The Interim Chief Officer Finance, Performance and Change presented an update on the development of the Medium Term Financial Strategy 2022-23 to 2025-26, following the revision of in-built assumptions, and updated information received since the MTFS 2021-22 to 2024-25 was approved by Council in February 2021.

The Interim Chief Officer Finance, Performance and Change reported that the Medium Financial  Strategy approved by Council on 24 February 2021 identified a potential gap of £22m over the period 2021-22 – 2024-25, with savings of £1.76 million required in 2021-22 and she outlined estimated future years’ savings, based on the best scenario, most likely scenario and worst scenario.  She stated that at the time the budget was set, there was a degree of uncertainty due to pay and price increases, along with the long term impact of the pandemic and Brexit.  She informed Cabinet that the Council had placed reliance on grant funding received from the Welsh Government’s hardship fund of £24.643m to achieve a balanced budget.  The Welsh Government had allocated £206m to the hardship fund to support local government for the first 6 months in 2021-22 and confirmed an extension of covid cost related support for adult social care up to the end of the current financial year.  No further financial support for non-adult social care was in place, placing additional pressures on the budget.

The Interim Chief Officer Finance, Performance and Change reported on the budget position for 2021-22 which is £298.956, funded from 3 sources.  As at 30 June 2021, the position was a projected overspend of £904k, reflecting pressures on adult social care.  She outlined the key pressures requiring consideration for the 2022-23 budget strategy, namely pay awards; price inflation and demographic pressures.  Consideration had been given to the different scenarios of changes to Aggregate External Finance and council tax increases and the resulting savings required.  Very few budget reduction proposals had been put forward and work would continue with the Budget Research and Evaluation Panel to bring together budget reduction proposals for consideration and consultation on over the remainder of the financial year.        

The Interim Chief Officer Finance, Performance and Change informed Cabinet that Audit Wales had completed a report on the Council’s financial sustainability and concluded that the Council has maintained a strong financial position during the pandemic and there are no apparent risks to the Council’s financial sustainability.  However, Audit Wales had advised that the immediate impact on the Council’s financial sustainability was mitigated by Welsh Government funding, and while the Council has a track record of delivering the majority of its in-year planned savings, like other Councils, identifying and delivering future savings would be more challenging.  Audit Wales also indicated that Councils that show a pattern of unplanned use of reserves to plug gaps in their revenue budget that result in reductions of reserve balances reduce their resilience to fund unforeseen budget pressures in future years.

The Interim Chief Officer Finance, Performance and Change reported on the budget consultation which will commence on 20 September 2021, concluding on 14 November 2021.  She also reported on the capital programme, which is a 10 year programme and is updated and reviewed and reported to Council quarterly.  The Council would continue to seek to secure external grant funding towards schemes where possible, to reduce the impact on in-house budgets.  The Interim Chief Officer Finance, Performance and Change outlined the likely budget timetable, commencing in September 2021, concluding in March 2022.

The Cabinet Member Communities stated there was a misunderstanding in relation to the Council’s level of reserves, in that its unrestricted reserves are not high.  Also, savings to the Council’s budget are in reality budget cuts due to austerity measures.  The Interim Chief Officer Finance, Performance and Change commented that the level of reserves is 9% and would only enable the Council to run for a few days in the event of an emergency.  She stated that the Council’s earmarked reserves of £29m are for schemes in the capital programme.  She also stated that the level of general reserves are low and that some Councils shore up its revenue budgets using reserves.  The Deputy Leader commented that earmarked reserves are prioritised to be used to support the school modernisation programme and that some are grant specific.  He stated that it was unusual for a mid-term report to be received on the MTFS, however the Welsh Government hardship funding had been crucial to keeping the Council afloat and that there were still significant challenges and uncertainty around covid ahead. 

The Leader commented that the pressure and demand on services is higher than ever, with no certainty of how much of the additional contributions for health and social care would come to Wales.  This policy would bring a further pressure on the Council as an employer in having to fun d increased National Insurance contributions.

RESOLVED:           That Cabinet noted the report on the updated MTFS 2022-23 to 2025-26.