Sheffield City Council has warned that it faces a £61.2m budget gap over the medium term due to “significant” government funding cuts – leaving the authority with “no easy decisions left to take”.
In March, Sheffield agreed on a balanced budget for 2023/24, which required the authority to make £47m of savings.
However, according to Sheffield’s medium-term financial plan, over the next four years the council has forecasted a budget gap of £61.2m of which £18.1m is in 2024/25.
A finance report by Philip Gregory, director of finance and commercial services, outlined that the council’s current financial position is predominantly due to the “arbitrary central government funding cuts throughout the decade of austerity, which were disproportionately targeted towards high need authorities such as core cities”.
The council stated that “significant” government funding cuts have meant that Sheffield now receives 29% or £856 per resident less in real terms, compared to the national average of 20% or £581 per resident.
Zahira Naz, Finance Committee chair, said: “We and other councils have had our budgets hammered by cuts from central government over the last 13 years. In Sheffield, we’ve been vocal about that and will continue calling on the government to step up and provide fairer funding.
“Demand is rising as funding plunges – there are no easy decisions left to take.”
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Social care increases ‘biggest concern’
Gregory’s report highlighted that Sheffield’s budget gap is also due to the increase in corporate expenditure variation and directorate pressures, which are forecasted to rise by £189m over the next four years.
Of the £189m rise, £124m is attributed to social care costs, which the report highlights as being the council’s “biggest cause for concern over the medium term”.
“Our social care costs are rising at an unsustainable rate putting the financial stability of the council at risk. The rest of the council cannot support this level of spend,” the report explained.
Gregory highlighted that like other areas of the council, cost and pay inflation are the major drivers of social care pressures.
He added that non-social care pressures, which are valued at £52m, are mainly the result of high inflation on retail price index linked large contracts such as highways and waste, the significant increase in relation to short-stay accommodation to support homelessness prevention, and the forecasted pay awards costs.
‘Limited reserves’
In addition, the report outlined that Sheffield has ‘limited reserves’ available over the medium term to plug the budget deficit. It detailed that during the council’s 2022/23 to 2025/26 medium-term financial analysis, £70m of reserves were identified to support budget pressures.
“However, if current in-year overspends are not brought under control only £13m will remain. Based on current analysis this will be insufficient to enable a balanced budget to be set for 2024/25 without further mitigations and savings being found,” the report explained.
The finance report will be presented and discussed by the council’s Strategy and Resources Committee on 7 September.
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