Progress towards greater financial stability continues to be a priority for Derby City Council, despite ongoing national challenges.
The Council has issued its Medium Term Financial Strategy (MTFS) which details the framework for how the organisation will manage its budget over the next three financial years, building back reserves and resilience for the future despite continued pressures.
Over the past decade Derby, like many other councils, has experienced a significant increase in demand for services, such as adult social care. Spending has risen by £101 million (48%), with £60 million of this increase occurring since 2021. To manage this, the Council has delivered savings of around £112.5 million since 2016/17, mitigating the fact that Government funding has not risen in line with increasing demand and costs whilst protecting essential front-line services.
The Government is now proposing a change in the way that councils are funded through their Fair Funding Reforms. The proposals aim to simplify the system, move to multi-year funding allocations and align funding with need. The new system, which would take effect from April 2026 if confirmed, would also address long term disparities in funding between councils, meaning that money would be redirected to areas such as Derby with high deprivation, population growth, and a low tax base. However, the Council will not receive confirmation of the amounts and details of the Government’s settlement until late 2025.
As the Council enters its annual budget setting period, the MTFS shows that the current projected budget gap for 2026/2027 sits at £7.756 million, not including the benefits of the Government’s Fair Funding Reforms, and will be considering how to present a balanced budget over the coming months
Councillor Kathy Kozlowski, Cabinet Member for Governance and Finance said:
Despite the challenges facing local government nationally, the Medium Term Financial Strategy shows that our careful spending and robust financial management are paying off, giving us much greater stability to continue transforming our city into a place that we can all be proud of. However, we are far from out of the woods.
We welcome the Government’s acknowledgement that the way local government is funded desperately needs to change. If they are confirmed, the Government’s proposed reforms have the potential to support us in maintaining the progress that we have made towards achieving financial stability.
The MTFS highlights of the many complex financial pressures that local government faces, particularly how best to protect the city’s most vulnerable residents, and the rising costs of services due to inflation. Adult Social Care in particular places a significant demand on budgets, and the Council has invested £35.2m into the area over the past four years.
Work to restore general reserves is also helping to put the Council on a firmer financial footing. During the 2025/26 financial year, reserves have been replenished to £15.8 million, equating to around 4.54% of the revenue budget, and the highest level for several years
The Council’s Cabinet will review the Medium Term Financial Strategy on Wednesday 8 October. The meeting will be available to watch on the Council’s YouTube channel.