Medium Term Financial Strategy (MTFS) 2026/27 - 2030/31

1.1 Aims and Purpose of the Medium Term Financial Strategy

The Medium Term Financial Strategy (MTFS) sets the framework for understanding the challenges and forecasted future financial position of the council. The MTFS supports the council's aims and objectives and encourages discussions about the allocation of resources, helping the council to understand its financial resilience.

The MTFS has three main objectives:

• consider the scale of any financial challenges over the medium term to enable appropriate actions and interventions to achieve financial sustainability
• ensure the council aligns its resources to its priorities

and

• enable the prioritisation of investment based on the deliverability of outcomes

With the ultimate objective of maintaining the council's financial sustainability over the short, medium and long term.

1.2 Principles

The principles underlying the MTFS 2026/27 to 2030/31 are as follows:

• council resources will be directed to the delivery of the Corporate Plan and the Thrive agenda framework
• prudent assessment of future resources and unfunded cost pressures
• financial sustainability will be achieved and maintained through targeted investment, demand management, interventions, income generation and more efficient ways of working
• the MTFS assumptions will be reviewed on an annual basis
• the council will maintain its general reserve at a minimum of 3% of the net revenue budget to cover any major unforeseen expenditure
• the council will aim to balance its revenue budget without relying on the use of the general reserve over the period of the MTFS
  
  and
• the council will maintain earmarked reserves for specific purposes which are consistent with achieving its key priorities. The use and level of earmarked reserves will be reviewed at least annually

1.3 Governance

The MTFS process is an integral part of the council's financial planning process. The development of the MTFS is iterative and must be reviewed to ensure that it reflects the most up to date information and issues.

The MTFS is not the council's formal budget. The formal budget is approved annually by full Council. The MTFS is the high level financial plan which sets the context and the parameters in which the detailed budget planning can commence. As budget proposals develop, engagement is extended to a wide range of stakeholders including residents, scrutiny committees, staff, schools and trade unions. This consultation is considered as part of the budget setting process.

The MTFS is formally reported annually to Cabinet and Council.

1.4 MTFS overview

In the Spending Review 2025 the Government stated their intention to allocate funding according to need. In June 2025, the Government released a consultation on Fair Funding Review 2.0 reiterating the Government's intention to redistribute funding according to need, deprivation and ability of a council to raise income locally. However, there is currently insufficient information available from early exemplifications of the needs funding formulae to determine whether the outcome of this review will be positive for Gateshead. Therefore, the MTFS has been created using current funding estimates. The MTFS estimates a budget gap of £42.054m over the period 2026/27 to 2030/31.

The 'budget gap' is the term used to describe the difference between the funding that the council expects to receive and the estimated cost of delivering the services that the council expects to provide.

Implications for financial planning

The financial projections indicate that the council faces a budget funding gap of over £42m over the next five years.