Councillors may be forced to make “politically unattractive or undesirable decisions”, including increasing charges and cutting services, to ensure financial sustainability, auditors have warned.

Brighton and Hove City Council faces a black hole of £25 million in the next financial year, with auditors expressing “significant concern” over its finances.

A report by auditors Grant Thornton said the council needs to “consider a realignment of priorities to coincide with securing financial sustainability”.

The council finished the 2022/23 financial year with an overspend of £3 million, the first time in over a decade.

Latest budget monitoring reports currently forecast an overspend of £14 million for the next financial year, with “significant concern” for the medium-term financial position of the council.

The budget gap for 2024/25 is forecast to increase to £25 million.

The report said the council may be forced to increase income from fees and charges, sell assets and even cut services to the “statutory minimum” to bridge the gap in funding.

It said: “The council is currently spending and forecasting to spend beyond its means in the medium term.

“The current medium-term savings requirement is treble what the council has been able to deliver in the past three years.

“The council must put effort toward exploring all opportunities for increasing income from fees and charges, potential fundraising opportunities, services transformation which may include significantly drawing back services to the statutory minimum, revision of policy priorities to ensure alignment with financial sustainability, reallocation of earmarked reserves, asset sales and alternative means of cost avoiding or income generating in order to bridge the 2024/25 budget gap, and subsequent medium-term gap, and address the currently forecast overspend for 2023/24”.

Pressures cited by the report for some of the financial challenges included rising inflation and interest rates, along with cuts to government funding, restrictions on council tax increases and “the very substantial increase in demands for adult social care”.

Auditors warned the council faces a “crunch point” and is in need of a “step change if it is to secure financial sustainability”.

Among the recommendations made by the council include revising financial plans with the sustainability of reserves in mind, focusing financial planning on reducing reliance on one-off measures and demonstrating a realistic plan for replenishing reserves.

“Due consideration must be given to the fact that the council is likely going to need to make very difficult financial decisions in the near future if it is to maintain its financial stability,” the report said.

The report also said its recommendations were “under consideration in the lead-up to the recent election”.

The council is understood to be bringing forward the 2024/25 budget-setting process to “put the council in a financially sustainable position in the medium term”.

Councillors will discuss the report in a meeting of the audit and standards committee later this afternoon.

Deputy leader of Brighton and Hove City Council Jacob Taylor said: "This report validates exactly what we said when we took office – namely that the last Green administration did not manage our finances well and left the council in a financially unsustainable position.

"When we highlighted the fact that the previous Green administration had overspent, a number of current and former Green councillors tried to claim that this wasn’t significant or unique. The audit report makes it crystal clear that the opposite is true.

"I said when we took office that we’d inherited a ‘budget built on sand’ and this audit report demonstrates how it happened. Shockingly a similar finding was made last year and the auditors make clear that this was not addressed by the Green administration."