To update Cabinet on the development of the Medium Term Financial Strategy (MTFS) 2017-18 to 2020-21.

The Section 151 Officer reported on an update on the development of the Medium Term Financial Strategy (MTFS) 2017-18 to 2020-21. 

He stated that the MTFS is set within the context of UK economic and public expenditure plans, Welsh Government priorities influencing settlements and legislation which defines the scope the Council has to raise income from council tax and to borrow for capital expenditure.  It also includes all elements of the Council’s financial strategy for the next four years, with emphasis on planned budget reductions and encompasses the Capital Strategy to ensure that capital investment proposals are prioritised and evaluated in accordance with asset management principles and contribute towards the Council achieving its strategic and service priorities. 

The Section 151 Officer informed Cabinet that following the Welsh Assembly elections a minority government has been formed, which includes the appointment of a new Cabinet Secretary for Finance and Local Government.  Against this background and with no clarity over Local Government Reform there remained uncertainty over local government funding.  He stated that in the absence of further information on likely future settlements, the Council would continue to work towards a most likely scenario in the MTFS of a reduction of -3.2% in Aggregate External Financing.  He also informed Cabinet that in pursuance of improvements to its Financial Strategy development, it had expanded the budget development process to include the best case scenario of a reduction in AEF of -1.5% and worst case scenario of a reduction in AEF of -4.5%.  He stated that the Council would be required to make budget reductions of £25 million given the best case scenario.  This would rise to over £45 million in the worst case scenario and given the most likely scenario would result in budget reductions of over £36 million having to be delivered which would require changes to the level of scope of discretionary services which the Council provides and involving difficult choices on service delivery.  The Section 151 Officer reported that a key planning assumption which influenced the Financial Strategy and Budget Reductions development is schools’ protection whereby schools’ delegated budgets were afforded protection.  He informed Cabinet that under current MTFS assumptions there is no protection afforded to schools and the budget reductions included a 1% efficiency saving from schools’ delegated budgets from 2017-18 to 2019-20.  He stated that if the Welsh Government continues to afford protection to schools this will put more pressure on other service areas. 

The Section 151 Officer reported that the Corporate Plan will direct the allocation of resources in the MTFS and all areas will be set a 1% annual efficiency target with further reductions over and above this targeted more heavily towards budget areas that contribute less towards the Council’s objectives.  He stated that Directors are reviewing existing budget proposals to confirm their current status and achievability.  The remaining revenue budget shortfall under a most likely scenario over the four years of the MTFS was currently estimated at £27.371 million.

The Section 151 Officer reported that the Budget Research and Evaluation Panel had determined to focus research on strategic or large scale budget reductions and had agreed to invite the Cabinet Member Resources to its future meetings to strengthen the link between the BREP and Cabinet.  Budget options, once developed, would be the subject of public consultation in the autumn. 

The Cabinet Member Resources informed Cabinet of the challenges which lay ahead of the Council and stressed the need to impress on the Welsh Government for money to be spent on early intervention.  The Deputy Leader also impressed on the need for early intervention to reduce demand on services and reflected on the increasing uncertainty about the future financial outlook particularly following the UK Government abandoning its target for a public sector budget surplus by 2020.  

RESOLVED:            That Cabinet:

1.         Noted the work being undertaken in MTFS development strategy;

Noted the requirement for further budget reduction proposals totaling over £27 million over the term of the MTFS which are under development.