Sunderland council facing £18M ‘funding gap’ for 2025/26
City leaders on Wearside have warned that “tough decisions” are needed around council spending next year, as Sunderland City Council faces an £18 million funding gap.
Senior councillors at a cabinet meeting this week heard rising demand and costs in adults and children’s social care are continuing to put pressure on the council’s revenue budget, which covers day-to-day spending.
As part of a report looking at forecasts and budget planning, council bosses were updated on the financial picture for the 2025/26 financial year and beyond.
Planning is under way to develop the next annual council budget, which will be finalised in coming months following key funding announcements from the Labour government.
This includes central government’s autumn statement due on October 30, 2024, and the provisional local government finance settlement expected during December, 2024.
Sunderland City Council said it is too early to say what next year’s increase in council tax will be on Wearside.
However, as it stands the local authority faces a funding gap of £18.154 million for 2025/26 after the use of earmarked reserves, and a funding gap of around £48 million over the following three financial years.
The total funding gap for Sunderland City Council, over the four years from 2025/26 to 2028/29, is around £66.511 million.
Councillor Alison Smith, Sunderland City Council’s cabinet member for corporate services and equalities, told a cabinet meeting on Thursday (October 17, 2024) that “tough decisions” were needed to allow for a “balanced budget” next year.
The cabinet report said rising demand and costs of adult social care continue to be one of the biggest budget pressures on the council, leading it to make provision for £10 million for additional increased adult social care costs in its medium term financial plan for 2025/26.
The number of older people aged 65 years and over in Sunderland is expected to rise from around 58,300 in 2024, to 69,500 by 2040, an increase of 19 per cent.
Meanwhile, the number of people aged 85 years and over, who generally have the greatest care needs, is forecast to rise from around 7,600 in 2023, to 11,600 in 2040, an increase of 53 per cent.
Together for Children, which provides children’s services on behalf of the council, is forecasting in-year pressures of £5.7 million, largely driven by external factors through increased costs linked to the complexity of children’s needs, higher accommodation costs and the increased cost of home to school transport.
The council is also anticipating “significant additional cost pressures” in relation to supported housing and temporary accommodation, with additional cost pressures of £2.704 million listed for 2025/26.
Cllr Alison Smith, in a previous statement, said issues around demand for council services had been “compounded by the last 14 years of austerity overseen by the previous Conservative government”.
She also noted that there were “significant uncertainties around other factors, including government funding announcements and the ongoing impact of the global economy and inflation on the council’s costs”.
The £18 million funding gap is based on current estimates and information and the council’s financial position for 2025/26 will become clearer following the government’s autumn statement and local government finance settlement.
Sunderland City Council’s ruling Labour Group will be expected to present a balanced budget for 2025/26, including any savings needed to balance the books, and final spending proposals will be debated by all city councillors at City Hall next year.
Cllr Smith told the cabinet meeting: “After taking account of pressures and reflecting assumed council tax and business rate increases for planning purposes aligned to the government’s assumption, the funding gap stands at £66.511 million over the four years to 2028/29.
“The gap for 2025/26 is £18.154 million which is after taking into account the use of £9 million of earmarked reserves, without which the gap would be £27.154 million.
“The scale of the gap demonstrates the understanding of local authorities after over a decade of cuts by the previous government, coupled with the significant inflationary and other cost pressures we’re now facing.
“Savings proposals to address the 2025/26 gap are being developed in line with the council’s ‘future council programme’ which will be considered later in the budget planning process.
“However, what is recognised is that given the size of the gap and uncertainty at the amount of government funding and current inflation cost pressures, tough decisions will need to be made to achieve a balanced budget.
“While the medium term financial plan includes assumptions to increase council tax, decisions in respect of the level of increases in core council tax and any social care precept, will be considered as part of the final council budget proposals in February, 2025”.
This year in Sunderland, there was a 4.99 per cent increase in council tax, composed of a 2.99 per cent core council tax rise to help fund day-to-day services and a 2 per cent rise for the social care precept.
The city’s council tax is still understood to be the lowest in the North East region.
Next year’s council tax will be decided in February as part of the final council budget once all the other funding factors are fully understood.
Sunderland City Council say consultation with residents and businesses about next year’s budget is being prepared and is due to begin in coming weeks.