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

3.1 Budget gap

The estimated cumulative budget gap for the period 2026/27-2030/31 is set out below:

This is the gap after assuming increases in Council Tax and the adult social care precept in line with Government's assumptions, which are 2.99% for Council Tax and 2% for the social care precept. This gap will need to be addressed through a combination of interventions, income generation and cuts.

3.2 Council Tax

Council Tax accounts for 35% of the council's general funding. This means that in order to generate a 1% increase in overall funding, Council Tax would have to increase by almost 3%. This is called the gearing of the tax. The council has little control over the majority of its funding, which is through Government grant. The variables that must be considered when setting Council Tax include:

• the Council Tax base of the authority
• Council Tax Support budgets
• the level of the Council Tax
• collection rates

Council Tax Base

The Council Tax Base is the number of Band D equivalent properties in the borough. In simple terms, it reflects the number and type of dwellings in the borough and takes into account if the dwellings may be eligible for Council Tax discounts or exemptions. Local authorities use the Council Tax Base to calculate how much Council Tax is expected to be generated. Whilst other factors affect the Council Tax Base, broadly speaking, property development in an area usually means that the Council Tax Base will increase, generating more Council Tax income.

The MTFS assumes the following growth in the Council Tax yield over the medium term given anticipated housing development in the borough.

Council Tax Support

The council allocates Council Tax support to eligible recipients under the Local Council Tax Support Scheme (LCTS). The MTFS does not assume any reduction in the Council Tax Base as a result of the LCTS scheme and assumes no changes to the eligibility of residents.

The council is undertaking a fundamental review of its LCTS scheme and this will be considered by Cabinet and Council.

The level of the Council Tax and Adult Social Care Precept

In the Spending Review 2025, the Government assumes that all councils will increase Council Tax by the maximum allowable prior to triggering a referendum and uses this assumption in the calculation of the funding allocations. Therefore, in line with the Government assumptions, the MTFS assumes that Council Tax and the Adult Social Care Precept will increase by 4.99% per annum. This assumption is a planning assumption and it is not fixed. The actual level of Council Tax is agreed by Council on an annual basis.

As mentioned previously, the gap provided in section 3.1 is after assuming an increase. The table below shows how the budget gap would increase if either of the following scenarios were to occur:

• Council Tax and the precept were not increased over the MTFS period
  
  and
• only the Adult Social Care Precept was increased

Implications for financial planning

The level of Council Tax and Adult Social Care Precept increases are decisions for Full Council and are agreed annually as part of the budget setting process. The agreed increase has a significant impact on the overall level of funding available for the council and there is an expectation from Government that over the spending-review period the portion of the council's budget funded from local taxation will increase.

3.3 Interventions

The MTFS projections around actions to close the budget funding gap are as follows:

In addressing the gap there will be a need to:

• capture the full financial benefits of early intervention and preventative work ongoing across the council, in order to manage the pattern of future demand for Council services
• consider the level at which it is affordable to continue to subsidise services of a more discretionary nature
• continue to maximise income streams and explore the potential for new income streams, particularly where services are not universal
• continue to target efficiencies, including baseline efficiencies for all services
• continue to undertake service reviews and to identify cross-group savings in areas such as corporate landlord functions and transport
• identify opportunities to work across groups and in partnership with other organisations
• target productivity savings to ensure that optimum value for money is achieved within scarce resources, including making best use of digital technology
• consider how targeted capital investment may deliver revenue savings
  
  and
• implement the corporate reviews to provide efficiencies and smarter ways of working

In developing detailed budget-cut proposals for the medium term, there will be a need to work across group boundaries to review all elements of expenditure that the council is able to influence. The corporate reviews are one of the processes being implemented to enable this cross-cutting look and the reviews aim to deliver smarter ways of working along with efficiencies.

Further work on developing a fully defined set of proposals for potential cuts to the budget in 2026/27 will take place over the coming months in order to inform the 2026/27 budget setting.

Social care interventions are captured in group and service plans. Going forward, all group and service plans will incorporate future years' pressures and intervention plans which can then be fed into the MTFS process.

3.4 Capital financing

Any capital investment that is funded by prudential borrowing creates a revenue charge to the budget which is to provide for the repayment of the borrowing. In order to close the gap, the capital programme could be reduced thereby reducing the additional charge to revenue or allocations within the programme can be redirected towards those projects that generate future savings and/or income.

Alternatively, the council funding gap can be closed over the medium term by targeting of capital investment into areas that will benefit the borough and increases council funding or income.

Implications for financial planning

Capital investment increases the charge to revenue when expenditure is funded by prudential borrowing. However, targeted and planned capital investment can change working practices, regenerate areas, create new homes, boost the local economy and reduce reliance on fossil fuels which all generate income and savings in the future.