Agenda item

Purpose of Report

To consider recommending the Medium-Term Financial Strategy for the period 2024-2029 and the budget for 2024/25 to the Council for approval.

To consider recommending the Capital Strategy 2024-2029 to the Council for approval.

Decision

That the Council be recommended to approve the Medium Term Financial Strategy 2024-2029, and the Capital Strategy 2024-2029, which included the following specific elements:

• a proposed council tax Increase of 2.92% for 2024/25;
• the Council being a member of the Lincolnshire Business Rates Pool in 2024/25;
• the General Fund Revenue Forecast 2024/25-2028/29, as shown in Appendix 1 and the main basis on which this budget had been calculated (as set out in paragraph 4);
• the Housing Revenue Account Forecast 2024/25-2028/29, as shown in Appendix 2 and the main basis on which this budget had been calculated (as set out in paragraph 5);
• the General Investment Programme 2024/25-2028/29, as shown in Appendix 3, and the main basis on which the programme had been calculated (as set out in paragraph 6).
• The Housing Investment Programme 2024/25-2028/29, as shown in Appendix 4, and the main basis on which the programme had been calculated (as set out in paragraph 7).

Alternative Options Considered and Rejected

None.

Reasons for the Decision

The refresh of the MTFS needed to be seen in the context of significant financial uncertainty for the Council. Exceptional economic factors such as; the impact of inflation on the Council’s pay bill and the cost of goods and services it purchased; rising interest rates increasing the cost of borrowing; increased costs of construction impacting on capital schemes; and reductions in service income and collection rates, continued to add considerable cost pressures to the Council’s budgets

In addition, the Council was facing growing demands for some of its key services as those more vulnerable in the city looked to the council for support as the cost-of-living crisis continued to impact on household incomes. The imbalance between housing supply and demand and the reliance on temporary accommodation, to provide the necessary support, were of particular challenge to the Council.

Alongside these cost and demand pressures, there still remained uncertainty around the level of funding for local government beyond the current Spending Review period and the implementation of the planned national funding reforms. These reforms had the ability to fundamentally alter the course of the MTFS. Although it had been confirmed that these fundamental reforms would not be implemented in 2024/25, and there was a high likelihood that this would be the case in 2025/26 as well, all this did was shift the financial challenges to later in the MTFS period. This was further compounded by the risk of a new round of public expenditure austerity measures. The funding outlook for local authorities therefore remained uncertain.

As a result of these factors, the financial landscape for local government continued to pose a challenge to the Council and was set in the context of this significant, inherent uncertainty. It was a long time since the Council had any medium-term certainty during budget setting, which made financial planning in this climate extremely challenging.

The Council would continue to build on its successful financial planning to date, driving down the net cost of services by implementing a range of transformational changes in the way in which it operated and delivered services, while continuing to prioritise investment in the City and its economy to grow future tax bases. Adopting this approach would ensure that the Council carefully balanced the allocation of resources to its vision and strategic priorities, whilst ensuring it maintained a sustainable financial position and delivered the required reductions in its net cost base.

Prior to submission of the MTFS 2024-2029 and budget to the Executive and Full Council, public consultation and member scrutiny had been undertaken.

The MTFS set out the overall framework on which the Council planned and managed its financial resources to ensure that they fitted with, and supported, the direction of the Council’s vision and strategic priorities.

The MTFS integrated revenue allocations, savings targets and capital investment, provided the budget for the next financial year and provided indicative budgets and future council tax and housing rent levels for the period covered by the strategy.

In light of the current economic conditions and the impact these were having on the Council’s finances, along with the inherent uncertainty in financial planning, the existing objectives of the MTFS had been reviewed to ensure they remained relevant. As a result, the key overriding objective continued to be;

·         To drive down the Council’s net cost base, in line with available resources, to ensure that it maintained a sound and sustainable financial base, delivering a balanced budget over the life of the MTFS;

The further objectives that the MTFS sought to achieve were detailed within the officer’s report.

Looking ahead the financial landscape for local government continued to pose a high level of uncertainty, with a number of unknowns in relation to both national and local economic factors. Layered on top of this was the lack of clarity on further government funding reforms, and the level of overall resources for local government beyond the current Spending Review period. Therefore, in order to ensure that the Council maintained a robust and sustainable financial position and was able to respond to the impact of external events and increased financial risks that it faced, the MTFS needed to remain flexible, the council’s reserves resilient and the soundtrack record of delivering savings needed to be sustained, whilst ensuring that resources were directed towards its vision and strategic priorities.