Medium Term Financial Strategy (MTFS) Consultancy

Annual budgets tell a local authority where it stands today. A Medium Term Financial Strategy tells it where it is heading. As funding pressures, demand growth and inflation continue to reshape public sector finances, authorities need more than a one-year view — they need a structured, multi-year framework that connects current decisions to future consequences. A robust MTFS allows finance teams and elected members to identify emerging budget gaps early, test assumptions before they are relied upon, and align spending with strategic priorities. Done well, it becomes the evidence base for the authority's most difficult financial choices.

A Medium Term Financial Strategy (MTFS) is a structured financial planning framework that sets out an authority's expected income, expenditure and funding position over a multi-year horizon — typically three to five years. Its purpose is to translate strategic priorities into a realistic, sustainable financial plan.

Unlike an annual budget, which fixes spending and funding decisions for a single financial year, an MTFS looks further forward. It sets out the assumptions behind future income and cost pressures, quantifies the scale of any projected budget gap, and identifies the choices available to close it — whether through savings, service redesign, income generation or reserves.

An MTFS typically informs and is used by:

Section 151 Officers and Chief Finance Officers, to evidence financial sustainability

Chief Executives and senior leadership teams, to align resources with corporate priorities

Cabinet Members and elected members, to understand the financial implications of policy choices

Finance and transformation teams, to plan savings programmes and service change

External auditors and regulators, as evidence of sound financial management

Put simply: annual budgets manage the present; an MTFS manages the trajectory. It is the mechanism by which today's financial decisions are tested against tomorrow's financial position.

Financial visibility A well-constructed MTFS shows how current decisions — spending commitments, savings targets, capital investment — play out over subsequent years, rather than being assessed in isolation.

Early identification of budget gaps Emerging pressures are easier to manage when they are identified two or three years in advance rather than discovered during the next budget-setting round.

Scenario planning Funding settlements, inflation, demand growth and policy change all carry uncertainty. A robust MTFS tests multiple scenarios rather than relying on a single, static forecast.

Strategic resource allocation An MTFS connects financial planning to the authority's stated priorities, helping ensure that available resources are directed towards what matters most, rather than being allocated by historical default.

Financial resilience Understanding financial capacity — including reserves, borrowing headroom and risk exposure — allows an authority to plan for uncertainty rather than react to it.

Better decision-making Senior leaders and elected members are better placed to make difficult financial choices when those choices are supported by clear, evidenced, multi-year analysis rather than short-term assumption.