Sheffield Council’s financial challenges laid bare as it calls for more help

Members of the Strategy and Resource Policy Committee heard that the council was facing a potential £61.2million gap in the next four years.

If councils can’t deliver a balanced budget as required by law, they will be forced to issue a section 114 notice – effectively declaring bankruptcy.

As the Local Democracy Reporting Service reported after this week’s Finance Committee meeting, head of accounting Jane Wilby said the revenue budget for the second quarter of the financial year shows a forecast overspend of £17.4m.

The council set aside reserves of £70m in 2021/22 to help it manage budget pressures but there is now only £13m left in the pot. Once that is gone, there is no help for future years, she told the committee.

Councillors have expressed their worries over the budget pressures, with Sheffield City Council facing a £17.4m shortfall with only £13m in reserves to help bridge the gap.

However, Strategy and Resources committee members were told: “Based on current analysis this (the £13m) will be sufficient to enable a balanced budget to be set for 2024/25 but will leave the council in a vulnerable position to mitigate any potential 2024/25 in-year overspends.”

Also, while each committee set a target to ensure a balanced budget for 2024/25, which requires them to find mitigations for any service pressures, Strategy and Resources members were told that the government’s autumn statement put extra pressure on authorities.

The original budget gap was £1m but after chancellor Jeremy Hunt’s autumn statement where he introduced an increase in the National Living Wage (NLW), it is now at £2.7m.

The aim for committees is to achieve a balanced position for 2024/25 by January 24, next year.

Cllr Tom Hunt, the leader of the council, said the council isn’t in an ‘extremely difficult situation’ but it needs more help from the government.

He said: “For 13 years we have had our budget hammered by cuts from central government. Demand for our services is increasing, prices are rising but the Government has failed to provide councils with any additional help this year. Local government funding cannot carry on like this.

“This means we have been forced to make difficult decisions, but we have managed our finances carefully and responsibly. Other councils are in extremely difficult situations, but we are not. We will continue to be prudent, and we will continue to make the case for more funding from the central government.

“The Government needs to provide councils with a long-term funding plan that sufficiently meets our needs. We need a multi-year financial settlement, not an annual settlement. However, we are being proactive. Our new draft Council Plan sits alongside our four-year medium-term financial analysis.

“Despite the lack of help from the government, we are focused on taking a longer-term, more strategic approach to our finances, and making sure our resources are focused on providing great local services.”

The Department for Levelling Up, Housing and Communities said it had recently announced a funding package worth more than £64billion to support councils, a £4bn increase for the year ahead.