Medium Term Financial Plan

Medium Term Financial Plan

Medium Term Financial Plan 2020 - 2025

Adopted by Council: 28th September 2021

Planned Review Date: September 2022

In accordance with the Council’s Financial Regulations, this Medium Term Financial Plan sets out the financial projections, considerations, pressures and issues for the Council over the next five years. Each year the Plan will be updated, taking into consideration any new issues emerging and the continual alignment of funding with priorities determined by Council through its Corporate Strategy and Business Plan. The forecasts are linked with the Council’s Treasury Management Policy.

The objectives of the Plan are:-

  • To enable the Council to allocate resources to achieve its priorities
  • To enable the Council to understand its key financial pressures and likely long-term implications of its decisions
  • To identify future financial impacts of both policy decisions and external factors so that risks can be managed
  • To control precept rises and identify external funding
  • To Support the delivery of value for money services
  • To ensure good use is made of assets
  • To maintain the General Reserve at or above the desired level.
  • To provide for future financial demands
  • To facilitate good financial management

The medium term financial position will be dominated by the priorities in Council’s Corporate Strategy which in turn takes account of the A Vision for Crewe – Crewe’s Community Plan and other partnership policies such as the Branding project and draft Heritage Strategy. As development takes place in accordance with the emerging Cheshire East Local Plan, the Council Tax base will increase steadily which will in effect provide for increased Precept without increasing the charge unacceptably on individual homes.

Localism and austerity have been placing more emphasis on local communities helping themselves and raising more physical and financial resources locally. The Localism Act 2011, has given a wider role and increased powers to local councils, a number of which will require additional local funding. Government grant reductions for the principal authority will undoubtedly result in local service reductions which the Town Council may feel obliged to take up.

The effects on local government, of the new Government in December 2019 and the UK leaving the EU at the end of January 2020, on local government are as yet uncertain. What is creating greater uncertainty however, is the adverse effect on the national and local economies of the current Covid-19 Pandemic.

The Town Council’s Risk Assessment Process identifies risks associated with:-

  • Any inaccuracies in the forecast
  • Difficulty in predicting costs for new projects
  • Difficulty in predicting amount of additional income
  • Low and uncertain investment income

The following guidelines are at the Core of the Plan:-

  • Maximise external funding opportunities in all areas
  • Maximise the benefits of partnership working
  • Review income opportunities
  • Join with others when possible for procurement
  • Maximise efficiencies to keep costs down

A central tenet of this plan is the introduction of annual contributions to a Rolling Capital programme beginning with the 2021/22 budget. This will allow a flexible fund to be used on both internal capital items such as IT equipment or outside provisions such as play equipment or High Street regeneration. An indication of how it may build up, (with no call on it in early years) is shown in the table below. It is suggested that £20k each year is transferred from the Precept in to this fund.

A council’s budget consists of two distinct elements, namely:

  1. A Revenue element, incorporating the necessary funds to run the ongoing services to which the council is committed, and
  2. A Capital element which must be sufficient to provide the level of resources necessary to maintain, and where necessary enhance, the council’s Capital Asset stock.

The first element is, by definition, relatively constant, being affected only by inflation and agreed changes in the level of service provision. It is likely however that this element will see significant increases in the future as principal authorities devolve services to Local Councils.

Capital budgeting, by contrast, can be subject to large movements in requirements as projects are identified and approved. Additionally, if projects are individually identified and budgeted for in a particular year, this can lead to protracted discussions as to which projects to include and which to leave out. The inherent fluctuations in Precept are regrettable, and to be avoided if at all possible.

Smoothing the effect of Capital

An increasingly common process for eliminating these Precept movements is for Local Councils to take a much longer view of their capital requirements, say over a five year rolling cycle.

This is achieved by budgeting on a Rolling Capital Fund basis. The medium-term requirement is equalised over the same medium term and included annually in the Precept calculation. No individual projects are actually included in the initial annual estimates, only the Rolling Fund requirement. On a continuous basis council then considers, approves and/or rejects individual projects as they are identified, justified and costed. The approval and timing of such projects can then be made based on priorities at the time of consideration, and also the availability of funds from the (known) source of capital funds flowing from the precept.

It follows from this concept that projects are only included in the council’s budget once approved and, since the source of funds is identified and agreed at the time of project approval, the use of such (previously earmarked) funds, together with any external funding that may be available, is also reflected as a credit budget and thus any effect on the council’s General Reserve (i.e. the Annual Surplus/Deficit) is entirely eliminated.

 

The current budget (2020/21) made provision for commencing the implementation of the Corporate Strategy and associate staffing review, a heritage officer and managing social media. It did contain a substantial general reserve deficit, however this was considerably reduced at the 2019/20 year end by the underspend on several budgets being transferred in to the General Reserve.

The spending pattern during the 2020/21 financial year may vary considerably from the budget because of the impact of the pandemic. There will be savings, particularly on events which are unable to take place, however it is inevitable that additional costs will arise such as technology for virtual meetings. Of more significance however will be the cost of supporting the community and community groups during lockdown and subsequently, and of providing help to businesses to recover.

A staffing review took place in 2020 once the new Town Clerk was in post

The following assumptions within inflation limits wherever possible, have been made in preparing this forecast:-

  • Fixed costs over which the Council have little control such as office costs are increased in line with inflation (currently relatively low) or actual predicted cost.
  • Demand for grants from community organisations are likely to increase, as other funding reduces and needs increase. Partnership working is an important part of the Council’s strategy.
  • The Precept Support grant has been discontinued by Cheshire East Council (CEC), which has resulted in an increase in precept in future years.
  • MHCLG will not cap precept rises for 2021/22, although as they did consult over capping in a previous year, it cannot be ruled out for the future.
  • There is little prospect of support grant directly from Government or a share in increased business rates for the Town coming to the Town Council although NALC are lobbying for this to happen.
  • Local funding opportunities will continue at a similar level, but the Council will continue to strive for grants and sponsorship.
  • Staffing cost increases will be constrained but in line with national pay awards, likely to be 2.75% for the next 2 years. Recognition of workload, level of responsibility and local market pressures will be taken into account in the staffing review
  • A non-specific sum for the staffing review and implementation of the corporate strategy will be discontinued from 2020/21 as provision is transferred to specific budget headings.
  • Increases in expenditure will inevitably necessitate appropriate increases in the General Reserve and a minimum level has been included.
  • There will be reduced income from events and Town Square bookings from 2020/21.
  • There may be a need for the Council to borrow, to part fund long term projects in the future. No provision has been made however, it is believed there is adequate flexibility in future provisions to accommodate such eventuality as well as scope for above inflation precept increases.
  • Difference between Nett effect on previous year baseline and Precept is made up of contributions to or from reserves.

 

Figures 2019/20 - 2025 / 26
  Cost
Revenue items (Net) 2019/20 (£) 2020/21 (£) 2021/22 (£) 2022/23 (£) 2023/24 (£) 2024/25 (£) 2025/26 (£)
(Allow general inflation, excluding salaries (say 2.00%)
Staff Costs (implement staffing review and inflation (say 2.75)
Finance and Governance
Marketing and Events
Community Plan
Planning
Operations and Improvements
Total Revenue Budgets
New/Increased Revenue Items
Member/Officer training
Environmental Audit
Implementation of Corporate Strategy 0 0 0 0 0
CCTV
Increase Community Grants
Town Promotion/Branding
Youth Development
Regeneration
BIDs feasibility
Net Revenue Budget
Capital\Non-recurring items
Loan Charges
Website improvements/accessibility
Rolling Capital 20,000 22,000 24,000 26,000 28,000
Non-recurring additions to gross Budget
Plus Contribution to/(from) General Reserve requirement
Total Projected Budget Increase
Less Capital CIL
Total Taxation Funding Required (Precept + grant)
Change in Tax base
Underlying Precept (decrease)\increase
% change in Precept from last year
Projected Minimum General Reserve requirement
Memorandum - RCP Balance available 0 30,000 60,000 90,000 120,000

 

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