Decision details

Setting the 2021/22 Budget and Medium-Term Financial Strategy 2022/23 – 2026/27

Decision status: Recommendations Approved (subject to call-in)

Is Key decision?: No

Is subject to call in?: Yes

Purpose:

Executive are asked to;

a) note the significant financial challenges and risks that the Council faces, primarily as a result of the Covid19 pandemic,

b) note the projected budget parameters for 2022/23 and future years and note the planning assumptions, as set out in Appendix A,


Decisions:

Purpose of Report

 

To update the Executive on the latest Medium Term Financial Strategy (MTFS) position for the Council, including the challenges in preparing for the 2022/23 and future years budget, setting out the parameters within which the Council would prepare these budgets and confirm the Council’s approach to development of the budget and Medium Term Financial Strategy.

 

The report included an update on the current economic position and developments in national policy, specifically the high level of uncertainty surrounding local government financing and reforms. This, along with the ongoing implications of the Covid-19 pandemic on demand for Council’s services, escalating cost pressures and reductions in income, would inform the development of the MTFS.

 

Decision

 

1.           That the significant financial challenges and risks that the Council faced, particularly the lack of clarity surrounding future funding reforms be noted.

 

2.           That the projected budget parameters for 2022/23 and future years and the planning assumptions, as set out in Appendix A of the report be noted.

 

3.           That the budget, strategic and service planning preparation programme, set out in Appendix B of the report be noted.

 

Alternative Options Considered and Rejected

 

None.

 

Reason for Decision

 

The Council’s Vision 2025 and five strategic priorities drove the medium-term financial planning process, with changes in resource allocation determined in accordance with policies and priorities. The Medium Term Financial Strategy provided the framework for the development of annual budgets in line with the aims of the Council’s strategy and priorities.

 

In March 2021, Council agreed the budget for 2021/22 and Medium Term Financial Strategy 2021-2026, which recognised that there was a funding gap forecast in 2021/22 and across the remaining years of the Strategy. The MTFS was refreshed annually and rolled forward one year.

 

The refreshed Medium Term Financial Strategy would include financial projections for the five-year financial planning period through to 2026/27. It would set out the financial parameters within which the Council was required to work and the recommended approach to addressing the financial challenges the Council faced to develop a balanced, sustainable budget and set at Council Tax for 2022/23.

 

The refresh of MTFS needed to be seen in the context of significant inherent uncertainty for the Council, with the ongoing impact of the Covid-19 pandemic on income and expenditure assumptions, and a lack of any form of clarity on future funding settlements from government. It was a long time since the Council had any certainty during budget setting and 2022/23 looked set to continue this tradition, which made financial planning in this climate extremely challenging.

 

The Covid-19 pandemic continued to cast a shadow on the Council’s finances with budget pressures arising from demand for services, the availability of goods and services, escalating costs and ongoing, permanent, reductions in income.

 

Alongside these service pressures, the Council continued to face a lack of clear direction over whether and when each of the planned local government finance reforms would be implemented. These reforms, together, had the ability to fundamentally alter the course of the MTFS. Providing certainty on these issues would make a significant difference to the Council’s financial planning and therefore the services it delivered.

 

Against this backdrop of significant uncertainty this report set out the financial planning assumptions that would form the basis of the MTFS refresh.  This medium-term financial planning was critical to ensuring that the Council had an understanding of the likely level of available resources and the potential costs of delivering services and identifying budget shortfalls at the earliest opportunity.

 

The current MTFS 2021-2026 had set out the need for continued reductions to be made in the net cost base of the General Fund.  Based on what was currently known, or could be reasonably assumed, at this stage in the development of the MTFS there was no current need to alter the trajectory of the savings target.

 

This report did however highlight a short-term one-off gain in resources as a direct result of delays in implementation of funding reforms.  This did not however alter the underlying financial position of the Council, there remained a requirement to deliver the significant level of reductions in the net cost base if the Council was to remain sustainable in the medium term.  The Council’s overriding financial strategy should continue to be, to drive down its net cost base to ensure it maintained a sustainable financial position.

 

Now more than ever, careful financial management was required to ensure that the Council was able to carefully balance the reductions required in the net cost base, ensuring it remained in a sustainable financial position, whilst driving forward its Vision 2025.

Report author: Jaclyn Gibson

Publication date: 25/11/2021

Date of decision: 22/11/2021

Decided at meeting: 22/11/2021 - Executive

Date comes into force if not called in: 03/12/2021

Call-in deadline date: 02/12/2021

Current call-in Count: 0

Accompanying Documents: