"Exceptional financial support" needed to balance budget in North Somerset
The council cannot balance its budget for next year unless the government gives it new powers to raise money, a report set to go before the council’s cabinet next week warns
North Somerset Council will need “exceptional financial support” from the government to avoid going bust next year.
The council cannot balance its budget for next year unless the government gives it new powers to raise money, a report set to go before the council’s cabinet on Wednesday October 15 warns. Exceptional financial support could mean government permission to raise council tax by more than the usual 5% limit or a “capitalisation directive,” which could mean borrowing could be used to cover day-to-day expenses.
North Somerset Council only managed to set a balanced budget for the current year in February by taking £9.1m out of its reserves, with one councillor warning that the council was “sailing very close to the rocks.” Now it faces a forecast budget gap of £25.864 for the next financial year. If the council cannot close the budget gap when it sets its budget in February, it will be forced to issue a section 114 notice — effectively declaring bankruptcy.
The council has made major cuts each year to balance its budget against increasing demand for adults and children’s social care. But now it is forecast to also lose £17m from the funding it gets from the government — a reduction of almost a fifth — under changes being made under the government’s Fair Funding review, the report said.
The council report — authored by its top finance officers — warned: “With the second lowest taxbase in the south-west, the council is unable to increase locally generated resources by enough to cover either the demand pressures for services or the planned reduction in government funding and so the council has reached the point where it cannot set a balanced budget for next year without exceptional financial support and has started discussions with the Ministry of Housing, Communities, and Local Government.”
Councils set two different budgets: a revenue budget covering ongoing expenses which is funded by council tax and income from council services, and a capital budget covering spending like one off investments, assets, and infrastructure which is often funded by grants or potentially borrowing. High profile projects such as Birnbeck Pier, the Tropicana, and the now-reversed Clevedon Seafront are funded from the capital budget — but it is the council’s revenue budget which is under pressure.
One way the government could offer exceptional financial support is through a capitalisation directive, which essentially allows some revenue expenditure to be treated like capital spending. For North Somerset Council, which does not have spare capital funding, this would mean using borrowing to fund operating expenses.
But the report going before councillors warned: “Where councils have increasing and ongoing levels of demand they need to pay for, this is not a realistic solution because it creates a bigger problem in the future — often described as kicking the can down the road.”
After setting its last difficult budget, the council commissioned a review into its financial resilience by the Chartered Institute of Public Finance and Accountancy. The council report said: “The financial resilience review prepared by CIPFA shows that the council is a low spending and low taxing authority which is well run and has managed its finances well, although is being challenged by sustained increases in demand for its services, particularly in both adults and children’s social care.”
Increased demand for adults and children’s social care has put pressure on council budgets across the country. Elsewhere in Somerset, Somerset Council has relied on exceptional financial support to balance its government for the last two years, selling off its assets to help balance its revenue budget and in 2025 raising council tax by 7.5%.
Bath and North East Somerset Council is perhaps the most financially secure of the ceremonial county’s three unitary authorities. But its council leader has previously warned: “If the funding situation — particularly for adults and children’s services — is not rectified by this government or the next government, it is only a matter of time before all local authorities in the United Kingdom go bankrupt.”
As a part of the cuts previously made by North Somerset Council, three libraries are “highly likely” to be closed while others are having their hours cut, black bin collections have been cut to three-weekly, and parking charges are being introduced in Clevedon, Nailsea, and Portishead.