Financial Outlook and Medium Term Financial Plan
Renfrewshire Council · 24 September 2026
Back to Council — 24 September 2026 and its agenda
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PUBLIC To: Council On: 24 September 2026 Report by: Director of Finance and Resources Heading: Financial Outlook and Medium-Term Financial Plan 1. Summary 1.1 This report provides the Council with an updated medium-term forecast financial position, covering the five-year period 2027/28 to 2031/32, and the key assumptions and risks that underpin it. This update continues to emphasise the ongoing challenging financial environment for local government in Scotland and particular issues relevant to Renfrewshire Council. 1.2 Successive financial outlook reports have highlighted the need for the Council to continue to develop and deliver significant savings in order to ensure ongoing financial sustainability, and this is still the case. However, as the years of financial constraint continue, it is increasingly difficult for any new savings proposals not to have a significant impact on service delivery and on the communities that the Council serves. 1.3 This report provides an update on the forecast level of spend and income over the medium term, and how these combine to provide a projected recurring financial gap of c£38m by the end of 2031/32. 1.4 The report outlines how specific reserves may be applied to support the Council’s financial stability in the short term, and it also provides a capital update that outlines proposed changes to the current capital programme. 2. Recommendations 2.1 Note the economic updates outlined in Sections 3 and 4;
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PUBLIC 2.2 Note the key financial assumptions and projected medium-term revenue position outlined in Section 5; 2.3 Note the savings update and agree the savings targets outlined in Section 6; 2.4 Note the reserves update and agree the principles outlined in Section 7; 2.5 Note the financial risks to the forecast position outlined in Section 8; 2.6 Note the treasury and debt update provided in Section 9 and the long term financial planning principles outlined to secure and support future strategic investment; and 2.7 Note the capital update and approve revisions to the Capital Plan as outlined in Section 10. 3. Economic outlook and Key fiscal events 3.1 As Members will be aware, there are a number of downside geopolitical risks that continue to impact public finances, including ongoing conflicts in Ukraine and the Middle East. This continues to bring volatility and create uncertainty in global supply chains, and associated costs. 3.2 Twelve-month CPI inflation increased to 2.9% in July, coming from energy, food and transport. Pay inflation remains high but is expected to ease over the rest of the year. The Bank of England expects inflation to rise later in 2026 before returning sustainably towards its 2% target over the medium term. 3.3 At its July 2026 meeting, the Bank of England's Monetary Policy Committee (MPC) voted to maintain Bank Rate at 3.75%, deciding that uncertainty surrounding energy prices and the risk of renewed inflationary pressures warranted a cautious approach. The Bank Rate is expected to remain broadly at its current level in the short term. 3.4 Economic growth is expected to remain modest over the next two years, with UK GDP growth forecast at 1.1% for 2026. While the Scottish Fiscal Commission's (SFC) latest official forecast projects Scottish GDP growth of 1.3% in 2026 and 2027, more recent independent forecasts have revised expectations downward to around 0.8%-0.9%, reflecting the impact of higher energy prices, economic uncertainty and weaker investment growth.
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PUBLIC 3.5 The SFC published its Fiscal Update in August 2026, in which they note that the outlook for 2027/28 remains considerably challenging for the Scottish budget. Their forecasts suggest that revenue spending could fall after taking account of inflation, with capital spending expected to fall further than planned. While the Scottish Budget has benefited from additional resource linked to UKG decision on spending for Special Educational Needs and Disability (SEND) in 2026/27, this additional resource is one-off. The SFC is forecasting a fall in the real terms value of the resource block grant in 2027/28 of 1.2%. This may change depending on UK Government decisions at the UK Budget – the arrival of a new Prime Minister and Chancellor may change the previously understood fiscal strategy. 3.6 Regardless of these, the outlook for the Scottish Budget is challenging. Additional pressures from the income tax reconciliation mechanism (outlined by the SFC as costing £720m in 2027/28), ongoing pay and demand pressures, as well as Scottish Government policy commitments will all bear on the 2027/28 budget. 4. Scottish Budget 2027/28 and Local Government Finance Settlement 4.1 The Scottish Government’s Scottish Spending Review (SSR) published in January 2026 alongside the 2026/27 Scottish Budget set out the Scottish Government’s indicative revenue spending plans for 2027/28 and 2028/29, with an additional year (2029/30) for capital spend. The spending review outlined a planned £1.5bn savings target over the period, underpinned by plans for public sector reform and NHS efficiencies. The Programme for Government published on 1 September outlined potential changes to the structure of local governance in Scotland, with engagement currently ongoing. At the time of drafting, there is no clear indication as to how any preferred model may affect the council’s financial position or outlook, therefore no assumptions have been included. 4.2 The UK Government Budget has confirmed that the UK Budget will be announced on 28 October. This typically drives timelines around the Scottish Budget, and it is expected the Draft Budget will be published on 3 December. Members will be aware that the Council must agree its budget and associated council tax decision by 11 March each year. 4.3 Renfrewshire Council’s settlement has benefited in the past year from the area’s relative growth in population, and this is expected to continue into 2027/28.
