Medium Term Financial Strategy (MTFS) 2022/23- 2026/27
Appendix 2 - MTFS estimates
The MTFS has been prepared on best estimates using the current funding methods as a guide. Key risks are included in the supporting information. Following a new approach to MTFS and budget planning the table shows the financial gap expected over five years but also a proposed use of reserves. These are shown in more detail within the review of reserves section.
The budget approach will be over a three-year period 2022/23 to 2024/25. The scale of the challenge requires a radically different approach to the budget. With reducing resources, the Council cannot keep doing everything, so the approach needs to be more clearly linked to the hierarchy of delivering on thrive priorities through the Health and Wellbeing Strategy, the emerging Economic, Housing and Investment Strategies.
A review of reserves will result in the need to reconsider existing reserve commitments. Some commitments may need to reduce or not proceed. The outcome of the reserves review is to propose formation of a £20m Budget Sustainability Reserve from realigning existing reserves that it is proposed be used to support the budget approach over the next three years. Consequently, the Council's general reserve will be at 3% minimum levels.
Based on local estimates outlined in this report, this Council estimates that overall, it will need to close a financial gap of £63m in the next five years (including covid impacts). This impact will be mitigated temporarily through the proposed planned application of £20m budget sustainability reserve over the next three financial years. Efficiencies and savings of £45m will be required over the medium term.
This financial gap can be summarised as follows (there may be slight differences due to rounding's):
| Indicative Budget Forecasts | 2022/23 £m | 2023/24 £m | 2024/25 £m | 2025/26 £m | 2026/27 £m |
|---|---|---|---|---|---|
| Net revenue budget | 238.758 | 230.262 | 237.176 | 245.987 | 249.935 |
| Base adjustments | |||||
| Removal of reserve funded budgets | (2.542) | 0.000 | 0.000 | 0.000 | 0.000 |
| Removal of temporary budgets | (11.627) | 0.000 | (0.250) | 0.000 | (0.440) |
| Inflation - general | 0.900 | 0.202 | 0.206 | 0.210 | 0.214 |
| Inflation - contractual | 0.720 | 0.537 | 0.394 | 0.406 | 0.418 |
| Corporate pay pressures | 2.279 | 4..057 | 7.457 | 2.423 | 2.953 |
| Strategic Economic Investment (capital) | 1.774 | 2.118 | 1.004 | 0.908 | (1.474) |
| Total revenue budget | 230.262 | 237.176 | 245.987 | 249.935 | 251.607 |
| Revenue Support Grant | (15.647) | (15.960) | (16.280) | (16.605) | (16.937) |
| Retained Business Rates | (43.374) | (44.231) | (46.127) | (48.061) | (49.021) |
| Top up grant/equalisation | (15.355) | (15.355) | (15.355) | (15.355) | (15.355) |
| Council Tax base | (100.675) | (103.513) | (106.073) | (108.683) | (111.346) |
| Council Tax council uplift | (2.010) | (2.060) | (2.111) | (2.163) | (2.216) |
Other grants (including Public Health) | (49.806) | (50.368) | (50.950) | (51.565) | (52.193) |
| Total funding resources | (226.867) | (231.487) | (236.896) | (242.432) | (247.069) |
| Annual minimum funding gap | 3.394 | 2.295 | 3.403 | (1.589) | (2.965) |
| Adult Social Care growth | 5.950 | 6.221 | 6.503 | 6.799 | 7.109 |
| Children's Social Care growth | 2.660 | 1.309 | 1.409 | 1.518 | 1.636 |
| Unfunded Council wide growth contingency | 2.000 | 2.000 | 2.000 | 2.000 | 2.000 |
| Possible funding - ASC precept (if allowable) | (2.020) | (2.070) | (2.121) | (2.174) | (2.227) |
| Growth budget required | 8.590 | 7.459 | 7.791 | 8.144 | 8.518 |
| Adult Social Care - COVID impact | 2.000 | 2.000 | |||
| Children's Social Care - COVID impact | 1.000 | 1.000 | |||
| Other Council wide pressures - COVID impact | 5.996 | 5.995 | |||
| Growth budget COVID | 8.9996 | 8.995 | |||
| Total cumulative growth funding gap | 20.981 | 39.730 | 50.923 | 57.478 | 63.031 |
| Use of reserves - budget sustainability | (10.000) | (6.000) | (4.000) | ||
| Use of reserves - pandemic service impact | (8.996) | (8.995) | |||
| Efficiencies and savings | 1.985 | 13.754 | 13.194 | 10.555 | 5.553 |
| Total efficiencies and savings | 45.040 |
This is an extremely challenging medium-term forecast. Using reserves in this way means that it is crucial to plan and deliver a schedule of savings, efficiencies and reinvestment to achieve a balanced budget in future years and to achieve Thrive priorities.
Capital investment must also be kept under review and clearly aligned to priorities and financial sustainability to ensure affordability and to manage risks. All budget growth (excluding social care demand or fees) must be funded through planned savings.