Medium Term Financial Strategy (MTFS) 2025/26 - 2029/30

Based on estimates outlined in this report, the Council estimates that overall, it will need to close a cumulative financial gap of £34.4m by 2029/30. The MTFS assumes positive interventions to manage demand and cost pressures in social care totalling £13.4m and proposed use of reserves of £12.5m over years 2025/26 to 2026/27 to allow smoothing of transformation work to deliver these interventions. Alongside proposed budget efficiencies totalling £6.1m, this leaves unidentified savings of £14.8m to deliver sustainability within the MTFS, summarised as follows:

Preventative interventions and demand management will be key components of a sustainable budget strategy. However, these often have a long lead in time and will possibly require pump-priming support. The MTFS sets out the financial context of the levels of demand management and cuts that are projected to be required to balance the budget over the medium term. This will provide a planning framework for an approach to budget setting.

The MTFS reflects a balance between long-term and short-term planning; the longer- term transformational and demand management interventions alongside the short- term immediacy of a legally balanced budget for 2025/26.

In summary, the MTFS strategy is built upon on the following approach:

• Intervention of demand / cost pressures- The MTFS outlines significant demand and cost pressures, particularly in social care. A fundamental approach to a sustainable budget is to propose positive interventions and transformation to reduce projected cost increases. The approach is underpinned by credible delivery plans with clear timescales.
• Planned Use of Reserves- Recognising the timing required to deliver change, it is proposed to continue to use reserves to allow time for the delivery of the interventions. The MTFS proposes use of reserves of £8.5m in 2025/26 and £4m in 2026/27. The proposed timing of the application of Budget Sustainability Reserve in the MTFS is aligned to options to close the gap to minimise cuts while permanent solutions to the funding gap are found. The extension is predicated on the following:
  • The impact that cumulative high inflation is having on the Council's budget;
  • The active management of reserves that allows this flexibility;
  • The current Capacity Fund and a further £2m proposed in 2025/26 to drive through to sustainability;
  • A budget approach to identify and deliver a pipeline of budget mitigations, efficiencies and cuts of £34m; and
  • A proposed plan to replenish reserves from 2026/27.
• Council Efficiencies -The Council will continue to review all service areas with a view to identifying more efficient ways to deliver services. The Group and Service plans will be the conduit for identifying, delivering, and monitoring progress.

The proposed MTFS for 2024/25 to 2028/29 is attached at Appendix 2. This presents a continuing challenging financial position over the medium term due to continued uncertainty on funding and increasing demand.

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 deliver the Council Corporate Plan and the thrive agenda framework. Financial sustainability will be achieved and maintained through targeted investment, demand management interventions, 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, then plans should be prepared setting out the actions required to ensure spending at the end of the year does not exceed original budget estimates. Senior management will be accountable for delivery of the budget in their areas of responsibility
• 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 Council priorities
• 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

A detailed review of the reserves will be undertaken as part of the budget and council tax setting. General Reserves and Strategic Earmarked Reserve balances as at 31 March 2024 can be found in appendix 1. Full breakdown of reserves can be found in the full MTFS document at appendix 2.

The Council recognises that use 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 to balance the budget requires there to be a planned pipeline of budget cuts and efficiencies to achieve a balanced budget in future years. The Investment Plan and Housing Revenue Account Business Plan will also be aligned and prioritised to ensure affordability and to manage strategic risks.