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PUBLIC 4.4 The latest population estimate was published in mid-July 2025. This showed that Renfrewshire’s population increased again and now stands at 189,270, an increase of 660 (0.3%) on 2024 and above the national rate of just under 0.1%. This yearly increase is based on a rebased figure for 2024 which was revised down slightly. Renfrewshire remains the 9th largest Council in Scotland in terms of population. This recent population increase places our estimated population at the highest level recorded since 1980 and continues increases recorded from the mid-2000s, however the rate of change has slowed significantly compared to the period following the 2022 census. 4.5 In terms of what this means at a strategic level: increased population is generally positive, as people are choosing to move to Renfrewshire, supporting the local economy, using services and contributing to their communities. However, in line with the rest of Scotland, Renfrewshire is experiencing a significantly ageing population, which leads to demand pressures on health and social care services. This trend is likely to become more acute as the top end of the working age population moves into the 65+ cohort. 4.6 The Scottish Government’s January 2026 public sector pay policy restated the 2025 position of a 9% increase over 2025/26 to 2027/28, with an annual cap of 3%. The most recent local government pay settlement agreed was for 4% in 2025/26 and 3.5% in 2026/27. In recognition of this, the Scottish Government has committed to reviewing the policy as part of the 2027/28 budget process. 4.7 The Scottish Government has made a number of policy commitments which will impact on the local government settlement, including a commitment to reduce class contact time for teachers, expand free breakfast provision in schools, and extend the rights of care experienced children under the Children (Care, Care Experience and Services Planning) (Scotland) Act 2026. A core assumption of this report is that the financial consequences of these commitments will be fully funded by the Scottish Government. 5. Medium term forecast position and assumptions 5.1 The most recent financial outlook update reported to Council in February 2026 covering the period 2026/27 to 2030/31, outlined gross revenue pressures of c£80million by 2030/31 before any decisions on council tax. This forecast was based on a number of key assumptions, which officers continually assess in light of new information. The updated core assumptions underpinning the forecast position within this report are outlined in Table 1 below:
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PUBLIC Table 1: Core budget assumptions September 2026 2027/28 2028/29 2029/30 2030/31 2031/32 Pay award 3.0% 2.5% 2.5% 2.0% 2.0% Employer Pension contribution rate (LG employees) 6.5% 6.5% 6.5% 15.0% 15.0% Non-pay inflation 0% 0% 0% 0% 0% Contract inflation 2.0% 2.0% 2.0% 2.0% 2.0% Revenue Grant 1.0% 0.5% 0.5% 0.0% 0.0% Council tax (rate) 6.5% 6.5% 6.5% 6.5% 6.5% Council tax (base) 0.7% 0.8% 0.7% 0.6% 0.6% Pay 5.2 The current pay settlement for teaching staff covers the period up to July 2027 (3.25% from 1 August 2026) and for local government (non- teaching) staff the agreement until 31 March 2027 was 3.5%. The assumptions for pay over the medium term are noted above. For context, each 1% pay award across both the teaching and non- teaching workforce would cost an estimated £3.5m per year. 5.3 On top of pay inflation, the Council’s pay bill also includes employer NICs and pension contributions. The Council’s current employer contribution rate to the Strathclyde Pension Fund is 17.5%, however, the current triennial valuation process will confirm rates for the next three-year period. The assumption in this Financial Outlook is that the 17.5% rate will reduce to 6.5% over the next three year triennial revaluation period. This position is not at the time of drafting confirmed by Strathclyde Pension Fund, however it is expected the position will be determined by the end of September. The indication from SPF is that the long term employer contribution rate is expected to be 15%, however due to the current well-funded position, the contribution rate could be reduced to 6.5% in the short to medium term. There remains uncertainty with this however, and a risk remains for the Council that an increase back to the longer term rate may be required in 2029/30. In this case, the Council would require to reinstate the budget back to the 15% rate in a relatively short period of time. This would present a significant challenge, and it is anticipated that the use of ringfenced reserves could be required to smooth this position.
