The Overview & Scrutiny Board of Havering Council met on Wednesday 4 February 2026 to discuss significant financial matters, including ombudsman complaints, contracts procedure rules, and the council's budget for 2026/27. The board reviewed draft budget figures, which are subject to change pending the final local government finance settlement. Discussions also covered the council's financial position, the capital programme, and the treasury management strategy.

Ombudsman Complaints 2024-25

The board reviewed the council's performance in handling ombudsman complaints for the 2024-25 period. Sandy Hamburger, Assistant Director of Insight, Policy and Strategy, presented the report. The maladministration rate for HRA-funded services was in line with national rates at 80%, while performance for local government's social care was better than the national average. Councillors raised concerns about the high percentage of upheld complaints, particularly regarding property conditions and complaints handling. Specific improvements expected over the next 12 months include weekly discussions of findings with contractors and in-house services to prevent recurrence, and a review of proactive versus reactive measures. The board discussed the potential for the relevant cabinet member to attend the complaints board meetings to gain a better overview. It was noted that performance targets and escalation measures are automated through the Case Tracker system, with performance reported monthly and cumulatively. Members requested quarterly or six-monthly updates on performance and target achievement. A factual clarification was sought regarding the discrepancy in property numbers reported in different council documents, which was attributed to different definitions of property types (general needs vs. leasehold/private sector). The board also heard that contractors are involved in the deep-dive review of housing complaints, with two days allocated for this in February and March. The impact of savings on officer time and service levels was discussed, with the Case Tracker system enabling efficiencies. The distinction between property condition complaints and complaint handling was clarified, with some property condition issues being linked to delays in complaint resolution. The council aims for zero ombudsman fines but acknowledges they are not there yet, with approximately £35,000-£40,000 spent on resolutions annually. More detail on adult social care complaints was requested for future meetings. Suggestions were made for future reports or trends from ombudsman complaints to be made available to the board on an annual basis, and for ombudsman rulings to be attached to reports for easier councillor access.

Contracts Procedure Rules

Ewan Beals, Head of Procurement and Contract Management, introduced the report on the Contracts Procedure Rules, explaining the complexities introduced by the Procurement Act 2023, which currently requires the council to operate under three different sets of procurement legislation. The current contracts register accounts for approximately £227 million in annual spend, with exclusions for some social care placements. The top three contracts by annual spend are Wates Property Services Ltd (£48.9 million), Adecco UK Ltd (£27.2 million), and Marlborough Highways Limited (£20.3 million). All these contracts have undergone stringent governance processes, including gateway governance, procurement group, and cabinet scrutiny. Each contract has its own management process, including regular meetings with suppliers, key performance indicators, dispute resolution, and variation/change management processes. Cumulative outcomes are measured against corporate plan strands, and an e-procurement tool is used for transparency. Financial savings are being realised from the largest two contracts due for re-procurement, which will be assimilated into a wider programme including estate improvement, window and door replacements, and kitchen and bathroom refurbishments. Social care procurement is facing significant pressures, with the council utilising dynamic purchasing systems and establishing an adult social care framework. The framework is split into three lots: home care, supported living, and care home services, with high interest from providers. The council is focusing on market needs rather than what the market offers. Questions were raised about whether services feel they have sufficient staff for contract monitoring, with assurances given for the top three contracts. The importance of resource allocation for contract management to achieve value for money and social value was highlighted. The council is seeking to centralise contract management training, toolkits, and methodology, with the Contract Procedure Rules needing to be approved first. Interim controls are in place under the Procurement Act 2023. Contracts have varying cycles, with monthly meetings for Wates and Marlborough Highways, and quarterly for Adecco, all covering performance measures and areas for improvement. Break clauses are included in most contracts for no-fault termination, weighted in the council's favour. The council is not seeing increased procurement costs due to these clauses, citing strong competition, such as 135 responses for the home care services tender. The council is also developing a new social value strategy, with KPIs and an annual report to cabinet.

