Agenda item

Purpose of Report

1.    To recommend to Executive the Medium-Term Financial Strategy for the period 2025-2030 and the budget for 2025/26, for referral to Full Council.

2.    To recommend to the Executive the Capital Strategy 2025-2030 for referral to Full Council

Decision

That the Council be recommended to approve the Medium Term Financial Strategy 2025-2030, and the Capital Strategy 2025-2030, which included the following specific elements:

• a proposed council tax Increase of 2.9% for 2025/26;
• the Council being a member of the Lincolnshire Business Rates Pool in 2025/26;
• the General Fund Revenue Forecast 2025/26-2029/30, 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 2025/26-2029/30, 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 2025/26-2029/30, 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 2025/26-2029/30, 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 Medium-Term Financial Strategy (MTFS) needed to be seen in the context of a high level of 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 implementation of a Business Rates Reset, were as yet unknown but all of which had the potential to fundamentally affect the Council’s funding trajectory and MTFS.

In addition, the announcement of the English Devolution White Paper, which set out the Government’s plans to widen and deepen devolution in England and reform local government structures, could have fundamental implications for all tiers of local government.

Furthermore, the Council continued to face cost and demand pressures, along with pressures on income streams and new statutory requirements. Inflation, pay awards, national insurance contribution increases, higher maintenance and construction costs, higher borrowing costs and reductions in local income streams all had a significant impact on the Council’s cost base. The Council also continued to see increased demand for services, by those who relied on the safety net provided by local government, driven in part by the cost-of-living crisis and housing shortfall. In addition, new regulatory and statutory requirements added further cost pressures particularly in relation to recycling and housing standards/building safety.

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

Alongside the financial pressures and funding uncertainty that it was facing, the Council still needed to ensure that its financial resources were directed towards delivery of its vision and priorities. Following the natural conclusion of the Council’s strategic plan, Vision 2025, the new Vision 2030 built upon its progress and presented a roadmap to address today’s most pressing issues while embracing opportunities for the future, progressing a vision for both the City and Council through to 2030. Recognising the potential impacts of national policy changes in a number of areas, alongside devolution and local government reform, the action plans supporting Vision 2030 prioritised its first 12 to 18 months, ensuring adaptability to legislative, policy and economic changes.

The development of Vision 2030 also acknowledged that the Council still had a significant financial savings target to realise over the period of the MTFS, so there did have to be a careful balance between delivering a range of new projects that would make a real difference for the City and the need to keep tight control of the Council’s financial position.

Prior to submission of the MTFS 2025-2030 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 uncertainty the Council faced in its financial planning assumptions and the forthcoming reforms to local authority funding mechanisms, which were likely to result in reduced resources for the Council, 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 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.

Over the last decade and a half, the Council, alongside the majority of other local authorities, had experienced unprecedented financial challenges in various forms. Councils had to adapt to; the impact of severe, unprecedented, central government funding reductions; radical reform of the methodology for funding local government - where Councils were self-sufficient funded from local taxes with limited reliance on Central Government, changes in the use and demand for services; as well as escalating costs. The reform of the methodology of funding local government had in particular transferred a significant amount of financial risk and uncertainty to local authorities, creating a greater degree of uncertainty over the budget planning parameters for the Council than was experienced previously.

Despite the significant reduction in income and increasing expenditure, the Council had, in recent years, been successful in protecting core services most needed by local residents and businesses, while still delivering plans for growth and maintaining a sound financial position. Although, given the scale of the savings delivered, this had required the Council to take some difficult decisions in terms of which services it continued to provide. This was an approach that had served the Council well and allowed savings of nearly £10.5m to be delivered over the last decade and half.

Looking ahead, the financial and operational landscape for local government continued to pose a high level of uncertainty, with a number of significant unknowns in relation to; the level of overall resources for local government following the Spending Review, the distribution of these resources to individual authorities following implementation of local authority funding reforms and the potential for local government re-organisation. 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 sound track record of delivering savings needed to be sustained, whilst ensuring that resources were directed towards its vision and strategic priorities.