompassed major repairs, assumptions around when refurbishments would be needed in new builds or new acquisitions, and other areas of HRA income and expenditure, which was reviewed every year. This ensured that yearly rent setting was factored in, and there was now consistency over rent increases for the next 5 years, adding some stability to those assumptions. He emphasised that only money generated in the HRA could be spent in the HRA and there were no subsidies from the General Fund possible. One of the major challenges for HRAs across the country in recent years had been around fire safety and cladding, meaning any capacity HRAs did have for major works had been used to resource fire safety works. Brent itself had prioritised that safety element in large blocks before putting additional investment into the stock.

• Noting that it was not possible to borrow from the General Fund for the HRA, the Committee asked whether there were any other opportunities to generate more income, such as investment opportunities for stock through grants, and how much more funding would be necessary in order to get to where the Council wanted to be. Minesh Patel advised that some investment was going into the green energy element through the use of specific grants. One area that it was hoped would make a difference was the introduction of rent convergence, which the Council had wanted to ensure was incorporated into the budget under the belief that it would be implemented in 2026-27 as it would have generated an additional £1.9m, but as that had been delayed there had been a need to rework the business plan and reprioritise. That additional income would have made an immediate impact on the budget and also grown each year, but the delay in introducing that further delayed that immediate relief for another year. In terms of how much money he felt was needed to be satisfied, he felt this was difficult to answer. He emphasised that the Council’s immediate priority was ensuring all stock was safe, and, as long as that priority was met with the investment available, everything else depended on additional funding. Officers continued to lobby government for different ways to generate income within the HRA but there were limited opportunities. The point was also made that this was a difficulty across the country and in London, with the City of London and Lambeth Council’s receiving a capitalisation directive for their HRAs recently. Overall, he expressed a feeling of pride for what Brent had been able to acheive over the last 10 years by bringing new and improved stock into the HRA, regenerating areas with improved quality stock.

• The Committee raised the point that there was a debt within the HRA but they had not been advised what that was. Minesh Patel agreed to confirm the overall debt position in the HRA outside of the meeting. In relation to new build debt, that was self-contained, with a proportion of the rental income from new builds going towards paying off the borrowing undertaken to purchase those builds, and the Council would only pursue buying or building where there was confidence that the rents would generate sufficient income to manage that debt over the borrowing period. He agreed to provide a document setting out what proportion of HRA income went towards debt servicing, repairs, maintenance and other spend in the HRA.

• Noting that the Council had referred itself to the Housing Regulator and that there was work now required to improve the subsequent C3 rating, in addition to the Council’s commitments around fire safety, damp and mould, disrepair cases, the Committee asked for reassurance that the HRA was enough to do all the work required in order to maintain the Council’s stock. Tom Cattermole responded that the demand for repairs remained high and significantly elevated due to the increase in complex cases and referrals for damp and mould. There was also increased costs on materials and labour putting additional pressures on the HRA, and those pressures accounted for a large proportion of the overspend. Councillor Donnelly-Jackson further emphasised the demand, with 40,000 repairs done in 2024-25. Going forward, the aim was to get into properties earlier before the issues became more complex repairs. To do that, Area Tenancy Managers would be engaging with tenants to collect that information, and she felt that ensuring an effective cycle of repairs was in place was essential.

• In relation to the implementation of interventions aimed at increasing the supply of alternative arrangements for clients currently in the most expensive temporary accommodation placements, outlined in 8.3 of the report, the Committee asked how that could be replicated across all temporary accommodation in the final quarter to avoid further overspend. Tom Cattermole advised that the curve was not yet changing in relation to housing need. It was still an unknown, but the Council was hoping for the Renters Rights Act to pass through parliament to avoid unnecessary evictions by landlords which further impacted housing need and the temporary accommodation demand. The most expensive temporary accommodation was nightly paid Bed and Breakfast, and the Director of Housing Need was designing a plan to end that nightly paid programme to reduce costs. The Council was also focused on making cross-border placements with other local authorities and subregional partners. There were tensions with other local authority colleagues around out of area placements, due to their own capacity pressures, but there was a need to work with others on this and with the GLA particularly around emergency accommodation.

• Moving on to Public Realm, the Committee highlighted a juxtaposition between School Streets and the number of Fixed Penalty Notices (FPNs) issued, highlighting that if School Streets were successful they would expect there to be very few FPNs. Minesh Patel responded that the model did make assumptions that the initial phasing of School Streets would see an increase in income that would drop off over time. He emphasised that the budget should not rely on that income to balance the budget and would need to investigate why those numbers were not decreasing. The Committee made an information request for that to be investigated. Alongside this, they suggested that signage locations and visibility were reviewed to ensure they were not impacting the number of FPNs issued.

In seeking to bring consideration of the item to a close, the Chair thanked officers and members for their contributions. As a result of the outcome of the discussion, the following suggestions for improvement and information requests identified were AGREED:

SUGGESTIONS FOR IMRPOVEMENT:

1)    Explore business investment and grant funding opportunities to help mitigate pressures on the Housing Revenue Account (HRA), including costs linked to building safety and decarbonisation programmes such as retrofitting.

2)    Maximise the use of social value spend to achieve greater outcomes in prevention and community?led programmes, and to direct investment towards apprenticeship pathways and education and training opportunities delivered through the Social Care Academy.

3)    Review and strengthen processes to better support the conversion of apprenticeships into permanent posts, helping to reduce reliance on agency staff.

4)    Strengthen financial monitoring processes for Adult Social Care, ensuring robust monthly budget management reporting is in place.

5)    Undertake a review of School Street signage throughout the borough to ensure it is sufficiently visible, accessible, and clearly understood by all road users.

INFORMATION REQUESTS:

1)    Provide a narrative analysis to accompany the summary of the 30?year HRA Business Plan, explaining how current HRA performance aligns with, corresponds to, and may impact the long?term financial forecasts.

2)    Provide a detailed assessment of the impact that actions underway are having on reducing the forecast overspend in Adult Social Care and outline the plans for managing budgets in-year for 2026/27, including how emerging pressures will be identified early and mitigated. The assessment should include:

i)        Clear delivery timelines and milestones

ii)      Evidence of effectiveness to date, where available

iii)    Identification of any actions that are off track or at risk of delay, with explanations and associated recovery plans

3)    Provide data and analysis on Fixed Penalty Notices issued in School Street locations, including year-on-year trends and comparisons where available, together with accompanying narrative commentary explaining what the data shows and whether any identifiable patterns or changes in compliance can reasonably be inferred.

Please note, whilst the suggestions for improvement, and information requests agreed as an outcome of each item were based on discussions and issues identified during the meeting, the final requests have been refined following the meeting to improve clarity and readability, while remaining consistent with the Committee's discussions and intended outcomes.