Suffolk County Council not at risk of going bust despite looming £358m education funding gap

An authority is not at risk of going bust despite a looming £358 million funding gap, a council has said.

With the final budget decisions scheduled for next month, Suffolk County Council will have the first round of feedback on its plans for the next financial year during next Tuesday’s scrutiny committee meeting.

Included in the documents to be presented to councillors is an overview of the council’s reserves position, forecasted at a £180 million useable balance by April, decreasing to £146.5 million by 2026 and £131 million by 2029.

Suffolk County Council’s budget for the next financial year will be looked at on Tuesday. Picture: iStock

When accounting for the looming possibility of having to plug a gap from overspending on the Dedicated Schools Grant (DSG), however, an extra £358.7 million predicted pressure by 2029 could mean the exhaustion of the reserves pot as early as next year.

As it stands, councils can accumulate an overspend of the DSG reserve, the money they get to fund schools, through what is known as ‘statutory override’ until March 2026 without it affecting their own books.

This means, if the statutory override were to run out by the deadline date, the council would have to cover the shortfall through their own reserves.

Forecasted Suffolk County Council reserve balances. Picture: Suffolk County Council

Cllr Andrew Stringer, the leader of the opposing GLI group at the county council, said ‘political expediency over sustainable budgeting’ from previous administrations, consecutive Conservative Governments, and the new Labour Govenment were to blame.

He added: “Obviously, the financial situation of the county council is of huge concern, given that education funding and adult social care funding are yet to be addressed by any recent government.

“The government will have to find a solution, but this should have been sorted years ago — we are supposed to be running public services, not firefighting a government-inspired economic crisis.”

Cllr Andrew Stringer, leader of the GLI group at Suffolk County Council. Picture: Mid Suffolk District Council

A council spokesperson said the authority recognises although permissible, overspending on the DSG is not sustainable.

They said: “The Government recognises the strain this has on Council finances and has committed to working with the sector on a way forward. It is important we continue to control spending in this area.

“It is likely the statutory override will be extended whilst the planned reforms are worked through. The Government have set out their intentions to reform the SEND system, further details awaited.”

Suffolk County Council said it was not at risk of issuing a section 114 notice. Picture: Suzanne Day.

Cllr Stringer warned if the problem was not fixed by the Government, the council could very well go bust.

He added: “Technically the council could be at risk of having to issue a Section 114 notice if the DSG gap isn’t sustainably resolved, but the council does have significant assets – although the vast majority are not immediately liquid.”

A section 114 notice is issued by local authorities when they believe they won’t be able to set a balanced budget, requires them to submit a new budget, and prevents them from making any new spending commitments.

However, the council spokesperson denied this could be a possibility in Suffolk but warned it could lead to the authority needing a Government bailout — as many as one in four councils could be in the same position, according to the Local Government Association (LGA).

The spokesperson said: “The council has built into its financial plans the cost of financing the increasing deficit.

“The challenge will be when the council will need to borrow above its limit to fund revenue expenditure relating to DSG. The Council will then have to seek Exceptional Financial Support from the Government to allow this to happen.”

Image Credits and Reference: https://www.suffolknews.co.uk/ipswich/news/authority-not-at-risk-of-going-bust-despite-looming-358m-ed-9399309/