Somerset Council’s interim chief financial officer, Clive Heaphy, has confirmed that the council is “not in the territory” of declaring effective bankruptcy within the next 12 months. However, balancing the budget remains a significant challenge amid increasing service demands and rising costs.
Currently finalising its annual budget, the council has made notable progress in narrowing its projected budget gap for 2026/27. The deficit has decreased substantially from £73 million in December 2025 to approximately £41.4 million a month later. Despite this improvement, closing the remaining gap still depends heavily on exceptional financial support from central government.
Heaphy stated that, with the final local government funding settlement expected soon, the gap is likely to shrink further, possibly to the mid-thirties of millions by the March 25 executive meeting. He emphasised that while the council has moved away from a financial emergency, deep budgetary issues remain. “We need to match our spending to our income without reliance on exceptional financial support, reserves, or one-off savings,” he said.
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One key mechanism helping manage the budget is government permission to use proceeds from asset sales to fund operational spending—an uncommon practice. However, council tax increases are capped at 4.99% without triggering a referendum, limiting the council’s ability to raise additional revenue. The government recently confirmed no higher council tax increase will be allowed in the upcoming funding settlement.
The council’s tax reduction scheme currently supports roughly 12,800 residents who pay no council tax, highlighting ongoing financial pressures on the community.
If Somerset Council fails to set a balanced budget by March 11, it would have to issue a Section 114 notice, effectively declaring bankruptcy. This would result in government commissioners taking control and implementing major changes with limited democratic input. Fortunately, Heaphy reassured that the council is not currently near that point. “While reserves are not at the level we need, they don’t represent a risk as long as they are not used for regular spending,” he said.
Opposition voices remain critical. Green group leader Councillor Dave Mansell expressed concern over the council’s reliance on capitalising asset sales for its transformation programme, arguing that better use of this money is needed. Mansell warned that raising council tax, currently the likely path, will require clear decisions on public service priorities.
Liberal Democrat Councillor Henry Hobhouse highlighted the broader systemic issues impacting financial sustainability, particularly in social care. He drew attention to the high costs of special needs education and adult social care homes, many owned by large financial institutions, calling for urgent higher-level reform.
Upcoming council meetings will address the setting of housing rents, savings proposals, and budget approvals. The full budget is due for approval on March 4 at a meeting in Bridgwater, with contingency meetings scheduled if necessary. The council also plans to appoint a permanent chief finance officer following these budget decisions.