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

The Medium-Term Financial Strategy (MTFS) includes financial projections analysis and context that supports the Council's new 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 new 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.

Medium term financial planning remains extremely difficult due to the exceptional circumstances currently being faced by all local authorities. There is great uncertainty in relation to the level of future funding due to the changes in the local government finance system, current and long-term pandemic impacts as well as the UK leaving the European union. 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 reducing 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. It is evident however the continuing reductions in funding and increases in demand 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.

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 review

The MTFS review allows for consideration of the Council's reserves policy and a review of the level of reserves to ensure there is adequate protection against unforeseen events. Following the outcome of the review of reserves the following changes are proposed;

Council General Reserve - £8.0m

It is proposed that £5.9m is transferred out from the general reserve to earmarked reserves, leaving a balance of £8.0m which meets the 3% minimum principle.

Financial Risk and Resilience - £9.9m

It is proposed that this reserve reduces by £4.4m following a review of earmarked risks. Projected balances are; (Insurance (£2m), grant clawback (£3m), workforce development costs (£3m), commercial risk (£1.5m) and budget flexibility (£0.4m))

A new Thrive reserve is proposed of £10.0m

This reserve will replace the two existing reserves to continue to support the delivery of Council Thrive priorities of Economic, Housing and Environmental Investment (£5m) and Poverty, Health and Equality Investment (£5m)

Budget Sustainability  - £20.0m

It is proposed that this reserve increases by £15.0m to provide temporary budget support over the next three financial years.

Using reserves in this way means that it is crucial to have a planned schedule of savings and efficiencies over the period to achieve a balanced budget that is sustainable in future years.

Consultation

The MTFS sets a financial context for budget consultation. 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.
• 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 this strategy 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 2020/21 - 20 July 2021