Our Medium Term Financial Strategy
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Our Medium Term Financial Strategy

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The council’s vision as set out in our strategic plan, the ‘Best Council Plan’, is for Leeds to be a compassionate, caring city that helps all its residents benefit from the city’s economic growth, the council supporting this by working with partners to reduce persistent inequalities and itself continuing to be an efficient and enterprising organisation. This Medium-Term Financial Strategy underpins that vision.

The Strategy focuses on how the council intends to respond to the government’s indicative reductions in public sector funding alongside rising demands for services and increasing inflationary and other cost pressures. It sets out the approaches and principles the council will follow to ensure we remain financially viable, able to respond in a flexible way to the range of risks and uncertainties we face while still delivering our Best Council Plan outcomes and priorities. The Strategy also forms the basis of the council’s Efficiency Plan for the next three financial years to 2020 though decisions around the annual budget, council tax base and rate of council tax remain reserved to Full Council as part of the authority’s annual budget-setting process.

Between the 2010/11 and 2016/17 budgets, Leeds City Council’s core funding from government has reduced by around £214m while demand-led cost pressures have grown. This means that by March 2017, the council will have had to deliver reductions in expenditure and increases in income totalling some £400m. To date, we have responded successfully to the challenge and have marginally underspent each year since 2010 through a combination of stimulating good economic growth in the city and creatively managing demand for services. This has been combined with a programme of more traditional efficiencies, bringing in alternative service delivery models and other savings, such as reviewing how we repay our capital borrowing, achieved through an organisational-wide cultural change programme. Throughout, we have listened to your views through public consultation and have continued to protect vital front-line services, specifically those that support vulnerable adults, children and young people.

This principle remains at the heart of our Best Council Plan and this supporting Medium-Term Financial Strategy: almost 65% of our net revenue budget is now prioritised to support Children’s Services and Adult Social Care, resulting in some key successes, such as a safe reduction in the number of children looked after by the state and a steady decrease in the number of delayed hospital discharges for older people. However, inequalities persist across Leeds in terms of poverty and deprivation, health and educational attainment.

To ensure our continued focus on those most at need at a time of tightening resources, the council is changing what it does and how it does it. This will have significant implications for the services provided directly and commissioned by the local authority, impacting upon staff, partners and residents. Those services that are no longer affordable and a lesser priority than others will be delivered differently or, in some cases, stopped. This will be achieved through a programme of policy and service reviews across the council’s functions and ongoing consultation and engagement.

Efficiency in our own operations remains important: our cultural change programme coupled with modernisation of the working environment is creating the necessary conditions for fundamental organisational change, fewer council buildings and more efficient processes and systems. We have reduced our workforce by 2,500 full-time equivalent posts (FTEs) since 2010 and anticipate further downsizing of around 1,000 to 2,000 posts by the end of March 2020. The council will seek ways of avoiding compulsory redundancies but it is unlikely this will be sufficient.

Alongside a sustained efficiency drive, we will continue to implement new and additional income generation opportunities across council services: our commercial income has increased by almost 23% since 2010 and we estimate more than £150m of such income in the 2016/17 financial year. This Financial Strategy recognises the importance of a more commercial approach and includes a range of proposals to expand the range of traded activities, securing much-needed additional income to fund essential services.

Looking to the future, we face probably the biggest change to local government finance in a generation: over the next four years, central government funding will phase out and we will become increasingly dependent on local funding, including fees and charges, council tax and business rates. Government is currently carrying out a Fair Funding Review of councils’ relative needs and resources, the outcomes of which will establish the funding baselines for the introduction of councils’ retention of 100% - up from the 50% presently - of the business rates generated locally. As a sector, local government welcomes this shift, but there are significant risks that need to be managed, including balancing needs and resources and funding volatility.

Going forward, it is imperative that the new system for financing local government is both workable and fair and that incentives for growth are properly balanced against the needs of our most deprived communities.

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