Council finances improve but £180m budget gap remains

Hampshire County Council has forecast an £8.6m improvement in its finances, but the authority says a £180m budget gap remains for next year.

The council expects to finish 2026/27 with an underspend, meaning it will need to use less money from its reserves to balance this year’s budget.

However, officers warned the improvement does not change the financial pressures facing the authority, with Hampshire still relying on reserves and savings to balance its books.

The latest financial update, discussed by cabinet on Tuesday, September 22, shows the amount the council needs to take from its Budget Bridging Reserve to support this year’s budget could reduce from £101.9m to £93.3m.

But the report also forecasts a £179.7m budget gap for 2027/28, showing the big financial challenge ahead.

Andy Lowe, the county council’s director of corporate services, said the £8.6m underspend was positive but warned it did not change the council’s wider financial challenges.

He told councillors the council’s budget was around £1.9bn and said the improvement meant it would need to take less money from reserves.

Mr Lowe said: “That positive position would reduce the required in-year draw from the Budget Bridging Reserve, which would be positive.

“But of course the budget will still be balanced on a recurrent revenue basis and we still rely on reserves to support the underlying position.”

Children’s services remain the council’s biggest financial pressure, with spending expected to be £13.6m over budget this year.

The report says this is mainly because residential care for children in care is becoming more expensive, with more children needing complex support.

The council said it is on track to deliver £133.3m in savings this year, just below its £134.1m target.

But Cllr Martin Tod warned that, while savings were being delivered, they would not be enough to remove the financial pressures facing the authority.

He said: “The savings are on track, but we also know that they’re not enough. And ultimately there are no prizes for accurately measuring our slow progress towards a disaster.”

Cllr Stephen Reid said the council’s financial position was “slightly better than budgeted” but warned it was still reliant on government decisions to address its wider funding challenges.

He said: “We are very much in the hands of the government as to what it will allow us to do to fix that problem.”

Council leader Cllr Nick Adams-King said Hampshire was a “well-run council” but said the authority would face difficult decisions when setting future budgets.

He said: “There are going to be some very difficult decisions for us all to make.”