REVEALED: Councils Preparing for Multi-Million-Pound Budget Overspends as Crisis and Cuts Hit

The cost of living crisis, more than a decade of cuts and the pandemic have left local authorities on the brink when it comes to key services

Councils across England are forecasting multi-million-pound overspends against their budgets this year as increasing demand and rising inflation crash into more than a decade of crushing austerity.

Local government has been one of the biggest victims of Conservative spending cuts since 2010, with government grants to councils slashed by nearly two-thirds between 2010 and 2020 according to the Institute for Government think tank. 

And with the pandemic having strained council finances and rising levels of need in adult care and children’s social services, councils are finding they are having to overspend their budgets – even though these budgets often incorporated large spending cuts and savings packages.

Forecast local government overspends have become more common under austerity, but the scale of overspends this year, combined with a looming new wave of spending cuts, is provoking fresh consternation among council bosses.

If councils cannot reduce these overspends to zero by next March – often by restricting recruitment and challenging complex care placements – they will either have to raid their reserves or add the deficit to their already ballooning budget shortfalls for 2023/24.

James Jamieson, chairman of the Local Government Association, believes the future financial sustainability of councils and local services is "on a cliff-edge". 

“The dramatic increase in inflation has undermined councils’ budgets," he said. "Alongside increases to the National Living Wage and higher energy costs, this has added at least £2.4 billion in extra costs onto the budgets councils set in March this year. Councils are now having to try and find ways to meet these costs this year and limit the damage to the local services that so many people rely upon.

“Some are planning to use reserves to plug funding gaps, stop capital projects or make cutbacks to services to meet their legal duty to balance the books this year. 

“However, with local government facing a funding gap of £3.4 billion in 2023/24 and £4.5 billion in 2024/25, it is clear that the Government needs to come up with a long-term plan to manage this crisis. Inflation is not going to come down overnight; reserves can only be spent once; a local service cannot be cut twice."

Of 28 councils, for which the financial monitoring reports have been examined by Byline Times, 26 are expecting to overspend their budget in 2022/23, including:

Surrey – the council forecast a £33 million overspend as of August, driven by a predicted £15 million overspend on home-to-school transport. A council report said: "The current level of projected overspend is significant and it is imperative that this reduces before we reach the end of the year. Otherwise, there would be a material negative impact on the level of the council’s reserves at a time when the level of external financial risk is extremely high."Redbridge – as of September, the council is predicting a £22.3 million overspend by the end of the financial year, amounting to 11% of its annual budget. There are significant cost pressures in children’s care services, with disproportionate growth in high-cost residential placements, increasing complexity of need, rising levels of concern about child and parental mental health, and increases in the incidence of domestic abuse and neglect.Waltham Forest – midway through the financial year, the council predicted a £12 million overspend, including £10.3 million in adult social care due to “significant and increased pressure” on placements and costs, and £1.1 million incurred after the provider of home-to-school transport for children with special education needs and disabilities pulled out of the contract.

One of the most widespread areas of rising costs and service pressures is in children’s services, driven by rising numbers of children with increasingly complex needs, staff shortages, private agency foster care costs, and general rising inflation.

The pandemic saw many children struggle with isolation and interruptions to in-person services, while emerging problems went unaddressed until they became more serious. Parental poverty also increases the number of referrals. 

“Social workers have been saying for a while that we're now dealing with the backlog from COVID,” according to Anthony Dhadwal of the British Association of Social Workers. “And a lot of that backlog is going to be a lot more complex cases, which takes a lot more resources, it takes a lot more social workers, and costs a lot more, and therefore they're forecasting that.

“On top of that, we’ve now got the cost of living crisis. And we know from experience, the poorer that people are, the more families break down, everyone is expecting across the sector more children to come into services that need help.”

Complex needs require specialist placements, which are in short supply – meaning providers can raise prices, sometimes in response to their own rising costs and sometimes just to raise profits. Sefton council, which is facing a £15.6 million overspend on children’s services, said some of its independent residential placements were now costing it £24,000 a week.

Staffing is also an issue, with children’s social work vacancies at a five-year high when last measured a year ago. The problem isn’t recruitment of new staff but retention of existing staff.

“What we know about the reasons behind that massive uptick in people leaving the profession, they always say the top three things to our surveys – working conditions, caseloads, there’s a lack of support,” Dhadwal said. “The conditions aren’t there for experienced social workers to stay. And the conditions aren't there for younger social workers to build their careers.”

Caseloads are too high in the poorest areas, and even when they’re closer to the national average of 16 cases per social worker, the case mix is changing.

“A social worker explained it brilliantly to me the other day – that I can have 16 caseloads and 14 of them are the neglect side on the scale of risk, and two serious abuse cases. I can handle that,” Dhadwal said. “But if I have eight serious abuse cases, or risk of abuse, and the rest are neglect, I can't handle that on my own, and I need other social workers.”

Among councils facing heavy children’s services overspends are Bradford, which midway through the financial year was forecasting a £43 million overspend – running nearly a third over-budget for the department. The council attributed the overspend to higher workloads, agency social work staff costs due to staff shortages, and a 22% rise in external placements in residential, fostering and post-16 care. Doncaster is struggling with a rise in need for school travel assistance, with route costs rising on average by £2,500 a year. 

As ever, many councils adopted significant spending cuts and savings in order to set balanced budgets – but rising costs mean some local authorities are struggling to meet these targets.

In Brighton, 57% of planned savings were deemed to be at risk of non-achievement last month. A council report said: “The majority of the savings at risk relate to children in care (£1.278 million) due to rising numbers of children entering care and increasing costs of children with very complex needs, and adults with learning disabilities (£0.883 million). This is a result of increasing fees and further fee uplift requests from providers.” 

A Government spokesperson told Byline Times that “we understand that councils are concerned about the impact of inflation and we are working with them to understand how this will affect their budgets".

“This year, we have made available an additional £3.7 billion to councils to ensure they have the resources to deliver vital services," they added. "We will announce details on next year’s financial settlement shortly.”

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