Medium Term Financial Strategy (MTFS) 2023/24 - 2027/28

Financial challenge beyond 2022

Medium term financial planning remains extremely difficult due to significant uncertainty amidst international issues, the national economy and cost of living crisis, coupled with the delays to finance reforms, which are now unlikely in this parliament.

The level of funding beyond 2022/23 has not been specified by Government resulting in greater risks in relation to the localisation of business rates and the local council tax scheme. The unknown impacts alongside the level of risk to finances mean that all forecasts will need to be closely monitored and potentially refreshed more frequently than usual as consequences become clear. Staying the same will not be an option for the Council. The Council will be required to change to deliver its priority outcomes within the limited funding available.

In response to the impact on the economy that the inflationary pressure is causing, the Bank of England has increased its base rate from 1.75% in August 2022 to the current rate of 2.25% on 22 September 2022.

Any increase in the base rate or further uncertainty in the economy could translate into increasing the cost of borrowing should the Council need to borrow for the Capital Programme. This will have a corresponding impact on the revenue budget and business cases for projects included in the capital programme.

The financial impacts of the pandemic are expected to continue this year and beyond. The Council has set aside funding from reserves to cover cost pressures and lost income and therefore these impacts are neutral early in the MTFS estimates. This will need to be kept under review. Impact on council tax and business rates funding has been included as these are being managed over three years. Impacts are kept under regular review within the revenue budget monitoring framework.

For planning purposes provision is included for the impact of pay awards and estimated impacts of the National Living Wage which are unfunded by government.

Savings proposals will have staffing implications. These will be managed through the Council's Redundancy Policy and Procedure as necessary. At this stage it is proposed that any cost of redundancy payments and the release of pensions (if applicable) as required by the LGPS Regulations will be met from within the overall corporate resource position at outturn each year, should the position allow. This position will be kept under review and updated as part of the budget proposals to Cabinet.

Economic growth

Local economies are linked to national economic growth. Our vision for Gateshead is of a fairer, greener and more resilient economy that enables everyone to thrive and delivers good jobs, growing businesses and great places. The Council aims to promote a strong and sustainable local economy leading to wellbeing and prosperity for residents, communities and businesses. This will be supported by a planned approach to investment to boost local economic growth such as improving local infrastructure and wider transport links. Success in this area will enable the Council to have a stronger medium- and long-term financial position and allow redirection of resource to activities which protect the most vulnerable.

The Council faces challenges with additional burdens relating to Planning and Building Control due to the changes in legislation with the new Building Safety Act 2022 coming into effect early 2023.

From a financial perspective the Council will look to invest resources to generate economic growth that may result in increased business rates and council tax income to the Council. This may contribute to closing the financial gap.

Significant challenges in Social Care

Adult's Social Care

Adult social care experience pressures year on year in relation to increasing demand for services due to the increase in population of older people and pressures due to fee increases in the commissioned sector. These pressures are expected to continue and be exacerbated for the short, medium and long term.

In December 2021 the Government published the People at the Heart of Care Adult Social Care Reform White Paper. The Paper sets out a 10-year vision that puts personalised care and support at the heart of adult social care. It includes plans to fundamentally reform the amount someone might pay for their care over their lifetime and significantly raises the threshold at which people start to pay for care. The charging reforms together with the requirement to undertake a market sustainability and fair cost of care exercise will come with significant cost pressures and the adequacy of the government funding to meet these costs is unclear. The funding for social care is already complex and the way in which funding is being considered for these reforms via short term grant allocations is going to further exacerbate this, and the reforms do not address the fundamental failings within the social care funding system.

The proposed charging reforms come at a time of other significant reforms such as the introduction of assurance across all adult social care and following the backdrop of a global pandemic which has severely impacted social care demand.

The discharge to assess model is resulting in people with more complex needs being discharged from hospital sooner which is inevitably having an impact upon social care spending.

Despite the increasing demographic pressures on social care through an ageing population and the increasing need of individuals requiring support, the workforce vacancy rates continue to be an issue and consequently people waiting for care and support, often in more expensive settings, is increasing.

In response to some of the challenges the Council is analysing our workforce data to understand the size of the challenge going forward. Regionally and locally, we are developing new and innovative approaches to workforce recruitment and retention across the health and care sector, however this is against a backdrop of a high wage economy policy, and a challenging labour market in other sectors, which compete with social care such as retail and hospitality.

