Financial Leadership

Financial leadership is a recognised strength of Bexley’s. The S151 officer (most senior finance officer) feels strongly supported by CLT colleagues and Members. The statutory officers (Head of Paid Service, Monitoring Officer and S151 officer) work well together. The Council will need to allow time for the newly appointed S151 Officer to make the role his own. The Leader, Cabinet and the opposition have a strong financial understanding. The Leader expects budget ownership and accountability.

The Council have established a Transformation Programme currently under the leadership of an interim Director. The Council will need to prioritise; the programme will demand time and capacity. The Council will also need to be clear about the skills required for the future, having a clear workforce plan setting out how the change is embedded. The peer challenge team are of the view that the finance team need to be fully embedded in the transformation programme, especially the business case development process.

Budget managers report a supportive and valued relationship with finance staff, working together to better align activity and cost information.

Financial strategy, planning & forecasting

The peer challenge team reviewed the Council’s budget, budget documents, audit, and financial monitoring information. The Council has a comprehensive MTFS containing a range of assumptions which is regularly updated. The MTFS is reporting a gap of £4.8m in 2025/26 rising to £43.9m in 2028/29. The reported gap from 2026/27 assumes the reduced level of Council Tax increase, no Adult Social Care precept and the discontinuation of a number of grants (as these have not been announced by the Government). Further work is required to identify and close the consequent gap. Funding risks are clearly identified. For example, 55 per cent of council expenditure is on external supplies, leading to contract inflation estimated to be £5.045m in 2025/26, rising to £18.714m by 2028/29, equating to circa 2.6 per cent of forecast expenditure on supplies, services and third-party expenditure.

The link between the asset management plan and the capital programme planning and resource allocation is not clear. This should form part of the MTFS refresh.

Subject to the spending review changes for 2026/27, the Council has a short period in which to stabilise spending before it can then plan to start replenishing General Fund Reserves. Un-ringfenced reserves as a percentage of net revenue expenditure are amongst the lowest of all London boroughs. The Council recognises it has a relatively low level of General Fund reserves, even though these have been increased from previous years, which necessitates the transformation programme being successful. The Council has proposed £0.5m is added to reserves from 2026/27 onwards.

There is a perception that the Transformation Programme is the answer to achieving financial sustainability However, the transformation benefits (as currently identified) are realised, the MTFS remains unbalanced. The peer team believes that the Council needs to work at pace to identify options to close the budget gap. There are no additional savings plans agreed and in place. Plans to deliver the savings targets should be prepared, approved, and monitored on a monthly basis, with clear actions and accountabilities assigned. This will help the Council to deliver the savings that are needed to put the Council on a sustainable financial footing.

As the Council refreshes the Corporate Plan, it needs to ensure that the MTFS is clearly linked to the corporate plan. The Council also needs clarity on the final operating model. In the peer team’s view, the Council needs to keep alive the longer- term strategic opportunities, whilst also focusing on the medium-term financial challenges.

The Council should consider the impact of significant recent demographic changes on its priorities, and the consequent customer service and financial implications of these.

Decision making

Cabinet Members are very engaged in the delivery of their Council plans and have a clear understanding of their individual portfolio budgets and are accountable to an effective scrutiny system. However, more needs to be done to support Members to ensure a collective understanding of the whole budget and especially in relation to their role as corporate parents. Reports for decision have a good level of information with the financial implications section clearly stated.

The Peer Team was advised that a Cabinet Member sits on the Committee due to the function of the General Purposes Committee. However, the peer team are of the view that consideration should be given to the membership of the Audit and General Purposes Committee to ensure it maintains the distinction between executive and independent scrutiny functions.

The peer challenge team saw evidence that the Council’s financial controls are showing signs of improvement through the introduction of financial control and spending panels. Whilst being effective, these are felt to be overly bureaucratic. The Council should consider reviewing these to create capacity for teams to also engage with the change agenda. If this does not happen, the risk is that the pressures of delivering business as usual activities, will leave no capacity to manage a successful change agenda.

Although the Transformation programme has a clearly stated risk register, the Council's corporate risk register needs updating and linking to the corporate plan (as it is being refreshed).

Financial outcomes

The peer challenge team noted that the transformation programme has just been established. The achievement of the programme deliverables will be a key part of ensuring the Council's financial sustainability.

The MTFS gap is acknowledged to be greater than the transformation programme target for savings. The transformation programme business cases setting out the financial targets need to be verified as a priority. Addressing the Council's culture is a key theme in the transformation programme. The Peer challenge team found that financial accountability needs to be embedded further in the organisation culture to ensure budget ownership and more accurate forecasting. Across the Council there is a growing challenge of budget overspending, despite additional annual budget allocations.

The peer challenge team reviewed the Council’s overspends and reserve position. The Council is reliant on reserves for this year’s overspend (the overspend of £4.134m, post mitigations). This overspend is proposed to be funded from the Financial Planning Reserve (which will be fully utilised). The Collection Fund reserve is due to be used for next year's gap. Furthermore, transformation delivery may not be sustainable. Overall, this presents significant risks for the council.

The Council has recognised that there are issues with council tax and business rate collection, which if not addressed will lead to bad debt charges to the accounts.

