Agenda item

Purpose of Report

To update Executive on the latest Medium Term Financial Strategy (MTFS) position for the Council, including the challenges in preparing for the 2025/26 and future years budget, setting out the parameters within which the Council would prepare these budgets and confirmation of 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 Government’s first Budget and Spending Review, which gave rise to specific impacts for local government funding. This, along with cost and demand pressures, and other emerging issues, would inform the development of the MTFS. Further details in respect of key budget assumptions for 2025-30, together with budget and financial planning preparation timetables for 2025/26 were outlined at Appendices A and B of the report.

Decision

1.    That the financial challenges and risks that the Council faced, particularly the uncertainty surrounding future funding levels be noted.

2.    That the projected budget parameters for 2025/26 and future years and note the planning assumptions, as set out in Appendix A be noted.

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

Alternative Options Considered and Rejected

There were significant, unprecedented risks to the Council’s budget strategy, particularly in the short-term as detailed within the officer’s report.

The budget process included the recognition of these risks in determining the 2025/26 budget and MTFS, but it would be imperative that the Council continued to build upon its record of delivering significant savings and maintained a strong financial management discipline in order to ensure a sustainable financial position.

Reason for Decision

The Council’s new emerging Vision 2030 and its five strategic priorities would drive the medium-term financial planning process, with changes in resource allocation determined in accordance with policies and priorities. The MTFS provided the framework for the development of annual budgets in line with the aims of the Council’s strategy and priorities.

The refreshed MTFS would include financial projections for the five-year financial planning period through to 2029/30. 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 Council Tax and Housing Rents for 2025/26.

The refresh of the MTFS needed to be seen in the context of significant financial uncertainty for the Council in relation to future Government funding levels. Significant changes to future public sector departmental spending through the Spending Review 2025, the allocation of this funding to local government through reforms to the distribution methodologies, and the potential implementation of a Business Rates Reset, were as yet all unknown but all of which had the potential to fundamentally affect the Council’s funding trajectory and MTFS

Furthermore, the Council continued to face budget pressures due to changes in the use of, and demand for, services, as well as increased costs and reduced income streams.

As a result of these factors, the Council, and local government as a whole, was yet again having to update their medium-term financial strategies in a very uncertain environment. It was a long time since the Council had any stability and certainty beyond a one-year timeframe, and the development of the latest MTFS looked set to continue this tradition, which made financial planning, and the subsequent impact on service delivery, in this climate extremely challenging.

Against this backdrop of uncertainty, the report sets out the current financial planning assumptions that would form the basis of the MTFS refresh. However, due to the level of uncertainty it was difficult to make a full, definitive and comprehensive assessment of the ongoing financial impact of some of these issues. As such, the figures in this report were based upon best estimates and forecasts and would therefore be subject to change as the budget process developed, and would continue to change into the new financial year. This medium-term financial planning process was though critical to ensuring that the Council had an understanding of the likely level of available resources and the potential costs of delivering services, identifying budget shortfalls at the earliest opportunity to ensure appropriate action could be taken in advance.

Based on the current financial planning assumptions it was estimated that the Council would not need to make any significant increases in the level of savings targets that underpinned the existing MTFS. The assumption that reductions in the annual net cost base of the General Fund of c£1.75m by 2027/28, if it was to remain sustainable in the medium term, would remain. The Council had a strong track record of managing its finances, having delivered annual revenue reductions of over £10.5m over the last 10+ years. But, £1.75m was a significant amount in comparison to the General Fund budget and with each year the challenge got much harder.

Careful and prudent financial management would continue to be required to ensure that the Council maintained a robust and sustainable financial position and was able to respond to the financial risks that it faced. The MTFS needed to remain flexible, the Council’s reserves resilient and the sound track record of delivering savings needed to be sustained, whilst ensuring that resources were directed towards the new Vision 2030.