Lewisham Council Faces £7m Overspend Amid Social Care Crisis
Lewisham Council is facing a projected £7 million overspend for the current financial year, primarily driven by escalating demand and costs within social care services.
The significant financial challenge was revealed in the Period 4 Financial Monitoring report presented to the Mayor and Cabinet on Wednesday, 7 October 2026. The projected overspend represents a £3.9 million increase since the previous monitoring period (Period 2).
Councillor Rudi Schmidt, Cabinet Member for Finance, Resources and Economic Development, highlighted that the increased costs are largely attributed to higher demand and placement costs in children's social care and adult social care. He also noted additional pressures within the parking contract in the Place Directorate.
Social Care Pressures Detailed
The escalating demand and costs
in children's and adult social care are driven by several specific factors beyond the general mention of the cost of living and housing crises. In children's social care, this includes increased demand and associated housing costs for children in need, as well as higher placement costs, with a single placement potentially costing £2 million per year. School transport costs have also risen due to high demand, with 98 more pupils receiving a service compared to the previous year. Furthermore, a surge in applications for Education, Health and Care (EHCP) plans, following government SEND reforms, has created an additional £1 million pressure on the children's transport budget. An increase in those receiving care over 18 years old and a decrease in the use of in-house fostering, leading to greater reliance on more expensive external fostering agencies, are also contributing factors. The council also faces the risk of housing families who may not meet the threshold for Children's Services but still require accommodation.
In adult social care, increased demand and associated care costs are a primary driver. There is significant pressure on packages and placements budgets, alongside high demand on the hospital discharge pathway. The forecast overspend in this area is based on current placement numbers, and any further increase will exacerbate the deficit unless offset by improved savings delivery or additional income.
Parking Contract and Dedicated Schools Grant Pressures
The parking contract
pressures within the Place Directorate are contributing £1.3 million to the overall overspend forecast for that directorate. These pressures stem from higher-than-anticipated contract costs, with the contract not performing as envisaged. An additional potential risk of £1.0 million relates to a disputed claim from Marston's for costs attributed to the previous financial year.
The Dedicated Schools Grant (DSG) is also forecasting a substantial £10 million overspend for the 2026/27 financial year. This is primarily due to pressures within the High Needs Block, driven by an increase in children requiring an EHCP. There are now 4,003 children with an EHCP, an increase of 259 in the past 12 months, with average costs of £15,000 for in-borough provision and £27,000 for out-of-borough provision. Increased placement cost requests from providers and a rise in transport spend due to the higher number of EHCPs are also contributing factors.
Wider Financial Context and Mitigation Plans
Councillor Schmidt attributed these pressures to ongoing austerity measures and significant cost increases driven by the cost of living and housing crises. He specifically pointed to the high cost of individual placements in children's social care, stating that a single placement can cost £2 million per year, quickly contributing to budget overspends.
The report also detailed that only £20.38 million of the planned £30.1 million savings for 2026/27 are forecast to be delivered, a decrease in achievability of £7.72 million since Period 2. Councillor Schmidt expressed that after 16 years of austerity, making the required budget cuts to balance the budget is becoming increasingly difficult.
Mayor Liam Shrivastava acknowledged the challenging financial environment, noting that central government austerity measures and policy changes, such as SEND reforms, have significant impacts on the council's budget. He stressed the need for central government intervention and adequate funding, particularly for areas of high climate risk and for reversing the 2011 freeze on temporary accommodation funding.
The council's plan to mitigate the impact of the £7 million overspend includes several measures. For children's social care, this involves implementing national Families First for Children reforms to rebalance the system towards earlier help, robustly reviewing placement costs for under 18s, and monitoring increasing costs for over 18s. The council aims to minimise the use of expensive nightly-paid providers and move people out as quickly as possible, alongside stringent oversight of temporary accommodation service activity. For adult social care, recruitment requests require Directorate Management Team approval, and panel oversight ensures proposed care meets assessed needs. Supported living is prioritised over care home placements, and timely reviews are conducted to identify opportunities for increased independence. AI assessment tools are also being used to increase staff productivity.
Generally, the report indicates that savings not being delivered and the observed overspend will need to be factored into future budgets.
Potential Consequences for Residents
While the meeting information does not explicitly detail the projected consequences of the £7 million overspend for Lewisham residents, Councillor Rudi Schmidt stated that the underfunding is pushing huge pressures on us, and it's costing local residents in Lewisham who are seeing cuts to services like libraries, youth services, leisure, all of these areas that savings have had to be found because of this underfunding and other underfunding.
This suggests that the overspend could lead to reductions in various public services.
In response to the financial situation, Mayor and Cabinet were asked to note the forecast position and approve the write-off of £350,300 in Business Rates debt and £60,700 in Short Breaks debt. Further details can be found in the Public reports pack here.