The Council's Budget 2026-27

Cathy Threeman, Strategic Director of Resources, Councillor Chris Wilkins, Cabinet Member for Finance, and other officers presented the council's budget for 2026-27 and the Medium Term Financial Strategy (MTFS) position from 2026/27 to 2028/29. The presented figures are draft numbers, as officers are still working on reducing the council's budget gap and awaiting the final local government finance settlement. The current gap is £73 million on a mid-case scenario and £84 million on a worst-case scenario, even after accounting for savings, the full benefit of fair funding reforms, and an assumed 4.99% council tax increase. The report clearly states the council is in an unsustainable financial position, forecasting a £90 million budget gap per year for years two and three of the MTFS. This necessitates requiring exceptional financial support or a capitalisation direction for the remainder of the current MTFS. Discussions with MHCLG are ongoing regarding the council's financial challenges. The impact of borrowing for exceptional financial support means accumulated debt could reach approximately £300 million by 2028/29, with borrowing costs estimated at £28 million per year. The council aims to set a legally balanced budget for 2026/27 through exceptional financial support loans, requiring borrowing of between £73 million and £83 million. The bid was submitted to MHCLG on 13 December, and they are aware of the timelines for the full council meeting on 4 March. The council's financial situation remains extremely challenging, with a £90 million gap forecast for years two and three of the MTFS, alongside significant borrowing costs. Senior leadership is working on cost reductions, efficiencies, and savings, and members will need to consider further savings, reductions, and efficiencies. Officers will also review funding for demographic pressures in people services, particularly social care and temporary accommodation. The capital programme reflects January cabinet papers, including regeneration business plans and the HRA business plan, with approximately £30 million in new capital spend, largely funded by grants and investor-save projects. The treasury management strategy, required under the SIFPA code of practice, includes prudential indicators demonstrating the affordability and sustainability of the capital programme, though it carries delivery risks. For the first time, the treasury management strategy states the council is unable to comply with the prudential code regarding exceptional financial support due to unaffordable and unsustainable borrowing levels. The council is able to set a legally balanced budget for 2026/27 only through exceptional financial support loans, requiring borrowing of £73 million to £83 million. The bid to MHCLG has been submitted, and they are aware of the timelines. The council's financial situation remains extremely challenging, with a £90 million gap forecast for years two and three of the MTFS, and significant borrowing costs. Work is ongoing to reduce demographic growth, find efficiencies, and savings. Members will need to consider council tax options.

Councillor Patel questioned the financial sustainability of the medium-term financial strategy beyond 2026/27 without exceptional financial support and asked for specific costed and deliverable measures to close the remaining gap by 2028/29. Cathy Threeman confirmed that the council would not be in a financially sustainable position due to insufficient fair funding, despite gaining nearly £40 million. A structural deficit exists that cannot be resolved independently. The £83 million gap for 2026/27 is for the worst-case scenario, with gaps for 2027/28 and 2028/29 estimated at nearly £90 million per year, requiring further borrowing. Recovery measures include reviewing demographic growth budgets, seeking further efficiency savings of £30 million over three years, delivering all proposed savings (£26 million), and members considering council tax options. Additionally, a significant high needs deficit on the dedicated schools grant (£65-£68 million forecast by year-end) is noted, with government intentions on addressing this deficit and potential reforms to be announced.

Councillor Good inquired about the use of capital receipts to fund the capitalisation direction, clarifying that £18 million of capital receipts were used in 2023-24 to finance an overspend, meaning no borrowing was required for that amount. For 2024-25, an overspend of £30.4 million was financed by raising the capital financing requirement, necessitating borrowing. For 2025-26, £1.5 million of minimum revenue provision was recorded as a cost, also requiring borrowing. The current year's monitoring position indicates a requirement of £56-£57 million for exceptional financial support, which will be funded from borrowing as capital receipts are earmarked for short-term assets like IT. The total amount of capital receipts applied against EFS is £18 million.

Councillor Taylor asked about the impact of stating the inability to comply with the Prudential Code, which was clarified as a statement to raise awareness rather than directly impacting the budget. Councillor Stanton questioned why the improvement and transformation plan was not more clearly integrated into the budget and MTFS, and was assured that progress updates are monitored and reported to scrutiny, and that better alignment will be sought in the final cabinet report. Councillor Keane inquired about the threat to capital projects from non-compliance with the Prudential Code, with a reply stating an indirect impact, but that the capital programme itself is affordable and sustainable. Concerns were raised about the lack of momentum behind house building programs and the need for regeneration to address infrastructure and funding. Councillor Wilkins highlighted the £258 million debt and the reality of needing exceptional financial support to set a legally balanced budget. Councillor Ruck expressed concern about the £200-£300 million indebtedness and the need for major changes in funding, questioning how to address the situation with central government. Councillor Morgan asked for context on council tax increases needed to balance the budget, with a 1% increase generating approximately £1.7 million. Richard Tyler explained that debt financing costs constitute about a third of the £90 million gap by 2028/29. Cathy Threeman acknowledged the discomfort with the level of debt but stressed the necessity of exceptional financial support to avoid the risk of not setting a legally balanced budget, which would jeopardize council tax collection. Councillor Taylor questioned the savings proposals, asking how many could have been identified earlier and what prevented their earlier proposal. Richard Tyler confirmed that £3 million of savings related to better living and targeted reviews have been ongoing for years, and single person discounts and concessionary fare passes are annual targets. Neil provided details on the lane rental scheme being a relatively new power for local authorities and the Mercury House contract being identified as an issue four years ago, with alternatives explored. Councillor Stanton sought reassurance on early recognition of risk in adult social care, distinguishing between fragility and crisis, and ensuring consistency across frontline services. Tara replied that early intervention is a focus, with new reforms and a family hub team being implemented. Neil added that annual tenancy audits are conducted for council tenants to identify support needs and prevent crisis, with rent arrears being an early indicator. Councillor Morgan suggested bringing in the Practice Improvement Oversight Board to demonstrate early help work. Councillor Wilkins confirmed that EDI policies are being embedded into day-to-day roles and HR policies. Cathy Threeman stated that specific funding for an ongoing EDI post is not yet allocated but will be assessed based on the detailed roadmap. Councillor Patel asked about trigger points and timescales for a Section 114 report, with Cathy Threeman explaining it's a combination of factors including loss of member/officer support, lack of progress with MHCLG, and exhausting all options. Councillor Taylor raised concerns about national insurance increases and their impact on borrowing costs, with Richard Tyler confirming a £200,000 shortfall and an estimated £20,000 annual financing cost. Councillor Stanton inquired about assumptions on business rate changes in the MTFS, with Richard Tyler stating no direct impact has been factored in yet, but collection fund deficits are included. Councillor Keane asked about work being done regarding the Hornchurch bid and business rate impacts, with Neil explaining the bid process and the need for transparency on performance indicators. Councillor Taylor questioned pre-application fees for developers, and Neil confirmed that fees for larger developments do cover their costs and that the council is looking at increasing them to deliver a better service. Councillor Stanton asked about the consistency of heritage advice and bringing expertise in-house, with officers agreeing to investigate. Councillor Taylor requested the cost of extending 30 minutes free parking to Park Lane in Hornchurch, and this was agreed to be provided individually. Councillor Keane also requested an increase in communications around green flags in parks. Luke was asked to circulate a draft of recommendations to all members for consideration by Cabinet on 18 February. The next meeting of the Board was scheduled for Thursday 5 March.