The peer challenge team reviewed audit reports and interviewed the external auditors. The audit process has been difficult. Preparing the statutory accounts is a complex task dependent upon a number of detailed transactions and the reconciliation of data held in different systems. The Council has been able to produce the annual accounts within agreed timelines, but the external auditor (Ernst & Young) has not completed their work, resulting in a disclaimed opinion not of the council’s making. The lack of audit ‘sign off’ of the statutory accounts for 2022/23 and the resultant disclaimed opinion for the accounts is a cause of concern amongst finance staff.

Partnership and Innovation

The Council has a wholly owned Local Authority Trading Company (LATCO) set up in 2017 to create new homes and return profit to the Council. In 2022 a £1.5m dividend was paid to Bexley. The Business Plan was revised in October 2024 to accelerate development to deliver 450 homes over the next four years and pay dividends from 2028/29. No estimates for future dividends were factored into the MTFS.

The Council needs to work with the LATCO to ensure it benefits from investment returns.

The transformation programme provides an opportunity to strengthen the sharing of learning and to effectively manage contracts, thereby bringing some degree of financial certainty over the long term. The peer challenge team reviewed the current governance and project management arrangements and noted that there is a need for strong governance arrangements to be in place. Bexley is a lean organisation (spending per head of population is below the London average) but has committed to a budget of £0.850m to fund the transformation work. There needs to be a clear link between programme costs and benefit realisation, demonstrating value for money.

The S151 Officer has recognised the need to improve contract management arrangements. This needs corporate ownership, and commissioning needs to be resourced effectively to secure a one council perspective and improved outcomes.

From the interviews undertaken the Peer Team concluded that here is a varied picture of partnership working across the Council. The Team was unable to test this with partners as the Peer Team did not meet any partners during the review process.

The peer challenge team are of the view that the Council needs to work at pace to deliver the innovation through the transformation programme.

Children's Services and Children's finances

The Safety Valve work and arrival of a new deputy director in social care has shifted the previous culture to one of operational rigour around budget management. This has been welcomed by staff and has been used to deliver better outcomes for children. There is now a strong operational understanding of the importance of financial rigour within Children's Services and emerging good practice in this regard, which still needs to be developed further. The peer challenge team believes that the Transformation Programme needs to work closely with the service to develop a robust business case for the workstream. There are systems and processes in place within the service to change culture, but it is recognised that it will not change overnight. Those in operational leadership have a clear insight into the transformational needs of the service, but the current council culture does not support the children's reform journey. This needs urgent attention.

Staff recognise and welcome the energy and pace brought by the new deputy director. The deputy directors need to be empowered to deliver service reform.

The peer challenge team found that CLT could have a better understanding of their collective role as champions for children in Bexley, and in doing so, they would better support their Cabinet Members to fulfil their roles.

The peer team found that there is real strength in operational leadership but the culture within the directorate needs to change to allow this to flourish. So that together with the corporate leadership, it can lead the organisation in preparation for the requirements of the Children's Wellbeing and Schools Bill introduced in December 2024. This bill sets out the most significant reforms for the children's sector in 25 years. The bill presents an opportunity if managed correctly, and conversely a considerable risk if it is not. The operational strength of the service is a good indicator for future change, but there needs to be recognition of the significant burden the service carries. In the peer team’s view, Children’s Services must be at the forefront of the transformation programme with the outcomes supported by the culture work.

The peer challenge team found that the service feels disconnected; there is no sense of "one council". Demand pressures have resulted in significant overspends in the service (29.9 per cent in 2023/24 and a forecast 9.7 per cent in 2024/25), which has tended to add to the feeling of “it’s all our fault”. The peer challenge team heard that relationships are changing, but it is hard work. The staff currently feel a lack of connection to both an overall council vision, and a vision for Children's Services. The staff in the service are very open to change and would welcome an ambitious vision for the service. The vision for the service and the children of Bexley, needs to be redefined, re-energised and clearly articulated to staff and residents.

The relationship between the Children's Services directorate and financial management support team has been challenging, this is now starting to improve.

The peer challenge team reviewed the documentation provided by the council and were not able to identify a comprehensive financial sustainability plan, however there is a series of mitigations in place that are being managed which support the MTFS. There currently appears to be no clear link between outcomes and financial sustainability.

The SEND Safety Valve agreement commits Bexley to:

• delivering additional early intervention measures to address needs before they escalate

• continue to expand local special school provision to reduce reliance on out of borough and independent sector placements

• continue to promote an inclusive approach within mainstream schools.

The plan envisages that Bexley will eliminate the accumulated deficit on the Dedicated School Grant (DSG) by March 2029. The Council’s latest budget monitoring report indicates an overall overspend for 2024/25 of £4.557m, the accumulated deficit on 31 March 2025 will be £11.513m, compared to an assumed deficit in Safety Valve of £7.641m. The SEND safety valve agreed deliverables are not yet on track, but hard work is being done on the agreed changes, and they are starting to have an impact.

There is an enthusiasm amongst the staff to implement service reform and they recognise there is work to be done in managing demand, both in terms of service design and structure and a one council approach. For example, integrating the care leaver package needs with housing.

The peer challenge team believes that the service needs to ensure that the right skillset and capacity exist within the service, to effectively drive and deliver transformation and reform.