Agenda item

Report from the Strategic Director for Finance and Customer Services.

Recommendations:

1.    That the MTFS update be noted.

2.    That Cabinet note the potential requirement to use reserves in order to balance the Council’s outturn position for 2023/24.

The Council’s Medium Term Financial Strategy (MTFS) 2023/24 through to 2025/26 was approved at Council in March 2023. Since approval of the MTFS there had been continuing financial challenges as a result of global factors, with inflation remaining high and impacting costs, in particular impacting food prices and the costs of materials/goods and so impacting repairs, maintenance and transport costs. Although inflation had been reducing during the year it had not been at the pace projected in the Council’s MTFS that mirrored Governments and the Bank of England assumptions. In addition, the Local Government Association (LGA) Pay Award for 2023/24 was agreed on 1 November 2023. The impact of this pay offer was estimated to be £4m above the position built into the Council’s Budget for 2023/24 and would be funded during 2023/24 through temporary savings from Treasury Management factored into Central Services. The ongoing impact would be factored into the Council’s Medium Term Financial Strategy.

This update of the MTFS included resource forecasts based on estimated increases to core funding streams that were inflated annually by CPI. These resource assumptions would be reviewed again when the Provisional Local Finance Settlement 2024/25 was released in December 2023, which would set out the specific amounts of Government funding to be provided to the Council or should Government make any clear announcements before then. Government could clarify their expectations for inflating core funding streams in their announcement on the 22 November 2023.

This update of the MTFS also included the Council’s latest financial assumptions, taking into account estimated income from Business Rates and Council Tax, impact of inflation on service cost and demand pressures and the Council’s timeline for the delivery of agreed savings across the MTFS. This update would support and inform the detailed budget setting process for 2024/25, alongside taking into account the outcomes of the Finance Settlement and Members’ policy choices and decisions on Council Tax levels.

The current MTFS forecasts identified that the Council was able to provide a balanced budget for 2024/25 but faced a significant financial challenge in setting a balanced budget for 2025/26. Therefore, it was expected that additional use of reserves would be required for 2023/24 and likely for 2025/26. This position was subject to review when the Finance Settlement for 2024/25 was received. The key challenge for 2025/26 was that there was significant uncertainty as to how Governments Financial Settlement for 2025/26 would look, as Government were only releasing single year Financial Settlements and where there were multiple year grants, they only run up until 2025/26. In addition, there was due to be national Government elections prior to the 2025/26 financial year.

Paragraph 2.6 of the report set out the financial challenges that had been identified and would need to be considered as part of the Council’s Budget and MTFS setting process for 2024/25. These were:

·       Placement pressures within Children and Young People’s Services and Adults Social Care.

·       Home to School Transport pressures within Regeneration and Environment and Children and Young People’s Services.

·       Inflationary costs impacting the cost of food in Schools Catering and contractual and provider inflation impacting Children and Young People’s Services.

The report was considered by the Overview and Scrutiny Management Board (OSMB), who advised that the recommendations be supported. They also requested that an all Member Seminar on Council Finances including Treasury Management and Investments be arranged. This request was supported by Cabinet.

Resolved:-

1.    That the Medium Term Financial Strategy update be noted.

2.    That Cabinet note the potential requirement to use reserves in order to balance the Council’s outturn position for 2023/24.

3.    That an all Member Seminar on Council Finances including Treasury Management and Investments be arranged.