Purpose

The medium-term financial
strategy provides a forecast of the financial position for the
county council for the next 3 financial years. This report provides
an update of the position and highlights any changes since the last
report to Members in November 2023.
 
It has been developed working
with services within the Council and benchmarking the assumptions
made with other Councils and through advice from professional
advisors.
 
The Council has a long track
record of strong financial management and is in a relatively good
position compared to some other Councils, however this report is
written against a backdrop of considerable financial challenge and
uncertainty.
 
The overall position reported
is a forecast financial deficit of £2.908m in 2024/25 with a
projected surplus of £4.892m by 2026/27, compared to the
position that was reported to Cabinet in November 2023 of a
forecast deficit of £14.505m in 2024/25 increasing to
£18.294m by 2026/27.
 
This report reflects the most
up to date information available including:
 

Revised demand and
inflation projections.
Impacts from the
government provisional financial settlement.
Proposed
mitigations.

 
The report highlights that
relative to the 2023/24 budget the council faces the following
financial pressures (shown cumulatively):
 

 

 2024/25

 2025/26

 2026/27

 

 £m

 £m

 £m

Pay

20.756

34.353

44.956

Price

52.701

101.311

136.532

Demand

39.003

58.067

74.277

Capital Financing

5.368

6.548

5.011

Total Pressures

117.828

200.279

260.776

 
The main changes since the last
report to Members are summarised below:
 

Increased demand
across Home to School Transport, Special Educational Needs and
Disabilities, and Adult Social Care.
An increase of 10%
for 2024/25 for Foundation Living Wage which was unexpected given
falling inflation, which is currently sitting at 3.9% in November
2023.
A reduction in the
level of assumed increase for the 2024/25 pay award.
This is based on reduced inflationary levels and
benchmarking information across other authorities.
Assumed additional
Council Tax levels in 2025/26 and 2026/27, in line with Office of
Budget Responsibility's assumptions contained within the
provisional financial settlement.
A net reduction in
grants compared to previous forecasts following the provisional
settlement.
Increased levels of
business rates following additional information relating to
inflationary increases confirmed in the provisional
settlement.
Inclusion of a
mitigation to utilise capital receipts to support the 2024/25
budget to support transformation expenditure as permitted by
flexibilities from the government.
Additional savings
proposed as a mitigation to support the 2024/25 budget.

 
In line with the Council's
continuing pro-active approach to financial management work was
undertaken by Directorates to identify financial savings and
efficiencies during the early part of this year in recognition of
the remaining budget gap. This resulted in "management action"
savings totalling c£23m being included in the medium-term
financial strategy presented to Cabinet in November. As part of
this report, policy savings totalling c£15m are included in
Appendix A for consideration and approval
which cover a range of services across the council.
 
Recent budgets have required
the delivery of significant levels of savings over a number of
years, aimed at providing efficiencies in costs on behalf of
taxpayers, whilst still investing in priority services and
protecting the vulnerable. The Council has continued to deliver
these savings year on year whilst maintaining delivery of
high-quality services to its residents. However, the savings agreed
in the previous medium term financial strategy and budget rounds
are now in excess of £164m over a four-year period and
necessitate an ongoing heightened focus on delivery to ensure
financial sustainability and resilience.
 
The Council's transitional
reserve (currently standing at £165m at the end of 2023/24)
will be utilised to bridge the 2024/25 funding gap and remains
sufficient to allow plans to be developed over the coming years to
continue to aim for a balanced long term sustainable budget.
The transitional reserve also serves a purpose going
forward to allow modernisation and transformation of council
services.
 
All reserves will be reviewed
as part of the Council's forthcoming budget report including the
General Reserve which currently stands at £23m representing
2.25% of net expenditure.
 
As stated earlier, a number of
Councils across the country are experiencing extreme financial
challenges and whilst this Council is not in that position it does
have growing demand for its services in a number of key areas and
the budget report that comes before Members in February will need
to consider the Council's approach to this scenario going forward
taking into account the assumptions within this medium-term
financial strategy report, and the sustainability of the current
position. 
 
In summary:
 
(i) 
The medium-term financial strategy has been updated
for current expectations of levels of funding (following the
provisional settlement), savings delivery, demand and
inflation.
 
(ii) 
At Cabinet in November 2023 the medium-term
financial strategy showed a deficit of £14.505m in 2024/25
with this increasing to £18.294m by 2026/27.
The updated position forecasts a gap of £2.908m in 2024/25,
with this improving to a small surplus of £4.892m in
2026/27.
 
(iii)A number of mitigating
measures have been put in place during the year and new proposals
totalling £14.940m are included within this
report.
 
(iv)The council is forecast to hold
a General Reserve against unforeseen issues of £23.437m
representing circa 2.25% of net budget, which is unchanged from the
previously reported position. 
 
(v) 
The council is forecast to hold £165.198m of
uncommitted transitional reserve at the end of the financial year.
This is sufficient to meet the forecast gap for the medium-term
financial strategy for the next three financial years.

Decision

The Cabinet approved the recommendation(s) as
set out in the report.