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Sunday, February 9, 2025

Nottinghamshire County Council budget update: No deficit now but could grow to £76m by 2027

The council acknowledges that the financial challenges for 2026/27 and beyond will intensify, with a cumulative funding shortfall projected at £76.2 million by 2027/28.

Nottinghamshire County Council has unveiled its updated financial plans for the 2025/26 fiscal year in an increasingly challenging economic landscape.

Financial Overview by Year

2024/25

  • Net Budget Requirement: £638.8 million
  • Funding Sources:
    • Business Rates: £144.3 million
    • Revenue Support Grant: £8.6 million
    • Council Tax: £415.3 million
    • Adult Social Care Precept: £67.3 million
    • Collection Fund Surplus: £3.3 million
  • Funding Shortfall: None reported for 2024/25.

2025/26

  • Net Budget Requirement: £651.0 million
  • Funding Sources:
    • Business Rates: £144.3 million
    • Revenue Support Grant: £8.6 million
    • Council Tax: £430.8 million
    • Adult Social Care Precept: £67.3 million
  • Revised Funding Shortfall: £1.8 million (adjusted to £13.5 million after considering pressures and additional assumptions).

2026/27

  • Net Budget Requirement: £687.0 million
  • Funding Shortfall: £20.0 million (cumulative shortfall: £36.3 million after additional pressures).

2027/28

  • Net Budget Requirement: £699.6 million
  • Funding Shortfall: £16.0 million (cumulative shortfall: £76.2 million after considering additional pressures).

Economic Context

The financial framework for 2025/26 is shaped by a convergence of factors: rising inflation, the national cost of living crisis, and geopolitical uncertainties such as the ongoing conflicts in Ukraine and the Middle East. These pressures have significantly impacted both the council’s operational costs and the demand for its services, especially in social care.

Despite a brief dip below the government’s 2% inflation target in September 2024, inflation rebounded to 2.6% by November 2024 and is projected to rise to 2.75% by late 2025. Coupled with the Bank of England’s continued high interest rate policy, these trends threaten to erode the council’s financial capacity.

Financial Highlights

The Council’s Medium-Term Financial Strategy (MTFS) provides a framework to address these challenges. Notable features include:

  1. Council Tax Adjustments: Residents may face an increase of up to 2.99% in Council Tax and an additional 2% Adult Social Care Precept for 2025/26. A public consultation revealed 66% support for the precept increase, highlighting the community’s willingness to invest in critical services.
  2. Budgetary Pressures:
    • Adult Social Care remains a key area of concern, with anticipated care package demands for adults aged 18–64 expected to rise by £7.1 million annually over the next three years.
    • Children’s services face mounting costs due to increased complexity in care requirements and a reliance on costly external placements, accounting for a projected £9.5 million increase in 2025/26.
  3. National Living Wage and Staffing Costs: The rise in the National Living Wage from £11.44 to £12.21 per hour and increased employer National Insurance contributions add £11.7 million to the council’s expenses for 2025/26.
  4. Reserves Management: Earmarked reserves will play a pivotal role, with £20.5 million allocated to bridge funding gaps in 2025/26. However, reliance on reserves is seen as a temporary measure rather than a sustainable solution.

Public Consultation 

An engagement process saw 3,072 residents participate in a budget survey, with an additional 594 young people engaged through targeted sessions. The consultation identified community and public transport as top priorities, with widespread opposition to service cuts. The council has pledged to align budget decisions with public sentiment.

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Initiatives

The council’s approach balances short-term exigencies with transformative reforms aimed at achieving financial sustainability:

  1. Service Transformation: Emphasis on prevention and early intervention is expected to reduce long-term reliance on high-cost services. For instance, programs designed to enhance independence among vulnerable populations are beginning to show positive outcomes.
  2. Collaboration and Efficiency: Partnerships with local organisations, integration with health services, and technological advancements, including AI adoption, are at the forefront of efficiency drives.
  3. Capital Investment: The 2025/26 capital program is projected at £143.9 million, funding infrastructure projects that support the region’s growth.

The council acknowledges that the financial challenges for 2026/27 and beyond will intensify, with a cumulative funding shortfall projected at £76.2 million by 2027/28. Strategic decisions, including potential local government reorganisation under the English Devolution Bill, will influence Nottinghamshire’s fiscal landscape.

The Cabinet is set to finalise the 2025/26 budget in February 2025, followed by approval at a full council meeting. With a focus on resilience, innovation, and community alignment, Nottinghamshire County Council aims to navigate turbulent waters while protecting the most vulnerable residents.

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