Agenda item

Report of the Deputy Chief Executive, Place

The Board considered a report of the Director of Finance and Corporate Services presenting the Medium Term Financial Strategy (MTFS) for adoption by the City Council.The previous strategy was approved in October 2018.The Strategy set out the financial planning foundations that support the Council’s vision and priorities and the financial and policy context for the Council’s forthcoming Budget process. Cabinet would consider proposals within the Pre-Budget Report in November and the final Budget Setting Report would be brought to Cabinet and Council in February 2020.

The national funding background to the MTFS was that the Council was currently within the final year (2019/20) of a four-year funding settlement from Government. A major upheaval in the funding arrangements for all councils that had been signalled for the period from 2020/21 onwards had now been postponed until 2021/22 at the earliest. The Pre-Budget report that would be considered by Cabinet alongside this one set out the impact of the one-year settlement proposed for 2020/21. Current medium-term estimates were still based on assumptions of local authorities continuing to face significant financial pressures.

The national political environment was subject to much fluidity and uncertainty, resulting from deliberations over the UK’s exit from the European Union and the dynamic political situation that has flowed from this. The likelihood or otherwise of the Government’s ability or intention to adhere to its fiscal rule (that borrowing should remain below 2% of Gross Domestic Product) has been widely questioned by commentators. The short-term impact of this was some short-term additional funding for local government but with no guarantee that this would continue beyond 2020/21. Therefore, concern remained that the pressure on public finances would not ease in a sustained way and that real reductions in available revenue resources and spending levels were likely to continue.

On a local level, the Council continued to be faced with challenging conditions affected by shortfalls in achievement of a small number of existing savings plans and financial pressures in particular within services for children, housing and homelessness. Although the Council had some ambitious Capital Programme plans, the scale and pace of these represented a significant challenge in terms of the Council’s ability to deliver them to the required timescales and within its existing project capacity. In addition, the elements of the Programme that were funded by future West Midlands Combined Authority grant approvals would not be able to proceed until resourcing for these grants has been secured through the WMCA.

The Council would need to maintain dynamic financial models that take account of changes in its medium-term budget position and ongoing re-evaluation of its Capital Programme. This may include adopting some measures which had a shorter-term focus or which re-evaluated the Council’s approach to financial risk. These would be set out fully at the point of decision making.

The report summarised the key national and local contexts that framed the Strategy.

Whilst acknowledging that there were factors outside of the City Council’s control, the Board questioned the officers on aspects of the report including the importance of the West Midlands Combined Authority (WMCA) contribution of £434m, the £203m that had been agreed in principle and the potential financial risk as no settlement figure had been received from Central Government.

In response to a question and subsequent discussion about the forecast revenue bottom line deficit of 16.7m for 2020/21, the Cabinet Member confirmed that Reserves would not be used to fund ongoing revenue spend.

RESOLVED that the Scrutiny Board support the Medium Term Financial Strategy whilst recognising that there were limitations on the accuracy of the figures due to factors outside of the City Council.