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

2.1 Council priorities

In July 2025, the Deputy Prime Minister announced plans for a Local Government Outcomes Framework. The framework will clarify the key outcomes that the Government expects local authorities to achieve for local people and communities. The framework will provide outcome-based performance measures against key national outcomes and is due to become operational from April 2026. This framework will be a key consideration for the allocation of resources through the MTFS to enable the council to achieve these outcomes.

The Corporate Plan sets out the ambitions of the council and how these ambitions will be achieved. The key priorities are summarised below:

People Gateshead - putting people and families at the heart of everything we do

• giving all children the best start in life
• thinking long-term and adopting a preventative approach
• empowering good health outcomes across the life cycle
• providing integrated and targeted family support where it is needed and reducing the risks of harm to young people
• ensuring people start life well, live fulfilling lives and enjoy later life in good health
  
  and
• providing information and advice which promotes independence through enablement and technology; is based on strength base practice and encourages a home first approach

Fair Gateshead - tackling inequalities so people have a fair chance

• tackling inequalities so that people have a fair chance
• tackling the actions set out in the Health and Wellbeing strategy, ensuring a healthy standard of living for all
• championing and supporting the delivery of high quality, inclusive education for Gateshead's children
• reducing the need for children and young people to come into care
• ensuring all children and young people in care have the best care and stable homes
  
  and
• improving outcomes for children with SEND

Communities Gateshead - supporting communities to support themselves and each other

• ensuring that people are safe and feel safe
• strengthening the support provided by the voluntary, community and social enterprise sector
• recognising the support of Gateshead's caregivers
• working with communities to ensure there are high-quality homes for children who need care
  
  and
• supporting and investing in the development of stronger and more resilient communities

Prosperous Gateshead - investing in the local economy to provide sustainable opportunities for employment, innovation and growth

• attracting and supporting investment in the local economy
• tackling unemployment and ensuring residents have the skills and qualifications to enable them to access opportunities
• supporting regeneration and development opportunities
• creating a fairer, green and more resilient economy
  
  and
• maximising the visitor and rural offer along with the opportunities that devolution for the North East provides

Future Gateshead - working together and fighting for a better Gateshead

• ensuring there is a broad range of homes available for residents
• improving connectivity to enable residents to travel for both work and pleasure
• protecting the environment by reducing borough wide carbon emissions
  
  and
• fostering civic pride, where diversity is embraced and people are proud of their community

The Corporate Plan is reviewed and refreshed regularly and will ensure that the priorities of the council align with the Local Government Outcomes Framework. The priorities and objectives of the Corporate Plan feed into the group and service plans to ensure that every department is working towards the shared goals of the council.

The council's priorities are important for the council's budget, MTFS, Capital and Treasury Management strategies to ensure that resources are spent in line with council priorities and support the long-term sustainability of the council.

Implications for financial planning

The MTFS needs to reflect the revenue funding required to support the corporate priorities and outcomes. This could mean that resources are redirected, there is growth for specific service delivery or there is capital investment to enable service delivery.

Any increase to revenue expenditure may require interventions and/or additional income to ensure that the associated increase in budget gap is addressed.

The MTFS links council priorities to the requirements of the budget.

2.2 Gateshead demographics

Population

As of mid-2024, Gateshead had an estimated population of 202,7601. It is predicted that the Gateshead population, as a whole, will decrease during the period of the MTFS. In terms of age profiles, it is estimated that the age ranges of 0-15 and 50-64 will reduce by 4-6% and over 65 years will increase by 4-6%. This potentially means an increased pressure on school budgets due to a reduction in pupil numbers and an increased pressure on adult social care budgets due to an aging population.

Implications for financial planning

A reducing borough population places greater pressure on funding. This is because population projections are used by the Government in their funding formula for the allocation of the Revenue Support Grant. A reducing population would reduce the council's share of need as it suggests a reducing need for funding.

A reducing school-age population puts more schools under pressure in terms of funding and sustainability and means potentially supporting schools in deficit positions.

