Sheffield Council budget pressures continue despite extra government funding
Financial pressures on Sheffield Council’s budget continue despite an increased £25m contribution from the government.
Council tax payers can expect a 4.99% increase in their bills each year for the next three years, the council’s finance and performance committee heard yesterday (January 19).
They got an update to the council’s current and predicted financial position following the news of the government’s medium-term financial settlement (MTFS) to the council over the next three years.
Government figures show that the fair funding allocation for Sheffield for three years from 2026/27 is £412.5m. That represents a £25.1m increase to the 2026/27 funding and a £52.4m increase over the three-year term of the MTFS.
Another £10.3m will come from a government recovery grant which is expected to end by 2028/2029.
The council is working to cut its predicted overspend for 2025/26 to below £20m, but a report to the committee from director of finance and commercial services Philip Gregory warns that many of the same cost pressures will roll over into 2026/27. The figure quoted is £48.4m.
Demand
The report says: “Cost pressures continue to outstrip increases in funding, both specific inflationary pressures in major service areas, particularly for care, accommodation and construction, and the increasing volume of demand in housing and care.”
It adds: “The council needs to take bold action to reverse the trend of successive overspends that the council has had to fund from its reserves.”
The main focus for change is the Future Sheffield programme, which includes a shift in focus to prevention and early intervention services, aiming to save money.
The potential gap in resources over the next four years is estimated at £69.6m.
The council says that other Future Sheffield changes will include improved customer services expected to save £3m in 2026/27, more joined-up working across departments, using technology to work smarter and better engagement with communities and businesses.
Total savings of £10.3m have been confirmed from Future Sheffield changes for 2026/7. The predicted overall budget gap has shrunk from £7.7m to nil.
Pragmatic
The report talks about “pragmatic management actions” to cut costs while the longer-term changes are being put in place. These are expected to deliver bigger savings in 2027/28 and 2028/29.
Mr Gregory said that the current situation is an “important milestone” in the setting a balanced budget for 2026/27. For several years the council had to use its reserves to achieve this situation because of historic underfunding, he said.
In reply to a question from Coun Mike Levery, he said that the council should not have to “dive into its reserves” for 2026/27, assuming sufficient savings were achieved as planned.
Mr Gregory said that the three-year settlement gives the council some breathing space to plan better. He said that the aim is to avoid “getting into the position where we’re constantly overspending year on year”.
Coun Elle Dodd said: “In the fair funding model the Labour government brought in a much clearer focus on funding areas where need is greatest, which is partly what’s seen the uptick for Sheffield in this three-year period, which is really brilliant.
“It’s great that we’re able to put more money into social care and special needs [home to school] transport, as you mentioned, that we know we’re going to need, given the rising demand for those areas.”