Sheffield Council warns again of “tough” financial situation with expected £34m overspend

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Sheffield City Council is “grappling with significant financial challenges” involving a projected £34m budget overspend and says it is putting measures in place to tackle the issue.

The council’s finance and performance policy committee will on Monday (November 18) look at the latest budget figures for the second financial quarter of the year.

As previously reported, the council’s reserves are able to bridge budget gaps for 2024-25. The £34m will be covered by using £26.1m budget contingency reserves, plus £7.9m housing benefit subsidy provision.

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A report to the committee says: “Sheffield City Council is grappling with significant financial challenges stemming from increased service demand, rising costs, and reduced funding, resulting in a current overspend of £34m.

Sheffield City Council finance and performance policy committee chair Coun Zahira Naz. Picture: Sheffield LabourSheffield City Council finance and performance policy committee chair Coun Zahira Naz. Picture: Sheffield Labour
Sheffield City Council finance and performance policy committee chair Coun Zahira Naz. Picture: Sheffield Labour

“The council will balance this year’s budget by drawing on reserves but the situation remains tough.”

It adds: “Key service areas affected include housing and homelessness, adults and children’s social care, and SEN [special educational needs] home-to-school transport.

Challenging

“While the council can temporarily avoid issuing a section 114 notice by utilising reserves to balance this year’s budget, the financial outlook remains challenging.” When a council issues a section 114 notice, it effectively declares bankruptcy, as happened last year at Nottingham, Birmingham and Woking councils.

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After the current financial year, the council will no longer hold enough reserves to cover another major overspend.

The report says: “To address these issues, the council is focusing on the Future Sheffield programme, a critical initiative aimed at transforming services to create a more sustainable and efficient operating model.

“This transformation is essential to ensure the delivery of statutory services and to drive initiatives that support city growth, aligning with the council’s broader strategic goals as outlined in the medium-term financial strategy.

“The need for long-term financial sustainability underscores the importance of these ongoing transformation efforts.”

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It says that the Autumn Budget statement by Chancellor Rachel Reeves “provides much-needed support for local government and public services.

Pressure

“The Chancellor has announced welcome increases in funding for the special educational needs and disabilities (SEND) system, social care, and homelessness, which are key areas of pressure for the council. Moving towards a multi-year funding settlement will further support local government.

“This additional funding will be used to offset the additional costs of National Insurance and National Living Wage increases. The net impact to the council’s budget will be more certain after the Local Government Funding Settlement, which is due in December.”

The report also welcomes announced additional investment into schools and the NHS, raises in the National Living Wage and Carers Allowance, plus an extension to the Household Support Fund, as these measures “will help to put more money in people’s pockets and address hardship”.

Committee chair Coun Zahira Naz said in a statement: “As a council, we have previously spoken about taking a proactive approach to financial planning for the coming years to ensure that we deliver the vital services that the people of Sheffield need.

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“This does not change. Of course, the current position is challenging, and that will not change for the foreseeable future nationally. So we are committed to working cross-party to find solutions that enable us to continue to deliver high-quality services for our residents.

Funding

“The Future Sheffield programme is just one way that allows us to do that.

“The government has committed to longer-term funding settlements to give us the certainty to plan, and last month’s Autumn Budget outlined some of those provisions, which all local authorities will be grateful for.

“This is very welcome, and we look forward to working with the government to deliver the essential public services that residents rely on, while continuing to deliver a balanced and sustainable budget.”

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