Issue - meetings

Report of the Chief Executive on the review of the Medium-Term Financial Strategy (MTFS) as the opening stage of the 2022/23 Budget Setting process.

Cabinet noted the contents of the report and approved the principles to be adopted for the 2022/23 budget setting process as highlighted in section 3.3.6, in particular the 2022/23 budget setting process should focus on closing the indicative budget gap beyond next year.

Report of the Chief Executive on the review of the Medium-Term Financial Strategy (MTFS) as the opening stage of the 2022/23 Budget Setting process.

(1)       The Decision Taken

RESOLVED:

(unanimous)

Cabinet noted the contents of the report and approved the principles to be adopted for the 2022/23 budget setting process as highlighted in section 3.3.6, in particular the 2022/23 budget setting process should focus on closing the indicative budget gap beyond next year.

(2)        Reasons for the Decision

Cabinet passed on their condolences to Grant Fairhall who sadly passed away to Covid-19 and was a member of the Council’s Finance team.

The current Medium Term Financial Strategy was approved by Full Council in February 2021.  Since that time, the 2020/21 financial year had been completed, leaving General Fund reserves at a relatively healthy £6.7M.  Government support has absorbed the worst of the Covid pandemic impacts, and the Council’s reserves were a testament to past prudent financial management.

The first quarter of the 2021/22 financial year has now completed.  The adverse impact of Covid is continuing into the new financial year, and it is unlikely that the Council will be able to rely upon government support to the same extent.  Accordingly, a drawdown of General Fund reserves for 2021/22 of £878,000 is now forecast, against an originally budgeted £220,000, as discussed at Cabinet on 10 August, 2021.

The updated General Fund MTFS, summarised in appendix A, will take us through 2022/23 to 2024/25.  The assumptions used in the updated MTFS were set out in the attached report.

Key points to note were:

•   Firstly, the savings requirement for future years does not include the additional forecasted 2021/22 shortfall identified at Quarter 1.  As discussed at the time of the 2021/22 budget setting, this would be absorbed by drawing down from reserves, rather than by attempting to find savings.  Thus the cumulative savings required essentially start in 2022/23.

•   As noted in the report, the improvement in the 2022/23 single year gap were mainly down to the fact that, following further analysis, the Council would be able to absorb the adverse impact on business rates for that year by use of previously established earmarked reserves.

•   Again as noted in the report, the worsening of the 2023/24 single year gap was mainly due to more conservative assumptions around borrowing and financing costs.  If interest rates remain very low, this additional gap may not materialise, but it is sensible to be prudent.

As noted in the report, closing the future years’ gaps would be a crucial objective in the budget process.  Predicted General Fund reserve levels were highlighted at the foot of Appendix A, and the situation beyond 2022/23, would alert us to a cause for concern.

For now, no material changes have been seen as necessary to the Housing Revenue Account, (HRA), and component of the MTFS.  Any HRA changes would be considered as part of the budget setting process.