More financial gloom on horizon for West Berkshire Council as auditors KPMG warn of ‘significant weaknesses’

West Berkshire Council’s finances have been described as having “significant weaknesses” by auditor KPMG.

In its annual report, KPMG says the council now has some of the lowest reserves in the country, according to government statistics.

The council’s financial woes are compounded by a projected £5.5m overspend in the first quarter of 2025.

The council acknowledges that it is in a difficult financial position but it will continue in the medium term without external financial intervention.

"Our opinion is that the council does not have appropriate arrangements in place,” says KPMG.

“We identified significant weaknesses in respect of arrangements to secure economy, efficiency, and effectiveness in the use of resources in relation to financial sustainability.”

The council is undertaking a transformation programme over a number of years to increase financial resilience, however national pressures in areas such as adult social care continue to impact its budgeted savings.

“Additional review confirms that many of the core pressures on the council’s budget are familiar to all unitary councils in the national context,” adds KPMG.

“It also suggests that current savings and transformation plans may be insufficient in the short term.

“Although the plans in place are showing results in individual directorates in the specific areas they are targeted, it likely requires a larger, more ambitious plan.”

Despite the financial outlook, the council continues to deliver ‘Good’ services according to the most recent reports from regulators.

Over recent years, councils have been expected to do more with less.

Central government grants have been reduced, and the nature of central government support has become more uncertain in timing and amount.

This has caused councils to cut services and change the way that services are delivered in order to remain financially viable.

The audit says the council set a balanced budget for the 2023/24 financial year, including total assumed savings of £9m (£5.3m required in 2022/23 with 77 per cent achieved).

But the 2023/24 Quarter 4 Performance Report states that just 56 per cent of the total identified savings were achieved, with a provisional overspend of £3.1m.

“The authority does not have significant reserves to draw from and this reduced the General Fund balance to £4.1m (excluding earmarked reserves),” says the auditor. “This compares unfavourably to other authorities.”

The total General Fund for the year saw another year-on-year decrease, leaving a balance of £7.6m (£11.5m 2022/23). This includes £3.5m of earmarked reserves, excluding schools.

The primary driver was a large overspend of £8.9m in the people directorate, where adult social care and children services overspent by £2.2m and £3.9m respectively, echoing trends seen nationally where spend has expanded beyond budgeted expectations in recent years.

The balance on the General Fund at the end of 2023/24 is on the limit of the £7m deemed prudent by the authority

Last year, the council set a capital development programme totalling £71m.

It slowed progress on projects to show an underspend of £23m. This is due to projects and recruitment being slowed to generate savings.

The council spent cash on an upgraded lido facility at Northcroft Leisure Centre, purchased 18 properties and redeveloped a former council office into accommodation.

And £20.7m was also spend on infrastructure improvement, including at Newbury rail station.

The council has a high reliance on council tax, which it historically increased by less than the maximum amount in previous years.

Coupled with lower reserves to rely on, national pressures have hit the council quicker than some others and have overwhelmed its saving plans.

The key area of overspend in 2023/24 relate to children and family services (children’s £3.9m) and education (£2.9m).

This is consistent with the national picture. Children’s issues can be traced to increasing demand for residential placements that are expensive, alongside difficulty with recruitment and therefore some reliance on agency staff. The latter has halved in the following period.

Education overspend is largely due to SEND and the national shortage of specialist school provision, as well as increasing home school transport costs as the council funds placements increasingly distant from the need.

The 2024/25 Quarter 1 Performance Report suggests an overspend of £5.5m.

It states: “If this was to be the final outturn position then…a section 114 notice would need to be issued or a capitalisation directive sought.”

Council senior management acknowledge and are transparent in their reporting about the scale of the challenge.

Once a finance officer issues a section 114 notice, the authority may not incur new spending unless the finance officer permits it to do so. After that, council leadership must meet within 21 days to discuss how to bring their expenditure in line with funding.

With the council’s revenue highly geared towards council tax and business rates, there is limited scope for significant short-term increases.

That said, it is anticipated that 400 to 500 houses planned in the area per annum will increase revenues by £2.5m to £3m without any significant change in the council’s current operations.