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PUBLIC 5.4 The employer contribution rate for the teachers’ pension scheme is also currently the subject of an actuarial valuation, however the formal position on this is unlikely to be agreed until early 2027. There was a substantial change in the employer contribution rate in England following the actuarial revaluation – the rate will reduce from 28.68% to 17.68% from 1 April 2027. The current rate in Scotland is 26%. For the purposes of this report, it is assumed that any change in the employer contribution rate will be matched by an equivalent change in revenue grant funding. Non-pay costs 5.5 The Council has a long-standing principle of no general inflationary uplifts being funded, with an expectation that Directors and their management teams will seek ongoing efficiencies in order to meet general inflationary pressures. This position has been significantly tested in recent years as both general inflation (as indicated by CPI) and construction cost inflation have both breached into double figures. Utilities in particular have seen large increases in cost; along with road fuel and costs associated with waste recycling and disposal. 5.6 The pressure on these budgets, along with other above inflation costs linked to conflicts in Ukraine and the Middle East, has resulted in a position where some costs have exceeded available budgets despite the best efforts of officers. This has been particularly prevalent in Children’s Services transport costs, as well as services delivered by the Environment, Housing and Infrastructure service; and the resulting overspends have been robustly scrutinised by relevant Policy Boards. 5.7 In closing the 2025/26 position, the Council added £1m to its Unearmarked General Fund balance to address some of this expected price volatility; however, the Council continues to face a number of expenditure risks, which are outlined in more detail in section 8 below. 5.8 Owing to revenue spending pressures the Council has had a long period of only basic buildings maintenance being in place. This has resulted in a position where the overall condition of the estate is deteriorating; most pressingly in the schools estate but also across other areas of public buildings including the leisure estate. The lifecycle maintenance and repairs budget has been increased over the past two years to address the scale of backlog and other repairs, and a further recurring £0.5m could be incorporated for this purpose in 2027/28.
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PUBLIC 5.9 The cost of running the local government election in May 2027 is estimated at £0.6m. As this is non-recurring, it is assumed that this will be funded from reserves, rather than adding to the recurring base budget and then removing it in 2028/29. Education costs 5.10 Members have agreed a learning estate strategy that includes a business case process to support and inform schools and early learning estate investment decisions. As reported to the Education and Children’s Services Policy Board in May 2026, a number of business cases are underway for the next phase of the programme – Trinity High School, Johnstone High School, and Johnstone Primary School Estate projects. In addition, both the expanded Park Mains HS and Thistle PS will become operational in August 2027. Both teaching and running costs have been incorporated into forecast spend. 5.11 Following agreement of the 2026/27 budget, a further pressure emerged around Additional Support Needs demand within schools, with a £0.2m investment agreed to be funded from reserves, with inclusion in the base budget from 2027/28. However the scale of this pressure has escalated during the current year. Renfrewshire Council has a rate of ASN demand (45% in 2025) that is higher than national average in Scotland, and the complexity of need means that in many cases a 1:1 support ratio needs to be in place. This pressure will continue to be closely monitored. 5.12 Across both ASN and mainstream school transport provision, the budget has come under severe pressure as tendered costs increase from private providers. Additional budget of £3.6m has been added in the past 2 years; however, the most recent forecast position for the 2026/27 outlines a further overspend of £0.8m. An additional recurring budget of £1m has been included in the outlook position for 2027/28. This means that spend on school transport has practically doubled in 4 years, predominantly linked to cost increases rather than increased numbers of children travelling. This level of cost increase will be difficult to contain without impacting on other Council service budgets and services. Borrowing costs 5.13 The Council’s strategic aspirations in terms of the learning estate and infrastructure (where this is not grant funded) will require to be appropriately resourced in the revenue budget to support prudential borrowing and revenue contributions to capital.