Treasury Management Strategy Statement (TMSS) and Annual Investment Strategy

The Treasury Management Strategy Statement (TMSS) and Annual Investment Strategy for 2026/27 were presented, outlining the council's borrowing and investment strategies, treasury management and prudential indicators. The report highlighted the macroeconomic outlook, with forecasts indicating falling interest rates and gilt yields. The borrowing strategy aims to borrow for shorter durations (1-5 years) from the PWLB or market sources, refinancing into longer-term loans when rates are expected to be lower. The council's current treasury portfolio shows investments of £18.4 million and external borrowing of £566.9 million as of 31 December 2025. The capital programme forecasts a significant increase in borrowing, with the Capital Financing Requirement (CFR) projected to rise to £1,575.8 million by 2028/29. This increase is largely driven by the need for exceptional financial support (EFS), which is projected to require borrowing of £337.8 million by 2028/29. The report notes non-compliance with the Prudential Code regarding affordability and sustainability due to the compounding interest and repayment costs of EFS. The HRA capital programme also shows a significant increase in borrowing, reaching £729.1 million by 2028/29, with financing costs approaching 50% of rental income. The investment strategy prioritizes security and liquidity over yield, with investments limited to high credit quality institutions. The council will continue to monitor interest rates and adopt a pragmatic approach to changing circumstances. The report also detailed the council's counterparty credit policy, minimum credit ratings criteria, and approved investment counterparties and limits.

5 Year Capital Programme and Strategy

The council's 5-year Capital Programme from 2026/27 to 2030/31 was presented, totalling £382 million for 2026/27 and £1,043 million over the full five-year period. This includes existing service projects, new bids, HRA capital projects, and regeneration projects. The General Fund capital programme amounts to £393 million, with the HRA capital programme at £650 million. New capital projects include essential building safety and condition works, grant-funded projects, and investment to save initiatives, particularly in children's social care. There is also investment planned for parks and open spaces. The financing of these projects will come from capital receipts, grants, revenue and reserves, and borrowing. The report highlights the council's commitment to regeneration, with significant investment in joint ventures and subsidiaries like Mercury Land Holdings, Bridge Close, and Rainham & Beam Park. These projects aim to deliver affordable homes, support economic growth, and improve the borough's infrastructure. The capital programme is financed through various sources, including capital receipts, grants, revenue contributions, and borrowing. The report also outlines the Minimum Revenue Provision (MRP) policy, which determines the amount set aside annually for debt repayment. The council's treasury management strategy is being reviewed to manage risks associated with interest rates and refinancing.

The council's capital programme is facing significant financial challenges, with a projected increase in borrowing to £1,575.8 million by 2028/29. This is largely due to the need for exceptional financial support (EFS), which is increasing borrowing costs and impacting the revenue budget. The report notes that the council is unable to comply with the Prudential Code regarding affordability and sustainability due to these borrowing levels. Despite these challenges, the council is committed to delivering its capital programme, with a focus on regeneration and affordable housing. The report also details the financing of the capital programme, including the use of capital receipts, grants, revenue contributions, and borrowing. The HRA capital programme is also substantial, with significant investment planned for stock improvements and regeneration. The council's treasury management strategy aims to manage financial risks associated with borrowing and investments, with a focus on security and liquidity.

The meeting concluded with a discussion of recommendations to be made to Cabinet. These included officers aligning the improvement and transformation plan with the budget and MTFS, modelling alternative street trading licence fees, reviewing the wording of discretionary fees and charges for compassion, providing cost estimates for extending free parking across Romford's parking areas, confirming the national insurance shortfall, piloting single bulky waste collections, and investigating individual licensed fly-tipping collectors. Increased communication around green flags in parks was also requested. Luke was asked to circulate a draft of these recommendations to all members for consideration by Cabinet on 18 February. The next meeting of the Board was scheduled for Thursday 5 March.