Somerset Council is grappling with a severe financial crisis, facing a staggering £73 million budget gap that threatens its future viability. Councillors and auditors alike have warned that without urgent action, the council risks a “lingering death” marked by worsening financial instability.
The authority recently unveiled initial budget proposals that include over £20 million in new savings and increased fees and charges. Despite these efforts, Clive Heaphy, the council’s interim chief financial officer, acknowledges that Somerset will likely need exceptional financial support from the government for a third consecutive year to avoid depleting its reserves entirely.
However, members of the council’s audit committee caution that the window for recovery may be closing fast, with effective bankruptcy becoming a real possibility. External auditors Grant Thornton have emphasized the need for accelerated transformation in service delivery, issuing three statutory recommendations, or “red cards,” highlighting persistent weaknesses in financial planning and management.
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Taunton resident and council critic David Orr highlighted that transformation plans have failed to progress sufficiently to generate the deep savings needed in the budgets for 2024/25 and 2025/26. He noted the council’s heavy reliance on exceptional financial support, including £36.9 million from asset sales last year and £43 million this year, alongside a 2.5% council tax increase. Orr expressed concerns about the lack of a clear roadmap for closing the budget gap beyond 2026/27 without further emergency interventions.
The council’s initial transformation program yielded savings of approximately £34 million, but at the cost of nearly 300 staff positions. To continue efforts, the council has engaged Newton Consulting Ltd. to lead the next phase, branded ‘Inspiring Innovation,’ with a projected cost of £20 million.
Grant Thornton’s Barrie Clarke pointed out that significant financial weaknesses persist, including over-reliance on one-off government support, ongoing pressures in children’s services, and an expanding deficit in the dedicated schools grant, which remains off the council’s balance sheet until 2028 due to a government override. Two red cards pertain to longstanding financial stability concerns, while the third relates to the failed Life Factory project under the Glastonbury town deal.
Clive Heaphy remains cautiously optimistic, noting progress in reducing the projected overspend for 2024/25 to under £1 million. He stressed the difficulty of moving toward balanced budgets amid local government reorganization but reaffirmed the council’s commitment to reducing dependence on exceptional financial support, comparing it to an unsustainable habit of covering routine expenses with mortgage loans.
Finalizing a balanced budget hinges on the awaited funding settlement from the Ministry for Housing, Communities and Local Government (MHCLG), expected before Christmas. Discussions on exceptional financial support are anticipated to continue into late January.
Councillor Gwilym Wren voiced stark warnings about the council’s trajectory, describing it as “staring down the barrel” of effective bankruptcy and criticizing the pace of response as lacking urgency. He highlighted that pressure on essential services, particularly children’s and adult social care, remains intense, and the council’s capacity to bridge the financial gaps seems strained amid significant staff cuts.
Chief Executive Duncan Sharkey acknowledged these challenges as widespread across local governments, pointing to limited capacity to implement multiple simultaneous changes without disrupting frontline services. He remains hopeful that the council can set a budget requiring less exceptional financial support than previous years but recognized that transformation efforts need time to yield sustainable results.
Exceptional financial support in Somerset’s context permits the council to sell assets and use proceeds for daily operational expenses—a practice usually prohibited. Councillor Norman Cavill urged transparency with residents about this necessity, emphasizing that such asset sales are not free funding and warning that continued reliance could lead to insolvency.
The council has opened consultations inviting residents to review and comment on budget proposals through mid-January. These proposals will undergo detailed scrutiny before final approval in late February.
Council Leader Bill Revans reflected on the council’s efforts, noting over £50 million in savings since its formation and significant pay cost reductions. Yet, he acknowledged the ongoing fragility of finances amid rising costs and service demands. Revans emphasized the importance of listening to community feedback as the council pursues tough decisions, innovation, and partnerships to build a sustainable financial future.