Medium Term Financial Strategy (MTFS) 2024/25 - 2028/29

The Medium-Term Financial Strategy (MTFS) includes financial projections analysis and context that supports the Council's policy approach 'Making Gateshead a Place Where Everyone Thrives'. The Council recognises there are huge financial pressures on not just Council resources, but those of partners, local businesses and residents. To deliver on the policy approach over the next five years, the Council will remain resolute in its determination to make Gateshead a place where everyone thrives. This means the Council's decision-making including resource allocation through the budget will be policy and priority led and driven.

Background

The MTFS establishes the best estimates of the level of revenue resources available to the Council over the medium term and estimates the financial consequences of the demand for Council services. It assists financial planning and strategic financial management through providing the financial context within which the Council budget will be set. A Budget Approach is reported elsewhere on this agenda.

Medium term financial planning continues to be challenging given the current climate. There is continued uncertainty in relation to the level of future funding, stubbornly high inflation amidst uncertainty around international issues, the national economy and cost of living crisis, notably around food, fuel and utility prices across the country.

A three-year Budget approach was agreed in December 2021 for planned use of reserves of £20m to allow time to identify cuts and efficiencies required over the three year planning. 2024/25 is the final year of this three-year approach and this report proposes an extension to the planned use of reserves for a further two years to 2026/27.

Other than some national allocations of some areas of social care funding for 2024/25, as with previous years there continues to be no guidance from Government on future funding and financial reforms which is a significant barrier to effective financial planning for the Council. The changing landscape to accessing funding has recently seen Local Authorities having to bid for additional funding.

The current context is exceptional and the unknown impacts alongside the level of risk to finances mean that forecasts will need to be closely monitored and potentially refreshed more frequently than usual as further consequences become clear.

The funding estimated to be received from Government and from council tax and business rate payers over the next five years is not sufficient to cover current level of spend plus new budget pressures. Local authorities are legally obliged to set a balanced budget each year and to ensure they have sufficient reserves to cover any unexpected events. Therefore, to legally balance the budget the Council must make spending plans affordable by matching it to the estimated funding available over that time. Staying the same is not an option. The Council is required to change to deliver its priority outcomes within the limited funding available.

The Council will ensure that resources are used to maximum effect and allow the Council to continue to deliver new and better ways of working and invest to improve the efficiency of services provided. However, without an increase in the quantum of funding for local authorities alongside a fairer distribution, it is evident the estimated funding gap will have an inevitable impact on both the nature and scope of services that the Council is able to deliver. The Council will aim to manage the process of change to its services effectively through the Budget Approach reported elsewhere on this agenda.

The Council will continue to have significant revenue and capital budgets to invest and deliver services consistent with the delivery of key priority outcomes of "Making Gateshead a Place where Everyone Thrives". The Council will retain its vision for the future of the Borough through promoting development and economic growth and this will assist in maintaining the medium-term financial sustainability of the Council.

Reserves summary

A breakdown of each reserve available to support the budget, and balances as at 31 March 2023 are outlined below;

• Council General Reserve £11.9m- This is a statutory fund that acts as a contingency and allows the Council to meet any unforeseen costs. If the council overspend in a year this fund will meet that liability. The minimum balance on the reserve is 3% of the net revenue budget which meets the MTFS principles.
• Financial Risk and Resilience £19.2m- This reserve is held in respect of key financial risks identified through risk management process. Balances include; Insurance £4m, grant clawback £3m, workforce development costs £3.5m, commercial risk £2.6m, Schools PFI £3.7m, ASC Direct Payments £0.8m, Highways maintenance £0.6m, Volunteering and Community Capacity £0.5m. and budget flexibility £0.5m.
• Thrive £7.5m -This reserve is held to support the Council Thrive priorities of Economic, Housing and Environmental Investment (£3.3m), Poverty, Health and Equality Investment (£3.7m), and Discretionary Social Fund £0.5m.
• Budget Sustainability £36.7m - Agreed in December 2021 an agreed approach to help support the timings of achieving significant budget savings and Thrive outcomes whilst still dealing with pandemic impacts over three-year period. £14.5m is committed in 2023/24 with the remaining £22.2m proposed to be used in this MTFS. A plan to replenish this reserve forms part of the MTFS.

The proposed use of reserves relies upon a planned pipeline of budget cuts and efficiencies over the period to achieve a balanced budget that is sustainable in future years.

Consultation

The MTFS sets a financial context for the approach to budget. The Council's budget planning framework is supported by the development of integrated impact assessments (IIAs) for draft budget proposals. These assessments include identifying possible disproportionate impact in relation to the protected characteristics as described within the Equality Act 2010 and identify potential mitigation where applicable.

The Council maintains its strong commitment to equality, believing that all groups and individuals within the community and its workforce have equal opportunity to benefit from the services and employment it provides. IIAs help the Council to arrive at informed decisions and to make the best judgements about how to target resources.

The Leader of the Council has been consulted on this report.

Alternative options

There are no alternative options.

Implications of recommended option

Resources:

• Financial Implications - the Strategic Director, Resources and Digital, confirms that financial context is contained within the report and appendices. Any direct implications will form part of the budget planning framework and identification of budget proposals. The Council is legally required to set a balanced budget annually and should plan to achieve this using a prudent set of assumptions. As such, the Government's decisions about 2024/25 funding will be hugely significant and could have a material impact on the level of budget cuts to be identified, and the wider budget process.
• Human Resources Implications - The need to support Council employees as much as possible through changes is recognised. Any direct implications will form part of the budget planning framework and identification of budget proposals.
• Property Implications - No direct property implications. Any direct implications will form part of the budget planning framework and identification of budget proposals.

Risk management implication

Risks arising from the direct impacts of this strategy will form part of the Council's approach to the budget planning framework.

Equality and diversity implications

An equality impact framework has been developed to assess budget proposals.

Crime and disorder implications

No direct crime and disorder implications. Direct implications arising from the impacts of this strategy will form part of the Council's approach to the budget planning framework and consultation process.

Health implications

No direct health implications. Direct implications arising from the impacts of the Health and Wellbeing Strategy this will form part of the Council's approach to the budget planning framework and consultation process.

Climate emergency and sustainability implications

The MTFS provides a framework with the express objective of achieving a sustainable financial position over the medium term. Addressing climate change remains a priority of the Council and the MTFS frames the resources available.

Human rights implications

No direct human rights implications.

Ward implications

All areas of the Borough are covered by the principles set out in this strategy.

Background information

• Provisional Revenue Outturn 2022/23 - 20 June 2023
• Revenue Monitoring 2023/24 Q1 - 18 July 2023