Agenda item

To consider the proposed Medium Term Financial Strategy for 2026-2030.

The Committee considered the report (Agenda Item 7). Councillor Iain Cottingham (Portfolio Holder for Finance and Resources) explained that the purpose of the Medium Term Financial Strategy (MTFS) was to determine financial planning assumptions for future years and align these with the Council Strategy to ensure that strategic objectives were delivered. The MTFS highlighted the overarching key issues facing the Council’s finances and referenced the scenarios and wider uncertainties concerning the Council’s future revenue streams in light of national and local economic factors.

Councillor Cottingham drew attention to the projected EFS funding requirement that was set out in the report - a revised EFS request of £20m for 2025/26.

The report highlighted a significant reduction in the funding settlement over the period of the MTFS. This was particularly concerning when considering increasing costs and with the risk of needing to fund, for example, a high cost placement.

It was noted that projections were based on a worst-case scenario with regard to EFS. If the announced SEND/DSG override materialised then this would improve the position. A realistic approach had been taken to financial forecasting.

There was an increasing reliance on Council Tax. A 4.99% Council Tax increase was proposed for 2026/27.

A number of questions were asked by the Committee, the responses to which were as follows:

·       It was only possible to increase Council Tax in excess of 4.99% via a referendum or by making an application to Government as part of an EFS request (without triggering a referendum). It was noted that this was generally permitted for local authorities with historically low council tax levels.

·       The Section 151 Officer recommended a General Reserve Fund of £10.5m. The forecast closing balance for the current year was £15.8m, giving headroom of £5.3m.

·       The requirement for a £15m annual savings target was questioned for future years, when compared to £4.5million being identified for 2026/27. Joseph Holmes (Chief Executive) confirmed that the savings requirement needed to increase to reflect the reality of the Council’s financial situation and the need to meet EFS conditions.

·       Concerns were raised about the growing increase in EFS as a percentage of the capital financing requirement (CFR). The sustainability of operating with such high levels of borrowing was questioned. In response, it was explained that while EFS as a percentage of CFR was increasing, as a percentage of the overall revenue budget it was less concerning. The need to focus on the proportion of the budget funded by EFS, and to reduce this over the MTFS period, was emphasised.

·       The point was made that if the Council had been able to retain its business rates then it would not have been necessary to apply for EFS.

·       The roles of the Finance Improvement Group and Financial Review Panel were discussed. The Finance Improvement Group would oversee the Finance Improvement Plan (with external representation for accountability and challenge), with the aim of reducing EFS requirements. The Financial Review Panel was internally focused and met on a weekly basis to review day-to-day expenditure and consider opportunities for in-year savings.

·       The increasing proportion of revenue spent on debt interest and Minimum Revenue Provision (MRP) was identified as a growing concern. This would continue to be monitored on an ongoing basis.

RESOLVED that the report be noted. It would next be considered by Executive on 12 February 2026, followed by Budget Council on 26 February 2026.