North Somerset Council’s financial reserves are on track to decline dramatically, falling from £125.8 million in 2023/24 to just over £40 million by 2027/28, according to a report by external auditors Grant Thornton. This represents a two-thirds reduction in usable reserves within four years—a trend that has raised serious concerns about the council’s financial stability.
Council leader Mike Bell acknowledged the severity of the situation, describing it as “the most challenging financial situation in our history,” while maintaining that the council remains “well run.” The auditors’ report, which was presented to the council’s audit committee on November 27, highlights increasing reliance on reserves to meet budgetary demands.
In the 2024/25 financial year alone, the council plans to draw £12.8 million from earmarked reserves, including nearly £6 million to address pressures in children’s services. Despite this, the reserve base is projected to plummet from £116.3 million in 2024/25 to just over £40 million by 2027/28, significantly eroding the council’s financial flexibility.
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Grant Thornton criticized the council’s 2025/26 budget plans, which include a £9.1 million planned use of reserves, deeming this approach “unsustainable.” Although some councillors voiced concerns, Mike Bell defended the decision, stating it was necessary to achieve a balanced budget given current constraints.
Financial reserves, often referred to as a “rainy day fund,” serve as a buffer for unanticipated expenses and in-year financial pressures. For example, in 2024, North Somerset Council used £153,000 from reserves to cover the unexpected costs of removing “wiggly lines” on Clevedon seafront.
The auditors warned that persistent reliance on one-off financial measures, coupled with fluctuating demand for high-cost services, weakens the council’s financial resilience. Further uncertainty stems from the unresolved government fair funding review, complicating long-term financial planning.
Grant Thornton assigned a “red” rating to the council’s plans for closing funding gaps and delivering savings, highlighting “significant weaknesses.” The auditors recommended that all council departments create feasible, recurrent savings plans to restore financial health.
Mike Bell emphasized that social care services now consume over 60% of the council’s budget, including critical support for looked-after children, young people with special educational needs and disabilities (SEND), vulnerable adults, and elderly residents. Despite tough decisions, the council faces a projected budget shortfall exceeding £48 million over the next three years, exacerbated by a forecasted £17 million reduction in government funding—equivalent to 20% of the revenue budget.
In response, North Somerset Council is pursuing a comprehensive transformation program, reviewing all services, and engaging with the government regarding the impact of financial reforms. Reserves remain a key component of the financial strategy, both for balancing the budget and funding essential capital projects across the region.
The council is also seeking “exceptional financial support” from the government. This may involve requests for permission to raise council tax beyond the usual 5% cap without a referendum, and/or permission to borrow funds to invest in longer-term savings strategies.