Agenda item

Medium Term Financial Strategy (MTFS) 2022-23 to 2025-26


The Chief Officer – Finance, Performance and Change presented a report, the purpose of which, was to present to Cabinet the Medium Term Financial Strategy for the period 2022-23 to 2025-26. This included:


·         A financial forecast for 2022 to 2026;

·         A detailed revenue budget for the coming financial year;

·         a capital programme for the period 2021-2022 to 2031 – 2032; and

·         the corporate risk assessment


The MTFS is fully aligned with the Council’s Corporate Plan and well-being objectives.


The development of the MTFS has been guided by these priorities.


Although reductions in the level of funding available in previous years has necessitated significant budget reductions across various service areas, the Council continues to manage annual gross expenditure of around £459m and is the largest employer in the County Borough. As a result, the Council does play a significant role in the local economy of this area.


The Council's MTFS articulates how the Council plans to use its resources to support the achievement of its well-being objectives and statutory duties, including the management of financial pressures and risks over the coming four years. The document outlines the principles and detailed assumptions which drive the Council’s budget and spending decisions, it outlines the financial context within which the council is operating and tries to mitigate any financial risks and pressures going forward whilst at the same time taking advantage of any opportunities arising.


The MTFS focuses on how the Council intends to respond to the increasing pressures on public sector services, which have undoubtedly been exacerbated during the COVID-19 pandemic.


The quarterly reports to Cabinet during this financial year on the projected revenue position for 2021/2022 have outlined in detail the impact on the budget of the additional cost pressures and loss of income faced by the Council throughout the year as a result of the pandemic. Welsh Government has played a significant role in mitigating a large proportion of these losses through their various funding streams, most notably the COVID-19 hardship fund.


The Council now needs to consider the longer term impact of the pandemic and how it will shape the Council as part of its recovery programme, given that the hardship fund is due to come to an end in March 2022.


The announcement of the final local government settlement for 2022-23 is again approximately two months later than in previous years, due to the outcome of the Comprehensive Spending Review by the UK Government not being delivered until the end of October 2021. The final settlement for local government in Wales is not due to be announced until 1 March 2022. As a result, this budget is being proposed on the basis of the provisional settlement received in December 2021. Whilst we do not anticipate any significant change in funding between the provisional and final settlement, any changes will be reported back to Council at a later date. It is not envisaged that any changes will impact upon Council Tax.


As the Council’s S151 Officer, she believed the level of Council Reserves is sufficient to protect the Authority in light of unknown demands or emergencies and current funding levels.


In finalising the MTFS and the budget for the coming year estimates have been made which take into account circumstances and events which exist or are reasonably foreseeable at the time of preparing the budget. The budget has been prepared following consultation with elected Members, the School Budget Forum and Service Managers. Subject to the risks identified, the MTFS provides a firm basis for managing the Council's resources for the financial year 2022/23 and beyond.


Annex 3 of the report contained the detailed Medium Term Financial Strategy.


Section 1 of the MTFS includes a financial overview at section 1.3. Cabinet will be aware that the Council has had to make budget reductions in previous years and Chart 1 indicates budget reductions of £62 million have been found over the last ten years which represents almost 21% of the Council’s net budget in the current year.


The Council receives the majority of its revenue funding from Welsh government through the revenue support grant and a share of the non- domestic rates. This is supplemented through the council tax collection, other grants and fees and charges. Council tax will account for 27% of the income received by the Council in the coming financial year.


It should be noted that the amount that council taxpayers are required to pay is made up of three elements:


  • a charge from Bridgend County Borough Council
  • a charge from Town and Community Councils
  • a charge from the Police and crime commissioner for South Wales


Budget planning for the financial year 2022-23 is more uncertain than usual due to the impact of the global COVID-19 pandemic, which is on top of the ongoing uncertainties and financial pressures arising from the UK's withdrawal from the European Union. Whilst the Welsh government has been supportive of the additional costs and burdens that have emerged from COVID and covered most of the directly incurred costs, we are aware that this funding is not going to be available going forward.


