A grim report says social care costs are rising at an “unsustainable rate” and the rest of the council can’t support the level of spending.
Director of finance Ryan Keyworth says careful prioritisation, focused investment and significant efficiencies are needed to avoid unsustainable pressure on finances.
He says in a report: “This will be made much easier if we are able to agree clear and long-term policy-led priorities with the administration.
“Without firm action, it will be challenging to set a legal budget for 2022/23 onwards.
“Unless firm action is taken to contain pressures, deliver agreed savings, and focus any new spending on a small number of key priorities, the council’s financial position will soon spiral out of control.”
The council is currently facing a £44m overspend – which officers say is the largest forecast overspend that anyone can remember at this stage in the year.
Officers warn there will be a budget gap of almost £121m by 2025/6 unless action is taken.
Which services are draining Sheffield Council’s budget?
The report says: “Adult health and social care has a £19m overspend on a £113m budget. The majority of the cost increase results from increased home care use and cost.
“Children’s social care is £17m overspent on a £97m budget. Demand has risen because of the pandemic and agency staffing costs continue to be high.
“Social care costs are rising at an unsustainable rate; faster than we can contain and at a rate that is putting the financial stability of the council at risk. The rest of the council cannot support this level of spend.”
Leisure will also become an issue in two to three years if subsidy levels do not “reduce drastically” from the current £15m budgeted subsidy to around £3m.
The council has protected social care and invested in it significantly while reducing spending in most other areas. Over the past five years the budget for People services has increased by £88m.
It has already transferred investment from other services to support social care but officers say repeatedly diverting money from other services isn’t sustainable.
Can Sheffield Council get out of this financial blackhole?
The council needs to “re-establish strong controls” with spending as it moves out of the pandemic and one-off Government support is withdrawn. Uncertainty about future Government funding is also a concern.
A large portion of one-off reserves will need to be used just to balance the books – with a reminder that “reserves are one-off money that, once spent, is gone”.
The report adds: “The challenge will be very difficult to manage without significant additional Government support but this support looks unlikely to be forthcoming as Government attempts to repair the national finances following spending on the pandemic.”
The best case scenario is the budget gap lessens to £54m if the council focuses spending on a few key priorities, contains pressures and delivers savings. The worst case is the gap grows to £235m in the next four years.