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PUBLIC This issue is outlined in more detail in section 9 below, however the forecast position includes an increase in loans fund costs each year for the full forecast period – potentially taking the ratio of debt to net revenue stream from 2.9% to 5.3%. This approach will provide the Council with the ability to lock in capital investment capacity to support long-term strategic investment planning. Income 5.14 The Scottish Government’s MTFS indicates an average 2.7% cash- terms increase to the local government settlement over the period of the plan. However, the MTFS, similar to the Council’s plans, shows a deficit position. Therefore, the Scottish Government will need to make savings or reduce planned spend over this period, potentially adjusting its expenditure plans to remain within available resource. On balance, the Council’s base forecast for revenue grant is therefore ‘flat-cash’. Given the scale of the budget gap projected by the Scottish Government, this forecast may be on the optimistic side, and this position will be kept under close review. The Council should however benefit in terms of distribution from an overall increase in share of the Scottish population. 5.15 In relation to council tax, Council previously agreed a core assumption of 6.5% increases for the remainder of the current administration period, noting that this decision would be for Council to take on an annual basis when setting each budget. This assumption remains the case across the five-year period covered here. Members will be aware that council tax is a key element of agreeing a balanced budget, so some variation from this core assumption is likely, depending on how other areas of spend and income move. 5.16 In setting the 2026/27 budget, an ongoing level of income from DEFRA in relation to the PackUK waste disposal packaging scheme was baselined. In recognition that this income may reduce over time as suppliers produce less packaging, there is an assumed 5% reduction in this income stream each year within the outlook position. 5.17 The Council has agreed to develop a Visitor Levy scheme proposition for Renfrewshire. While the Council has yet to make a formal decision as to whether to introduce the levy, given the statutory timescales involved around consultation and implementation, the likely earliest date for potential implementation would be April 2029. Within the outlook position, a new income stream of (prudently) £1m, which is net of administrative costs, has been included in 2029/30.
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PUBLIC It is expected a proportion of this funding will require to be invested in visitor related services and infrastructure. 5.18 Council officers will continue to work towards a principle of full cost recovery for services, setting fees and charges in line with this principle. An increase of 5% per annum has been in place for a number of years and this level is assumed to continue over the medium term. Officers will also explore other options for increasing income, or introducing new income streams, such as the visitor levy. Gross revenue position 5.19 The cost assumptions above result in the projected revenue position outlined in Table 2 over the next 5 years i.e. before any decisions on further savings, but inclusive of an assumed level of council tax increase in line with the core assumptions in Table 1 above. Table 2: Summary medium term forecast Summary medium term forecast - September 2026 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 £m £m £m £m £m £m Opening base budget gap/(surplus) (3.2) (6.9) (3.5) 5.3 12.7 29.9 New pressures: Pay 15.4 10.7 9.3 9.3 17.9 7.8 Non-pay 14.8 10.1 9.1 8.5 7.0 6.0 Borrowing 5.3 5.0 3.5 3.5 3.5 4.5 Asset maintenance 1.5 0.5 Gross pressures 33.8 19.5 18.4 26.5 41.1 48.2 Savings: Fees & Charges 5% (0.3) (0.3) (0.3) (0.4) (0.4) 0.6 Council Tax base increase (0.6) (1.0) (1.1) (1.1) (0.9) (1.0) Corporate and service savings (2.5) (10.6) (2.9) (3.1) (1.8) (1.0) Total Savings (3.4) (11.9) (4.3) (4.5) (3.1) (1.4) Sub-Total 30.4 7.6 14.0 22.0 38.0 46.8 Increase in SG revenue grant (23.9) (3.7) (1.9) (1.9) 0.0 0.0 Baseline EPR funding (4.4) 0.2 0.2 0.2 0.2 0.2 Budget gap prior to CT decision 2.1 4.1 12.4 20.3 38.1 47.0 CT increase (6.5% from 27/28) (9.2) (8.6) (8.2) (8.8) (9.4) (10.1) CTR requirement 1.0 1.1 1.2 1.2 1.3 Recurring budget gap/(surplus) (7.1) (3.5) 5.3 12.7 29.9 38.2 Recurring Motion Investment 0.2 0.0 0.0 0.0 0.0 0.0 Net recurring budget gap/(surplus) (6.9) (3.5) 5.3 12.7 29.9 38.2 Agreed one-off spend 7.9 0.0 0.0 0.0 0.0 0.0 Use of reserves 1.0 (3.5) 5.3 12.7 29.9 38.2