Children's Social Care

With regards children's social care, The End Child Poverty coalition reports the North East as having the second highest rate of child poverty at 38% and this region has seen the steepest rise in the last 5 years. The North East Child Poverty Commission's report in September 2022 reminds us that the NE has gone from having a child poverty rate below the UK average to the highest of any UK nation or region in the space of seven years and that is even by the government's preferred measure of 'absolute child poverty', which has fallen marginally across the UK since 2014/15. All 12 NE local authorities feature in the top 20 local authorities nationally that have seen the sharpest increase in child poverty between 2015 and 2021.

Around 16% of Gateshead residents live within the most deprived 10% of neighbourhoods in England and many of the families open to Children's Social Care and Early Help live in the most deprived areas of the borough. Research available leaves little doubt of the clear evidence linking the impact of deprivation to risk for children, and subsequently higher levels of demand for statutory social care and early help services.

Locally in Gateshead some significant pressures are emerging. Over the course of the pandemic, since March 2020 to present, there have been substantial increases in referrals and demands and for services. Caseload numbers in children's social care since March 2019 are as follows:

  • 31 March 2022 - 1,979
  • 31 March 2021 - 1,697
  • 31 March 2020 - 1,587
  • 31 March 2019 - 1,505

This is a 31% increase since March 2019 and assuming a caseload of 20 children per social worker a requirement of 23 additional posts. Numbers have started to fall recently and were 1,869 as at 31 August 2022.

For too many of our families, life with a range of issues such as domestic abuse, poor mental health, the impact of trauma, coupled with significant poverty creates a complex and unequal system which leaves many families ill equipped to provide the safe nurturing environment for their children that they crave, and their children need.

Gateshead Council had circa 510 looked after children (end September 22) costing on average £40,000 per child annually. This compares to:

  • 31 March 2022 - 484
  • 31 March 2021 - 440
  • 31 March 2020 - 414
  • 31 March 2019 - 379

This is a 33% increase since March 2019. The national and local increase in safeguarding pressures is the result of a complex myriad of factors, including longer term pandemic impacts which are still to be recognised. The internal residential estate in Gateshead has grown in recent years, however this has not been able to meet the increased demand seen in the system because of overall numbers of children.

The outsourcing of placements comes at a higher cost, the most expensive of which is costing £24,000 per week currently. This is not only occurring due to increased complexities of need for the children in the system but also due to the increased numbers of children requiring placements. Increased activity set out above has resulted in a significant impact on the social care workforce with caseloads per social worker increasing which will also need to be kept under review.

Looking ahead threats

  • cost of living crisis and high inflation rates if these continue to rise
  • any unachieved budget savings in the agreed savings programme leading to pressure the following financial year
  • continued growth in demand in Adult and Children's Social Care Services and funding reforms are insufficient to address this
  • unfunded pay pressures such as public sector pay award and the Governments National Living Wage aspirations, which also impacts on negotiations with care providers and commissioning costs
  • the performance of traded and investment income linked to wider economy
  • significant uncertainties on the pandemic impact on income from business rates and council tax and fees and charges
  • the financial impacts of the UK's vote to leave the European Union (EU) and the current uncertainty which is likely lead to instability in the short to medium-term
  • challenges in recruitment and reductions/ shift in work force from working in social care/ linked to competing industries such as retail, hospitality
  • addressing the health, employment and poverty inequalities that the pandemic has added to
  • increased demand for welfare, mental health services and debt advice
  • increased demand for business advice and support

Looking ahead opportunities

  • review all Council services to focus resources on the delivery of priority outcomes and shaping the Council to how it needs to be in the future to withstand other pressures and delivery priorities
  • embrace and embed new ways of working arising from the pandemic such as putting the customer first, more efficient working practices staff resilience and adaptability
  • opportunity to accelerate climate change targets through reduced building use and travel
  • accelerating and building on working with communities in hubs alongside the voluntary sector and other partners
  • embracing the move to self-service and online services to provide a quick and streamlined service
  • opportunities to rationalise Council buildings and assets
  • working closer in partnership with key partners such as the voluntary sector, health partners and the Police and Crime Commissioner to help residents to thrive
  • following the housing review the ability to drive forward housing delivery and provide a good service to tenants