To update Cabinet on the development of the Medium Term Financial Strategy 2018-19 to 2021-22.

The Section 151 Officer reported on an update on the development of the Medium Term Financial Strategy (MTFS) 2018-19 to 2021-22.

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 necessary to achieve a balanced budget.  It encompassed 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 2017 General Election, the Government had signaled a possible relaxation of the austerity agenda with the Chancellor of the Exchequer having already retargeted deficit elimination. He stated that while details of any changes would not be clear until the autumn statement, there was the possibility of favourable implications for public sector funding overall.  There was also a rising tide of opinion over the abandonment of the public sector pay cap.  He also stated that funding for the Welsh Government would inevitably be affected by the Barnett Consequential and would depend upon the spending decisions made by the UK Government.  He informed Cabinet that there had been a significant rise in inflation in recent months, which was likely to persist over the medium term.  He stated that reductions in external finance had been exacerbated by additional pressures over and above inflation, which include demographic changes leading to increased social care costs as well as the apprenticeship levy.  He informed Cabinet that the Welsh Local Government Association in July 2017 had estimated that Welsh Councils face pressures of up to £762m over the next four years.

The Section 151 officer reported that against this background and 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 alternative scenarios had been developed of a best scenario of a reduction of -1.5% and a worst case scenario of -4.5%.  He stated that the Council would be required to make budget reductions of £23 million given the best case scenario, added to the £40m the Council had reduced budgets over the last five years. 

The Section 151 Officer reported that there had been a significant and growing number of budget reduction proposals which were proving challenging to implement either in part or full.  He stated that in Bridgend, as with many councils had been able to achieve an underspend position in recent years, which was forecast in 2017-18 and evident of the strong financial resilience of the council. 

The Cabinet Member Social Services and Early Help informed Cabinet that he had today attended a pay roadshow wherein the implications of the possible abandonment of the public sector pay cap and national pay bargaining were discussed.  He stated that every 1% pay increase would require the Council to find £1.7m, but it was unlikely that the public sector pay proposals would become clear until after the autumn statement.  He informed Cabinet that the Council’s Pension, Pay and Grading Manager would be putting together some calculations on how the various scenarios would affect the Council.

The Leader informed Cabinet that the 22 leaders of Welsh Councils had met last week and whose view was that more favourable public sector funding needed to be met by an increase in Revenue Support Grant.  He stated that the UK and Welsh Government’s need to be aware that local government has borne the brunt of austerity measures and the WLGA would be making that case accordingly to the Welsh Government.  He also informed Cabinet that it would be working with Overview and Scrutiny Committees and Group Leaders on the budget proposals which would be a budget for the whole Council.

RESOLVED:            That Cabinet:

(1)          Noted the work being undertaken in MTFS development strategy; 

(2)          Noted the significant requirement for further budget reduction proposals over the term of the MTFS which are under development, and will be brought to Cabinet/CMB for consideration during September.