As we reported in August, Cheshire East Council have had to take urgent action to address a half year projected overspend of £13.6m.
I caught up with Councillor Frank Keegan, Resources Portfolio Holder, recently to find out more about his role and the budget pressures.
Tell me a bit about your professional background.
I spent 9 years in Malawi as an accountant and auditor and as an UN ILO adviser in Accounting Education in Southern Africa. I ran the Blantyre leg of the Malawi College of Accountancy.
Then from 1985 till the early noughties, I worked as a management consultant. In the UK as a change specialist, in Europe, then in the USA and in Kazakstan for the World Bank. I was there before Borat!
Part of the UK role was delivering change in the public sector, cost reductions, and that part lasted 6 years. Other consultancy roles included a Lloyds of London syndicate whereby I commuted to London daily for over a year.
From 1985 – 2001 my role was very much stripping costs out of businesses which was ideal preparation for local government reform and Cheshire East.
I moved to Alderley Edge in 1984 have been a Parish Councillor since 1987 and Chairman six times to date. I was a Borough Councillor from 1999 till 2009 and joined the Cabinet in Macclesfield Borough Council in 2004 with the Environment Portfolio. I took the Finance Portfolio in 2006 and in 2008 became Leader of Macclesfield Borough Council. I was then elected to Cheshire East Shadow Council in 2008 and became Cabinet Member for Resources, covering Finance, HR, Legal and IT.
What do you you consider to be some of your greatest achievements?
My background is cost reduction in business and in Cheshire East we have saved £40m in the first 2 years. We have a challenging target of £30m in 2010/2011 and I expect to be able to do that. £70m in 3 years is special!
I have located a data centre in Macclesfield for Cheshire East so that will form the springboard in Cheshire East for the knowledge economy, with many small businesses trading from rural parts, a strong IT hub will deliver great services for the public sector, including the remains of the PCT. Macclesfield will also become the centre for CCTV in Cheshire East.
Tell me about the projected overspend at half year.
The half year projected overspend was £13.6m with a contingency of £1.6m. This does not mean a loss of £13.6m at the half year, but it does mean that if spending continues at this rate, we will be overspent by £13.6m at the full year.
A report to the Cabinet on 20th September reported that the deficit had been reduced to £7.4m with a contingency of £1.6m so the annual overspend is projected to be £5.8m.
We continue to bear down on costs, and we are working to a balanced account against budget. We had similar issues last year and we finished the year within £200,000 of the original budget, which in a £700m budget is good work considering it was our formation year.
What are the reasons for the projected budget overspend this year?
The major pressures on all local authorities are "people" related. In our Children and Families Service there are various components; firstly, a growth in the number of looked after children which means children in care. The Baby P case has put pressure on social services and we have experienced an increase in children referred to care.
Secondly, the complexity of the cases referred is growing and with the complexity growth is a growing cost per case. Thirdly, the breakdown in families means that more children (the definition is up to 19 years old) are now turning to the Local Authority for care rather than the family home. The increased costs must be met; the Council is the carer of last resort and we take our responsibility seriously.
In our Adult Services, we are going through a transformation process whereby we have day centres and we are encouraging personalisation. The budgets are given to individuals, and yet we still need day centres for people. If we had 30 people in a centre, and 10 take a personalisation budget, the remaining 20 people need a centre. Ultimately we can rationalise the number of day centres, but closures will have to always be historic rather than in advance. Therefore our costs may be too high for a period, but the welfare of the remaining citizens has to be paramount.
Also, in former times, pensioners were self sufficient when they had savings and relied on an annual interest payment. Recently, interest rates have been very low, people have lived off capital and eaten into their capital and that has brought more people into the council's care regime because they now qualify.
So people costs are the main pressures on our budget and that will always be the case.
What remedial action has the Council taken to reduce the projected overspend?
The remedial action taken by the Council has reduced the projected overspend by £6.2m. The component parts of that were not filling vacant posts, and cutting consumable costs. Actions such as these will be continued until the end of the year.
Do you think Cheshire East will be able to reduce the projected overspend further this year or do you expect to carry a £5.8m overspend over to next year?
If we do not clear the overspend this year, then it will carry forward and add to the pressures of next year.
What are the pressures of setting the budget for next year?
The challenge for next year is a cut of £30m, and this is a daunting prospect in a net base budget of £220m. It is 14% in one year, and yet the Chancellor is advocating 25% over 4 years.
The £30m is achievable but it will require thinking outside the box, the future is bright if we can take decisive actions this year. We have a glorious opportunity now to get our balance, and really build firm foundations for the future. Remember we are only in our second year as a Council, and much of the first year was relocating from Chester to Cheshire East. All things considered the Council has achieved wonderful results in caring for our community.
We will be consulting on our budget in November 2010 and when we do that I will set out the broad budget headings and invite comments and preferences. Our preference will be to protect the vulnerable and to only carry on with services which are required by the public.
We have a gross budget of £700m and the broad split of that is: 25% staff costs, 50% grant funded adult and children costs (including schools grants) and 25% other costs (including contract costs).
In procurement terms we have a potential control of £175m, 25% of £700m. However we have contracts to which we are committed, such as:
- Transport including concessionary fares, rural transport, adults and children
- Highways waste collection and disposal
- Fuel/energy charges
- Care contracts nursing homes
- Childrens' social care costs
- Essential maintenance of property
- Sundry contracts
That leaves us with a potential procurement pot of around £50m which is not defined by contracted costs, and setting a 5% annual reduction is a target of £2.5m.
If £2.5m is going to be cut from the procurement pot next year where do you see the potential for cutting the other £27.5m?
We are in the middle of working it out, I am holding a challenge session this morning. Then a session on Monday morning, then Monday afternoon. Then on Tuesday, the Cabinet and the officers are off to an away day. We will look at the outcome of all the sessions I have done and we will look at the shape we want for Cheshire East. Services will have offered savings, and then we, as Cabinet, will decide if the offer is a politically acceptable offer.
When Tuesday is over, we will have worked out how we are going to save £30m next year. In all probability, the Tuesday will point us at different workstreams to go away and clarify and the deadline will be the end of October. We are consulting on the budget in November, and we will take as long as we need to shape the consultation so that we are satisfied that the budget put forward will be the best we can offer the electorate of Cheshire East.
I am off to London on 22nd October with Cllr Fitzgerald, Leader of the Council, to have a meeting with the Conservatives in Government and with information from the Treasury we hope to understand after that what the size of the challenge is for next year.
