Medium Term Financial Strategy (MTFS) 2020/21 - 2024/25

Local government is facing unprecedented financial and demand pressures following a decade of austerity. Achieving financial sustainability is critical to protect outcomes for the community and local economy.

This is the annual review of the council's Medium Term Financial Strategy (MTFS). It is based on a financial forecast over a rolling five-year timeframe from 2020/21 to 2024/25 which will help ensure resources are aligned to the outcomes in the council's strategic approach "Making Gateshead a Place Where Everyone Thrives". The MTFS sets the financial context for the council's resource allocation process and budget setting.

Reviewing the MTFS remains essential to ensuring the council's medium term financial sustainability. The council has responded to the financial challenges in a planned way through an approach based around four inter-related areas: economic growth, income generation, managing demand, and identifying savings/efficiencies.

Gateshead's strategic approach of Making Gateshead a Place Where Everyone Thrives was agreed with the council's purpose and beliefs in mind, along with what matters most to the people of Gateshead. Due to insufficient funding the council will be forced to make very difficult choices in the years ahead about which services to prioritise investment.

Significant changes are being proposed to local government funding. However recent announcements in the spending review confirm that longer term reforms regarding business rate retention and fair funding have been delayed at least until 2021/22. There will be a one year local government settlement expected early December.

In future it is expected that there will be greater reliance on income streams the council raises itself such as council tax, business rates, fees and charges and investments. This funding is highly unlikely to meet the rising cost of demand and cost of essential services. Local authorities are legally obliged to set a balanced budget each year and to ensure they have enough 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. The gap between the two amounts is referred to as the "funding gap". Thus, the funding gap is a combination of the council's best estimate of the future budget needed to cover rising cost pressures and demands for services alongside a reduced amount of income. Action is required now to enable the council to satisfy the legal requirement to balance the budget both next year and in future years.

Based on local estimates outlined in this report, this council estimates that overall it will need to close a financial gap of £49.9m to 2024/25. This gap can be summarised as follows (there may be slight differences due to rounding's):

The financial gap over the medium term can be further analysed to identify separately increasing cost pressures at the same time as the impact of reductions in funding on income. 

The funding gap comes on top of £170m of budget savings since 2010. The council aims to ensure that reducing resources are used to maximum effect and allows 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 priority services consistent with achieving the outcomes of "Making Gateshead a Place where Everyone Thrives".