A report on the council’s finances has laid bare the extent of its huge budget deficit.

Brighton and Hove City Council has announced its potential budget shortfall of £105 million over the next four years, with a possible £36 million deficit for the next financial year.

In a report titled General Fund Budget Planning and Resource Update 2025-26, the council has highlighted its precarious financial position as well as areas for savings to bridge the gap, including staff redundancies and increased use of AI.

What is the council’s financial situation for the year ahead?

The council said that since 2021, external auditors have described its financial sustainability as a “significant weakness”, while for the last 14 years it has experienced “more significant annual budget gaps” due to increased demand for services and the reduction of government funding, totalling £109 million from 2010/11.

In the projected budget for 2025/26, the highest forecast increases came from areas including adult social care, such as providers and other cost increases, at £8.2 million, and general inflation assumptions including the 2025/6 pay award, totalling £9.8 million.

The council predicts its total cost increases for the financial year ahead to be £53.5 million, while funding is only forecast to rise by £16.7 million, leaving a budget gap of -£36.7 million.

The council may look at reducing or closing “non-priority” services during the budget-setting process for 2025-26 and beyond.

More spending to make long term savings

In the report, the council has set out plans for a ‘four year indicative transformation fund’ which outlines bulk spending to make future savings.

It proposes the spending of £4 million on digital and AI development and skills, as the council said it “will need to move with the technology and ensure appropriate skills are developed to make the most of any investment”.

It has also set aside £3.85m for “managing staff changes” including redundancy costs.

The report reads: “Transformation and change inevitably results in significant changes to services which will entail changes to the mix or level of staffing in services.

“This can lead to potential redundancies which the council attempts to manage through holding vacancies or redeployment as far as possible, but otherwise through voluntary severance where this meets the council’s business case criteria.

“This can involve significant redundancy and/or pension strain costs. At least £1 million per year is expected to be required over the 4-year period supporting severance of around 25 to 30 staff each year.

“Alongside vacancy management and redeployment this could enable reductions of up to 100 full time equivalent posts each year.”

Additionally, £8 million was allocated to “invest-to-save business cases” and £0.15m to “resources to generate capital receipts”.

How will council housing be impacted?

The council has specified that the Housing Revenue Account (HRA) is a ring-fenced account, meaning funding allocated to the HRA can only be spent on council housing.

However, it has also stressed that the department has been under strain due to rising costs in relation to fire and building regulations, as well as investment requirements in large panel system blocks, both short term and long term to ensure safety.

Will education be affected?

Again, the Dedicated Schools Grant (DSG) is a ring-fenced grant that provides funding for schools, academies, early years, special educational needs and a small number of allowable central items.

Funding is allocated based on a National Funding Formula driven by pupil numbers, which the council says has dropped from 29,451 in October 2022 to 28,972 in October 2023, leading to a loss of £2.45m in funding, presenting a “very challenging financial backdrop for schools”.

Forecasting of “high needs” funding from the government has also predicted a potential deficit of around £800,000 for SEND pupils.

What changes have actually been proposed?

The council has identified areas of the budget for “exploration”.

These include:

  • Potential development of in-house residential provision for children with complex disabilities to explore best value for money delivery options;
  • Exploring in-sourcing of the highest cost home-to-school transport routes (minibuses) to provide better value for money;
  • Exploring AI technologies, including predictive analytics, to focus the right support at the right time for children and families and reduce administrative support costs;
  • Potential use of technology-enabled care across adult social care to maintain independence;
  • Managing adult social care demands at the front door with improved information and self-assessment options;
  • Exploring alternative delivery models for in-house adult social care provision to ensure best value for money;
  • Use of tools which support adult social care brokerage for achieving best market value;
  • Creation of a wholly-owned housing company to acquire housing and attract higher rates of welfare benefit (Local Housing Allowance);
  • Further review of the delivery model for the schools IT&D traded service;
  • Business support and admin functional alignment review.

The council added: “In the current financial climate, the level of risk that the council may be prepared to carry is likely to be higher than in normal circumstances.”

What next?

A detailed update will be given to councillors at the next cabinet meeting on September 26 at Hove Town Hall.

Consultation on cuts are due to begin in December. The council said it plans to conduct a residents survey on what they think the budget should be spent on, as well as holding an open access event to discuss the challenges it faces.

Proposals will be put to the council in February for approval.