In particular, it is anticipated that some of the impact on levels of income may be a medium-term problem. It is likely also that there will be an additional call on the Council Tax Reduction Scheme, in view of the economic impact of the pandemic and the level of Council Tax collection is estimated to be lower than pre-pandemic levels. In addition, ongoing expenditure on matters relating to public health as well as other expectations with regard to addressing homelessness more robustly, and supporting social care which is experiencing increased costs need and demand for services, are likely to be significant


In section 2 of the MTFS further context is provided, detailing both financial and non-financial information which has shaped the financial position for the Council. It should be noted that there are some significant underlying budget pressures in some service areas that were reported in 2020-21 and still persist in the current financial year. The main financial pressures are in home to school transport, social services and well-being, homelessness and waste.


As in previous years efforts have been made to secure greater involvement of stakeholders in the development of the Strategy and the Corporate Plan. Details regarding this were outlined in the report, but included the Budget Research and Evaluation Panel, Overview and Scrutiny Committees and a public consultation.


Cabinet and CMB had reflected on the responses received from the public consultation and from discussions with, and recommendations from, the Budget Research and Evaluation Panel and Scrutiny Committees, and have compiled the budget based on the comments and responses received. This includes:


  • Protecting school budgets
  • Support for waste and recycling
  • Additional funding to support an ageing population
  • Continuing to provide support for homeless individuals
  • continuing to invest in our digitalization capabilities
  • continuing to invest in our highways and infrastructure
  • A freeze in council tax in the coming year to support residents to meet the significant rise in the cost of living


Details of the budgets for individual services were shown in section 2.4 of the MTFS, while section three contained the current financial situation and the Chief Officer – Finance, Performance and Change outlined these for the benefit of Members.


Within this settlement the authority is required to fund the following:


  • The costs arising from the 2021-22 teachers pay deal and their 2022-23 pay deal
  • The increase costs arising from the UK government's announcement to increase National Insurance contributions for employers to fund a health and social care levy
  • The additional costs of introducing the real living wage for care workers


A significant change for the coming financial year is that the local government hardship grant, which has supported local authorities with the additional financial pressures resulting from the COVID-19 pandemic, will no longer be available. Therefore, the authority is expected to meet any additional costs resulting from the pandemic in the new financial year from within its own budgets.


The MTFS also models the financial position for the authority for the next four years, based on the latest information available from Welsh government. For the first time in a number of years, Welsh government has provided a provisional settlement for the coming financial year and then some indicative increases for the following two financial years. Using this information, it is possible to look at different scenarios for the resources that may be available going forward. The MTFS is regularly reviewed as more information becomes available. This is particularly important given the uncertainties around Brexit and the fallout from the COVID-19 pandemic in the coming months and years.


The financial forecast for 2022 to 2026 is predicated on assumptions regarding demographic projections, inflationary uplift, the impact of new legislation and policies and increased staffing costs. In developing these estimates, the MTFS contains assumptions with regards to possible council tax increases going forward. Due to the significantly better than anticipated settlement for the coming financial year, it is proposed to freeze the level of Council Tax for 2022-2023 to support the citizens of Bridgend to deal with the rising cost of living, such as increased energy and food bills, other inflationary increases, mortgage interest rises and National Insurance increases. For planning purposes, it has been assumed that the Council Tax will increase by 4.5% in 2023 - 2024 and 2024 - 2025. These figures are for planning purposes only and will be reviewed each time the Medium Term Financial Strategy is updated.


Together with the indicative funding from Welsh Government, it is estimated that there will be a net budget requirement of £21 million to be met over this period. These scenarios are detailed for members at Table 7 within the MTFS.


The Council's Corporate Risk Assessment identifies the key corporate risks and mitigating actions, as shown in the report. The risk assessment is reviewed regularly throughout the financial year and is scrutinised by the Governance and Audit committee. These risks have been taken into account in the preparation of this document and where there are identifiable financial implications, these have been provided for either within the budget or earmarked reserves.


Section 4 of the MTFS outlined in more detail the budget position for 2022/2023. The net budget requirement for next year was detailed at table 9 of the report, which shows a net budget of £319m.


