Decision details

(a)      approve the Medium Term Financial Strategy for the General Fund, 2024;

(b)      note that the Scottish Government, in light of the July 2024 General Election and limited information provided by the UK Government in advance of the Autumn Budget Statement at the end of October 2024, has not yet published a revised Medium Term Financial Strategy (MTFS) for 2024. The Scottish Budget for 2025/26 has been announced as being presented to the Scottish Parliament on 4 December 2024;

(c)      note that the Scottish Government published its latest Programme for Government in September 2024, alongside announcements of several emergency spending controls and savings measures for 2024/25. This, in addition to the outcome of the Local Government Settlement for 2024/25 and information included in the previous MTFS from Scottish Government means the Central Scenario maintains a flat cash position for grant funding from the Scottish Government for future financial years. The MTFS model also includes previously approved savings of £9.155 million for 2025/26, and will be updated for the Council’s Budget meeting in March 2025 with details of the actual financial settlement for 2025/26;

(d)      note that the Strategy relies on delivering its intentions contained in the TOM1.2 report [Council, August 2022, CUS/22/171 and Council, February 2024, CUS/24/043] which describes the approach the Council intends to take through transformation and multi-agency working to contribute towards closing the gap between income and expenditure forecast;

(e)      note that although inflation has fallen back to Bank of England target levels, the 2024/25 pay awards for Scottish local government have still to be agreed, and this may have an impact on the future funding gap;

(f)       note that the report Capital Programme Delivery: Projects Update – CR&E/25/273 was presented to the Finance and Resources Committee on 12 September 2024;

(g)      note that the Capital Programme, as included in the Council Financial Performance Quarter 1, 2024/25 report (CORS/24/223), is the basis for capital financing costs and debt levels referred to in the MTFS and following the regular review of the Loans Fund Repayment Policy, approve the policy for 2025/26 and beyond as described in Table 5 of the MTFS;

(h)      note the 2025/26 Budget will be discussed and set by the Council in March 2025 following an extensive public engagement exercise as required by the Scheme of Governance and Budget Protocol, and that details of the Phase 1 consultation exercise are contained in Appendix 4. For Phase 2 consultation, while the central scenario will be key, it will be prudent to identify the impact of options that address the Downside scenario shown in the MTFS 2024 and the results of the engagement will be reported to Council in December 2024;

(i)       note that the Council’s Financial Resilience Framework shows that the General Fund has underlying resilience of £12m (uncommitted reserves) which is a falling percentage of the net General Fund budget. The Council should consider if, in the current financial climate, that is sufficient and decide during the 2025/26 budget setting process whether to budget for this to increase;

(j)       note that the strength of the Council Balance Sheet as at 31 March 2024 (net worth is £1.35bn) is reduced from to the year before. Key changes are in unusable reserves relating to the capital accounting and asset valuation changes;

(k)      note that the Resilience Framework identifies that the total value, and cost of servicing, debt is rising. Careful consideration will have to be given to each and every capital project to ensure it fits with the Council’s Strategic priorities, ensures it delivers Best Value, as well as being affordable, sustainable, and prudent in compliance with the Prudential Code;

(l)       note that the options available to the Council for managing rising debt levels include reducing the scale and scope of the General Fund Capital Programme or extending the programme of projects over a much longer period. With the costs rising, these capital financing costs are forecast to become a larger proportion of the Council’s net income. The Council approved a cap on the cost of capital financing of 12% of Net Revenue Expenditure and this will require difficult decisions if Revenue Funding from Scottish Government and Council Tax income does not increase in future years;

(m)     note that the Chief Officer – Finance has an instruction to review the Council’s Long term Financial Strategy and this will be reported to Council later this financial year; and

(n)      note that the Chief Officer – Finance will continue to develop the Financial Resilience Framework with a view to embedding it across the councils financial planning, financial monitoring, and financial year end reporting arrangements.