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PUBLIC 5.20 The position for the current financial year is shown for information; however, it can be seen that the Council has agreed a budget that returned to a positive recurring financial balance in 2026/27. 5.21 While the return to a recurring balanced position in 2026/27 is positive, without further substantial savings being delivered, a financial gap is projected for 2028/29 of £5m, increasing to £38m by 2031/32. For clarity, this is after the assumed council tax increases in Table 1 above. It is also worth highlighting, the above analysis makes no provision for additional financial support to Renfrewshire IJB – this financial risk is explored in further detail in section 8 below. 5.22 The Council will have choices in how to address the financial gap, however these will essentially be restricted to three main themes: reduce planned spend (specifically, that spend which is within the Council’s control); generate savings to offset the forecast increase in cost; or increase income. For context, each 1% increase in council tax generates c£1.1m. The most likely solution will be a combination of all three. 5.23 There would also be a short-term option in terms of utilising reserve balances to temporarily close the gap, however the underlying financial gap would remain to be addressed on a recurring basis. As has been discussed in many previous reports, the use of reserves to achieve financial balance can only ever be a short-term option, which should only be agreed in circumstances where planned and agreed recurring savings, required to achieve recurring balance, cannot be delivered in line with the financial gaps emerging. These issues are explored in further detail below. 6 Savings 6.1 Previous financial updates have outlined the measures the Council has taken to deliver substantial savings in recent years from transformation programmes, financial sustainability workstreams and corporate financing measures such as adjustments to the Council’s long term debt smoothing strategy. 6.2 Action taken by the Council since 2011/12 has generated substantial levels of saving totalling £193m, however as has been reported previously, in each successive year it is increasingly difficult to continue to generate savings at scale. From an average saving of £19.5m per annum in the period from 2011/12 to 2014/15, the average saving over 2022/23 to 2026/27 was £5.8m.
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PUBLIC As outlined above however, without continuing significant levels of saving being generated, there is a risk the Council will not remain financial sustainable. There is a significant anticipated saving in 2027/28 linked to the reduction in the employer pension contribution rate outlined at 5.3 above, estimated at £8-9m. 6.3 As outlined in the most recent Reshaping Renfrewshire report, key areas of focus for the Council in terms of transformation will be: to reshape how we use council assets, reimagining the role they serve within our communities; to drive long term economic growth and address the climate transition journey; to develop our strategic partnerships to support delivery of shared goals; and to secure a digital agenda that drives the delivery of large-scale savings whilst also transforming how we work, how we use data to inform our decisions, and improve our service delivery to, and choice for our citizens. 6.4 In respect of the digital agenda specifically, it has been recognised that artificial intelligence may provide substantive potential for service change. The Council is concluding the appointment of a supplier to support the Council’s AI Transformation Programme. Regular updates on the AI Transformation Programme will be reported to the Leadership Board at key points throughout the programme, including a six-monthly ‘AI Transparency Report’ outlining the AI tools used by the Council, the purpose, and function of each system, any data-protection or equality assessments undertaken, changes since the previous report, and any identified risks, mitigations or recommendations for future deployment. 6.5 The phasing of resulting financial savings is included in the forecast outlook position, from 2028/29 to 2030/31, targeting c£4.8m in total. This is net of anticipated recurring costs. The delivery of these savings is also predicated on a requirement for short-term investment to facilitate the transformational change necessary, and the Council maintains a Service Modernisation Fund for this purpose. Savings delivery on this scale is contingent on wide adoption of AI technology across services, and robust vacancy management as services take advantage of the service reconfiguration possible through the use of AI. 6.6 A recurring financial gap remains over the medium term, meaning further work will be required to secure the Council's long-term financial sustainability. The savings identified within this report should therefore be viewed as an initial programme, with additional proposals to be developed as the financial outlook becomes clearer. In the shorter term, reserve balances may be required to support financial stability while longer-term solutions are implemented.
