Contents

  1. Issues of the medium term financial strategy
  2. Medium term financial strategy
  3. Change in financial planning assumptions
  4. Budget pressures, growth, inflation, council tax and business rates
  5. Collection fund
  6. Fees and charges
  7. Risk Strategy
  8. Reserve and contingency strategy
  9. Transformation
  10. Capital programme
  11. Treasury
  12. Strategy milestones
  13. Risk and mitigation measures
  14. Comments of the director of finance and corporate services
  15. Comments of the monitoring officer
  16. Summary of legal implications

1. Issues of the medium term financial strategy

The budget for 2025/26 and Council Tax for the financial year was agreed by Council on 5 March 2025. 

This report follows on from the last Medium Term Financial Strategy report presented to Public Cabinet on 24 February 2025 and extends to the 2029/30 financial year. This provides an update on the Council’s financial estimates and projections over the medium term (2026/27 to 2029/30) based on information currently known. 

Setting the Council’s annual revenue budget has become an increasingly challenging process over recent years. The Council successfully set a balanced budget for 2025/26 against a series of challenging circumstances including a growing and ageing population, an increase in demand and cost of services, policy changes such as the increase in National Insurance Employers Contribution and an elevated interest rate environment compared to previous years. Many of these challenges continue, particularly within Children’s and Adult Social Care, SEN transport and Housing, where there is increasing demand, higher unit costs, and greater competition, because of changing market conditions. Inflation pressures and its impact across a range of services alongside pay settlements continue to present a financial challenge to Bexley.

When setting the 2025/26 budget, a medium term budget gap of £32.658m was forecast for 2026/27 increasing to £43.893 by 2028/29. This assumed that there is an increase of 1.99% on Council Tax and 2.00% for Adult Social Care Precept for 2026/27 onwards.

 2026/272027/282028/29
 £’m£’m£’m
Budget Gap Reported to Public Cabinet February 202532.65838.49043.893

If the future Local Government Finance Settlement provides for social care grants to continue throughout the medium term and permits for Council Tax to be levied at 2025/26 levels of 4.99% (as confirmed in the Spending Review), this would significantly reduce the budget gap in 2026/27 onwards, to £11.794m in 2026/27, £15.977m in 2027/28, £19.576m in 2028/29 and £20.819m in 2029/30.

The Autumn Budget on 30 October 2024, where the Chancellor of the Exchequer confirmed the overall funding totals for 2025/26, included an outline of the approach that will be taken at Spending Review 2025 (published on 11 June 2025), referring to it as “Phase 2” (with this 2025/26 Budget representing phase 1, which was announced alongside the 2024 Autumn budget).

Highlighted key future pressures relevant to 2026/27 onwards

The Council continues to face ongoing and increasing pressures in relation to: 

  • Contract Inflation – whilst inflation rates have reduced, the Council spends 54.02% of the budget on supplies and services and third party contracts as a predominantly outsourced organisation thus even small inflation pressures have the ability to make material differences to Council budgets
  • The ability to recruit and retain staff given current employment conditions within the market, where we are unable to compete based on salary levels with other private and public service providers. This may increase costs if interim or agency staff are required to cover vacant posts
  • The budget for the pay award for 2026/27 has been set at 2.00%. Given the actual pay award in 2024/25 averaged out at 3.25%, and the current offer from the Employers for 2025/26 is 3.20% there is an increased risk that the actual pay award in 2026/27 could be higher than the 2.00% and will be updated in due course in the MTFS
  • Increasing levels of demand, specifically for Adult and Children Social Care, SEN transport
  • Budget reductions in relation to Integrated Care Boards (ICBs) could adversely impact council services and the health of residents.  The Department for Health and Social Care has mandated a 50% reduction in ICB expenditures to enhance the efficiency of the National Health Service (NHS)
  • The cumulative impact on the cost of living for residents and businesses is impacting on discretionary spend, debt collection rates and homelessness

Highlighted key changes (policy and legislation)

Proposed policy and legislative changes could have significant operational and financial impacts on the council. The key changes are outlined below, with the remaining legislative changes contained in Appendix B.

  • Children's Wellbeing Bill - The new policy statement outlined the new Government’s vision for the future of the children’s social care system, education services and core related legislative proposals. The aim is creating a system which:
    • Works with the whole family so more children and young people can thrive in their family.
    • Prioritises kinship care for children who cannot live safely with their parents.
    • Supports children in care and care leavers to live healthy and happy lives.
    • Provides a high quality of care, which all children deserve.
    • Takes action to end excessive profit-making by care providers.
    • Works effectively across agencies and empowers professionals working within. 
  • Resetting the Business Rates Retention System - The government confirmed in the policy statement, published on 28 November 2024 that it plans to reset the business rates retention system in 2026/27, this has been set out in further detail through the Resetting the business rates retention system: technical consultation and has the  potential of impacting Bexley adversely by £1.928m in 2026/27 (a conservative initial estimate) and £2.302m in 2027/28 and £2.687m in 2028/29. Key changes including increased business rates multipliers and the first reset since 2013, along with a revaluation in 2026.
  • The Local Authority Funding Reform - A multi-year settlement, updated needs and resources assessments has the potential to significantly impact the Council. Separate to the business rates changes, there is a fundamental review of the needs and resources assessments that underpin the funding allocations to Local Authorities, alongside a review to simplify and reduce funding streams where possible. Of particular concern with regard to the needs assessment is the Children’s and Young People formula changes that suggest a reduction London wide of c£1bn. 

In order to address these challenges, the Council is  continuing to plan early to ensure we are able to deliver a balanced budget for 2026/27 whilst at the same time reduce the budget gap in future years.  The financial assumptions within the strategy remain under continuous review and will be reported to Public Cabinet at future meetings  throughout 2025/26.

Options

This report sets out the latest Medium Term Financial Strategy over the period 2026/27 to 2029/30. This covers a further financial year from the report presented to Public Cabinet on 24 February 2025.

The Council has a duty to set a balanced budget and agree its Council Tax before the statutory deadline in March 2026. Council will consider the 2026/27 budget on 5 March 2026.

Proposed decisions

Cabinet is recommended:

  • to note the current planning assumptions used in the Medium Term Financial Strategy for 2026/27 to 2029/30
  • to note the latest forecast position for the Medium Term Financial Strategy
  • to note the transformation programme update on this agenda, that is the primary approach for setting a balanced budget for 2026/27, noting the Medium Term Financial Strategy will be updated once the modelling has been completed
  • to note a further report is due at Public Cabinet late 2025 which will provide a further update on the Council’s Medium Term Financial Strategy

Reasons

Based on the latest information on external funding and known income and expenditure pressures the Council now has a budget gap of £32.658m was forecast for 2026/27 increasing to £46.842m by 2029/30.

The Council is under a legal duty to set a balanced and sustainable budget and maintain adequate reserves such that it can deliver its statutory duties and Council priorities.

A Medium Term Financial Strategy covering the entirety of the resources available to the Council is considered to be the best way that resource prioritisation and allocation decisions can be considered and agreed in a way that provides a stable and considered approach to service delivery and considers relevant risks and uncertainty.