The Budget and Finance Scrutiny Committee reviewed the 2025/26 Quarter 3 Financial Monitoring Report. The report indicated a forecast revenue outturn of an overspend of £6.117 million, representing 0.49% of the approved budget. Services were actively developing mitigation strategies to reduce or eliminate these adverse variances.

The capital programme for 2025/26 was revised to £299.106 million. The forecast outturn for capital expenditure was £203.257 million, resulting in a forecast underspend of £95.849 million (32.05%). This underspend was attributed to a combination of factors including the roll-forward of projects from the previous financial year, additional grants received, and a review of the phasing of spend for multi-year projects.

A significant concern highlighted was the forecast overspend in the Dedicated Schools Grant (DSG) revenue outturn of £73.08 million. This was primarily due to increasing demand and placement costs for pupils with Special Educational Needs & Disabilities (SEND). The report noted that DSG funding had not kept pace with this growing demand, creating significant financial and service pressures.

2025/26 Quarter 3 Financial Monitoring Report

Key Variances and Discussions:

• Adults, Health and Wellbeing Services: A forecast overspend of £2.454 million was noted, with pressures in Adult Services (£4.032 million) attributed to increased demand for commissioned care and higher than budgeted costs for agency staff. The Public Health service, however, reported an underspend of £1.578 million due to effective budget management and strategic use of the Public Health Grant.
• Education and Children's Services: An overspend of £8.291 million was forecast, largely driven by the SEND recovery plan, increased demand for SEND transport, and pressures in Children's Social Care. Specific pressures were identified in placements and support for children with disabilities, and the commissioning of external Education Psychologists and EHCP writing resources to address the backlog.
• Place Directorate: The directorate was forecasting a slight underspend of £0.336 million. However, within this, Facilities Management was overspending by £2.000 million due to delayed savings targets and an income shortfall in schools catering. Highways and Transport reported an underspend of £0.429 million, partly due to increased income and cost reductions in maintenance.
• Resources Directorate and Chief Executive Services: This directorate was forecasting an underspend of £2.643 million. Digital Services reported underspends due to staffing vacancies and higher than budgeted income, while Law and Governance reported an overspend primarily due to increased legal fees related to safeguarding referrals.
• Corporate Budgets: An overall underspend of £1.650 million was forecast, including an overachievement on the pension prepayment and an underspend in Funding and Grants.
• Capital Programme: The significant underspend in the capital programme was a major point of discussion. Variances were noted across various blocks, including Schools Basic Need (-£14.635 million), Operational Planned Maintenance (-£12.469 million), and the East Lancashire Levelling Up Fund (-£29.600 million). Reprofiling of delivery into future years was a common theme, with reasons cited including funding delays, planning issues, market capacity constraints, and optimism bias.
• Dedicated Schools Grant (DSG): The £72.45 million overspend in the High Needs Block was a significant concern, driven by increasing demand and placement costs for pupils with SEND. The report highlighted that the DSG deficit was growing, necessitating increased borrowing.

Recommendations to Cabinet:

The committee discussed recommendations to Cabinet. These included:

• Noting the forecast revenue overspend of £6.117 million.
• Noting the forecast capital expenditure of £203.257 million for 2025/26.
• Noting the forecast overspend in the Dedicated Schools Grant of £73.08 million.

The committee also discussed its work programme, agreeing to receive a summary of changes to the Medium-Term Financial Strategy and a report on the progress of in-year savings.

Key Concerns Raised by Councillors:

• Follow-up on previous actions: Councillor Riggott raised concerns about outstanding actions and written responses from the November 2025 meeting, highlighting that similar questions were being asked again.
• Public Health Grant: Several councillors questioned the underspend in the Public Health Grant and its strategic use, expressing concerns that it might be used to subsidise other services. Assurances were given that proposals met grant regulations and offers were made to provide further information.
• Staffing and Vacancies: The impact of vacancies on service delivery was discussed, particularly in relation to the Children and Family Wellbeing Service.
• SCSO Dispute: Concerns were raised about the ongoing SCSO dispute and its impact on waiting times and reputational damage.
• Capital Programme Delivery: Concerns were expressed about the significant underspend and reprofiling within the capital programme, questioning whether this indicated systemic delivery issues.
• Mental Health Funding: Concerns were raised about mental health outcomes and resourcing for timely assessments, with a recommendation made to consider the Public Health Grant and other funding sources for mental health issues.
• Winter Gritting: Winter gritting was highlighted as a significant risk area, particularly in eastern counties.
• Reporting Clarity: A request was made for papers to match the page numbering of mod.gov to improve clarity.
• Interdepartmental Collaboration: A suggestion was made to involve representatives from the Integrated Care Board (ICB) when discussing mental health to address potential duplication and issues.
• Transparency in Capital Spending: A request was made for a breakdown of highway schemes to be shared with all councillors and a list of capital spent on schools.
• Workforce and Agency Costs: Discussions touched upon workforce and agency costs, with assurances that agency staff were delivering good services despite market challenges.
• Capital Programme Variances: Specific concerns were raised about variances in operational planned maintenance for corporate property and the underspend on the transport capital programme, linking it to potential underinvestment in staff capacity.
• DSG Deficit and Borrowing Costs: The report detailed the increasing DSG deficit and the associated borrowing costs, which would otherwise have been used to support services.

The meeting concluded with the committee agreeing to add further considerations to its work programme, including grant profiling and the process of sign-off and reporting for past and current spending. A recommendation was also made to explore expenditure on mental health promotion within services.