Issue details

This report provides an update to Cabinet on the county council's 2021/22 revenue and capital financial position, as at the end of June 2021 and an updated medium term financial strategy (MTFS) covering the period 2022/23 to 2024/25.

There is ongoing and unprecedented uncertainty in relation to future local government funding and the financial impact of the COVID-19 emergency has exacerbated the problem.

Accordingly, significant assumptions are required to underpin our forecasts. While these can be made with a level of confidence in the current year, over the medium term, with limited information, we rely heavily on advice from national bodies, benchmarking and discussion with peers.

Whilst a multi-year Spending Review was originally expected at the end of 2020, the Chancellor and the Prime Minister decided to conduct a one-year Spending Review, setting department’s resource and capital budgets for 2021/22 only in order to prioritise the response to COVID-19 and focus on supporting jobs. This means that the MTFS included in Appendix 'B' contains a number of assumptions due to there being no additional information available from the Government at this stage in the financial year.

Whilst the quarter 1 forecast presents an underspend of £5.219m for the current financial year, there remains a level of uncertainty about the longer-term impacts of the ongoing pandemic. The level of latent impact on demand for our services also remains unclear.

The current MTFS indicates an aggregated funding gap of £63.958m by 2024/25, an increase of £13.910m from the previously reported position in February but is largely due to the inclusion of an additional financial year within the forecast. The forecast funding gap for 2022/23 is £34.826m which is an improved position of £2.669m due to increased levels of funding forecast in the next financial year, particularly from capital receipts.

In summary:

(i)  The 2021/22 revenue forecast outturn is £876.194m, representing a projected underspend of £5.219m (0.59%) of the agreed budget.

(ii)  The MTFS has been updated for our current expectations of levels of funding, savings delivery, demand and inflation.

(iii)At Full Council in February 2021 the MTFS showed a deficit of £50.048m in 2023/24. The forecast now indicates a financial deficit of £63.958m by 2024/25.

(iv)The council is forecast to hold a General Reserve against unforeseen issues of £23.437m representing circa 3% of net budget, which is unchanged from the previously reported position. 

(v)  The council is forecast to hold £180.340m of uncommitted transitional reserve at the end of the financial year. This is sufficient to meet the forecast gap for all of the years covered by the MTFS, 2022/23 to 2024/25.