Agenda item

To submit a report by the Director of Function (Resources)/Section 151 Officer.

The report of the Director of Function (Resources)/Section 151 Officer incorporating the Medium-Term Financial Plan (MTFP) 2021/22 to 2023/24 was presented for the Executive’s consideration. The MTFP sets out the Council’s likely resource requirements for the next three financial years and details how the Council plans to balance the resource requirement with the funding available.

The Portfolio Member for Finance reported that the MTFP has been finalised during a period of uncertainty surrounding the UK economy following on from the global pandemic and the continuing Brexit negotiations; putting the Plan together in these circumstances has been a challenging task. A range of factors is likely to affect the assumptions made in the MTFP as the Covid-19 crisis continues including the ending of the Furlough scheme and an expected rise in unemployment which will have an impact on the local economy with implications for the Council’s tax revenue and claims on the Council Tax Reduction scheme. Although Welsh Government has made available additional funding to support the Council in responding locally to the pandemic, there have been no indications hitherto about the local government settlement for 2021/22. Based on last year, information about the indicative settlement is expected in December/January but the figures are liable to change by the time the final settlement is announced. Despite all the uncertainty, the Council will be required to prepare a balanced budget.

The Director of Function(Resources)/Section 151 Officer advised that the purpose of the Medium Term Financial Plan is to project the costs of delivering services over the course of the next three years set against an estimate of the resources available and to chart a course to bridge the budget gap for each of the three years. Whilst the costs can be predicted taking into account known changes and making revised assumptions about the main factors that impact on the Council’s revenue budget including pay costs, inflation, pensions and demand, there is no intelligence to date regarding the level of Welsh Government funding for local government for 2021/22. It was hoped that the improved local government settlement for 2020/21 marked a turning point whereby local authorities would begin to be funded to the level they need to deliver services effectively but the Covid 19 crisis has cast doubt on this outcome. The report as at section 5 sets out the national and local budget pressures facing the Council and how these are planned to be accommodated by the MTFP.  Table 3 of the report shows the projected standstill budget for each of the three years from 2021/22 to 2023/24. The estimated standstill budget (the cost of continuing to provide services to the same level, delivered in the same way as in 2020/21) represents a cash increase of 8.6% over the 3 year period (but not including Covid-19 related costs). The estimated standstill budget is funded from the level of Aggregate External Finance (AEF) received from Welsh Government (made up of the Revenue Support Grant and NNDR pooled funding) and from the Council Tax raised locally. Table 4 of the report shows the impact that various changes in AEF would have on the Council’s funding and the level of Council Tax that would have to be set accordingly. A reduction of 1% in the AEF would require a Council Tax increase of 3% in order to ensure that the level of funding in cash terms remains at least at the 2020/21 level whilst a reduction of 2% in AEF would require a Council Tax increase of 6%. For 2021/22 it would require AEF to rise by 3% and Council Tax by 9% to fund the £6.059m increase in the Standstill Budget.

As it is very unlikely that AEF will rise by 3%, a Council Tax increase of in excess of 10% would be required to fund the standstill budget of £148.2m in 2021/22. It is therefore necessary to find a level of savings in 2021/22 in order to balance the budget. Given that the traditional avenue of delivering efficiency savings has by now been exhausted, the budget cuts will have to come from changes in the way the Council delivers services and a reduction in the services it delivers. Trying to deliver the services currently provided with significant reductions in funding will lead to the continued overspending of budgets, further reductions in the level of general balances and a significant risk to the financial viability of the Council. Difficult and unpopular decisions will have to be taken for the Council to be able to deliver a balanced budget, which accurately reflects the cost of running the services it provides.

In agreeing that the outlook was very challenging the Executive highlighted the following –

•           The vital role that local authorities in Wales have played in responding to the Covid-19 emergency in keeping essential services running throughout the period and in supporting the most vulnerable in communities in acknowledgment of which they should be awarded a fair funding settlement to enable them to properly meet the pressures and demand on services, and to help support economic recovery.

•           That the level of savings which local authorities have had to make over several years - £24.616m by the Isle of Anglesey County Council in the period from 2013/14 to 2020/21-  is not sustainable.

•           That were the Council to be properly funded in accordance with need, local taxpayers many of whom will be affected economically by Covid-19, would not have to fund the yearly shortfall in the Council’s budget through high Council Tax rises.

It was resolved to note the contents of the Medium Term Financial Plan 2021/22 to 2023/24 and to approve the assumptions made therein.