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 financial challenges as 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 the council was in a position to add to the futures fund and Members after listening to feedback agreed to use unallocated balances of £4.7m to invest in five areas which hold great value to our community.
The Council’s Corporate Plan priorities and long-term goals, were used in setting the criteria for the Futures Fund investments with emphasis on maximising growth in the Darlington economy and ensuring everyone is able to share in the subsequent wealth creation within community.
As a consequence of looking to these long term goals the following five themes which are wholly consistent with the Council’s corporate plan priorities were agreed:-
- Community Safety
- Maintain an attractive street scene environment
- Developing an attractive visitor economy
- Neighbourhood renewal
Given the pressure on budgets and the limited funds for discretionary services it was recommended that £1.800m of the unallocated revenue balances was utilised for the Futures Fund to replenish priority funding and support the Councils ongoing priorities for a further two years to 2023/24. £0.800m for the ongoing commitments in Street Scene and Community Safety at £0.600m and £0.200m respectively. £0.350m to bolster the one-off Community Safety theme to allow the continuation of the additional staffing; £0.500m to maintaining a vibrant Town Centre given the significant pressures all town centres are facing and the great work the current futures fund has enabled. And finally, £0.150m for neighbourhood renewal to replenish the fund which is being utilised on a key priority as noted above.
The Core offer remains challenging with some significant pressures arising in Children’s social care. Nevertheless, through innovative financial investments, increased income from economic growth successes and a positive pension triennial review, the Council can still deliver the agreed balanced plan, finance the MTFP a further year to 2023/24, and allocate an additional £1.8m to bolster the Futures Fund themes whilst retaining usable balances of £3.683m.
In addition to the proposed spending reductions, annual council tax increases of 3.99% 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 2020 is projected to be £19.235m.
The Council has set a revenue budget of £90.584m for 2020/21 which is summarised below:-
|Children and Adult services||58.423|
|Economic Growth & Neighbourhood services||20.867|
|Joint venture - Investment return||(1.028)|
|Council wide pressures/(savings)||0.405|
|Contribution from revenue balances||0.271|
|Total net revenue budget||90.584|
The Budget is funded by:
|Business rates retained locally||18.901|
|Top up grant||7.297|
|Revenue support grant||3.614|
|New homes bonus||1.285|
|Improved better care fund||4.356|
|Social care grant||2.952|
A detailed report prepared by the Chief Officers Executive (COE) was presented to Cabinet on 7 January 2020 for consultation. The views of Economy & Resources Scrutiny Committee were fed back to Cabinet on 11 February 2020. The results of the consultation and other updates were considered at the meeting and the budget was recommended to Council on 20 February 2020.
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.
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 £129.637M between 2020/21 and 2023/24.
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 2020/21 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 £65.785M 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 2020/21 was approved at the Council meeting on 20 February 2020 after being considered at Audit Committee on 29 January 2020. 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 3.99% in Council Tax levels from 2019/20.
In addition to the Council’s own requirements, Council Tax bills include the Office of the Durham Police Crime and Victims’ Commissioner precept (£215.24 for Band D), Durham and Darlington Fire and Rescue Authority precept (£105.48 for Band D) and in parish areas the Parish Council’s precept (ranging from £10.25 to £49.58 for Band D).