Medium Term Financial Plan (MTFP)
The Council has a long established process of operating a medium term approach to its financial planning and in line with this it reviews the plan at least on an annual basis when it firms up the following year, by approving a detailed budget and Council Tax level for the year.
In doing this, the Council also takes due consideration of future year demands on its resources and establishes its firm proposals for the coming year with due regard to prudent financial management in the medium term. The Council has a successful track record of managing its resources in this way.
The Council has faced significant challenges over the last decade following the economic downturn and reduction in public sector spending.
To date, the Council has been successful in responding to these challenges, but this is becoming increasingly difficult, particularly in respect of a growing elderly population; pressure in the children’s social care sector and of course the major economic impact of Covid-19 which has had a direct impact on the Council’s finances this year and will undoubtedly be felt for a number of years to come.
We must therefore press ahead with our top priority of growing Darlington’s Economy and continue to be creative and find innovative ways of working
The Government responded to the worldwide economic downtown by introducing public sector spending reductions.
This was exacerbated by a growing demand for services, particularly in relation to social care, both Adults and Children’s services.
In the case of Darlington Borough Council, a fundamental review of service provision was required and in 2016 following a need to reduce the budget by a further £12m the Council, following an in-depth and detailed review of all services, undertook a significant consultation exercise with the public during 2016.
This resulted in the agreement of a Core Offer budget which reduced expenditure and services to a risk based minimum level with a small investment fund (The Futures Fund) of £2.5m for services which the Council does not have to provide but which add great value to Darlington and its residents.
Subsequently following good progress made on achieving savings, strong cost management and innovative treasury initiatives over the following years the Council was in a position to add to the futures fund and unallocated balances of £6.5m were invested in the following five areas which hold great value to our community and are consistent with the councils priorities in particular the key priority of Growing Darlington’s economy:
- Community Safety
- Maintain an attractive street scene environment
- Maintaining a vibrant town centre
- Developing an attractive visitor economy
- Neighbourhood renewal
This year the Coronavirus pandemic has brought further considerable challenge and Darlington is facing significant pressures on its expenditure budgets and more significantly on its income streams.
The impact is across the board but being particularly felt across leisure and culture facilities that have been required to close; on car parking revenues and reductions in council tax income as housebuilding slowed in the early part of the year along with an increase in Local Council Tax support claimants, all of which are having a major effect.
The Government have provided support in the form of various grants in 2020/21 which have been helpful in sustaining services and have also confirmed additional Covid-19 support in 2021/22 which is welcomed however despite this it is clear the financial and economic impact will be ongoing into future years.
It is therefore very challenging to predict expenditure and income levels moving forward so best estimates have been used and assumptions made on the impact of Covid-19 on budgets in 2021/22.
For future years it is assumed income and expenditure levels will return to normal from 2022/23 onwards and no further Government Covid-19 funding is received.
In addition to the proposed spending reductions, annual council tax increases of 4.99% have been included in the MTFP as this is the limit by which council tax can be increased without a referendum.
Taking account of the above the Council’s General Fund balance at 1st April 2021 is projected to be £22.306m.
The Council has set a revenue budget of £97.825m for 2021/22 which is summarised below:
|Children and Adult services||61.026|
|Economic Growth & Neighbourhood services||24.326|
|Joint venture - Investment return||(1.546)|
|Council wide pressures/(savings)||(0.499)|
|Council wide contingencies||0.725|
|Contribution from revenue balances||2.420|
|Total net revenue budget||97.825|
Budget funding breakdown
|Business rates retained locally||19.016|
|Top up grant||7.297|
|Revenue support grant||3.634|
|New homes bonus||1.182|
|Improved better care fund||4.356|
|Adult Social Care Support Grant||3.593|
|Additional Covid 19 Government Funding||3.574|
|Lower Tier Services Grant||0.143|
A detailed report prepared by the Chief Officers Executive (COE) was presented to Cabinet on 8 December 2020 for consultation.
The views of Economy & Resources Scrutiny Committee were fed back to Cabinet on 9 February 2021.
The results of the consultation and other updates were considered at the meeting and the budget was recommended to Council on 18 February 2021.
As with the revenue budget in recent years the Council has developed a medium term financial plan for Capital that is now included in the Capital Strategy which has been developed in line the CIPFA Prudential Code for Capital Finance in Local Authorities 2017.
