Corporate Strategy 2025-30

Funding into the medium term

The draft Medium Term Financial Plan 2025-26 to 2028-29 was presented to Cabinet at its 10 February 2025 meeting.  The final 2025-26 to 2028-29 Plan will be agreed by Council at its 20 February 2025 meeting.

A projected funding gap of between £66.5m (best case) and £80.8m (worst case) for 2025-26 to 2028-29 has been assessed having regard to the re-pricing of the base budget – estimating future AEF and Council Tax base changes, potential pay and non-pay inflation rates and potential future demand. For the purposes of this report the ‘most likely’ budget assumptions of a £73.6m projected funding gap over the term of the MTFP is shown. The assumptions and estimates are reviewed and revised on an ongoing basis, so the projected funding gaps will change.

The immediate impact/cumulative impact of the projected funding gap on the Council and its services will be significant e.g. reduced level or quality of service provision or cessation in the worst case scenario) but as in previous years, the key challenge will be to protect those services which impact upon the most vulnerable in our communities.

The following table summarises how the most likely budget scenario of £73.6m will play out over next year and the following three years. A combination of budget savings, additional income from a Council Tax ‘Band D’ increase, continued use of the Second Homes Council Tax Premium or the potential use of reserves will be required to bridge the projected funding gaps identified for the MTFP.

 

Budget assumptions (most likely scenario) - individual school budgets	2025-26 (£m)	2026-27 (£m)	2027-28 (£m)	2028-29 (£m)
Pay award and NI pressures (additional burden)	3.4	0.0	0.0	0.0
Pay award assumption %	3.0%	2.5%	2.5%	2.5%
Pay award pressures	3.1	2.5	2.5	2.5
Non-pay inflation	0.4	0.3	0.4	0.4
Demand	0.4	0.2	0.2	0.3
Other	1.3	1.5	1.4	1.1
Total	8.6	4.5	4.5	4.3

 

Budget assumptions (most likely scenario) - social care	2025-26 (£m)	2026-27 (£m)	2027-28 (£m)	2028-29 (£m)
Pay award and NI pressures (additional burden)	0.8	0.0	0.0	0.0
Pay award assumption %	3.0%	2.5%	2.5%	2.5%
Pay award pressures	1.1	1.1	1.0	1.0
Non-pay inflation additional NI burden	2.0	0.0	0.0	0.0
Non-pay inflation	4.3	3.4	3.6	3.9
Income inflation	(1.2)	(0.7)	(0.8)	(0.8)
2024-25 rebase demand	9.8	0.0	0.0	0.0
Demand	8.2	7.4	7.1	6.5
Other	0.6	0.0	0.0	0.0
Total	25.6	11.2	10.9	10.6

 

Budget assumptions (most likely scenario) - other services	2025-26 (£m)	2026-27 (£m)	2027-28 (£m)	2028-29 (£m)
Pay award and NI pressures (additional burden)	2.4	0.0	0.0	0.0
Pay award assumption %	3.0%	2.5%	2.5%	2.5%
Pay award pressures	1.7	2.3	2.2	2.0
Non-pay inflation	0.7	0.9	0.9	0.9
Income inflation	(0.6)	(0.3)	(0.3)	(0.2)
2024-25 rebase demand	0.4	0.0	0.0	0.0
Demand	0.1	0.0	0.0	0.0
Other	1.4	0.0	0.0	0.0
Total	6.1	0.0	0.0	0.0

 

Budget assumptions (most likely scenario) - other	2025-26 (£m)	2026-27 (£m)	2027-28 (£m)	2028-29 (£m)
Capital financing costs and investment income	(0.3)	2.9	0.3	1.0
MWWFRA levy	0.5	0.2	0.2	0.2
Teachers' pension additional burden	3.0	0.0	0.0	0.0
Employers NI additional burden	0.0	0.0	0.0	0.0
Total	3.2	3.1	0.5	1.2

 

N/A	2025-26 (£m)	2026-27 (£m)	2027-28 (£m)	2028-29 (£m)
Grand total service pressures (most likely scenario)	43.5	21.7	18.7	18.8

 

Funding assumptions - AEF funding	2025-26 (£m)	2026-27 (£m)	2027-28 (£m)	2028-29 (£m)
AEF base adjustment (including transfers)	(6.1)	0.0	0.0	0.0
AEF increase % (real term)	3.5%	2.0%	2.0%	2.0%
AEF increase £	(8.0)	(4.7)	(4.8)	(4.8)
Total increase in AEF funding (above 2024-25)	(14.1)	(4.7)	(4.8)	(4.8)
AEF increase above 2024-25 %	N/A	N/A	N/A	N/A

 

Funding assumptions	2025-26 (£m)	2026-27 (£m)	2027-28 (£m)	2028-29 (£m)
NI employers direct salary cost (assumed fully funded)	(4.9)	0.0	0.0	0.0
Less one-off use of reserve to fund budget in previous year*	1.5	1.3	0.0	0.0
Council tax base adjustment**	1.4	0.0	0.0	0.0
Total	(2.0)	1.3	0.0	0.0

 

N/A	2025-26 (£m)	2026-27 (£m)	2027-28 (£m)	2028-29 (£m)
Projected Funding Gap	27.4	18.3	13.9	14.0

 

Cumulative projected funding gap: 73.6 (£m)