Finance Peer Challenge: Swindon Borough Council

Swindon Borough Council (SBC) is a unitary council in the South West with a population of just over 220,000. The council is in the midst of significant change. Following the May 2023 elections there is now a new Labour administration for the first time in over two decades.

Alongside the change in political leadership, there have been recent changes at a senior management level. The interim chief executive was promoted internally for a year following the previous chief executive leaving in July 2023. The longstanding corporate director of finance and assets & section 151 officer left the council weeks later and there is now an interim director of finance and audit & section 151 officer in post. 

Whilst the council is progressing through change, it is welcoming of challenge and support. As part of that the Local Government Association (LGA) were asked to undertake a focussed Finance Peer Challenge, very early into the life of the new political administration. As a result, there was a specific focus on the revenue budget position and the impact of the challenges in delivering Children’s Services.  

SBC’s finances have long been challenged. As a small unitary it faces the challenges of managing social care demand, but without the scale or economies of larger upper tier authorities. It also has low levels of reserves and a high percentage of costs on social care.  In recent months high inflation and issues in Children’s Services, borne both out of demand pressures and also from being in Intervention, have accelerated the council’s financial position to a ‘cliff edge’. It has very little time in which to reengineer its finances to a position that can be resilient in the medium to long term.

In terms of its revenue budget, the Council has a very significant gap next year (2024/25) of £16.4m on top of assumed savings in that year of £19.6m. Added together this amounts to £36m or nearly 22% of the 2023/24 budget. This is a very significant challenge.

In the view of the peer team, the council does not have sufficient levels of uncommitted reserves to provide a cushion to resolve this issue, so it will need to meet these challenges quickly and decisively. The General Reserve is £8.3m and the “Cashflowing” Reserve, which is also used to give resilience is estimated to stand at only £8.7m at year end, after it has been used to fund the in-year underspend. Therefore, total reserves potentially available to support the future bottom line are currently only £17m which is less than half the savings target for 2024/25.

The challenge now for the council is how it responds to that ‘cliff edge’ and the early signs are promising, although time is extremely tight given the scale of financial challenge and limited reserves. The new political and managerial leadership are showing clear ownership of the financial position that the council finds itself in and collectively they are committed to Swindon and to addressing the financial challenges, for example, the council has already implemented controls over non-essential spending. In recognising the need to create stability and capacity to move forwards, they have welcomed challenge and support. 

The key issues for SBC to tackle include concerns over the reserves position, the challenges in Children’s Services, the fixing of which will be critical to the corporate finances of the council, ensuring the Dedicated Schools Grant deficit is addressed, and development of a Medium Term Financial Strategy (MTFS) that demonstrates a balanced budget beyond 2024/25. The initial focus for the senior management team has rightly been prioritised on the revenue budget position. Whilst maintaining a relentless focus on the revenue budget, early development of that balanced MTFS for 2024/25 and beyond will provide the framework for other financial strategies to link into.

In addition, it will be important that the new Corporate Plan, which was being developed at the time of the finance peer challenge, reflects the context of the MTFS, in particular, making significant progress on all areas of transformation, most especially in Children’s Services.

The council strategies and plans should be supported by a communications plan that sets the narrative of the council’s financial position for a wider audience, explaining why it needs to take action and what action it is taking.

As the council begins the next and critical iteration of its transformation journey, careful consideration needs to be given to the internal and external capacity that will be required to deliver the programme. This is important because officers need to be in a position to continue to deliver services on a business as usual basis which will impact the time available to focus on the requirements of the transformation programme project, and, from a capacity perspective, the client role in managing partners will require time and a specific skill set.

The council will need to:

• Develop a separate MTFS for Children’s Services as a sub set of the corporate MTFS. Getting Children’s Services budgets back into some control is mission critical to Swindon’s financial resilience.
• Develop strategies to seek to protect and bolster reserve levels to provide some cushion to the challenges.
• Act swiftly as the reserve levels cannot support the bottom line for very long.
• Review its Capital Programme and only proceed with Council funded schemes that are essential.
• Maintain and review the effectiveness of its emergency spending controls.

