Somerset Council ‘not in territory’ of going bankrupt within 12 months
The council is currently in the throes of setting its annual budget
Somerset Council is “not in the territory” of declaring effective bankruptcy in the next 12 months, according to its interim head of finance.
The council is currently in the throes of setting its annual budget, with rising demand for services and the ever-increasing cost of meeting these needs making it increasingly difficult to balance the books.
The council’s projected budget gap for 2026/27 has shrunk considerably from £73m in December 2025 to around £41.4m a month later – though it will still be relying on exceptional financial support from central government to close this gap.
Clive Heaphy, the council’s interim chief financial officer, said that he was not immediately worried that the council would not be able to set its annual budget, adding that he expected the projected budget gap to fall further once the government confirmed the final local government funding settlement.
Mr Heaphy addressed the issue at length when the council’s corporate and resources scrutiny committee met in Taunton on January 28.
He said: “We have probably moved slightly away from a financial emergency, but let’s be clear: we still have deep issues to do with our budget and balancing our finances, and we still have a lot of work to do.
“We need to match our spending to our income without reliance on exceptional financial support, reserves or one-off savings.
“You will recall that had a gap coming into this year originally of £101m, representing some 17 per cent of our net revenue budget – that’s a very large deficit by any measure.
“The gap as reported in December was down to £73m, and is now down to £41.4m. By the time we get to the executive on March 25, we will be moving towards a figure starting with a three, and the likely figure is likely to be in the mid-thirties millions.”
To close the remaining gap, the council is heavily reliant on exceptional financial support from central government – which allows the council to use the proceeds of selling off land, property and other assets to fund day-to-day spending (something which is not normally permissible).
The council can only raise its portion of council tax bills by a maximum of 4.99 per cent without triggering a referendum, with the Ministry of Housing, Communities and Local Government (MHCLG) ruling out any higher increase in the final local government finance settlement on Monday (February 9).
The council runs a council tax reduction scheme which provides support for people who are struggling to pay council tax – with Mr Heaphy stating that the current scheme meant that the equivalent of 12,800 Somerset residents were paying no council tax at all.
If the council cannot legally set its budget by March 11, it will have to issue a Section 114 notice and declare effective bankruptcy – leading to MHCLG sending in commissioners who can make sweeping changes with little democratic oversight.
Mr Heaphy said: “I am pleased to say that this year, we are not in Section 114 territory of at the moment.
“While the reserves are not the levels where we need them to be, I don’t think they represent a risk as long as we are not calling on them for regular, day-to-day spending.”
Councillor Dave Mansell (who leads the opposition Green group on the council) said that the council’s decision to spend money earned from selling assets on its ongoing transformation programme may not prove fruitful for local taxpayers.
Mr Mansell (who represents the Upper Tone division near Wellington) said: “We have relied a lot on the capitalisation, and I tend to think we’ve relied on that too much – we’ve avoided doing something better with that money.
“We’ve had 15 years of cuts and savings to local government; there have been many painful decisions over those years, and it’s still going on. Our officers are overstretched, having to do too much and are struggling to keep up with everything – I’m sure we all see that.
“It looks like the budget gap will be closed through a council tax increase – I think we have to look at that, given our circumstances.
“Those who don’t want to pay more council tax will have to say which public services they don’t want any more . We’ve already dropped some that we should have kept going.”
Councillor Henry Hobhouse (Liberal Democrat, Castle Cary) said the council would never be financially sustainable until wider reform of social care could be brought forward.
He said: “In my division, I have Chilton Cantelo special needs school and six different adult social care homes – almost every single one of which are now owned by financial institutions in London.
“It is a complete and utter disgrace the amount of money that is being charged by special needs schools – it is more expensive to send a child to Chilton Cantelo than it is to send a child to Eton, and it really isn’t good enough.
“Somebody higher up than me and this committee has got to do something about it.”
The council’s executive committee will next meet on Wednesday (February 11) to consider setting the rents for the council’s housing stock, rather than the full budget as originally planned.
A special executive meeting will be held two weeks later on February 25, to discuss savings proposals, increases in fees and charges, and any other measures which may be needed following further government information.
The full council will now meet at the Canalside conference venue in Bridgwater on March 4 to approve the budget.
If the budget cannot be approved, a reserve full council meeting has been scheduled for March 6 at the same venue (with a reserve executive date the previous day).
The council will appoint a permanent replacement for Mr Heaphy following the budget, with its senior management appointments and employment committee due to meet in confidential session to discuss the matter on Monday evening (February 16).