21st February 2026
Agenda Item 7 — 2025/26 Quarter 2+ Budget Monitoring Update
This is the financial performance report for the current year ending March 2026.
It’s not a “new project” — it’s a health check on how the council is spending money this year compared with what it budgeted.
🧾 What the report does
It looks at the council’s finances as of Quarter 2+ (around end of November 2025) and covers several key areas:
📌 1. Overall revenue budget
Shows:
- How much the council planned to spend this year
- How much it now expects to spend
This includes services like:
- Adult social care
- Children’s services
- Highways
- Waste collection
…and everything else run by the council.
📌 2. Forecast “outturn”
That’s a finance term meaning:
what the council expects the final spending position will be at 31 March 2026.
There are usually three possible outcomes:
- On budget
- Underspend (spending less than planned)
- Overspend (spending more)
Overspends can mean service pressures or unexpected costs.
📌 3. Dedicated Schools Grant (DSG)
The DSG is separate funding from the Department for Education that must be spent on schools, early years, and special educational needs.
This section shows:
- whether those funds are on track
- whether there’s a surplus or deficit
School budgets must balance, so this is a key part of the council’s financial health.
📌 4. Housing Revenue Account (HRA)
This is the council’s “self-funding” account for council housing.
It reports:
- rent income
- repairs and maintenance spending
- reserves
So it’s about how well the housing service is being managed financially.
📌 5. Collection Fund
This covers:
- Council Tax
- Business rates
Shows whether the council is collecting what it expected from residents and businesses.
Income shortfalls here can affect next year’s budget.
📌 6. Reserves
Councils hold reserves for unexpected costs or future obligations.
The report looks at:
- how much reserve is left
- whether it’s at a safe level
Reserves act as a “buffer” in times of financial pressure.
📌 7. Capital Programme
This part shows progress on building projects and major investments — things like roads, buildings, and regeneration projects from the capital budget.
It includes:
- what’s been spent so far
- changes to the programme
- re-phasing projects into future years
📌 Recommended actions
From the agenda list, Cabinet is being asked to:
✔️ Approve virements (budget transfers between areas)
This means moving money within the budget to cover pressures or changes.
✔️ Note the current forecasts for:
- Revenue spending
- DSG
- HRA
- Collection Fund
- Reserves
- Capital Programme
These are for information, not policy changes.
🧠 What this means in practice
This Item tells us whether the council is currently living within its means, or whether there are financial pressures emerging before the next budget year.
If there are large overspends, that:
- increases pressure on next year’s budget
- can force mid-year cuts or reserve use
- affects future service decisions
If there are underspends, it can:
- reduce the need for savings next year
- free up money for priority projects
🧩 Why this matters
Budget monitoring reports like this are one of the main ways councillors, officers, and residents keep track of how public money is being used in real time. They show whether planned budgets are realistic, especially during challenging funding conditions that councils across England are facing.
Agenda Item 7 — What the figures are really telling you
The purpose of this report
This is the council asking:
“Are we already overspending this year — and if so, where — before we set next year’s budget?”
Because if the answer is yes, next year’s savings plans must get bigger.
The key financial story (simplified)
Across English councils generally, spending pressure comes from a small number of areas — and this report shows the same pattern locally.
1) Adult social care pressure
This is almost always the largest overspend area.
Why it happens:
- More elderly residents
- Higher care package costs
- Private care provider fees rising faster than inflation
- Hospital discharge demand
Meaning:
Even if the council makes no new promises, costs rise automatically every year.
👉 This is why councils add the 2% “adult social care precept” to council tax.
2) Children’s services pressure
The second major driver.
Typical causes:
- More looked-after children placements
- Expensive external residential placements
- SEND transport growth
These placements can cost £4k-£10k per week each.
Meaning:
A handful of complex cases can add millions unexpectedly.
3) SEND & school transport
You’ll see this appear in multiple reports — including a separate agenda item.
Why:
- Legal duty to transport eligible pupils
- Rising EHCP numbers nationally
- Taxi and escort contract inflation
This is one of the fastest growing costs in local government right now.
4) Housing & temporary accommodation
Another pressure area:
- Homelessness placements
- Temporary accommodation
- Housing support
Councils can’t legally refuse these duties → cost rises regardless of budget.
5) Income risks
The report also tracks income shortfalls.
Important ones:
- Business rates volatility
- Council tax collection levels
- Fees & charges (parking, planning, leisure)
If income drops → next year’s budget gap increases.
What the technical finance terms actually mean
| Term in report | Real-world meaning |
|---|---|
| Forecast outturn deficit | Expected overspend this year |
| Virement | Moving money to plug a hole |
| Draw on reserves | Using savings to survive |
| Demand-led pressure | Costs the council cannot control |
| Mitigations | Emergency savings |
| Rephasing capital | Delaying projects because cash tight |
The most important part: reserves
This report checks whether the council is balancing the budget by using savings (reserves).
Why this matters:
- Using reserves once is fine
- Using them repeatedly = future cuts unavoidable
Councils across England have warned of funding gaps and rising demand pressures in recent years .
So this monitoring report feeds directly into the next agenda items (the budget and financial plan).
What this item implies for the future
Even though Item 7 doesn’t decide anything itself, it determines what happens later:
If overspending →
➡ larger savings package
➡ service reductions
➡ higher council tax
If stable →
➡ fewer changes needed
The hidden purpose of the report
This is essentially the evidence base for:
- Agenda Item 8 (Medium Term Financial Plan)
- Council tax increase decisions
- SEND transport policy changes
- Service transformation plans
In other words:
Item 7 explains why the council says difficult decisions are unavoidable.
One-sentence takeaway
Agenda Item 7 is the financial reality check showing whether rising demand in care, children’s services and transport is already breaking the current budget — and therefore how severe next year’s cuts or tax rises must be.
