Council confirms £5m budget overspend last year as reserves continue to fall

A report to be put before the cabinet on June 17 states it is “imperative” that an overspend is not repeated this year and reveals that reserve levels have dropped by £50 million since 2023, from £70 million to around £20 million.

Higher interest rates than anticipated and delays in asset disposals are among the reasons blamed for the council’s financial position, as well as the fact that only 68 per cent of the authority’s “ambitious” savings programme was achieved last year.

It is stated in the report that a delay in a large asset sale in March had a “detrimental impact” on the financial position as the authority expected to bring in £23.7 million from asset sales, but only achieved £10.3 million.

Other overspends included £3.2 million on children’s social care placements, £1.7 million from pressure across leisure services, £1.7 million through a rise in homelessness, and £1 million on demand for home to school and children in care transport.

These overspends were offset by several underspend areas and savings delivery.

Also of significant concern was the Dedicated Schools Grant (DSG) overspend by £5.8 million, which the council said was mainly due to the rise in expenditure within the high needs block.

Despite a £5 million total overspend by the end of the financial year, the council’s forecast overspend peaked at £11 million in July 2024, which was marked as a notable improvement.

However, it is noted in the report that the council “isn’t out of the woods yet”, especially considering this year’s budget carries a high degree of risk.

The report states: “Reserves are now at a level lower than required, which has consequences for the council’s overall financial resilience, reducing the ability to respond to any financial shocks or an emergency.

“The General Fund is below five per cent of Net Revenue Expenditure, which is the recommended level that should be held by local authorities.”

It adds: “While it’s recognised that the 2025/26 programme is equally ambitious and challenging, focus remains firmly on delivering the savings in full, and/or finding alternative solutions and mitigations where there are anticipated delays or shortfalls.

“Given the risk profile it will also mean additional in year savings will be required. Going forward the desire will be to ‘over-programme’ savings, to manage the impact of such delays or shortfalls.”

The council says its financial situation remains “difficult and challenging” but actions are planned to “rebuild reserves and handle new pressures”.

Cabinet members are recommended to note the 2024/25 revenue and capital outturn at the meeting next week.