An increasingly ageing population potentially puts more demand on adult social care services.

A static working age population potentially leads to increased budget pressure due to a lack of economic growth.

Potential capital investment is required in housing to attract and retain residents. An increasing population within the borough will increase both direct income (Council Tax receipts) and indirect income (Government funding). A MTFS in financial balance will be supported by an increased population.

Housing

The Government target for house building in Gateshead is 811 per annum. This is a significant target and work on the joint local plan with Newcastle City Council is being undertaken to update housing requirements. Housing development will come from range of sources such as private developers, the Gateshead Regeneration Partnership and the Housing Revenue Account (HRA). The council has an ambitious Housing Strategy to build affordable, high quality, energy-efficient homes.

Implications for financial planning

The financing costs of the council's house building programme are captured in the HRA business plan (as the HRA is a ring-fenced account.) From a general fund perspective, planned growth in housing will mean that new communities will exist. These will need the support of council services, such as waste collection and schools. Demand for these services will require careful modelling, including the extent to which costs may be offset by additional Council Tax. There is a need to gauge how demand for services in new communities, including school places, might affect demand in other parts of the borough.

Employment

Gateshead's economy is fairly static. The number of active businesses in 2023 was down by 55 compared to 2022 according the ONS Government statistics. The gross median weekly pay is also just below the average compared to other authorities at £563 in 2023.

According to the Living Wage Foundation's 2024 report 17.3% of employee jobs were paid below the Real Living Wage in April 2024. The Real Living Wage is an independently calculated hourly rate of pay set to cover basic costs of living.

Implications for financial planning

Financial forecasts will need to consider future National Living Wage rates, both as an employer and commissioner or procurer of services within the borough.
Increased numbers of better-paid jobs within Gateshead will have a positive benefit to the local economy.

Deprivation

In 2019 Gateshead ranked 47th most income deprived of 316 councils across England. There is wide disparity across the borough in terms of deprivation which can impact on life expectancy. There is a 10.8 year gap in life expectancy between those children born in the most deprived areas of Gateshead to those in the least deprived areas. This is not just isolated to Gateshead. Residents in the South of England can expect to live on average 13 years more than residents in the North East of England.

Implications for financial planning

Policies to tackle poverty and create healthy communities will need consideration in financial planning. This may include ensuring there is sufficient resources within the budget to create clean environments, good quality education, sustainable employment opportunities and warm safe homes. These policies will have revenue and capital implications. For example, the provision of affordable housing (HRA), growing Gateshead with a continued focus on education and regeneration to create employment. These all take time to implement so resources may be required in the short term to tackle homelessness, exclusions and repairs.

2.3 Economic and financial outlook

UK context

On 7 August 2025, The Bank of England's Monetary Policy Committee (MPC) announced the base rate would be reduced to 4.0%. The MPC's forward guidance suggests further rate cuts will be dependent on evidence of waning inflationary pressures, with markets expecting the next cut to 3.75% by October 2026. The Committee noted that monetary policy would need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term had dissipated further.

As at 21 May 2025, the Office for Budget Responsibility estimated that the consumer price index (CPI), which is the indicator for inflation, would be 3.3% for September 2025 compared to 1.7% in September 2024. CPI is not expected to fall to the target 2% until Autumn 2026.

Market analysts estimate the economy will grow by 1.0% in 2025. This is down from the 2% estimate in October 2024.

Implications for financial planning

In theory, relatively stable forecasts of inflation should provide a degree of planning certainty. General wage growth and the easing of restraints on public sector pay awards will mean additional financial pressure for the council, both in terms of its own workforce and external spending, as the council procures services from suppliers.

Public sector net borrowing

The level of public sector net borrowing (PSNB) influences Government spending policy. Higher debt interest payments and lower than expected receipts to Government means that Government policies are only achieved if there are reductions to day-to-day department spending. This was the reason for the years of austerity; trying to target a reduction in PSNB. Public sector net borrowing is expected to fall each year to 2028/29 to reach £74.0bn or 2.1% of GDP, meaning that day-to-day spending in Government departments is not expected to increase.

