The continuing and volatile pressures experienced by local government throughout the UK has resulted in some councils facing extreme financial hardship and crisis.
This has been caused by a variety of reasons ranging from changes to funding models as well as failed investments undertaken by some councils. It is also self-evident that councils have moved from delivering what was previously viewed as a traditional service delivery model to an environment where councils have wholly owned subsidiary companies or other entities that are aligned to council functions and responsibilities.
Council decisions are now more complex and include a range of delivery options that require specific knowledge and understanding of the obligations and liabilities that flow from them. The role of the modern day finance function in a council is now to understand and monitor the wider financial arrangements, obligations and performance that can impact on the Council itself.
Increasing financial pressures
As pressures on councils increase in the coming years and as funding is reduced and structural changes take place, there is a growing need for the Council to create a set of resilience indicators that can predict and provide early warning of issues that are likely to impact upon us.
We have a Reserves Strategy which ensures an appropriate level of reserves is retained to safeguard the Council against the risk of any uncertainties or unforeseen expenditure.
This is considered best practice and demonstrates sound financial planning. Much like using savings to offset monthly household bills the use of financial reserves cannot solve a budget problem outright but allows for short term smoothing of impacts.
Reserves are predominantly held to:
- manage the impact of cuts over a longer period
- invest in schemes that allow services to be delivered at lower cost
- fund 'one-off hits' for the Council without the need to further reduce service budgets
- provide capacity to absorb any non-achievement of planned budget reductions in each year
- to insure against major unexpected events
Financial wellbeing
Financial resilience of the Council is an important gauge of our financial wellbeing.
It demonstrates our ability to anticipate, prepare for and respond to the changing financial environment, derived from internal decisions and external factors. To be financially resilient is to have resources available in the time of crisis as well as understanding the level of flexibility we have in terms of accessing funds when they are needed.
Given the financial challenges that exist and which will increase during the lifetime of our Medium Term Financial Strategy it is proposed to introduce a number of financial indicators in order to inform policy decisions, provide early indications of adverse events and provide assurance around the adequacy of the financial resources available to the Council.
Work to compile the most effective indicators for the Council will be undertaken as part of the Revenue Budget, Treasury Management, Capital Asset plan suite of reports presented to elected members as part of the 2023/24 budget setting process. Indicators will also be presented at specific points in the year so as to inform and support judgements and decisions that are to be taken.
It is anticipated that the indicators will provide details in the following areas:
- Council reserves and liquidity (the availability of resources)
- Capital financing, investment and borrowing
- capital finance requirement
- debt
- prudential indicators
- investments
The overall purpose is to ensure that we remain financially secure in the long term and that actions will be taken to modify policies and actions based on the information and trends provided by the indicators.
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