Medium Term Financial Strategy (MTFS) 2022/23- 2026/27

The MTFS is based on a 5-year planning horizon within a ten-year investment framework, including projections to 2026/27 and these estimates will be kept under regular review.

To assist in meeting the financial challenges ahead, the principles which underpin the MTFS have been reviewed and these are proposed as follows:

• the overall financial strategy will be to ensure that the Council's resources are directed to the thrive agenda framework. Financial sustainability will be achieved and maintained through targeted investment, reducing costs and more efficient ways of working. The Council's MTFS will be reviewed on at least an annual basis
• the Council will consider a range of delivery mechanisms and funding sources to support capital investment to deliver thrive priorities, including the use of prudential borrowing, and will ensure that the full costs associated with financing the investment are considered when investment decisions are taken
• the Council will maintain its general reserve at a minimum of 3% of the net revenue budget to cover any major unforeseen expenditure. The Council will aim to balance its revenue budget over the period of the MTFS without reliance on the use of the general reserve
• the Council will maintain earmarked reserves for specific purposes which are consistent with achieving its key priorities. The use and level of earmarked reserves will be reviewed at least annually
• overall Council spending should be contained within original estimates. If following monthly revenue monitoring, service budgets are projected to exceed original estimates, plans should be prepared setting out the actions required to ensure spending at the end of the year does not exceed original budget estimates
• the Council recognises the impact of increases in council tax levels and fees and charges in an area of relatively low income and low wealth and will therefore balance the need for increases against the delivery of the thrive framework and the need for services
• the Council will meet its financial obligations and maintain financial sustainability through the setting of a balanced budget and the delivery of outturn within the overall budget each year

The MTFS estimates and plan for 2022/23 to 2026/27 have been reviewed and updated wherever possible. Full details are attached at Appendix 2.

The MTFS presents a very challenging financial position over the medium term. The outcome of the review gives an estimated revised financial gap over the five-year period of £63m including COVID impacts. This impact will be mitigated temporarily through the planned application of pandemic reserves of £18m and the plan assumes proposed use of £20m from the budget sustainability reserve over the next three financial years. Efficiencies and savings of £45m will be required over the medium term. It is essential these are delivered to ensure the financial sustainability of the Council.

Reserve levels are reviewed twice a year as part of budget and council tax setting and as part of the MTFS review. The outcome of the reserves review is the proposal to realign existing reserves to add funds to the budget sustainability reserve thus creating £20m of temporary funds to support a planned approach to achieve a balanced position over the next three years.

Further details on the changes to reserves can be found in appendix 1 and the MTFS document at appendix 2. Following review and realignment of earmarked reserves existing commitments will need to be reviewed and possibly reduced or removed.

The Council recognises that usage of reserves is one-off in nature and must be linked with expenditure and income plans to support financial sustainability in the medium term. Therefore, using reserves in this way means that it is essential to have a planned schedule of savings and efficiencies to achieve a balanced budget in future years and reinvest to achieve thrive priorities. The Investment Plan and HRA Business Plan will also be aligned and prioritised to ensure affordability and to manage risks.