Lambeth Council is facing a significant financial challenge, grappling with a £60.5 million overspend, primarily driven by rising housing costs for homeless families. The dire financial situation was a key topic at a recent Cabinet meeting, where councillors discussed the Outturn Report 2024-25 and strategies to address the crisis.
The report revealed that the cost of housing homeless families exceeded the budget by £35 million, contributing to over half of the council's total overspend. Councillor Claire Holland, Leader of the Council, attributed the financial woes to 14 years of structural underfunding and austerity.
She also expressed concern that proposed changes to funding, as they currently are expressed in the consultation could represent a real risk to the council's budget in the years ahead,
potentially leaving Lambeth as one of the worst impacted councils.
Councillor Matthew Bryan raised concerns about a £27 million deterioration in the final quarter of the financial year, questioning the drivers behind the overspend in the corporate budget and why it was not anticipated. Officers clarified that interest costs and an increase in bad debt provision were the main factors. The council is working to ensure greater oversight and transparency of that debt, with the finance report set to address the issue.
The cabinet also discussed the Early Year End Forecast 2025-26 and Contract Award to Newton Limited and Xantura Software, which projects a reduced but still substantial overspend of £18 million. As part of this, the council approved a direct award of contract to Newton Ltd for diagnostic services covering Temporary Accommodation, Adults Social Care and Children's Social Care to identify savings, cost reductions and demand management opportunities, with an estimated value up to £0.9m. A direct award of a contract for 2 years plus a 1-year extension was also approved for Xantura Software covering identification of savings and cost reduction opportunities through prevention and early intervention, with an estimated value up to £1m. These contracts are expected to contribute to reducing the overspend by identifying savings and cost reduction opportunities in key service areas.
To mitigate the financial strain, the council is implementing measures such as a council-wide transformation programme, director reductions, a recruitment freeze, and a review of the capital investment programme. The director reductions are expected to save more than a million a year, and the recruitment freeze is intended to end all non-essential spending. The council-wide transformation programme aims to improve services and deliver savings. The impact on council services and staffing levels is not detailed in the meeting information, but it is implied that the council is trying to retain capacity below the director level.
Looking ahead, the Medium Term Financial Strategy Update Report 2026-2030 warns that Lambeth will need to find an additional £84 million in savings over the next four years, on top of the £99 million already agreed.