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PUBLIC 7 Reserves 7.1 The planned use of reserves as a support to the Council’s medium- term financial position has been outlined in previous reports as likely to be required; and the analysis above clearly demonstrates this requirement over the medium term. The application of reserves is a legitimate tool in managing temporary financial challenges and securing immediate financial stability while the design and delivery of well- managed sustainable savings are generated to match financial pressures; it cannot, however, be more than a short-term measure. 7.2 In summary, the Financial Sustainability reserve will be the prime source of financial stability support over the medium term. The balance on this reserve coming into 2026/27 was £35.8m. Delays with the achievement or non-achievement of savings will require to be supported through the application of this reserve. 7.3 Members should continue to recognise the risk that savings may be delayed or deliver less benefit than anticipated, and should prudently plan for this eventuality. In addition, Members’ attention is drawn to the significant financial risks outlined in section 8 of this report, in particular the ongoing risk posed by the financial outlook of Renfrewshire HSCP. 7.4 While there remain uncertainties in much of the analyses above, it is helpful to reiterate previously agreed principles in terms of the planned use of specific reserves which could be deployed to support the Council’s medium- term financial position, namely that: o There should be no planned use of unallocated reserves, which are held as a risk contingency (however the Council took a deliberate decision to increase unallocated balances by £1m in closing 25/26 in recognition of specific cost volatility – up to £1m therefore could be applied in 26/27 to fund known pressures); o Unallocated reserves should be maintained at a minimum of £10m (c2.0% of net running costs) over the medium term; and o The Council commits to the planned use of the Financial Sustainability reserve to support the medium-term financial position, and in the interim, develops and implements plans to address the forecast structural financial gap in a sustainable manner.
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PUBLIC 7.5 Updated revenue outlook reports will continue to be provided to future Council meetings, including the annual budget setting meeting, incorporating the confirmed level of Scottish Government revenue support in 2027/28, plus any revised financial assumptions and any variation in the requirement to utilise ring-fenced reserve balances from that outlined here. 8 Risk management 8.1 The most recent financial overview report to the Finance, Resources and Customer Services Policy Board outlined a projected revenue overspend in 2026/27 of £6.0m. This includes a projected overspend with Adult Social Care services managed by Renfrewshire IJB of £5.1m; with remaining Council services therefore projecting an overspend of £0.9m. 8.2 There are a number of financial risks which the Council is facing in-year that have the potential to significantly affect the forecast outturn position outlined above: i. Pay inflation - Provision has been made in the budget for a level of pay uplifts based on affordability, and the prospect of reducing inflation; however, given current economic volatility, there is some likelihood that this provision will be insufficient. Any costs over and above budgeted levels will require to be funded from reserve balances in-year, with adequate provision requiring to be made in future budgets. ii. Reduced class contact time – the Scottish Government has outlined its intention to reduce teacher class contact time from 22.5 hours to 21 hours per week, starting with primary schools from August 2027. Officers in Children’s Service are currently developing plans, however early indications are that the additional cost could be in the order of £3-4m per annum. The working assumption is that this will be fully funded by the Scottish Government as a new burden; however, this is yet to be fully confirmed on a recurring basis. One- off preparatory work funding will be made available to councils during 2026/27. iii. Renfrewshire IJB – as has been previously reported to members, Renfrewshire IJB continues to face significant cost pressures, with the June report to the IJB outlining a projected year end overspend of £5.1m for 2026/27. A recurring financial gap of c£12m is forecast for 2027/28, some of which could be offset through the applications of remaining reserves.
