Agenda item

Report from the Strategic Director of Finance and Customer Services.

Recommendations:

1. That Cabinet note the Medium Term Financial Strategy 2025/26 to 2028/29 update.

Consideration was given to the report which set out an update of the Council’s Budget and Medium Term Financial Strategy (MTFS) to 2028/29, including the standard technical updates required, recognition of financial pressures impacting the delivery of services and the ongoing impact on the Council’s base costs of inflation.

The technical adjustments also included the Council’s assessment of the potential impact of the Government’s Fair Funding Review 2.0 (FFR) which looked to make a significant change to the way Local Authority funding was distributed. The FFR 2.0 would provide a significant change in the formulas used for funding distribution as it looked to direct more funding to areas of greater need. To manage the impact on the Local Authorities that would see reduced resources as a result of the new methodology, there was a tapering of the impact over 3 years. However, the Council still estimated a positive impact that would see a £20m increase it its base funding by the end of the spending review period 2026/27 to 2028/29. It was expected that the Government’s Budget on the 26 November 2025 will provide further clarity about the impact of the FFR 2.0.

The MTFS position could change as the Council gained greater clarity on the impact of the FFR 2.0, the Government’s Budget and the impact of management actions taken to ensure that the 2025/26 financial outturn was balanced by year end. The FFR 2.0 was the biggest change in the approach to Local Authority funding methods for many years and as such it presented a degree of uncertainty. The Government’s Budget and outcome of the FFR 2.0 consultation would help, but none of these would provide a definitive outcome for the Council. The Provisional Financial Settlement was set to be released in mid to late December 2025; until then the Council would not have specific

allocations.

The current MTFS forecasts presented small surpluses ahead of a large budget gap in 2028/29. The Council would need to utilise its positive short term position to plan for the 2028/29 challenge. As this pressure was far enough into the future, it would not necessarily be required to be resolved as part of setting the 2026/27 Budget.

The report was considered by the Overview and Scrutiny Management Board (OSMB) who advised that the recommendations be supported. Discussions at OSMB had focussed on the Children and Young People’s Services overspends, the winding-up order made against Specialty Steel (the Council’s single biggest rate payer at £2.8m a year) and the South Yorkshire Pensions revaluation process.

Resolved:

1.    That Cabinet note the Medium Term Financial Strategy 2025/26 to 2028/29 update.