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 September 2021 and an updated medium-term financial strategy covering the period 2022/23 to 2024/25.

It has been announced that the Chancellor of the Exchequer will detail a 3-year spending review on 27 October 2021. The date was set following the prime minister’s announcement that the government would be introducing a new levy of 1.25% to fund social care.

Accordingly, as no information is yet available 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 to prioritise the response to COVID-19 and focus on supporting jobs. This means that the medium-term financial strategy included in Appendix 'B' contains several assumptions due to there being no additional information available at this time. Further information will now be available following the spending review for the Quarter 3 report.

Whilst the quarter 2 forecast presents an underspend of £16.441m for the current financial year, there remains a level of uncertainty about the longer-term impacts of the ongoing pandemic. The extent and profiling of any latent impact on price or demand for our services also remains unclear.

The current medium-term financial strategy indicates an aggregated funding gap of £58.583m by 2024/25, a £5.395m decrease from the previously reported position at Quarter 1 of this financial year. The forecast funding gap for 2022/23 is now £30.470m which is an improved position of £4.356m from Period 1 resulting from further analysis on demand resulting in a reduction in the level of funding built into the previous medium-term financial strategy position. 

In summary:

(i)  The 2021/22 revenue forecast outturn is £864.972m, representing a projected underspend of £16.441m (1.87%) of the agreed budget.

(ii)  The medium-term financial strategy has been updated for our current expectations of levels of funding, savings delivery, demand, and inflation.

(iii)At Full Council in February 2021 the medium-term financial strategy showed a deficit of £50.048m in 2023/24. The forecast now indicates a financial deficit of £58.563m 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 £183.275m 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 medium-term financial strategy, 2022/23 to 2024/25.