There are strengths to build upon, for example the peer team recognised how well respected the council’s finance team are and how that helps build good working relationships across the council. Also, the Council has a good track record of delivering savings – they are on track to deliver 83% of savings in 2023/24. Positive foundations such as these will be important to build upon as SBC clearly communicates its journey of change with strong leadership, managerial ownership, staff engagement and overall stakeholder buy in. Improvements in the quality of financial reporting are required, and along with a clear narrative which sets out the financial rationale for decisions will help SBC to disseminate wider understanding of its financial position. 

SBC is also due an LGA led Corporate Peer Challenge and the council is keen to undertake this. It is recommended that takes place in the next 12-18 months, so the councils progress with the recommendations within this report can be externally assessed.

There are a number of observations and suggestions within the main section of the report. The following are the peer team’s key recommendations to the council:

A balanced MTFS for 24/25

SBC should work to deliver a MTFS that balances the budget for 2024/25 and moves to a balanced position over the medium term, using the transformation programme as a key lever. The new Corporate Plan should align to the MTFS to show the council has the financial capability to deliver on the priorities. 

Work to ensure Children’s Services budgets are under control

The council needs to ‘grip’ and then ensure its Children’s Services budgets are under control as this is interlinked with the corporate financial outlook. SBC should consider developing a subset of its MTFS with a focus on Children’s Services. Managing the Children’s Services budget will be key to being able to manage the corporate budget and will help SBC to get Children’s Services out of the current Inadequate rating. 

The Dedicated Schools Grant (DSG) deficit

SBC needs to plan to get the DSG back into annual balance and to deal with the deficit at that point. The Statutory Override may well be extended but will come to an end at some point.

A communications plan around the council’s financial position

SBC should develop a strong narrative and communications plan around its financial position, the need for savings and improvement and the transformation programme. The plan should be widely socialised with all stakeholders including members, managers, staff, the public and trades unions.

Transformation Programme Pace and Capacity 

SBC should make swift and decisive progress in its Transformation strategy, with strong support and buy in at management and member level. SBC should be clear about the in-house capacity and external support required to deliver the Transformation Programme.

Financial Reporting

The Council needs to improve the quality of its financial reports to ensure that the full context and picture of its position is clear and unequivocal. The risk register also needs to be refreshed although the peer team heard that this is in progress.

Corporate Peer Challenge

Take part in a corporate peer challenge in the next 12 to 18 months which will include checking progress against both the previous corporate peer challenge held in March 2022 and this finance peer challenge.

The peer team

Peer challenges are delivered by experienced elected member and officer peers. The make-up of the peer team reflected the focus of the peer challenge and peers were selected on the basis of their relevant expertise. The peers were:

• Sir Steve Bullock – ex Mayor of LB Lewisham
• Chris West – LGA Finance Associate, former S151 Officer at Coventry City Council
• Kathryn Trant – LGA Peer Challenge Manager

Scope and focus

The peer team considered the following four of the five themes which form the core components of all Finance Peer Challenges. These areas are critical to councils’ performance and improvement.  The peer team focus was particularly on the revenue budget because of the need for an early external assessment of the financial position of SBC.

• Financial leadership: Does the council have plans for its long-term financial sustainability, which are owned by its members and officer leaders?  
• Financial strategy, planning & forecasting: Does the council understand its short and long term financial prospects? 
• Decision-making: Are key decisions taken in the understanding of the financial implications, risks and options? 
• Financial outcomes: Are financial results (including those of the Council’s investments and transformation projects) monitored and acted upon so as to realise the council’s intentions? 

The peer challenge process

Peer challenges are improvement focused; it is important to stress that this was not an inspection. The process is not designed to provide an in-depth or technical assessment of plans and proposals. The peer team used their experience and knowledge of local government to reflect on the information presented to them by people they met, things they saw and material that they read.

The peer team prepared by reviewing a range of documents and information in order to ensure they were familiar with the council and the challenges it is facing. Pre-engagement calls took place with the chief executive and director of finance and audit and s151 officer, and with the Leader and Cabinet Member for Finance. The team then spent two days onsite at SBC, during which they:

• Gathered information and views from more than 10 meetings, in addition to further research and reading.
• Spoke to more than 32 people including a range of council staff together with members and external stakeholders.

This report provides a summary of the peer team’s findings. In presenting feedback, they have done so as fellow local government officers and members.

