Council sets out proactive approach to budget planning for next four years

A proactive cross-party approach to the Council’s financial sustainability will be taken to manage the challenging budget situation which Sheffield City Council, like many other local authorities, faces.  

The Council’s Strategy and Resources Committee met on Wednesday 24^th July to consider – at an early stage – the forecast for 2025/2026 and to explore a three-to-four-year approach to financial planning. 

While the financial position is challenging, the Council continues to have the resources available to meet its planned expenditure.  

The Council’s Medium-Term Financial Strategy aims to predict the financial situation for each financial year, budget gaps, as well as necessary savings targets so that the Council can continue to deliver for the people of Sheffield. 

Key points: 

• In February (2024) the Council met to discuss the in-year overspend of £17.4m and agreed a balanced budget for 2024/25 which identified £7.5m areas of savings to be made 

• 2023/24 saw an overspend of £15.5m which reduced the budget contingency reserve from £30.7m to £15.2m 

• An additional £12.5m has been identified as a one-off surplus from the Collection Fund to increase this reserve to £27.7m. This is the amount set aside to cover overspends and budget pressures in future years across the medium term 

• In total over the next four years, corporate and service cost pressures are forecast to increase by £166.7m. This is offset by additional income and savings already identified of £97.8m, resulting in a total budget gap of £68.9m 

• Sheffield’s budget position is not unique – many cities and local authorities are facing similar challenges 

• Over the past decade Sheffield, along with many other local authorities, saw significant reductions in funding from the previous government. Alongside this, demand for services is rising. Since 2010, the Council’s spending power reduced by 26% or £858 per resident, compared to the national average of 18% and £556 per resident 
• For Sheffield City Council to remain financially sustainable without persistent overspends there must be a programme of savings and prioritisation of spend to set a balanced budget for 2025/26 and the medium term ahead

Key areas of spend: 

The budget pressures at Sheffield City Council remain consistent with those identified in last year’s Medium Term Financial Strategy.  

Adult and Children’s social care budget forecasts total £119.1m. The increase in spend reflects a trend seen in recent years of increasing costs, pay inflation and increasing demand for placements.  

Adult Health and Social Care – Services are forecasting increased costs as a result of fee uplifts, growth and other demographic changes, and increased transition costs between children’s and adults’ social care.

Children’s Health and Social Care – One of the main expenditures in this area is placements, meaning children placed in care and the cost associated with this. It’s important that every child across the city has a warm, safe place to live, and feel they belong. This is something the Council is determined to deliver. There are limited places in the city and as a result, providing children with homes outside of the city incurs further costs. An increase to home to school transport costs is also anticipated. Sheffield City Council is now supporting 2,444 children with transportation to school; an increase of around 1,000 children in four years, and demand is forecast to continue to increase. 

Homelessness support - The Government currently does not fully subsidise all housing benefit payments made by the Council. The Council has been bridging the gap between the amount the accommodation costs to procure and the amount we are able to recover via housing benefits. In 2023/24, this cost the council £4.9m for temporary accommodation and £3.5m for support accommodation. We will always support people into accommodation; therefore this expenditure was and will continue to be wholly necessary. 

Next steps:  

• Committee Chairs will plan how to cost save within their committees and present these plans to Members 

• Proposals for the 2025-26 Budget will be made available to the public

• Residents will be able to have their say on the budget proposals via consultation later in the Autumn

• Following public consultation, the Council’s Budget for 2025/26 will be discussed at Full Council at the end of the financial year (March 2025) 

Cllr Tom Hunt, Leader of Sheffield City Council, said:

“We are taking a proactive approach to the Council’s financial planning for the coming years to ensure that we deliver the vital services that the people of Sheffield need.  

“While the current position is challenging, we are committed to working cross-party to find solutions that enable us to continue to deliver high-quality services for our residents. 

“The new government has committed to longer-term funding settlements to give us the certainty to plan, and to a reset in the relationship between local and central government. This is very welcome, and we look forward to working with the new Government to deliver the essential public services that residents rely on, while continuing to deliver a balanced and sustainable budget.”