£59m black hole places council at 'high risk' and means cuts to vital services

A £59m black hole in the finances of Sefton Council is being driven by an 'exponential' rise in costs for adult and child-centred social care. As a result, the local authority will have to make significant savings which will mean cuts to vital services across the borough.

Sefton Council's cabinet will meet on Thursday, November 7 to consider a range of topics including the local authority's performance this financial year and what is forecast for the remaining two quarters of 2024/25. According to the council's Financial Management report, Sefton Council continues to face significant and rising costs resulting from the 'exponential' demand for adult social care, children’s social care and home to school transport.

Forecast outturn analysis by the council's Corporate Services department shows a £9.273m net overspend on social care services. At present, more than 70% of the council’s revenue budget is allocated to adults and children’s social care and home to school transport - leaving less than 30% of the budget for all other remaining services. However, this problem is not isolated to just Sefton's local authority, but is a trend being observed in councils across the country.

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According to the Association of Directors of Adult Social Services (ADASS) Autumn Survey 2024, 81% of councils expect to overspend their adult social care budgets this year with an estimated total budget deficit of £564 million. This is compared to an overspend of £73.66mn just two years again.

The ADASS report also indicates that a significant number of councils will have to make further in-year savings which come on top of the highest level of planned reductions in eight years. Furthermore, the ADASS Spring Survey published earlier this year, detailed how councils were expected to find £905m in savings in 2025/26 - this has now risen to £1.4bn and represents a 55% increase.

An example of the associated costs of social care services is highlighted in the increasing costs of accommodation. The additional placement of 14 new children into residential settings costs Sefton Council an extra £90,000 per week; equating to £4.5m per year. It was previously assumed the increase in residential care packages would be short-term, but it is now understood some placements will continue for longer than expected.

There is also risk for the council in their High Needs budget where the current deficit position has been increasing over a number of years due to rising demand and shortfall of funding from central government. Earlier this year at a cabinet meeting in July, the deficit position reported to Sefton Council was £38m for the 2023/24 financial year.

The Treasury Management Position report to be reviewed tomorrow evening recommends the local authority will have to increase borrowing to maintain a stable financial position. The report states: "It is forecast that the council could be servicing a deficit that will be around £59m at the end of the financial year that will arise from the cumulative effect of High Needs expenditure."

Furthermore, the Financial Management report shows the demand and cost pressures relating to social care services and its impact on the local authority's financial position, it states: "This is considered high risk as if spending pressures increase either in this area or other areas there is little flexibility to meet this pressure."

The report adds: "A further increase in the proportion of the budget allocated to these demand led areas will increase the financial risk the council faces and compromise financial sustainability."

The council reports argue that savings will continue to be made and will mean some services will be cut. The local authority is also expecting extra income from government grants to increase core spending power and includes a share of a £1bn uplift to Special Educational Needs and Disability (SEND) funding as part of the Dedicated Schools Grant.