North Somerset Council is facing a dire financial crisis and will require “exceptional financial support” from the government to avoid insolvency next year. A forthcoming report, scheduled for the council’s cabinet meeting on October 15, reveals that the council cannot balance its budget without new funding powers.
The report outlines two potential government interventions: permission to increase council tax beyond the usual 5% cap or a “capitalisation directive” allowing borrowing to cover day-to-day operational costs. Currently, the council managed to balance its 2023-2024 budget only by withdrawing £9.1 million from reserves, with councillors warning they are “sailing very close to the rocks.” The forecasted budget shortfall for 2024-2025 stands at a staggering £25.864 million. Failure to address this gap could force the council to issue a section 114 notice, effectively declaring bankruptcy.
Years of substantial budget cuts have failed to offset rising demand, particularly in adult and children’s social care. Compounding the issue, the council faces a £17 million reduction in government funding—nearly a fifth—due to the Fair Funding review reforms. The report from senior finance officials underscores the challenge: “With the second lowest taxbase in the south-west, the council is unable to generate sufficient local revenue to meet demand pressures or offset funding reductions. Discussions with the Ministry of Housing, Communities, and Local Government have commenced.”
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Local authorities operate two budgets: the revenue budget, which covers ongoing expenses funded by council tax and service income, and the capital budget, used for infrastructure projects like Birnbeck Pier and the Tropicana. It is the revenue budget that is under acute strain. A capitalisation directive would allow revenue costs to be treated as capital expenditure, enabling borrowing to fill shortfalls. However, the report warns this merely postpones financial problems, describing it as “kicking the can down the road.”
Following its last budget, North Somerset commissioned the Chartered Institute of Public Finance and Accountancy (CIPFA) to review its financial resilience. The assessment praises the council as “low spending and low taxing,” efficiently managed but heavily challenged by increasing social care demands.
Similar pressures impact councils nationwide. Somerset Council has depended on exceptional financial support for two years, selling assets to balance budgets and planning a 7.5% council tax increase in 2025. Bath and North East Somerset Council, among the region’s more financially stable authorities, has also sounded alarms that without government funding reform, all UK local authorities face insolvency risks.
Cuts in North Somerset have already begun affecting public services: three libraries face likely closure, others have reduced hours, black bin collections have shifted to every three weeks, and new parking charges will be introduced in Clevedon, Nailsea, and Portishead. The looming financial crisis underscores the urgent need for government action to ensure the council can continue delivering essential services.