Implications for financial planning

The Spending Review in June 2025 suggested growth in grant funding for Local Government of £0.8bn over three years to 2028/29 and assumed £9.2bn of growth for Local Government from local taxation increases.

The Government is committed to multi-year settlements and the redistribution of funding to those areas of greatest need. However, there will be a requirement for a period of transition to reduce instability for some Councils.

The Local Government Finance Settlement will provide clarity on grants that are rolled into the Settlement Funding Assessment (SFA) and will be published before the end of 2025.

The implications for individual local authorities like Gateshead are currently unclear.

2.4 Government funding

The 2025/26 Local Government Finance Settlement was a one year settlement and, on the whole, was more positive than anticipated. At +7.8%, Gateshead's increase was slightly above the England average of +6.0%. The following chart models the RSG since 20215-16.

Whilst settlements in recent years have seen marginal increases, often the benefit has been eroded by the inclusion of new responsibilities within the overall funding envelope. This means at least part of the additional funding came with additional responsibilities or the funding was ring-fenced to particular areas.

In June 2025, the Government launched a consultation on the Fair Funding Review 2.0. The Government's aim for the review was to move away from wasteful bidding pots and create a new transparent method of funding which would align relative need, cost and resources to enable the targeting of funding to where it is most needed.

Credible expert modelling has taken place based on the information contained within the consultation document which suggests that early indications are that following transition arrangements the Local Government Settlement will not address the funding issues faced by Gateshead Council.

This MTFS does not include any changes related to the Fair Funding Review due to the lack of information available at this time. The MTFS prudently assumes some Government funding will end and/or remain cash flat.

If the Local Government Settlement Funding is worse than the planning assumptions contained within this MTFS, there may be a need to identify significant additional budget cuts at short notice. This could pose a material risk to the council's financial resilience, as the achievability risk associated with such savings is likely to be high. In order to address this risk, the council has a contingency base budget. It is used to invest in priority areas, but that investment must be one-off and decided afresh each year. This means that the budget is used proactively, but could be deleted without affecting day-to-day services if required.

A further mitigation is the increased emphasis on planning for interventions within group plans over the medium term.

The Government also announced its intention to reset the business rates retention model in 2026/27 to create a new baseline for each authority. Again, no assumptions have been made for the changes in the business rates system due to insufficient information at this time. This position will be kept under review.

2.5 Council financial context

Over the years the financial challenges have impacted on the shape of the council's budgets.

Some groups have contracted, and some have grown.

Demand and price pressures have been acute in areas such as social care, services to schools and temporary accommodation. The council has a strong track record of delivering to budget and has a stable reserves position.

The council had a positive outturn for 2024/25. The overall provisional 2024/25 revenue outturn position for the council, including non-service budgets and financing, results in the delivery of the budget for the year with an overall positive revenue balance of £4.735m. The positive year-end position is a testament to the collective approach taken by groups and services that kept pressures under review within the financial year and ensured that action was taken in a timely manner to outturn within budget.

Although the overall outturn is positive, the position masks overspends in some services, such as children's social care. The positive outturn remains a significant achievement given the financial pressures faced by the services and enables the council's sound financial position to be maintained.

On 20 February 2025 Council agreed a revenue budget for 2025/26 of £328.629 which was balanced through the planned use of £8.500m of reserves. This approach was in line with Cabinet agreement and the MTFS approach to use reserves to allow time for the identification of budget cuts and efficiencies.

Implications for financial planning

The assumption for the MTFS is that all budgets will be spent in full with no under or over spends. This is a prudent assumption given that the council has a strong record of delivering to budget.

The MTFS assumes that the planned use of reserves to balance the budget will end in 2026/27 and reserves will start to be replenished from 2027/28 onwards, provided that in year budgets are delivered successfully.

The MTFS is in balance without the use of the financial sustainability reserve from 2027/28 if budgets are delivered.