WARRINGTON Borough Council is forecasting an overspend of almost £29 million – with a warning over the possibility of issuing a Section 114 notice in the future.

A budget monitoring report for quarter one of 2024-25 will come before the cabinet at its Town Hall meeting on Monday.

It highlights that in February 2024 the council approved a budget for 2024-25 of £194.292 million – which included savings targets of £15.9 million.

Furthermore, it says the council has since 2010-11 delivered over £205 million of savings as a result of ‘reduced funding levels’ from the Government – and over the current four-year budget cycle, approved by full council in February 2024, the council is required to achieve a further £64 million.

According to the report, the budget planning process for 2025-26 to 2028-29 is currently in progress.

It also states that, at the end of quarter one, the financial forecast outturn for 2024-25 is an overspend of £28.985 million.

“The forecast for the same period last year, 2023-24, was an overspend of £12.6m,” it adds.

“It needs to be noted that this overspend is after the use of additional reserves of £5.385m agreed by the Section 151 officer in Q1 to meet a one-off budget overspends on special educational needs transport and expected business plan temporary forecast shortfalls in property commercial income.

“This is due to planned refurbishment work, and new tenants/leases. The council’s overspend position is also reflective of the national position of overspends in adult social care, children social care and homelessness, caused by continuing underfunding and increasing demand and inflationary pressures.

“The council’s commercial programme and borrowing position are mitigated by long-term fixed PWLB borrowing and are not contributing to this overspend position.

“Forecast overspends in service departments at this early stage of the year are of significant concern, and action will need to be taken by department managers to mitigate them.

“The forecasts are however an early estimate of the year end position of the council based on current trajectories and evidence, and the actual overspend has not yet happened.

“The forecast overspends are an early warning of issues on the horizon that need to be addressed.”

The report says the council is ‘clearly facing a difficult budgetary position with an overspend of this magnitude’ – and to mitigate this position a number of financial measures will be introduced.

These include monthly budget monitoring will be implemented for the cabinet and the senior leadership team (SLT), the SLT is to continue to review the budget position on a weekly basis, cash limited budgets are to be introduced for 2025-26 and beyond, a refreshed council-wide voluntary redundancy exercise to be developed with trade unions and implemented at pace, and to explore opportunities for securing additional external funding.

However, it says that these recommended actions are all ‘relatively short-term measures’ that can be introduced quickly, however, a ‘longer-term solution is required’.

According to the report, if these actions are not introduced and followed, and the budgetary position ‘continues or worsens’, then the council would ‘need to consider’ issuing Section 114 notice or applying to Government for exceptional financial support.

“A full transformation programme that will fundamentally change the authority will also be considered, in order to continue to deliver effective services in an increasingly challenging financial environment,” it adds.

“By taking strong and early action the council aims to avoid the greater risk to frontline services which would occur by not taking action.

“By acting in this transparent and clear way we aim to identify and take the further difficult decisions that will be needed in a planned and effective manner that minimises the potential for disruption.”

The cabinet is recommended to note the forecast outturn as at quarter one of an £28.985 million overspend, note the progress on delivery of savings targets as at quarter one, agree the further actions proposed to address the current financial challenge, and to note that all directors are required to reduce their expenditure during the remainder of the financial year to significantly reduce the current forecast overspend.

After confirming that its quarter one projection shows it could be facing a near £29 million overspend by the end of the financial year, the council says the overspend is attributable to a number of pressures and areas of ‘unavoidable spending’.

What’s behind the overspend?

The majority of the council’s budget challenge stems from more people needing help and support, but it costing more for the council to run these services.

For example, the council has highlighted, it faces:

  • A projected £7.6 million overspend across adult social care, due to more adults needing help as part of Warrington’s ageing population. £5.8 million of this is due to the council needing to deliver more care packages and care support for people
  • An overspend of around £11.7 million across children’s services. The vast majority of this overspend is attributable to children in care, because there are more young people and children that need the council’s help and protection, but it’s more expensive than ever to get the right support in place
  • A £1.8 million budget pressure caused by an overspend on providing accommodation for people at risk of homelessness
  • A £4 million budget pressure on providing help to people with special educational needs and disabilities (SEND)

Managing the budget pressures

The council’s cabinet member for corporate finance, Cllr Denis Matthews, said: “Unfortunately across the local government sector, on an almost daily basis at the moment, councils are publishing significant projected overspends.

“This is the result of growing demand for council services, which is adding additional cost and pressures onto council budgets. The current £29 million projected overspend in Warrington puts us in a very pressurised position, but it is not an inevitability. It is an estimate at this point, and we have time to bring this down by making carefully targeted interventions.

“Although we are masters of our own destiny, and the overspend projection in Warrington is ours to manage, we are far from alone in facing a difficult challenge this financial year.

“Total funding for councils in 2024-25 is predicted to be around £13 billion less in real terms compared to 2010/11, but local authorities continue to be asked to deliver more.

“The pressures we face are acute, but I must stress – we are well managed, we know the scale of the problem and we are putting plans in place, to help us manage the budget challenge we face.”

The council has highlighted that, in January 2024, independent research from Grant Thornton suggested 40 per cent of councils could face ‘financial failure’ over the next five years, with the Local Government Association also stating their belief that due to a council funding gap of £6.2 billion, one in five councils may need to issue a section 114 notice – effectively declaring themselves ‘bankrupt’ – this financial year or next due to a lack of funding.

Equally, out of the 20 councils in the region, Warrington is the second most poorly funded place per home, receiving £360 per home, compared to the regional average of £829 per home.

Cllr Matthews said: “Unfortunately, Warrington is fundamentally not as well funded as other councils in the region and indeed nationally.

“We do however have a good level of reserves at the moment which will help to provide a cushion this financial year.

“We also need to acknowledge that our commercial approach is continuing to help us manage our budget pressure. We have previously been able to take advantage of fixed, low interest rates when borrowing. This means we are locked in at low rates for the long-term. Our commercial approach is therefore not contributing to our overspend position – in fact, our projected overspend is despite the £23m per year that our commercial activity generates.

“There is a fundamental mismatch between what local authorities are expected to do and the resources they have to do it. This is pushing councils closer to Section 114s and resulting in significant cuts to local services. Only through multi-year settlements, fairer funding and long-term reform of the funding system across local government, can councils build the financial resilience that we need. We will keep doing all that we can to manage the pressures on our budget and work with Government to resolve the national problem of council funding.”