To recommend to Council that the Medium Term Financial Strategy be adopted. 

That it be RECOMMENDED TO COUNCIL that the Medium Term Financial Strategy 2024/25-2028/29 be ADOPTED. 

59.1          The report of the Executive Director: Resources, circulated at Pages No. 40-62, attached the Medium Term Financial Strategy (MTFS) 2024/25-2028/29 which the Committee was asked to recommend to Council for adoption.

59.2          In presenting the report, the Lead Member for Finance and Asset Management advised that it was important to note the comment at Appendix 1, Paragraph 1.5 of the report which stated that the Council was not in immediate danger of a Section 114 notice being required and the next two budgets looked manageable provided that a range of sensible decisions were made.  He recognised that, looking ahead, there were parts of the document which may be uncomfortable but that was why a five year strategy was necessary in order to feel confident with the authority’s direction and to update it at appropriate times.

59.3          The Lead Member went on to explain that this was an update to the MTFS approved at Council in January 2023 and reflected the latest information and financial assumptions.  The strategy had been brought forward to set the scene for Members ahead of the 2024/25 budget round which was about to begin in earnest.  He stressed that it was merely a financial forecast and its approval did not bind the Council to anything, for example, setting Council Tax for the next five years or setting staffing budgets.  Local government funding continued to remain uncertain with no assurance over any funding stream in the medium term and the MTFS focused on a ‘likely’ funding scenario based on previous government communication and consultations which resulted in a £3.5m funding ‘cliff edge’ in 2026/27.  Given uncertainties, there were potentially many different scenarios – some worse but many better – and the MTFS illustrated some of those better funding scenarios which highlighted the, albeit remote, possibility of a £5m improvement in financial projections.  Costs had been projected forward using latest estimates of inflation and reflecting known unavoidable cost increases such as external audit and the Materials Recovery Facility (MRF) gate fee and it was noted that the cost of providing current Council services was set to increase by £3.2m over the next five years.  A managed level of growth had been included to reflect the Council’s aspirations.  Bringing all of this together and reflecting the ‘likely’ funding scenario, the Council could face a deficit of over £6m over the next five years.  The deficit reduction programme has been depleted and renewed focus was required on delivering efficiencies within services, generating additional income and considering the future of some service areas – even after that, it was unlikely the Council would find enough of those actions to fully close the gap, therefore, it would be reliant on the government finding a long term solution for local government finance to guarantee sustainability for the Council.  Whilst the Council had a £3m reserve which could support the financial challenges faced, 2026/27 going into 2027/28 looked particularly challenging based on current funding projections.  It was noted that a Member seminar was due to be held later that evening to discuss this in more detail prior to the report being taken to Council.   The Lead Member felt it was worth noting that the Chancellor’s Autumn Statement had indicated that no additional funding would be coming forward to help local government and an article in The Times on Monday had focused on the “Council crisis being faced in an election year” which made claims that the Local Government Association had written to the Chancellor sharing that 90% of Councils would need to dip into reserves to maintain statutory services; since 2010, Council budgets had been cut by an average of 27%; and a wave of local authorities were expected to declare in 2024 that they could not balance the books – Tewkesbury Borough Council was clearly not alone in facing this.

59.4          A Member sought clarification regarding the ‘damping regime’ referenced within the document and the Executive Director: Resources advised that damping was a term used to describe the mechanism used by the government to mitigate against changes to funding.  The Council’s projection for the 2026/27 cliff edge was based on the government giving some support in the short term to limit the damage - a £3.5m reduction in funding was projected with a £600,000 damping grant for one year which would give some breathing space but would not save the authority from the cliff edge entirely.  Officers did not have the detail of the damping regime, or whether there would be one, but the projection was based on what had been done previously.

59.5          A Member recognised that a great deal of work went into producing the MTFS and, whilst it was sensible to have one, the current situation meant that the position beyond the next 12 months was based on considerable estimation.  Tewkesbury Borough Council was a few steps behind other authorities in terms of the cliff edge and the question was how high it would be which was impossible to know at this stage.  He could not imagine a scenario where what was predicted would actually happen as, if it happened to Tewkesbury Borough Council, it would be catastrophic for many other local authorities.  He felt this needed to be carefully communicated to Members with a strong message that, whilst there was a degree of certainty for the next couple of years, beyond that was mainly conjecture.  The Executive Director: Resources shared this sentiment and indicated that it was phrased in the document as the ‘likely’ scenario but, given the amount of uncertainty, the MTFS also tried to give an indication of what a better scenario would look like.  Without government intervention the impact on the sector would be catastrophic but how the government would deal with that he was not sure.  The biggest frustration for the Finance team was not being able to provide certainty for Officers, Members and residents.  Several Members noted that the report was in the public domain and expressed the view that any communications around it needed to be handled carefully so as not to cause unnecessary panic and Members were assured there would be a robust communication plan in place.  The Lead Member for Finance and Asset Management advised that the MTFS was based on what was known currently and whilst he suspected that the situation would change, it was important to be honest should that not be the case.  Another Member indicated that this information was nothing new and it was important to demonstrate awareness of the possibility of the situation and make clear it had been handled as best it could.  A Member indicated that, equally, it was important not to make any knee jerk decisions which would be detrimental to the authority in the long run, should the worst case scenario not materialise, for instance, cutting services which then required reinstatement and reinvestment later down the line.

59.6          The Chair indicated that he had recently attended a meeting of Council Leaders across the South West and there had been cross-party lobbying of the new Secretary of State for Communities and Local Government around the lack of certainty for local authorities.  Councils such as Tewkesbury Borough Council were continually facing the cliff edge despite being small and cautious in terms of spending.  Furthermore, the absence of a strong Council Tax base due to decisions dating back to the 1990s continued to impact this Council – he had raised the point that District Councils did not have the autonomy to raise Council Tax to the level required to do the tasks required by residents despite Parish Councils being given that freedom.  The Chancellor’s Autumn Statement had been beyond disappointing, offering no comfort whatsoever, and what had been a worry for his predecessors would certainly remain for him.

59.7          It was proposed, seconded and