Following the local elections in May 2023 there was a change of political leadership at SBC and a new Labour administration is in place. Key changes have also taken place at a senior management level and, whilst they are internal appointments which will provide consistency, both the chief executive and director of finance and audit & section 151 officer are new in post on an interim basis. The council recognises the importance of filling the s151 officer position as quickly and efficiently as possible and in doing so will benefit from the opportunity to inject impetus but also help establish ongoing stability into the role as the council rightly prioritises dealing with the financial position.    

The peer team heard from members of cabinet and senior managers that they now have a clear understanding of the financial challenges that SBC is facing, particularly with the revenue budget. However, it was accepted that amongst the wider membership and lower down the organisation the understanding was mixed, and that front line staff probably were not fully aware of the details of SBC’s financial position. There needs to be greater investment in explaining and communicating what the council’s financial narrative is so that everyone in the organisation is aware of the position and can play their part in delivering savings and services within budget.

The first budget monitoring report for 2023/24 presented to Cabinet on 20^th September 2023 included details of mitigating actions proposed by the Corporate Management Team such as:

• stop or defer non-essential spend
• maximise opportunities following the implementation of Pay and Reward
• only allow out of area travel for safeguarding or statutory purposes
• review fees and charges.

The latest budget position provided to the peer team for 2024/25 is:

Within this the revised overspend on Children’s Services is £11.6m, including £2.5m of savings not delivered.

The uncommitted reserves available to cushion this challenging position are a General Fund Reserve of £8.3m and a “Cash flowing” Reserve that will stand at £8.7m at year end, a total of £17m. This is less than half of the total savings that will need to be found. It represents a very thin cushion in size and time. Pace as well as magnitude of change are key issues for SBC to address.

Children’s Services is forecasting a pressure of £11.6m, mainly related to increased placement costs as a result of a national shortage of suitable provision at the right level. Children’s Services at SBC recently received an Inadequate Inspection rating from Ofsted. The Inadequate Inspection rating will require an Improvement Plan which will need resourcing. The Children’s Services budget will have to be brought under control if SBC is going to succeed in demonstrating longer term financial sustainability. The peer team have recommended developing a subset MTFS for Children’s Services, the management and monitoring of which will be critical to managing the wider corporate financial outlook. This MTFS would contain forecast cost increases and the mitigations needed to get the Children’s Services budget back into a steady state. 

The council needs to deliver both the Improvement Plan and greater financial discipline and control at the same time – this will be highly challenging.

Although in overall terms the financial issues in Children’s Services are most concerning, there is also an overspend in 2023/24 on Adults, Housing and Public Health – reported as £3.22m in September 2023. Given the scale of challenges it will be imperative to manage adult social care within budget, and to seek future savings in the area. The council may wish to consider using the LGA’s Use of Resources report and associated support to feed into its plans going forward.

SBC is currently working on a new Corporate Plan. As the Plan is developing the council should ensure they have the financial capability to deliver on the priorities.  Aligning the emerging Corporate Plan with the MTFS will confirm that they are mutually consistent. This echoes a recommendation from the Corporate Peer Challenge undertaken in March 2022 to ‘establish the golden thread that aligns ambitions and imperatives with available resource and is underpinned by robust mechanisms to manage and monitor delivery’. 

In view of the importance of Children’s Services on the future of the council, SBC should be satisfied that Children’s Services features significantly enough in the list of priorities. Through links with the MTFS this will ensure financial capacity to deliver the improvements required.

The peer team heard of the plans being developed for a Transformation Programme.  A cross organisation transformation plan is being developed as a key enabler to future financial stability. The following work streams will guide the Programme:

• At our Best 
• Housing and Care 
• Commissioning and Procurement
• Estates and Assets 
• Children’s Transformation programme
• Target Operating Model

Work to progress a Transformation Programme has come at a relatively late stage and, in light of the financial position of the council, needs to move forwards very rapidly so that the council is in a position to benefit from financial savings that result. Even so, this is not likely to be in time to impact on the 2024/25 budget. SBC should carefully consider the capacity that will be required to drive and implement the change arising from the Programme, and whether and where to employ external advisors to assist. Only with the right capacity and resource in place can the council develop credible medium and long term plans which will be a key factor in the council’s financial sustainability. 

The sector as a whole is experiencing financial challenges. SBC is now engaging with other councils and financial networks to share information and best practice. Taking this learning from elsewhere is a positive step and can only be helpful.

