Sheffield Council budget worries continue over £17.4m shortfall in cost of paying for services

The council’s finance committee met yesterday (December 18), just ahead of the government announcing its £64 billion funding package for councils in England for 2024-25, an increase of 6.5 per cent. This includes £1 billion in additional grant funding for social care in 2024-25 compared to 2023-24.

Councils such as Sheffield will be able to put up council tax by five per cent next year without the need for a referendum, the government said.

Council bosses will now be assessing whether the settlement lines up with their financial forecasting for the budget-setting process. A meeting of the council’s strategy and resources committee on Thursday (December 21) will make a decision on savings to be made.

Head of accounting Jane Wilby told the meeting that the revenue budget for the second quarter of the financial year shows a forecast overspend of £17.4m.

Councils must by law achieve a balanced budget, failure to do that means they have to issue a section 114 notice – effectively declaring bankruptcy.

Challenges

The council set aside reserves of £70m in 2021/22 to help it manage budget pressures but there is now only £13m left in the pot. Once that is gone, there is no help for future years, she told the committee.

“The issues here in Sheffield are not unique and councils across the country are facing the same challenges and financial context,” Ms Wilby said. “We’ve seen four local authorities in the past 12 months declare insolvency, issuing 114 notices, Nottingham being the latest.”

She added: “The autumn (budget) statement from government offered no reassurance that there will be additional funding for local authorities.”

All council departments are continuing work to identify savings to stop the budget gap from widening even further, she said.

On the plus side, the council is not currently borrowing as it has a strong cash position because interest rates remain high. However, although inflation is falling, it is still high, adding to the pressure on budgets.

Ms Wilby said that the other main strains on council budgets are increasing demand for temporary accommodation for people who have become homeless, more need for adult health and social care services and a rise in the number of children who require home to school transport provided by education, children and families services.

Overspending

Coun Mike Levery said: “The situation with children and families is causing me more and more concern. It has gone up by another £2m overspending since quarter one. I assume we’re still seeing some level of increase happening toward the end of quarter three?”

Ms Wilby said that currently, the council is 80 per cent on track to deliver budget savings, whereas children and families is achieving 65 per cent overall.

She added: “The children and families budget does continue to be a really challenging one with the home-school transport provision. There is an increased number of children we are providing transport to school for.

“That has increased again as the new term started. There is an overarching review of transport services going on at the minute that is trying to look at opportunities to provide savings and look at efficiencies in how we provide that transport provision.”

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Ms Wilby said that another issue is the rising costs for children in council care. “The costs of placements continue to be really, really expensive. There is a shortage of supply, a shortage of labour. We are having to pay for a lot of out-of-city packages to support children in the city. It’s really, really difficult.”

The national shortage of foster carers is being experienced in Sheffield, she said. This has a knock-on effect on the number of children who remain in care, which is far more expensive than fostering.

Coun Andrew Sangar said: “Placements has been a problem for 15 to 20 years. It was a budget choice on fostering that said it was achievable. At this stage, six months in, we’re talking about £1.6m.

Confidence

“On home to school transport, have we implemented all the previous reviews and at what point did we spot that we’d gone from 1,400 children being taken to school to 2,400?

“It does seem to be a large increase over a relatively short period of time and wasn’t a major feature of either last year’s budget discussion or the one before’s budget discussion.”

Ms Wilby said that a review is already underway, looking at the short-term issue and how to lessen future budget pressure.

She said that a bigger cost for the service would be embedded in the next budget.

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On homelessness, Coun Sangar asked: “What confidence can you give us that this is very much a one-year blip, that there is a problem at the minute? It seems to me that what we are doing this year is bridging the gap, we’re not necessarily finding more accommodation.

“Why are we not going to be in the same place in 12 months’ time?”

Solutions

Ms Wilby said that Sheffield, in line with councils nationwide, is dealing with a rise in homelessness and struggling to find solutions: “I don’t think that it’s going to go away in the short term and it’s still going to hit budgets next year.”

She said that work is taking place to make sure that empty council properties are repaired and re-let quickly, helping to bring down numbers of Sheffielders stuck in temporary accommodation.

The council is also looking at what investment to make in creating more temporary accommodation, which is more cost-effective than putting people in bed and breakfasts.

Coun Sangar pointed to the work of the adult health and social care committee to help get costs under control in that service. He hoped lessons could be learned elsewhere.

Coun Bryan Lodge asked if the drop in inflation would benefit council budgets. Ms Wilby said there may be some immediate effect but some of that impact would take time to work through.

Committee chair Coun Zahira Naz said: “It’s going to be incredibly difficult. This situation is what local authorities have up and down the country. They are facing the same pressure that we are here.”