Cabinet has received an update on the Council’s three-year Medium Term Financial Plan, which sets the context for work towards setting next year’s budget. Officers note that difficult decisions will continue to be faced during this period, reflecting the financial challenges across the public sector.
Each year, as part of its robust financial management, the Council reports on its budget modelling work and financial planning for the period ahead – in advance of the detailed budget strategy work to be undertaken in the autumn. Officers reported this year’s position to Cabinet on Monday, September 23.
The public sector has faced a sustained period of real-term reductions in funding for many years, and officers report that the forecasted position remains challenging into the medium term. This is due to a number of factors including the ongoing cost of living pressures – bringing increased demand and costs across Council services, particularly social care. It is very likely that every Council in Wales will face a budget gap for 2025/26.
The UK Government budget in October, and the conclusion of a multi-year Spending Review expected in spring 2025, will be key factors in determining the level of funding provided to devolved nations, and subsequently Welsh Government’s settlement to local councils. Monday’s report outlines the financial modelling work completed by officers, and the potential budget gap that could be faced.
In a modelled scenario of a cash-flat settlement from the Welsh Government, a budget gap amounting to £35.7m is forecasted for 2025/26. This then rises to £91.8m across the three-year period of the Medium Term Financial Plan. This includes an assumed 4% rise in council tax for each year, and the continued prioritisation of schools funding. The Council’s budget for next year will be subject to public consultation over the coming months.
The Council will continue its successful strategy to identify and deliver budget-reducing measures in-year, that will enable early savings to be made. Further urgent and detailed reviews will be undertaken across all services to identify the options to close the anticipated budget shortfall. Parallel to this work will be a continued focus on Digitalisation, Commercialism, Early Intervention and Prevention, Independence, and being an Efficient and Effective Organisation.
As part of this process, the Council will continue to assess how its earmarked reserves can be used to prudently support investment in services. However, reserves are one-off in nature, and do not represent a sustainable strategy to make base budget reductions. For example, if the modelled £35.7m budget gap for 2025/26 is met by using reserves alone, that same gap of £35.7m would remain during 2026/27 – on top of the new budget gap faced that year.
Councillor Andrew Morgan OBE, Leader of Rhondda Cynon Taf Council, said: “Cabinet Members have received a detailed update from officers on the Council’s projected financial position, in the context of the three-year Medium Financial Plan. This process is undertaken each year by officers as part of our responsible approach to setting the next year’s budget – including financial modelling not only for the next financial year, but also the wider period ahead.
“It is clear that the public sector continues to face very difficult challenges at this time, with every council in Wales again likely to face a significant budget gap for 2025/26. This is due to many factors, including the ongoing impact of the pandemic and continued cost of living pressures. We are also following two financial years where the Council has needed to meet the largest budget gaps that it has ever faced – of £38m in 2023/24, and £36m in 2024/25.
“Our prudent financial approach has enabled us to consistently bring forward extra investment for key services, even in these difficult times. We’ve provided real improvements to areas valued by residents – like schools, towns, roads, parks and play areas. We’ve delivered £181m in extra investment for such priorities since 2015, not including a further £6.95m programme for 2024/25 recently agreed by Cabinet. However, while this one-off funding has been positive, we recognise that projected revenue base budget shortfalls still need to be addressed.
“Monday’s report notes several examples of the potential budget gaps that could be faced by the Council in the years ahead, based on varying scenarios. The exact figure is difficult to forecast due to a number of potential variables – for example, every 1% variation in our Welsh Government settlement equates to £4.9m in Council funding. Officers have, however, modelled a potential budget gap of £35.7m for next year, and £91.8m over the next three years.
“While there will likely be difficult decisions ahead, residents can be assured that officers are continuing to look at every single area of the Council’s business, to see how we can be more efficient while protecting key services. This is very difficult to achieve following years of austerity, but we are committed to delivering our services in smarter ways and becoming even more efficient in doing so. Senior officers have already started this process in the context of the 2025/26 budget. We will also continue to prioritise key areas such as social care and education, which has been included in officers’ financial modelling.
“Residents will be able to have their say on next year’s budget in the Council’s annual consultation. We’ll soon be communicating the full details about how to participate in the first phase of this process, taking place during the autumn.”
Posted on 27/09/2024