In summary the key points to note are that financial pressures of £20.667m are funded for the coming year, which include:


·         £6.006m to meet pay and price inflation

·         £2.1m to fund the increases NI contributions to fund the Health and Social Care Levy

·         £12.5m for inescapable service cost pressures which includes:

o   Cost of the implementation of the Additional Learning Needs Educational Tribunal (Wales) Act 2018 (ALNET) and to meet additional demand on the Council’s special schools from Bridgend pupils.

o   Recurrent increased costs of home to school transport - the detail of this is provided within the report

o   Increases in the older persons’ population, which place additional pressures on adult social services.

o   Increased costs in the Supported Living Service as a result of a recent tender exercise.

o   Increased workforce issues in Children’s Social Services

o   Increased costs of commissioned services in the social care sector following the increase in the National Living Wage announced by the UK government.

o   Increased cost of waste collection


There have been two additions to the proposed cost pressures since the draft MTFS was considered by Cabinet and Scrutiny Committees and these were detailed at 4.1.14 of the MTFS.


Further details regarding the cost pressures are  in Appendix C of the MTFS.


Due to the better than anticipated settlement, it has been possible to reduce the proposed budget reductions, although proposals totalling £631,000 have been identified. Members could find these detailed in Appendix D of the MTFS. These have not been changed since the draft MTFS was reported to Cabinet in January 2022.


The Council does raise income via fees and charges and these are reviewed on an annual basis. A schedule of fees and charges for the coming financial year will be published on the council's website in accordance with Fees and Charges Policy that was approved by Cabinet in October 2021. New charges or charges that have been included in the 2022-23 budget and are above the general increase are shown in Appendix E.


The MTFS also deals with the proposed capital programme for the period 2021-22 to 2031 - 2032. This 10-year programme has been revised during this financial year to bring it up to date and to take into account new capital schemes as they have been developed


Within the Welsh government provisional settlement for the coming financial year, £6.678 million is being made available to support capital expenditure. As with the revenue settlement, indicative figures have been received for the following two years, but these have only been provided on an all Wales basis to date.


Due to the limited capital finances available, services have not been asked to submit bids for funding at this stage although it is recognised but there are a number of capital pressures that will need financing going forward, including economic recovery, decarbonisation and homelessness. In addition, financial pressures arising as a result of the impact of the pandemic and Brexit, which were reported to Council earlier this month, will be monitored to ensure that the schemes already agreed can be fully funded to ensure their completion.


The Capital Programme contains a number of annual allocations that are met from the total general capital funding for the Council. The proposed allocation of these for 2022 - 2023 is shown in table 14 of the MTFS. The latest capital programme was approved by Council on the 9 February. Within this budget report, it is proposed to include an additional sum of £2 million in the capital programme to enable the authority to continue to invest in, and proactively maintain, the highways infrastructure.


On the 7 February the Council was informed by Welsh government of an additional general capital grant of £3.115m for the current financial year. This funding can be used to support the effective management of the Capital Programme. In line with the grant letter, it is proposed that this funding is slipped into 2022- 2023 and allocated accordingly in that financial year. This will enable a proper review of all possible new schemes to be undertaken, to ensure Members can be assured of the purpose of the scheme, the full cost of the scheme, any risks associated with the proposal and the likely timeline for completion of the scheme before its inclusion in the Capital Programme.


Any further new proposals for capital funding will be considered in light of, and in line with, the proposed Capital Strategy for the period to 2031 - 2032 and will be brought back to Council for approval at a later date.


The revised Capital Programme was shown at appendix H to the report.


More detail on Reserves, was given in section 4.3 of the MTFS. At the end of March 2021, the Council fund stood at £9.772m, which is 5.01% of the 2021-2022 net budget, excluding school delegated budgets. The Chief Officer – Finance, Performance and Change, recommended that the Council maintains its Council Fund Balance at a minimum level of 5% of the Council's net budget, excluding schools. This will be monitored and will depend upon financial performance during future periods on the need to cover against specific risks as they arise through the earmarked reserves process.


An overview of the Council’s reserves was undertaken at the end of September and the end of December 2021. A further review will be undertaken at the end of the current financial year and transfers will be made at this point taking account of the overall financial position of the Council, including the final out turn position and any new pressures or risks that may need to be provided for.


