Somerset CC only has “sufficient resources to balance its budget for one more year” beyond 2018-19 if it continues to overspend at its current levels, a corporate peer review by the Local Government Association has found.
Children’s services has been identified as the biggest pressure on the council’s budget and the council has been told to get a “grip” on expenditure on them in the same way it has managed to do so in adults’ services.
LGC reported earlier this year how analysis from Pixel Financial Management found a number of councils, including Somerset, had “alarming” reductions in reserves since 2015.
The corporate peer challenge report said there had been “a recurring pattern of using reserves to fund overspends” in recent years, adding that using funds in this way was “more concerning and much stronger budgetary control is needed within the overspending services”.
“As a consequence the council’s overall reserves have reduced significantly,” the report said.
Somerset is forecast to overspend £14.5m in its children’s social care services this year, while a further £2.9m savings are due to be made in 2019-20. This follows overspends of £4.5m in 2015-16 and £3.7m in 2016-17.
This had resulted in a “very challenging” financial position for the council which was estimated to have £11.3m of general reserves at the start of 2018-19, along with a £7m contingency fund.
“This would suggest that if the level of overspending seen in 2017-18 continues in 2018-19, [Somerset CC] will only have sufficient resources to balance its budget for one more year,” the report said. “Furthermore, the level of earmarked reserves was only £8.1m at the start of 2017-18, leaving little flexibility if needed to support the budget.”
The peer review report added Somerset’s 2016-17 audited accounts were “not qualified in terms of its overall arrangements but it did remark upon ‘the weaknesses in proper arrangements for understanding and using appropriate and reliable financial and performance information to support informed decision making’.
“As such, in the view of the peer team, the levels of reserves and the management of them, including greater clarity in respect of reporting and monitoring, needs specific attention.”
The report warned that “only 65% of agreed savings have been delivered” over the last two years and added “whilst there may be specific reasons for this, this level of delivery is simply unsustainable into the future”.
“Given the current position, including the low level of reserves, it is imperative that current and future saving programmes are delivered in full and on time,” the report said.
The report did say, however, that the “council is very aware of the financial challenge it faces” and it “is now demonstrating the wherewithal to make difficult financial decisions”. The staff the peer review team met “were clearly dedicated to, and intent upon, helping the council to effectively respond to” the financial challenges it faces.
A spokesman for Somerset CC said: “There is clearly pressure on our budgets, as there is on local authority budgets up and down the country as government funding falls and demand grows.
“Despite this pressure we are delivering improved children’s services and trail-blazing work in adult social care; and our closing financial report will show slightly increased levels of reserves compared to last year.”
The spokesman said the peer review concluded the council “can meet” its financial challenges and added all budgets are being reviewed to find further savings.
“We believe the system by which local government is funding is broken and call on the government to address this as a priority as part of its fairer funding review,” the spokesman said.
This all comes after Somerset leader David Fothergill (Con) earlier this month sought to “start the ball rolling” on unitary discussions in the county, with the intention of saving up to £28m annually.
The peer review also acknowledged that Somerset had “made significant improvements across a range of issues since its last corporate peer challenge in 2014.”
The council is more “outwardly focused now” while the political leadership and senior officers were said to have been “instrumental in creating a culture for more effective partnership working”.
“The impact of the chief executive [Patrick Flaherty] in leading the council through this recent period of change is clear for all to see,” the report said.
Improvements to children’s social care services were noted while the peer review team said it was “very clear” the council is focussed on the right issues for the area.
At the beginning of the month director of finance Kevin Nacey left Somerset. A spokesman told LGC: “We are very sorry to see him go but of course respect his decision, thank him for all his excellent work and wish him all the best for the future.”
The peers who delivered the peer challenge at Somerset CC:
- David Finch (Con) – leader, Essex CC
- Richard Flinton – chief executive, North Yorkshire CC
- Arthur Charvonia – joint chief executive, Babergh and Mid-Suffolk DCs
- Helen Riley – deputy chief executive and director for families and communities, Staffordshire CC
- Heather Hauschild – chief officer for West Hampshire Clinical Commissioning Group
- Lorna Baxter – director of finance, Oxfordshire CC
- Dan Archer – programme manager at the Local Government Association for the North West
- Paul Clarke – LGA peer challenge manager
This story was updated at 15.32 on 17 May to include comments from a Somerset CC spokesman.