The cost of children in care plus adult disability services lie at the heart of Herts County Council’s £20.9million in-year overspend, a meeting of its resources and performance cabinet heard.

The council announced the hole in its finances last week, ahead of the meeting on Thursday, October 3, in which the first quarter report detailing the background to the overspend was discussed.

Scott Walker, head of corporate finance, presented the first quarter report to members and summarised its findings.

The report stated: “In real terms, an early assessment of our current budget position has forecast an overspend of £20.9m for the 2024/25 financial year before any use of the contingency budget.

“This isn’t the result of poor governance or financial mismanagement. Instead, we, like other local authorities, are continuing to see the impact of factors such as increased demand, complexity of need and higher than estimated increases in externally commissioned care.

“The council prudently increased the annual contingency for 2024/25 by £10m to £20m.

"This will offset the majority of the forecasted operational overspend, but the objective at the start of the year was to minimise the use of the second £10m if possible. This could then be made available to reduce any budget gap for 2025/26.”

A breakdown of the budget shows the biggest extra spending occurred in looked-after children (£8.9million) of which £7.1million was spent on placements for children in care, and £1.6million on care for migrant children separated from their parents.

The second biggest overspend was in adult disability services (£7.8million), which was “primarily due to pressures in supported-living services”. A smaller surplus of £1.2million was spent on community protection.

An integrated savings plan of £46.1million is to be delivered in 2024/25, of which 95 to 96 per cent has already been achieved, increasing to £74.1m by 2027/28. This is described as “a very challenging target” by the council, with a number of risks to the delivery of services set to be closely monitored.

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Another key risk is the prospect of increased pay demands from unions, with the council’s pay bill increasing by £3million for every one per cent increase in pay offer.

Mr Walker said: “Our pay forecast in the quarter one report assumes the employees offer [a weighted 4 per cent increase across all staffing] would be accepted. Since this date, there’s been more national press on the likelihood of that being rejected by the unions, so there is a risk that forecast will increase…

“The other risk is sort of linked to the pressures we’re seeing in social care demand… we’ve seen the demand hasn’t dropped in those areas, there is some contingency built into the budget but if the trends continue as they are, there is potential for those forecasts to increase as well.”

Cllr Tim Williams says his main concerns were “the risk factors for the forthcoming year”, citing the dispute with unions over the national pay award, as well as the council’s achieving just 95 to 96 per cent of its planned savings.

Mr Walker said: “So, on the pay awards, obviously the national negotiations which we’re now part of are continuing. Honestly, right now we haven’t had any further update other than they haven’t been accepted, so we haven’t seen the next employees’ offer and what exactly that would look like.”

Describing two “shortfalls” in the saving plan, Mr Walker referred to the intensive foster caring project – an attempt to recruit foster carers on to the council’s payroll rather than paying external providers – which had no recruits at the beginning of the year, but has since had two join up. The other “shortfall” was a planned renovation on a site to house migrant children, which didn’t go ahead.

Cllr Williams then referenced the new Labour government and raised the prospect of receiving an increased core grant in the October 30 budget.

Cllr Bob Deerman, chairman of the committee, said: “Obviously, we do now have a new government and I agree, I’m sure we’re all waiting anxiously to see how much money they will give us in the budget coming up at the end of October.”

The chairman went on to described the situation as “immensely challenging”, adding: “Therefore, we do certainly need more support from central government.”