Decision details

The Council resolved:-

(i)             to note that the Scottish Government published its latest Medium Term Financial Strategy in May 2023.  This indicated that while the Scottish Resource Budget was increasing up to 2027-28, in both cash and real terms, it was not expected to rise at the same rate as the spending bill, creating a growing funding gap over time;

(ii)           to note that in light of the deficit in the Scottish Budget forecast as part of the Scottish Government’s MTFS, May 2023, and expectations for Local Government included in the Resource Spending Review, published in May 2022, the future funding assumption within the MTFS had been revised to flat cash for the period through to 2025/26, with a 1% increase thereafter.  Further information would be available once the Scottish Budget for 2024/25 was published in December 2023 and the Local Government Settlement was issued.  At this point the MTFS model would be updated to reflect the latest data;

(iii)          to approve the Medium Term Financial Strategy for the General Fund, 2023;

(iv)          to note that the Strategy relied on delivering its intentions contained in the TOM1.2 report [Council, August 2022, CUS/22/171] which described the approach the Council intended to take through transformation and multi-agency working to contribute towards closing the gap between income and expenditure forecast;

(v)           to note the reported impact that pay and price inflation and supply chain volatility was continuing to have on our current financial year [Finance & Resources Committee, August 2023, RES/23/255] and that the impact was anticipated to continue to have an effect on the future funding gap;

(vi)          to note that the commitments contained within the Partnership Agreement, adopted on 18 May 2022, as part of the 2023/24 budget setting process were prioritised and where appropriate the decisions taken by the Council had been incorporated into the MTFS to reflect the financial implications of those decisions;

(vii)        to note that a review was being undertaken of the Capital Programme, in light of the financial environment, and the best value considerations, with a report being provided to the Finance and Resources Committee in September 2023;

(viii)       to note that the current Capital Programme, as included in the Council Financial Performance Quarter 1, 2023/24 report, was 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 2024/25 and beyond as described in Table 5 of the MTFS;

(ix)          to note the 2024/25 Budget would be discussed and set by the Council in February/March 2024 following an extensive public engagement exercise as required by the Scheme of Governance and Budget Protocol.  Councillors would be issued with full detail of the Phase 1 consultation referred to in Section 5.10 of the Appendix.  For Phase 2 consultation, this would be based on the central scenario shown in the MTFS 2023 and the results of this would be reported to Council in December 2023;

(x)           to note that the Council’s Financial Resilience Framework showed that the value of useable reserves had continued to rise on the back of additional funding being provided late in financial years for specific purposes.  The General Fund had underlying resilience of £12m (uncommitted reserves) which was a falling percentage of the net General Fund budget.  The Council should consider if, in the current financial climate, that was sufficient and decide during the 2024/25 budget setting process whether to budget for this to increase;

(xi)          to note that the strength of the Council Balance Sheet as at 31 March 2023 (net worth is £1.5bn) was broadly similar to the year before.  Key changes were a reduction in long-term pension liabilities (down £0.1bn) offset by an increase in total borrowing (up £0.1bn);

(xii)        to note that the Resilience Framework identified that the total value, and cost of servicing, debt was rising.  The rising cost of debt would have to be managed and it was notable that short-term debt had risen during 2022/23, which had been a deliberate choice to avoid locking into rising interest rates for the long-term when financial forecasts would suggest the cost of borrowing reducing over the short to medium term;

(xiii)       to note that the options available to the Council for managing rising debt levels included reducing the scale and scope of the General Fund Capital Programme or extending it over a much longer period.  With the costs rising, as noted at 2.12, these capital financing costs were forecast to become a larger proportion of the Council’s net income.  The Council must consider if the proportion of revenue resources allocated to capital financing was appropriate, as per the Prudential Code, and it should make changes as necessary as part of the 2024/25 budget setting process; and

(xiv)       to note that the Chief Officer - Finance would continue to develop the Financial Resilience Framework with a view to embedding it across the council’s financial planning, financial monitoring and financial year end reporting arrangements.