It is the view of the peer team that SBC has had a short term focus in financial planning and therefore it does not have sufficiently adequate plans in place for the medium term.

SBC has a MTFS until 2025/26 but the peer team was not clear of plans beyond that to ensure its longer term financial sustainability. In 2024/25 it has a very significant gap of £16.4m on top of assumed savings in that year of £19.6m. Added together this amounts to £36m or nearly 22% of the councils 2023/24 revenue budget. This is a very significant gap and identifying sufficient interventions to close it will be challenging.

The General Reserve is £8.3m and the ‘Cashflow’ Reserve which is used to give additional financial resilience is estimated to stand at only £8.7m at year end, after it has been used to fund the in-year overspend.

Therefore, the peer team believe SBC does not have the necessary levels of reserves to provide an adequate cushion to resolve these issues.  Reserves available to support the future bottom line are only £17m, less than half of the savings target for 2024/25.

The peer team heard from senior managers that they received strong support from a very knowledgeable finance team. Ownership of service budgets sits within each service and the finance ‘Business Partners’ provide support and advice to aid budget monitoring and decision making. The quality of data provided to service managers is good. There is an ongoing project to improve data quality service by service to support decision making. SBC uses benchmarking data from a variety of sources such as LG Inform and the Office for National Statistics. 

The positive comments about the finance team are in stark contrast to the quality of the published financial reports which the peer team believe do not provide an adequate basis for elected members or the public to understand the position that the council is in. Detailed consideration of the operational and financial pressures are not included. Clarity about whether full year impacts of savings are achievable in the first year would be helpful. The analysis of reserves in the budget reports and the annual Section 25 Statement in particular would benefit from significant improvement to inform leadership and accountability.

The council is aware that the Corporate Risk Register in its current form is inadequate and have planned a review of the council’s approach to risk. It is vital that this review seeks to address a number of issues. The peer team felt that coverage of finance information is inadequate. The detailed text is poor and very generic, and Children’s Services are not flagged despite being a risk to the council’s financial sustainability.

Financial planning at SBC is focused very much on 2024/25 and not the medium term. Even going into 2023/24, the MTFS from February 2023 only covered the period to 2025/26.

Corporately, savings are generally delivered, for example, achievement of £30m savings in 30 months between 2017 and 2019 under ‘The Swindon Programme’. In 2023/24 SBC expects to deliver 83 per cent of savings, £22.4m of £27.2m planned.  Any ongoing shortfall will be built into the 2024/25 budget.  The peer team view is that the council needs to be achieving a higher percentage of required savings and should ensure that all services comply.  SBC should identify what the corporate and financial consequences of non-delivery of savings and non-attainment of budget targets are.  In relation to achievement of savings, the corporate peer challenge report in 2022 stated ‘clear plans and leadership are required to deliver this, along with robust monitoring by both the managerial and political leadership and the council needs to ensure that these are in place’.

There are enormous financial challenges in Children’s Services which is struggling to contain its overspending while at the same time address its Inadequate Ofsted rating. Children’s Services will need to manage their way out of the Inadequate rating and get finances under control simultaneously as doing one without the other will not deliver a resilient and lasting outcome. 

On top of these issues SBC has a Dedicated Schools Grant deficit predicted to be £7.6m at year end and growing annually. At present there is a Statutory Override in place which means that the council does not have to offset this against its reserves. That is currently planned to end in April 2026. The £7.6m is almost equivalent to the entire General Fund Reserve of £8.3m. The council needs to plan to get the DSG back into annual balance and to deal with the deficit at that point. The Statutory Override may be extended but will come to an end at some stage and that must be planned for.

SBC should plan communications and develop a strong narrative around its financial position, including the need for savings and improvement and the Transformation Programme. This will need to include clear information about the impact of savings and address resident expectations about future service levels. 

Socialising this widely with all stakeholders and including members and staff, the public and trades unions, will help to share a wider understanding of the financial situation and therefore the justification for decisions that are made.

It is recognised that senior political and managerial leadership will want to consider, discuss and reflect on these findings. 

Both the peer team and LGA are keen to build on the relationships formed through the peer challenge and further support can be discussed.

In the meantime, Paul Clarke, Principal Adviser for the South West, is the main contact between your council and the Local Government Association. Paul is available to discuss any further support the council requires. [email protected].