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London council deficit more than doubles to hit reds ‘of an order never seen previously’

A local authority has more than doubled its financial deficit largely due to an overspend in children’s services “of an order never seen previously” in the area, board papers show.

In a cabinet meeting, Lewisham Council revealed that it overspent by nearly £18m in 2017-18, a figure which was then brought down to £16.5m after dipping into a fund earmarked for ‘risks and other budget pressures.’

“These were for such items which although difficult to quantify with absolute certainty, could prove significant should they have materialised over the course of the financial year,” the papers explained.

Given that local government must legally deliver a balanced yearly budget, the £16.5m overspend was then covered through the use of one-off corporate resources.

In contrast, in 2016-17 it overspent by just £7m, although this too was helped by a £2.8m bailout from its risk-dedicated fund.

“The level of overspend recorded at the close of the 2017-18 financial year is unprecedented for Lewisham,” the council said. “It would firmly suggest that these are budgetary pressures of an order not previously seen by the council and this is with particular regards to children’s social care.

The biggest contributor to last financial year’s deficit was children’s and young people’s services, which overspent by a whopping £15.6m – a variance of 32% from its actual budget. By way of comparison, the second largest contributor was customer services, which delivered an overspend of just £5m at a 11.7% variance from budget.

Discussing the £15.6m overspend, the board papers said: “This is a significant overspend for the directorate and is of an order never seen previously in Lewisham.

“Up until the final quarter of the financial year, the forecasts had generally remained consistent throughout the year. However, the last quarter has been witness to the most significant month-on-month increases since the year began.”

The most significant cost pressure was linked to children’s social care, which by itself accounted for an overspend of almost £13m.

“As the new financial year begins, with a new set of challenges in terms of the delivery of revenue budget savings, the council will continue in its resolve to apply sound financial controls. It is clear that the short and medium-term outlook will remain difficult and challenging,” the board papers argued.

“However, the executive director for resources and regeneration, as the council’s section 151 officer, will continue to work with directorate management teams across the council to effect the necessary continued actions to manage their services and intervene early where necessary to avoid a budgetary situation becoming unmanageable.”


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