Across the country, local government auditors have consistently rated council finances as “red,” reflecting a widespread crisis fueled by mounting debts from special educational needs and disabilities (SEND) and social care. At a recent audit committee meeting, North Somerset Council’s financial struggles were highlighted as part of this broader national challenge.
External auditors from Grant Thornton assigned North Somerset Council a “red” rating for financial sustainability, citing “serious weaknesses” in the council’s ability to deliver savings and control overspending on SEND services. This rating is not unique; the auditor stated, “I have not seen a council this year that does not have a ‘red’ financial sustainability.”
Councils are facing soaring costs and rising demand for SEND provision, outstripping the funding provided through the government’s designated schools grant (DSG). This gap has resulted in growing DSG deficits, with North Somerset running a £12.7 million deficit in 2024/25 alone and a cumulative deficit of £26 million. Although a “statutory override” currently excludes these deficits from budget balancing requirements, this protection is set to expire after the 2027/28 financial year, raising alarms among auditors.
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Amy Webb, North Somerset’s section 151 officer, emphasized the systemic nature of the issue: “We have systemic issues in local government that are then flagged as a red issue for us organisationally.”
While the government has announced plans to take over SEND funding starting in 2028/29, it has yet to clarify whether accumulated DSG debts will be forgiven when the statutory override ends, leaving councils facing uncertainty.
In addition to SEND pressures, social care costs and demands continue to strain local government budgets. North Somerset’s reliance on using reserves—its “rainy day fund”—to cover overspending has significantly reduced its financial flexibility. In just four years, the council’s usable reserves are projected to fall from £125.8 million to just over £40 million, a two-thirds decline.
Audit reports warn that this reliance on reserves is unsustainable. When setting the 2025/26 budget, council leader Mike Bell revealed the need to use £9.1 million from reserves to balance the books, underscoring the severity of the financial challenges.
Peter Bray, an independent audit committee member, praised North Somerset Council’s management but noted, “Local government is being put under pressures that are not of their making.”
Council leader Mike Bell acknowledged the dire situation: “We are facing the most challenging financial situation in our history with rising demand and costs alongside predicted reductions in government funding. Social care — for children and adults — now accounts for over 60% of our budget.”
Despite difficult decisions and service reviews, the council projects a budget gap exceeding £48 million over the next three years. Added to that is an anticipated government funding cut that could reduce revenue by a further £17 million, or 20%.
North Somerset is actively engaging with the government seeking “exceptional financial support,” which may include permission to increase council tax beyond current limits or to borrow funds to secure long-term savings.
These challenges at North Somerset reflect a crisis echoed across the nation: with SEND deficits mounting and social care costs escalating, local authorities face unprecedented financial hurdles that demand urgent, systemic solutions.