The Capital Strategy is intended to give a high level overview of how capital expenditure and financing plans are decided upon and provides framework for the development, management and monitoring of the Council’s capital investment plans.
The Council has an extensive capital programme with significant resources invested to purchase, improve, protect and maintain our assets, to enable the council to deliver its priorities for example purchasing land to enable road improvements or investing in modernising school buildings and housing.
The Council continues to deliver a significant capital investment programme in the main funded from the Housing Revenue Account (HRA) and grant or other external funding which is targeted at specific schemes and programmes such as Transport and Schools.
Furthermore, investment from the Tees Valley Combined Authority (TVCA) along with European and other external funding sources are being used for economic growth initiatives.
Local authorities’ new freedoms in capital investment and borrowing came into force on 1st April 2004 and under this system councils are able to borrow subject to affordable and prudent limits.
This has ensured that there is even closer linkage between capital and revenue financial planning.
The MTFP includes planned capital investment of £120.591m between 2021/22 and 2024/25.
The new Tees Valley Local Transport Plan has a number of accompanying documents that set the strategy and vision for different modes of transport.
Each Local Authority is required to produce a Local Improvement Plan, which will effectively replace the local authority Local Transport Plan. These plans will cover local priorities and maintenance requirements.
The Department for Transport (DfT) releases capital funding to the Tees Valley Combined Authority (TVCA) to implement these plans based on a needs formula and this is transferred annually to the Local Authority.
In 2021/22 the indicative amounts for Darlington are £0.886m allocated for the Integrated Block and £1.689m for the Highways Maintenance Block (comprising £1.398m maintenance and £0.291m incentive funding, which is performance related payments, Darlington receive the maximum amount of funding based on assessments of our process and asset management).
The Local Authority now only receives school condition funding for Community Maintained Schools. Maintenance funding for Academies is available through other routes.
This funding received by the Local Authority will be spent in line with key priorities identified with each maintained school through the locally agreed asset management planning (LAMPA) process, carried out each January.
There are no strict spend deadlines for these small scale condition related projects which are prioritised and completed as funding becomes available
As a result of the implementation of the government’s self-financing initiative introduced from April 2012 and savings delivered in the Capital Works fund it has been possible to create an HRA Investment Fund. This will be primarily used to deliver a new build programme.
A total of £58.964m is available for the development of new council houses.
The Council can and has supplemented Government Capital Funding from its own resources such as capital receipts and prudential borrowing, although, in such challenging financial times the ability to fund from the Council’s resources is severely limited.
There is a need, however, to maintain the buildings and assets which the Council owns and provision for this needs to be made within the Council’s overall financial strategy.
In order to enable investment required to deliver Darlington’s ambitions for sustainable economic growth there has been created an Economic Growth Investment Fund (EGIF).
The majority of the Plan will be completed in conjunction with the Tees Valley Combined Authority, although the Council will be required to pump prime and match fund some of the schemes.
Borrowing to fund capital expenditure and the investment of money that the Council holds to meet future costs is managed in accordance with a Treasury Management Strategy, which is approved annually by the Council.
The Strategy for 2021/22 was approved at the Council meeting on 18 February 2021 after being considered at Audit Committee on 27 January 2021 and Cabinet on 9 February 2021. The management of the Council’s borrowing and investments is an integral part of the MTFP for both revenue and capital.
In setting the budget the Council has regard to public expectations and demands for services and the impact on Council Tax.
Government support in the form of Formula Grant is determined by national formulae and does not vary with local spending decisions.
In this way, nearly half of the Councils non-schools net budget funding is fixed which means that the Council’s expenditure decisions impact very significantly on Council Tax.
This is the amount paid to the Borough Council for band D properties excluding the average Parish Precept. This represents an increase of 4.99% in Council Tax levels from 2020/21.
In addition to the Council’s own requirements, Council Tax bills include
- the Office of the Durham Police Crime and Victims’ Commissioner precept (£230.24 for Band D)
- Durham and Darlington Fire and Rescue Authority precept (£107.55 for Band D)
- parish areas the Parish Council’s precept (ranging from £10.55 to £55.50 for Band D)
The latest version of the Medium Term Financial Plan was approved by Cabinet on 9 February 2021 and by Council on 18 February 2021.
See the agenda and minutes.