The Council has a long and proud history of sound financial management, forward planning and aligning the necessary financial resources to enable policy decisions to be achieved.
In previous years this has been done against a challenging financial backdrop where government fiscal policies created a period of austerity which led to reductions in grant funding. However, it was also a period when interest rates and inflation were consistently low and stable.
Financial challenges
Our Medium Term Financial Strategy 2022–2027 will seek to deliver financial planning and resilience at a time when uncertainty and volatility will be ever present and where significant structural change to the public sector landscape will take place making financial planning and modelling even more challenging.
The primary financial challenges facing the Council over the period of our Strategy will be delivering a balanced revenue budget year on year and the development of an affordable capital programme which maintains appropriate investment in infrastructure that meets a statutory need or generates ongoing revenue savings
The preparation of financial modelling and creating effective budget assumptions is a well-established part of the work undertaken within the Finance and ICT Service. This will be needed more than ever given the current financial climate and there will also be a requirement to review, amend and update forecasts and assumptions as this Strategy progresses through to 2027.
The scale and scope of current economic pressures are such that governments have acknowledged that they are unable to mitigate all pressures and, while specific financial interventions and supports have been made available with more planned for the future, these are only likely to provide short term relief.
Inflation and spending
Inflation is expected to remain high around 9% throughout 2023 and not expected to return to previous levels of 2% until 2024/25. The impact of these high rates means that significant pressure is placed on Council service budgets as goods, services and specific contracts will cost more and the purchasing power of existing budgets is diminished.
In May 2022, the Scottish Fiscal Commission (SFC) published Scotland’s Economic and Fiscal Forecasts to accompany the government’s Medium Term Financial Plan. In its publication it was noted that spending in most areas is expected to fall in real terms and in 2025/26 only the Net Zero, Energy and Transport portfolio is expected to increase. All other portfolios will see real term reductions in spending in every year of the government's Financial Plan.
In their recent Resource Spending Review (RSR) the Scottish Government set out details of the grant funding settlement to local government from 2022/23 through to 2026/27, with the multi-year funding being held at flat cash for all years except 2026/27.
As part of that review the National Care Service Bill was noted and signalled that further public sector structural changes are likely with precise detail being provided in the Scottish Government budget published in December 2022. The anticipated changes will create further uncertainty and cause budgetary and operational challenges as functions and resources are disaggregated.
Public sector pay
A significant change in the Resource Spending Review related to public sector pay with the Scottish Government seeking to introduce measures to reset pay and workforce expectations by announcing a broad aim to freeze total pay bill costs, as opposed to pay levels, at 2022/23 levels through a pathway that will return the overall size of the public sector workforce to around pre-coronavirus levels while supporting expansion in key areas.
The Scottish Government also noted that further opportunities to review wider pay and conditions could include a review of:
- developing non pay benefits
- standardising the 35 hour week across bodies where the Public Sector Pay Policy applies
- introduce the Right to Disconnect
- explore a four day working week where possible
Population statistics
It is clear that the forthcoming years will be extremely challenging and that Council budgets will be under enormous strain to deliver services for its communities. This is even more so due to projected population changes provided by the National Records for Scotland.
Population statistics show that the population across East Ayrshire will fall by 1.7% from 121,840 in 2018 to 119,716 by 2028. During the same period it is expected that All Scotland population is to increase by 1.8%.
The impact of these changes in population and in specific parts of the population mean that funding to East Ayrshire Council will fall relative to other councils, as resources are moved to the parts of Scotland where there is population growth.
In order to safeguard the Council and to build operational and financial resilience it is important that we plan for these changes now and deliver new service delivery models around the future population for East Ayrshire.
Strategies and plans
Comments and suggestions
Get in touch if you have any comments or suggestions on the Council Strategic Framework and its strategies:
Comments and suggestions