Medium Term Financial Strategy (MTFS) 2023/24 - 2027/28
Summary of MTFS
This Medium-Term Financial Strategy (MTFS) sets out the forecast financial resources that are needed and also that are available for the Council to deliver its key priorities. Since the last MTFS was agreed by Council in October 2021, a number of factors have affected the financial outlook for the Council.
Externally, the war in Ukraine and the pandemic has led to inflation increasing beyond the provisions in the previous MTFS, with the cost-of-living crisis notably around food, fuel and utility prices across the country.
Internally work has begun to identify and address the in-year inflationary pressures and progressing the three-year budget approach agreed in December 2021. This approach was in line with the agreed approach for the planned use of reserves of £20m to allow time to identify cuts and efficiencies required over a three-year planning period.
Based on local estimates outlined in this report, the council estimates that overall, it will need to close a cumulative financial gap of £55m to 2027/28. In calculating the gap, £14m reserves has been applied over the medium term in line with the agreed approach (£6m in 2022/23). In addition, the gap assumes use of pandemic reserves of £8.9m in the current year, £13.5m in 2023/24 and £3m in 2024/25.
This gap can be summarised as follows (there may be slight differences due to roundings):
| 2022/23 £m | Indicative Budget Forecast | 2023/24 £m | 2024/25 £m | 2025/26 £m | 2026/27 £m | 2027/28 £m |
|---|---|---|---|---|---|---|
| 254.304 | Estimated Base budget | 280.117 | 288.867 | 304.807 | 317.093 | 327.410 |
| (254.304) | Estimated Funding Resources | (245.941) | (252.008) | (258.895) | (265.981) | (272.218) |
| Funding Gap (before Reserves) | 34.176 | 36.860 | 45.912 | 51.112 | 55.191 | |
| Pandemic Reserves | (13.520) | (3.065) | ||||
| Budget Sustainability Reserve | (10.000) | (4.000) | ||||
| Total Reserves | (23.520) | (7.065) | ||||
| Minimum Cumulative Funding Gap | 10.657 | 29.795 | 45.912 | 51.112 | 55.191 | |
| Minimum Annual Funding Gap | 10.657 | 19.139 | 16.117 | 5.200 | 4.079 |
The budget gap is predominantly driven by the significant ongoing impact from demand pressure (for social care) and inflation on the Council's cost base in 2023/24. This is forecast to increase core costs by £25.813m in 2023/24.
Although we expect some compensatory increases, the funding resources initially fall back in 2023/24, due to the continuing uncertainty of the Government settlement but then slowly increase, largely due to the potential impact of council tax increases.
After the planned use of reserves the gap for 2023/24 is £10.657m - Securing savings to support closure of a gap at this level is a significant challenge but will be assisted by the emerging work on the delivery of the budget approach and through the delivery of change to align resources to priorities to enable residents of Gateshead thrive.
Since the start of austerity, the Council has made substantial cuts and responded to demand pressures to deliver £179m budget savings. Despite ongoing financial challenges, the Council has delivered against its revenue budget since 2010 showing strong and stable financial management with an outstanding record of budget delivery.
The budget gap as identified within this MTFS will present a significant financial challenge that will be met by a Council wide approach driven by the delivery of Council priorities.