Derby City Council is facing a significant financial strain as demand and costs for essential services continue to rise much higher than forecast.

The Council was already aware that managing its budget this financial year would be a huge challenge.

Despite its best efforts to bring costs down, the figures for the end of the first quarter show that without further mitigation, the Council faces a predicted revenue budget overspend of £9.6 million by the end of March 2025.

These increases in costs and demand are outside the Council’s control, and at the heart of the overspend are services which the Council is required by law to provide, affecting the most vulnerable residents in Derby.

For social care, where the Council spends 80% of its budget, costs and demand are soaring way beyond what was forecast. Despite the Council adding £12 million to social care budgets this year, significant overspends are emerging. Derby City Council looks after, and is the corporate parent to over 550 children, with the ten most expensive children’s care packages costing the Council over £5.5 million. Demand in adult social care is currently costing £13.5 million more than the Council has planned for.

Rising homelessness and the need for temporary accommodation emerged as a new significant pressure in the last financial year. During 2023-2024, there were 2,486 homelessness approaches and there have already been a further 593 in the first quarter of this financial year.

Like councils across the country, Derby City Council has less money coming in than it needs to spend on services. The local government sector has been lobbying the Government for a change to the way councils are funded to bring more stability to vital services. They currently depend on one-year grant settlements, Council Tax and business rates, and one-off grants that are usually ringfenced for specific projects.

So far Derby City Council has managed to weather the storm better than many councils, who have been forced make a Section 114 declaration, which stops the Council from committing new expenditure, or seek exceptional financial support from the Government because they can no longer deliver a balanced budget.  

At the end of the 2023-2024 financial year, the Council had reduced its mid-year £6.5 million revenue overspend down to £4.4 million, meanwhile councils nearby saw overspends into the tens of millions, indicating the severity of the situation for the local government sector.

The Council has a good track record of reducing its pressures and delivering its savings and has implemented various measures to address these challenges.  Strict controls on spending and recruitment remain in place, while the city continues to find innovative ways to deliver good and cost-effective services. One example is purchasing former student accommodation at Abbey Lodge to provide a better, more stable environment for homeless families living in temporary accommodation, whilst also unlocking income for the Council through additional Housing Benefit to support those costs.

Councillor Kathy Kozlowski, Cabinet Member for Governance and Finance, said:

We are doing everything we can to manage our budget responsibly. We have a good track record of this, achieving 98% of our target savings last year, but we remain realistic about the challenges ahead.

The new Government has made positive noises about moving to multi-year grant settlements which would make it easier to plan ahead, and while we’re optimistic of an announcement in the Autumn settlement, we need to remain pragmatic and continue to make savings where we can.

However, just a few changes by Government could make a significant difference here in Derby. Reviewing housing benefit caps to councils would help us to the tune of over £4 million, and reviewing the social care market and introducing caps on fees that Councils pay for care would significantly alleviate our social care pressures. These are just some of the measures we will be communicating to Government over the next few weeks.

In the meantime, we will continue to be vigilant, and continue to take measures to mitigate the pressures, with plans to build back reserves to ensure the Council has a sound financial footing for the future. Above all, we remain ambitious for the city.

The Council’s Q1 Financial Monitoring Report will go to Cabinet on Wednesday 11 September and outlines how the Council is continuing to mitigate against the rising pressures.

 The meeting will be streamed live on the Council’s YouTube Channel.