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PUBLIC IJB officers continue to implement savings through the Sustainable Futures plan, with a number of service changes being required to mitigate the projected overspend. This work is ongoing, however the difficulties in securing recurring savings at the scale required is not to be underestimated. For Adult Social Care alone, pay inflation averages £0.950m per year for the next 5 years. In addition, based on the report to the IJB in March 2026, it is estimated that IJB reserve balances will be fully exhausted during 2027/28, potentially requiring both the Council and NHS Greater Glasgow & Clyde to provide significant additional support. Council officers continue to engage regularly with IJB officers to ensure appropriate visibility of the forecast position. Members will be aware that in terms of risk scoring, the Council, similar to all councils across the country, now has IJB financial sustainability as its highest financial risk given the potential for this issue to impact severely and directly on the Council’s financial stability. iv. Waste Disposal Costs – the Council deals with multiple streams of recyclate disposal on a daily basis, and contracts with suppliers to collect and process this waste. Many of these waste streams have generated income for the Council in past years, but currently the majority present a significant cost to the Council. The position, however, is subject to frequent change, linked to global supply chain needs, leading to market sensitivity. Consequently, a further recurring sum is not recommended in the base budget; rather Members are asked to approve the principle that adverse fluctuations in these costs can be managed by drawing on the Financial Sustainability Fund, if there is no available capacity in the in-year service revenue budget. The proposed development of a transfer station as outlined below would help mitigate this financial risk, but not extinguish it. v. The Children (Care, Care Experience and Services Planning) (Scotland) Act 2026 received Royal Assent on May 15, 2026, following approval by the Scottish Parliament. Its provisions extend accommodation support and continuing care for care experienced individuals up to age 26 in certain circumstances. It is assumed within the medium term outlook position that new burden funding will be forthcoming from the Scottish Government to support additional costs arising from these new requirements.
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PUBLIC vi. Savings delivery - Directors and their management teams continue to try to manage as efficiently and effectively as possible within a highly constrained financial envelope; however this is becoming increasingly difficult following 15 years of savings delivery at scale and a continually volatile financial environment. This increased level of financial risk further supports the requirement to hold a prudent level of unallocated reserves. 9 Treasury management and debt 9.1 The medium term forecast position outlined in the sections above contain an assumed increase in the funding required to support borrowing which is a prerequisite to ensuring the Council’s ambitious capital plans remain affordable and financially sustainable. It will be critical for the Council to understand not just the capital costs concerned and the risks inherent in managing these (see section 10 below); but also in ensuring that the revenue consequences of that investment are affordable and are appropriately provided for within council revenue plans. 9.2 Prior to agreeing any capital project; and as has been explicitly approved in the context of the learning estate strategy, the Council must as part of its business case gateway process ensure that appropriate provision has been made in future revenue plans to fund both borrowing costs and any increased operational costs resulting from capital investment. 9.3 It is recognised that increased investment in the council’s asset base is both desirable and essential, however investment decisions must be taken in the context of the current constrained financial environment. Increases in revenue support for borrowing will inevitably result in choices between capital investment and dealing with ongoing service pressures and priorities. Any increase in property related costs should aim to be mitigated by rationalisation in the size of the council’s property portfolio – in line with the principles of the property asset management strategy. A reduced number of better condition buildings from which to deliver services should remain the aspiration. 9.4 Members have been advised previously that the Council has one of the lowest debt-to-revenue spend ratios in Scotland. The ratio at the end of 2025/26 was 2.8%, whereas the Scottish average sits around 6%. There is no target rate; this is determined by a range of factors around historic levels of investment, historic borrowing rates, timing of investment decisions, and other non-financial factors such as overall estate condition and local priorities.
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PUBLIC This low rate does not mean that we have excess funds available, as what the Council is not spending on serving debt, it is spending on delivering services. This is very important to understand moving forward. Given there is a clear aspiration to improve the estate, this will mean less revenue funding available for service delivery. 9.5 Supporting substantial future capital spend (and therefore borrowing) requires a commitment from the Council over a long period to prioritise revenue provision for loan charges as a core principle of its budget strategy. Steadily increasing loans fund budgets in this way locks-in revenue resources as part of financial planning to provide certainty of future borrowing capacity, and also generates short-term investment from CFCR contributions in advance of new loan charges commencing, thereby increasing the overall capital funding available. 9.6 The Council’s 2026/27 budget was agreed incorporating an increase in provision for borrowing costs of £3.0m; with a further commitment of similar increases in future years. Setting aside funding at least on this scale will be a precursor for any decisions for further at scale investment in the property estate. This is both required over the remainder of the current Council administration term in order to underpin the learning estate strategy but will also need to be established as a fixed feature of the Council’s very long term financial planning arrangements to secure ongoing investment capacity over the next 20 years. The outlook position assumes a baseline of additional loan charges provision of £2.5m per year. 9.7 Successive treasury management reports to Council have outlined that the Council’s borrowing strategy is to firstly use internal cash balances to fund the capital investment programme. This strategy remains, however internal cash balances have been depleted, and it is likely that external borrowing will be required in the medium term. Any external borrowing will be undertaken in line with the Council’s agreed treasury strategy. The current relatively high interest rate environment will be an influence on the timing of borrowing decisions, however there may be circumstances where the Council requires to borrow externally in the relative short term, potentially increasing costs in that period. 10 General Fund Capital Programme 10.1 The Council continues to deliver its ambitious capital programme, incorporating the delivery of significant investment in cultural venues and wider infrastructure linked to City Deal projects and Levelling Up Funding; as well as major improvement and expansion projects in the school estate.
