Barking & Dagenham Council is facing a projected budget shortfall of £12.6 million for the 2026/27 financial year, according to an updated Medium Term Financial Strategy (MTFS) discussed at a Cabinet meeting on 19 August 2025. To address this, the council is looking to proactively identify further savings and efficiencies across all services to deliver a balanced budget for 2026/27 and secure long-term sustainability.
The forecast, presented by Cllr Dominic Twomey, Leader of the Council, is an increase from the previously anticipated £12.2 million gap and is expected to rise to £16.8 million in 2028/29.
The report highlighted that the funding outlook beyond 2026/27 remains uncertain due to the government's planned local government funding reform. These reforms include:
- Resetting the business rates retention system from April 2026.
- Modernising the Local Government Finance Settlement from 2026/27, revising needs-based formulas, consolidating grants, and reducing reliance on competitive bidding processes.
- Modernising and Improving the Administration of Council Tax to make council tax billing, collection, and enforcement fairer, more transparent, and more efficient.
The impact of these reforms on Barking & Dagenham is uncertain, but the government has indicated that any changes will be phased in over several years. The total funding available, particularly for urban areas such as London, is expected to decline due to a shift in distribution priorities towards other parts of the country. Although the Council may benefit from the updated deprivation indices, which better reflects its high levels of need, the overall outcome remains uncertain.
Wider economic factors, including inflation and interest rates, are also expected to continue influencing the council's financial position. The MTFS projections include assumptions about inflation and interest rates. The National Joint Council (NJC) for Local Government Services have proposed a 3.2% pay offer, which exceeds previous inflation assumptions used in the Council's MTFS. This updated pay award has now been reflected in the revised MTFS. PWLB rates are expected to remain elevated in the short to medium term.
The MTFS and Budget Strategy Update 2026/27 - 2028/29 report does not include any assumptions about recurring pressures from 2025/26. However, the Council is aware of potential risks in demand-led services.
The MTFS report also included details of the council's revenue budget monitoring position for 2025/26, with a forecast underspend of £0.2 million as of June 2025. However, the report noted ongoing pressures in social care and a projected overspend of £6.6 million on the Dedicated Schools Grant, primarily due to increasing demand and costs related to special educational needs.
Cllr Twomey noted that extra funding from the new Labour government had helped, and that he hoped for more in the coming year to begin the process of resetting budgets back to a more workable level after 14 years of Tory austerity.
Councillor Warby commented on the report, suggesting that the council should consider making some provision for demand pressures, as they are a known reality. Cllr Twomey responded that it was difficult to put an arbitrary sum aside without knowing what the pressure might look like, but that there would be plenty of discussions over the coming months.
The Budget Strategy and MTFS Update 2026/27 - 2028/29 report outlined the budget objectives, with a focus on robust financial discipline to ensure every pound is spent efficiently and effectively. The report also set out the Budget Strategy for the Capital Programme, Dedicated Schools Grant and for the Housing Revenue Account.