With regards to Council Tax, the proposed budget of £319.51m shown in table 10 of the Medium Term Financial Strategy, can be balanced with no increase in Council Tax for 2022 -2023. This takes into account the better than anticipated settlement and aligns with the response from the budget consultation whereby 54% of respondents stated they wished to keep  Council Tax at the same level. It should be stressed that it is proposed that this is done on a one-off basis for the coming financial year to support the citizens of Bridgend in dealing with the current rising cost of living.


The final section of the MTFS, provides information on the Council’s longer term financial outlook. This is not intended to be a 10-year Budget Strategy due to the number of variables that impact on BCBC’s financial position. However, it does provide a financial framework to reference against when preparing both annual and longer-term financial plans.


The value of this longer-term framework is that it enables Finance Officers to understand the broad direction of financial travel that the Council is currently on, and the impact that current decision making will have on the long-term financial health of the Council. Within this section consideration is given to a number of different areas including future sources of funding, future cost pressures on the Council and a strategy to meet those challenges.


The Deputy Leader explained that it was essential for any local authority to set a balanced budget, as without that, it would not function. He stated that the Council’s Budget Research and Evaluation Panel (BREP), started work on the MTFS last July and had played a big part in scrutinising this as had each of the Overview and Scrutiny Committees, which had culminated in recommendations being given on the budget upon which Cabinet and the Corporate Management Board have commented upon and been held accountable for their recommendations on the same. He thanked the general public for offering their views who had also contributed by giving their views on how BCBC should shape its Budget moving forward. That was a considerable help he added, given that the County Borough has around 4,000 different businesses and organisations. It was extremely important to put in place an effective Budget also, given the current cost of living crisis, with inflated energy bills and, in view of the better than anticipated settlement the Authority received from Welsh Government, the Council planned to freeze Council Tax for the forthcoming year.


The Cabinet Member – Social Services and Early Help thanked the Chief Officer – Finance, Performance and Change and her team for the hard work they had committed to the MTFS.


The Cabinet Member – Education and Regeneration echoed this and thanked Member colleagues for supporting an annual income increase for schools and the provision of Nursery support that exceeded the level a local authority should provide under legislation. The Capital investment to be committed to education including 21st Century Primary Schools and regeneration projects in each of the 4 town centres, he commended.


The Leader added that the MTFS proposals, would allow for budget growth, with all major proposals being supported with a Business Case. He echoed the invaluable work and support of BREP and Overview and Scrutiny Committee, as a Critical Friend. He noted that the deadline for challenging the MTFS proposals was now out of time, however, he asked the Chief Officer – Finance, Performance and Change if the Budget had been challenged by any Member of the Authority, including also by way of the submission of an alternative Budget by any of the minority political groups.


The Chief Officer – Finance, Performance and Change confirmed that she had received no comments from any Member on the MTFS and its recommendations and reminded Members, that all the proposals contained as part of the Budget were considered by the Council’s Overview and Scrutiny Committees in January 2022.


The Leader also commended Welsh Government in relation to the added financial support for owners of Band A - D properties, who would get a £150 discount off their Council Tax April coming as well as the Winter Warm Payment allowance, both of which the local authority would continue to publicise for the benefit of the constituents of the County Borough.


He added that the Council were also allocating some significant extra funding to employees in Social Services (Care Workers, etc), in order that they may receive a Real Living Wage. The Council had also set aside as part of its Budget, £1.2m towards Children’s Services, Safeguarding and Foster Carers, with a view to recruit more Foster Carers to meet the increased demands for Foster Care. £147k of extra support the Leader further added, would also be committed to support individuals with mental health problems, in partnership with the Local Health Board.  


RESOLVED:                          That Cabinet approved the MTFS 2022-23 to 2025-26, including the 2022-23 revenue budget and the Capital Programme 2021-22 to 2031-32, and recommended these to Council for adoption. In particular it is asked to approve that the following specific elements are forwarded to Council for approval:


• The MTFS 2022-23 to 2025-26 (Annex 3 of the report).

• The Net Budget Requirement of £319,510,077 in 2022-23.

• A Band D Council Tax for Bridgend County Borough Council of £1,597.01  for 2022-23 (Table 17 of the MTFS).

• The 2022-23 budgets as allocated in accordance with Table 10 in paragraph 4.1.3 of the MTFS.

• The Capital Programme 2021-22 to 2031-32, attached at Appendix H of the MTFS.  


Supporting documents: