The Overview and Scrutiny Management Board met to discuss the council's financial performance, the re-procurement of an occupational health contract, local government reorganisation proposals, and the treasury management annual report. The board supported the recommendations outlined in the review of financial performance, and also supported the re-procurement of the occupational health contract. The board voted to recommend option one for local government reorganisation.

Review of Financial Performance 2024-25

The board reviewed the Review of Financial Performance 2024/25, which outlines the council's financial performance for the year, noting a £9.851 million underspend on council budgets and a £2.42 million overspend on school budgets. The report explains key variances in revenue and capital budgets, proposes a carry forward of under and overspends into 2025-26, presents an updated reserve statement, reports on financial and prudential indicators, and provides an update on a fundamental review of the council's finances.

Andrew Crookham, Deputy Chief Executive and Executive Director of Resources, updated the board on budget planning for future years, including the removal of the rural services grant and the fair funding review. He noted that officers are working to build up savings of at least £25 million through reviews and contract assessments.

Councillor Sean Matthews, Leader of the Council, reassured the board that any efficiency review would be conducted legally and safely, with the full involvement of council officers.

Councillor A D Findley raised concerns about future borrowing, given the council's existing debt of £469 million and the reduction in reserves from £242 million to £196 million. He questioned the financial return predicted from the £220 million invested in major assets during the year.

Andrew Crookham, Deputy Chief Executive and Executive Director of Resources, explained that the council is expected to comply with the Prudential Code¹ and that investment decisions are based on clear business cases. He also noted that the reduced reserves were planned and that the council is in the process of growing the general reserve to provide further financial sustainability.

Councillor M J Hill OBE congratulated officers and members of the previous council for forecasting an underspend, unlike most other councils. He sought clarification on the reduction in the borrowing requirement from £70 million to £44 million, reassurance that antisocial behaviour and flood money would be carried forward, and an explanation of the South Holland waste tipping.

Michelle Grady, Assistant Director in Finance, clarified that the borrowing was delayed, not cancelled, and that the £1 million for flooding is still available.

Councillor Sean Matthews, Leader of the Council, criticised the previous administration's decision to take £7.8 million from reserves to artificially reduce council tax, which he said almost entirely wipes out the surplus.

Councillor Ashley John Baxter raised concerns about the forecast of a £1.9 million overspend in quarter three, which then turned into an £11 million underspend. He also questioned the unplanned outages at the Energy for Waste facility² and whether the council would receive compensation. He asked about the budget for pay awards and sought clarification on traffic regulation orders and home-to-school transport.

Michelle Grady, Assistant Director in Finance, explained that the quarter three reports were clear that there had been no calls against the contingency at that point.

Councillor Mike Beecham asked about the most significant and unexpected variances in the 2024-25 outturn and what they reveal about the robustness of forecasting models.

Councillor R G Davies expressed sympathy for Councillor Findley's concerns about the word investment and questioned the strategy in place to avoid a structural deficit in the schools budget. He also asked when a detailed impact assessment of the savings plan would be available and urged Councillor Sean Matthews, Leader of the Council, to ensure a clear scrutiny process for bringing external parties into the organisation.

Councillor C J Parkinson expressed concern about the government pushing councils towards increasing taxes through council tax and business rates.

The board supported the recommendations to the executive as detailed in the report.

Re-procurement of the Occupational Health Contract

The board discussed the re-procurement of the occupational health contract, as the current contract is due to expire on 31 March 2026, with no remaining extension options. The report outlines the proposed approach for procuring a new contract and seeks approval to delegate the necessary decisions to progress the procurement process.

Vicky Sharp, HR Services Manager, explained the importance of occupational health services, including asbestos testing and medical assessments for the fire service. She noted the challenges in finding professionals in the occupational health sector.

Councillor S French questioned why the council could not contract directly with occupational health workers, rather than subcontracting.

Leanne Fotherby, Commercial and Procurement Manager Commercial Services, explained that the framework approach is being used.

Councillor M J Hill OBE sought justification for relying on the framework and asked how the contract would address issues of timeliness.

Vicky Sharp, HR Services Manager, said that the number of key performance indicators has been reduced from 40 to 15, focusing on timeliness.

Councillor A C Woodruff asked about the contingency plans if the contract fails.

Leanne Fotherby, Commercial and Procurement Manager Commercial Services, said that there are partial termination clauses and direct award mechanisms within the frameworks.

Councillor R G Davies asked how the council is ensuring the effectiveness of virtual appointments.

Vicky Sharp, HR Services Manager, said that video conferencing is being used to reduce travel time and improve communication.

Councillor S French referenced Animal Farm³ and questioned where the council draws the line at fostering better chances for one group without detriment to another group.

Vicky Sharp, HR Services Manager, explained that the Equality Act allows for positive action to be taken with disabled employees.

The board supported the recommendations to the executive as detailed in the report.

Responding to Government Feedback on Local Government Reorganisation Proposals

The board considered a report summarising the progress made in the local government reorganisation process and seeking agreement to develop and submit a single business case supporting a proposal for Lincolnshire by 28 November 2025.

Clare Rowley, Head of Transformation, outlined the government's criteria for proposals, including achieving a single tier of local government, improving efficiency and capacity, prioritising public services, demonstrating collaboration, supporting devolution arrangements, and enabling community engagement.

Councillor Ashley John Baxter expressed his dislike for the report and raised concerns about misleading information. He argued that existing Lincolnshire is too big and that the proposals do not enable stronger community engagement. He also questioned whether all parties are sharing data as expected.

Clare Rowley, Head of Transformation, responded to Councillor Baxter's points, clarifying the issues around co-terminosity and data sharing.

Councillor Robert Antony Gibson, DEPUTY LEADER OF THE COUNCIL, stated that the Secretary of State will make the final decision, not the council.

Councillor L A Cawrey said that personal and party political preferences should be set aside to prioritise the needs of residents.

Councillor Mike Beecham raised concerns about the potential implications for the fire and rescue service.

Councillor M J Hill OBE supported the proposals, arguing that disrupting big services like social care and highways would be dangerous.

Councillor Sean Matthews, LEADER OF THE COUNCIL, said that he was terrified that some parish councils would not be able to cope with the work they would be expected to do.

Councillor C J Parkinson expressed concern about the government's lack of respect for democracy and the risks associated with devolution.

Councillor R G Davies supported the proposals and said that the professional view is that the council has great services that are delicately balanced and should not be broken up.

The board voted to recommend option one at this stage.

Treasury Management Annual Report 2024/25

The board reviewed the Treasury Management Annual Report 2024/25, which presents the council's treasury management performance for the financial year, comparing actual activities with the approved treasury management strategy.

Karen Tonge, Treasury Manager, defined treasury management as the management of cash and debt through lending and borrowing activity, controlling associated risks. She highlighted that the report details the results of the council's activities for the year and compares that activity to the approved treasury management strategy.

Robert Baxter from MUFG Corporate Markets, reiterated that it is a complicated area. He said that the council's borrowing costs will reduce in the longer term and that internal investments will start to come down a little bit as well.

Councillor L A Cawrey asked for training to be made mandatory for members of the board.

Andrew Crookham, Deputy Chief Executive and Executive Director of Resources, said that the training is becoming mandatory to satisfy the code.

Councillor C J Parkinson asked if the council ought to be even more conservative with its expectations around interest rate cuts, given that inflation is difficult at the moment and unpredictable.

Karen Tonge, Treasury Manager, said that the council is in a very volatile environment and that MUFG provides forecasts to inform the council's strategy.

Councillor R G Davies asked how the council is deciding what level to set the voluntary revenue provision at and what the decision-making process is behind it.

Andrew Crookham, Deputy Chief Executive and Executive Director of Resources, explained the history of the voluntary revenue provision and how it has resulted in a balance of £66 million of proactive overpayment of borrowing.

Councillor M J Hill OBE supported the training issue and asked if it was fair to say that the investment situation would be different if the council did external borrowing instead of internal borrowing.

Karen Tonge, Treasury Manager, said that there is minimal cost to internal borrowing, as the fund manager is internal.

Councillor C J Parkinson asked if there is a concern that the council may have to look at external borrowing moving forward, as it continues to utilise cash.

Karen Tonge, Treasury Manager, said that there will be a time when the council will have to look at borrowing, but that it will mitigate those risks by monitoring the interest rate environment.

Councillor Ashley John Baxter asked why the contract for treasury management services was renewed through a direct award by exception. He also asked if there is a league table of how well councils are performing against each other.

Karen Tonge, Treasury Manager, said that there are limited participants in the market and that the council is part of a benchmarking group.

Robert Baxter from MUFG Corporate Markets, said that the council is at the very top of that league table.

Councillor P J Roberts asked if the council has charged itself interest for internal borrowing and whether the future North Harkon bypass will be funded by internal or external borrowing.

Karen Tonge, Treasury Manager, said that the council does not charge itself interest and that the decision on external borrowing is not linked to any particular scheme.

Councillor Ashley John Baxter asked if there is any ethical element to the council's treasury management strategy.

Karen Tonge, Treasury Manager, said that the council's investment strategy is based on the credit criteria of the counterparties that it engages with.

Councillor C J Parkinson said that he believed that the reason the council is using a bank in China is because it is one of the listed investments.

Karen Tonge, Treasury Manager, said that to her knowledge, the council does not have any outstanding investments in any Chinese banks.

The board endorsed the report and asked that comments and concerns raised in the debate be shared with the Executive Councillor for consideration.

Overview and Scrutiny Management Board Work Programme

The board reviewed its work programme.

Councillor M J Hill OBE requested an update on the Green Master Plan and noted that updates from the transformation programme had been discontinued.

Andrew Crookham, Deputy Chief Executive and Executive Director of Resources, said that the transformation programme is currently under review.

Councillor M J Hill OBE asked about future budget proposals and whether there would be an opportunity to scrutinise emerging proposals.

Andrew Crookham, Deputy Chief Executive and Executive Director of Resources, said that actions requiring a member decision would naturally come through the democratic process.

The board agreed that the report be received and noted with a caveat of amendments identified in earlier debates.