Nottinghamshire County Council has set out the scale of the financial challenge it faces over the next three years, warning that rising demand for care services, inflationary pressures and uncertainty over national funding reforms continue to stretch local government finances, despite the authority being in a comparatively stronger position than many councils.
A detailed Budget Update Report, to be considered by councillors at the Overview Committee meeting on 15 January, provides the latest assumptions underpinning the 2026/27 budget and the Council’s Medium-Term Financial Strategy, which will ultimately be approved by Full Council in February.
The report makes clear that the financial environment facing councils remains the most difficult in decades. Inflation has remained above the Government’s 2 per cent target throughout 2025, standing at 3.2 per cent in November, while demand for statutory services, particularly adult social care and children’s services, continues to rise. Nationally, research cited in the report suggests more than a third of councils believe they could face effective bankruptcy within five years.
Against this backdrop, Nottinghamshire County Council says its long-term approach of service transformation, preventative support and prudent financial management has helped it avoid the severe financial crises seen elsewhere. Reserves are being used strategically to protect services in the short term, while longer-term reforms aim to reduce reliance on costly crisis interventions.
The update follows the Council’s approval of the Nottinghamshire Plan 2025–29 in November, which sets out four years of priorities focused on stronger families, thriving communities, economic connectivity and a more efficient, listening council. The budget, officers say, is being shaped to support those ambitions while remaining within tight financial limits.
When councillors set the budget in February 2025, a funding gap of £18.5 million was identified across the three years to 2027/28. Since then, the Council has continued to experience pressure on day-to-day finances. As of the most recent monitoring position, the authority is forecasting an overspend of £5.9 million in the current year, largely driven by adult social care, where increasing complexity of need and higher provider costs continue to outpace assumptions.
Although underspends in areas such as interest costs and business rates relief have offset some pressures, any year-end overspend will still need to be met from reserves. Officers caution that this is not a sustainable solution and underline the need for permanent changes to service delivery.
The updated Medium-Term Financial Strategy reflects significant revisions following the Autumn Budget Statement and the Provisional Local Government Finance Settlement announced in December. For the first time in a decade, councils have been given a multi-year funding settlement covering the period to 2028/29. Core spending power is expected to rise by 5.7 per cent in 2026/27, followed by increases of 4.3 per cent and 4.4 per cent in the two subsequent years.
While this provides greater certainty, the Council notes that the total amount of funding available nationally remains unclear and that the settlement assumes councils will raise council tax to the maximum level permitted without a referendum. For Nottinghamshire, that remains 4.99 per cent, made up of a 3 per cent core increase and a further 2 per cent adult social care precept.
The report stresses that council tax decisions are taken annually and that members will need to balance the impact on residents against the growing cost of services. Under current assumptions, each one per cent increase in council tax in 2026/27 would raise around £5.2 million, while growth in the council tax base from new housing is forecast to generate an additional £6.1 million, independent of any rate increase.
By December 2025, total pressures and inflation across the Medium-Term Financial Strategy had risen to £94.2 million, driven by wage costs, demand growth and care market inflation. Departments have identified £44.2 million of mitigation measures through service redesign, efficiencies and transformation programmes, leaving the budget heavily reliant on those plans being delivered in full.
The increase in gross pressures and inflation bids received by Departments to 2028/29 totals £40.0m. These pressures have been mitigated by both portfolio and service level intervention by measures totalling £44.2m to give a net pressure reduction of £4.2m across the MTFS. Total pressures and inflation to 2028/29 now stands at £94.2m.
Adult social care remains the single largest area of concern. Demand for care packages for adults aged 18 to 64 is forecast to cost an additional £24.9 million over the next three years, reflecting the growing number of people with complex needs living longer and transitioning from children’s services into adulthood. Rising National Living Wage levels are also expected to add more than £30 million in cost pressures over the same period.
Children’s services face similar challenges. Although the overall number of children in care has not increased significantly, the cost per child has risen sharply as more young people with complex needs require expensive external placements. Growth in these placements is forecast to cost nearly £3 million by 2028/29.
The report also highlights mounting pressures in the Dedicated Schools Grant High Needs Block, a national issue affecting councils across England. Nottinghamshire has historically avoided falling into a deficit position, but an overspend of £18.1 million in 2024/25 and a forecast £37.2 million overspend in 2025/26 mean reserves are being rapidly depleted. Officers warn that without further reform, the position could worsen ahead of the Government’s planned absorption of SEND costs from April 2028.
Beyond service pressures, the Council is also preparing for structural change. Local Government Reorganisation proposals submitted to Government in November would see the current two-tier system replaced with new unitary authorities from April 2028. While transition costs are not yet included in the budget, the report notes these are expected to be funded initially from reserves and capital receipts.
Transport responsibilities are also changing, with highways capital funding and wider transport functions transferring to the East Midlands Combined County Authority. This shift will introduce a new levy and alter how infrastructure investment decisions are made across the region.
To address these pressures, the Council continues to develop its “portfolio of change”, bringing together reform programmes aimed at prevention, community-based support and better outcomes delivered at lower cost. These include new approaches to family support, SEND provision, supported living for adults and closer partnership working across public services.
Councillors are being asked to consider the assumptions underpinning the draft budget and to highlight any concerns ahead of Cabinet’s formal budget proposals later this month. Final decisions on council tax, reserves and spending priorities will be taken by Full Council on 26 February, when Nottinghamshire County Council must legally set a balanced budget for the year ahead.
