The council is currently in the throes of setting its annual budget, with rising demand for services
Somerset Council’s Headquarters at County Hall on The Crescent in Taunton(Image: Local Democracy Reporting Service / Daniel Mumby)
Somerset Council is “not in the territory” of effectively declaring bankruptcy within the next 12 months, says its interim finance chief. The council is presently grappling with setting its annual budget, as escalating demand for services and the continually rising costs of meeting these needs make balancing the finances increasingly challenging.
The council’s forecasted budget deficit for 2026/27 has significantly reduced from £73m in December 2025 to approximately £41.4m a month later – although it will still be dependent on extraordinary financial aid from the central government to bridge this gap.
Clive Heaphy, the council’s interim chief financial officer, expressed that he was not immediately concerned about the council’s ability to set its annual budget, adding that he anticipated the projected budget shortfall to decrease further once the government confirmed the final local government funding settlement.
Mr Heaphy discussed the matter extensively when the council’s corporate and resources scrutiny committee convened in Taunton on January 28.
He said: “We have probably moved slightly away from a financial emergency, but let’s be clear: we still have deep issues to do with our budget and balancing our finances, and we still have a lot of work to do. We need to match our spending to our income without reliance on exceptional financial support, reserves or one-off savings.
“You will recall that had a gap coming into this year originally of £101m, representing some 17 per cent of our net revenue budget – that’s a very large deficit by any measure.
“The gap as reported in December was down to £73m, and is now down to £41.4m. By the time we get to the executive [on March 25], we will be moving towards a figure starting with a three, and the likely figure is likely to be in the mid-thirties [millions].”
To bridge the outstanding shortfall, the council is substantially dependent on exceptional financial assistance from central government – which permits the council to utilise the proceeds from disposing of land, property and other assets to fund everyday expenditure (something which is not ordinarily allowed).
The council can only increase its share of council tax bills by a maximum of 4.99 per cent without prompting a referendum, with the Ministry of Housing, Communities and Local Government (MHCLG) rejecting any higher rise in the final local government finance settlement on Monday (February 9).
The council operates a council tax reduction scheme which offers support for residents who are finding it difficult to pay council tax – with Mr Heaphy noting that the current scheme meant that the equivalent of 12,800 Somerset residents were contributing no council tax whatsoever.
If the council fails to legally set its budget by 11 March, it will be forced to issue a Section 114 notice and declare effective bankruptcy – resulting in the MHCLG dispatching commissioners who can implement sweeping changes with minimal democratic scrutiny.
Mr Heaphy said: “I am pleased to say that this year, we are not in Section 114 territory of at the moment.
“While the reserves are not the levels where we need them to be, I don’t think they represent a risk as long as we are not calling on them for regular, day-to-day spending.”
Councillor Dave Mansell (who heads the opposition Green group on the council) suggested that the council’s choice to spend proceeds from asset sales on its ongoing transformation programme might not deliver value for local taxpayers.
Mr Mansell (who represents the Upper Tone division near Wellington) said: “We have relied a lot on the capitalisation, and I tend to think we’ve relied on that too much – we’ve avoided doing something better with that money.
“We’ve had 15 years of cuts and savings to local government; there have been many painful decisions over those years, and it’s still going on. Our officers are overstretched, having to do too much and are struggling to keep up with everything – I’m sure we all see that.
“It looks like the budget gap will be closed through a council tax increase – I think we have to look at that, given our circumstances.
“Those who don’t want to pay more council tax will have to say which public services they don’t want any more . We’ve already dropped some that we should have kept going.”
Councillor Henry Hobhouse (Liberal Democrat, Castle Cary) argued the council would never achieve financial stability without comprehensive social care reform.
He said: “In my division, I have Chilton Cantelo special needs school and six different adult social care homes – almost every single one of which are now owned by financial institutions in London.
“It is a complete and utter disgrace the amount of money that is being charged by special needs schools – it is more expensive to send a child to Chilton Cantelo than it is to send a child to Eton, and it really isn’t good enough.
“Somebody higher up than me and this committee has got to do something about it.”
The council’s executive committee will reconvene on Wednesday (February 11) to examine rental levels for the authority’s housing portfolio, rather than addressing the complete budget as initially scheduled.
A dedicated executive session will follow on February 25 to scrutinise cost-saving proposals, fee adjustments and any additional measures that might be required once further Government guidance arrives.
The full council will convene at the Canalside conference centre in Bridgwater on March 4 to ratify the budget. Should the budget fail to gain approval, a backup full council meeting has been arranged for March 6 at the same location, with a reserve executive date set for the day before.
Following the budget’s approval, the council will name a permanent successor to Mr Heaphy. The senior management appointments and employment committee is scheduled to convene in a confidential session on Monday evening (February 16) to discuss this matter.
