Medium Term Financial Strategy 2012-2017
The Medium Term Financial Strategy 
(MTFS) is the Council’s key financial planning document. It considers and encompasses the financial implications of the priorities and actions in the Priorities document and is thus an integral part of the Corporate Business Planning process and is updated at least annually.
The MTFS ensures we have a clear policy framework to enable us to allocate funds in accordance with our priorities as we go through the budget setting and service planning stages of the process.
The MTFS includes a forward look over the next five years to anticipate the spending pressures we will face and the level of savings that will need to be made to keep Council Tax increases to acceptable levels.
The MTFS reflects the fact that there are a number of significant unknowns at the present time in terms of the Local Government Resource review and it may therefore be necessary to update the MTFS later in the year as things become clearer. At this stage the MTFS assumes that Government funding will fall by around 8% in the period 2013-2016 in line with the original assumptions from the Comprehensive Spending Review.
The MTFS includes the following assumptions:-
- Budget starting point is the current year base budget
- Year on year spend is adjusted to take account of cyclical variations in expenditure
- Investment income falls in accordance with the cash flow/investment projections to take account of the reducing balance of capital receipts and assumptions regarding interest rates
- Assumed average rate achieved on deals in 2011/12 and onwards of 1.75% on long term and 0.9% on short term investments.
- Any approved one-off increase in expenditure or carry-forward budgets for 2011/12 have been removed from the base figures in subsequent years
- Reduction in Government support of 13.4% in 2012/13 (as per the provisional settlement) and then a further assumed reduction of 1.9% in 2013/14 and 7% in 2014/15.
- Contract inflation in accordance with the individual contract terms
- Pay inflation at 0% for 2012/13 and 2% per annum for each year thereafter.
- Pay increments due in 2012/13 and future years have been built in to the model (approximately £150k for 2012/13) Pay increments are part of contractual pay and the calculation is based on those staff due to receive an increment, the remainder having already reached the top of the grade
- Superannuation contribution of 22.6% until 2014/15 when it is estimated contributions will need to increase by 1% per annum to meet the liability in the pension fund. Any further changes to the Local Government Pension Scheme that might be adopted following the current government consultation will need to be reflected in the MTFS assumptions. The Council could apply to make a capital contribution to the fund which would reduce the contribution rate in the future.
- No allowance is made for general inflation on remaining expenditure.
- Discretionary fees and charges income increased by RPI at October (currently assuming 4% increase)
- Use of the special general fund reserve will happen on a phased basis to prevent erratic movements in Council Tax increase.
- Some of the New Homes Bonus will be used for investment in Council priorities over the life of the bonus scheme while the remainder is required to continue the delivery of services in the face of other government funding reductions. Any further new investment will require more savings to be made in services.
- The Council tax base figure will rise by 0.5% per annum.
- An assumed 99% collection rate for the purposes of calculating the Council tax base.
- The minimum General Fund balance should be 5% of net expenditure, plus an allowance for identified risks.
- A vacancy savings target set at 3% of salary budget to yield in the region of £400,000 is included in the base budget in each year.
- Any investment in Area Committee budgets to reflect additional responsibilities will be offset by reductions in Directorate budget
- Council tax increase of 0% for 2012/13 and onwards
All these assumptions are subject to further refinement as we go through the budget process and more certain information becomes available.