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PUBLIC 10.2 Council has agreed its learning estate strategy which continues this level of ambition over the medium to longer term; with an initial planned spend in the order of £170m over the initial phase of the strategy. With early business cases underway for this phase, and construction inflation a considerable factor over time, it is becoming apparent that this sum will be insufficient to support the Council’s ambitions, and therefore work is ongoing to assess what additional borrowing capacity will be required going into the 2027/28 financial year. 10.3 An outline business case for a new waste transfer station was approved at the August meeting of the Infrastructure, Land and Environment Policy Board. An estimate of just under c£6m total cost is included in the recommended development option. To fund this, the Board also agreed to recommend the drawdown of £3.6m from the Financial Sustainability Fund to support this capital investment and that the remaining capital cost is funded from prudential borrowing. It should be noted that this early estimated cost is subject to change as the final business case is progressed, however it is recommended that the Capital Plan is updated to reflect this investment. 10.4 Members should remain alert to the fact that major capital investment projects bring an inherent level of financial risk and further costs may emerge as they are delivered and contractually concluded. It remains possible that costs may be incurred in excess of agreed budgets within the existing capital plan given the scale and nature of the Council capital programme and growing incidence within the construction industry of contractors pursuing contractual claims, reflecting the ongoing financial pressures and volatility being experienced. 10.5 Where budgets are expected to be exceeded, appropriate approval will be sought to adjust the capital plan to reflect these costs with any consequential impact on the overall capital plan or revenue consequences being clearly articulated. Implications of the Report 1. Financial – the report highlights the scale of the short and medium term financial challenge the Council faces. The development and implementation of savings options at pace and scale will be critical to the ongoing financial sustainability of the Council. The report indicates a projected recurring financial gap of c£38m by the end of 2031/32. 2. HR & Organisational Development – the medium term financial position and associated savings plans require to align with workforce plans to ensure the size and composition of the workforce remains
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PUBLIC appropriate and affordable. 3. Community/Council Planning – the Council requires to remain financially sustainable in order to deliver on its priorities as outlined in the Community and Council plans; and these plans in turn require to inform the financial strategy. 4. Legal – the Council is legally required to set a balanced budget. 5. Property/Assets – the report outlines investment that aims to ensure the Council’s property asset base is efficient and properly maintained. 6. Information Technology – the report outlines the digital agenda, including AI, as a critical factor in the delivery of future savings, efficiencies and improved customer service. 7. Equality & Human Rights - The recommendations contained within this report have been assessed in relation to their impact on equalities and human rights. No negative impacts on equality groups or potential for infringement of individuals’ human rights have been identified arising from the recommendations contained in the report, however the report highlights the need for the Council to continue to make substantial savings which may impact on service delivery. Each savings proposal will be individually assessed for any impact on equalities and human rights. 8. Health & Safety – none arising directly from this report. 9. Procurement – none arising directly from this report. 10. Risk – as outlined in the report the Council’s financial sustainability risk remains relatively high, and increased in the short term due to the potential financial implications arising from the Renfrewshire IJB’s financial outlook. 11. Privacy Impact – none arising directly from this report. 12. Climate Risk – none arising directly from this report. 13. Children’s Rights – none arising directly from this report. 14. Cosla Policy Position – none arising directly from this report. Author: Alastair MacArthur, Director