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

4.1 Purpose of reserves

Reserves are used to strengthen the financial position of a council so that the council is protected against uncertainties or unforeseen events without impacting key services and delivery outcomes. The council maintains a general fund reserve to act as a contingency and allows the council to meet any unforeseen expenditure. The general fund reserve MTFS principle is that the reserve should be a minimum of 3% of the net revenue budget.

Some reserves are agreed by Council to be earmarked and held for specific strategic purposes. This may be to help achieve key priorities or held for specific purposes such as mitigating against unforeseen events or risks. Other reserves are ring fenced and committed to be used for specific projects or activities, usually prescribed by Government, and cannot be used to support the general Council budget. These reserves include the schools reserves, developer contributions and the Public Health reserve. Cash in reserves is not idle; it generates investment income in line with the Treasury Management Strategy and avoids the need for short-term borrowing.

Reserves can only be used once and are therefore not a sustainable source of financing without placing the council's financial position at risk. This is an area of interest to External Audit who will look at both how the council has planned to use and has actually used its reserves.

4.2 Reserves Policy

The council's policy on reserves is as follows:

• 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 over the period of the MTFS without reliance on the use of the general reserve
• 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 annually
• the council's general reserve is available to support budget setting over the period of the MTFS and usage should be linked to maintaining financial sustainability over the medium term

4.3 Reserve balances

A breakdown of each reserve available to support the budget, and the balances as at 31 March 2025 and forecast to 31 March 2026 after planned budget use are outlined below: