Kingston upon Thames is facing significant financial headwinds, with a projected £3.42m overspend for the 2025/26 financial year. This overspend is against a budget of £192.48m. The revelation came during a recent Corporate and Resources Committee meeting, where councillors grappled with budget monitoring reports and debated strategies to mitigate the growing deficit and its potential impact on council services and residents.

The most pressing concern is the schools budget, which is forecasting an £11.06m overspend. The forecast gives an increased accumulated deficit on the Dedicated Schools Grant (DSG) Adjustment Account (an unusable reserve) of £19.33m at 31 March 2026 compared to £8.27m at 31 March 2025. The Revenue and Capital Budget Monitoring 2025/26 as at Month 6 report detailed the complexities of the financial situation.

Adding to the financial strain, the Housing Revenue Account (HRA) is also forecasting an adverse variance of £1.57m. The main variances for the HRA are due to void property repairs (£0.39m), council tax costs on void properties (£0.28m), loss of income from Gloucester Road Hostel due to repairs (£0.15m), increased costs associated with Right to Buy (RTB) and lease extension activities (£0.15m), Bed and Breakfast costs for tenants whose properties have been decanted for major repair works (£0.10m), housing insurance (£0.24m), and lower investment balance compared to the budget position coupled with lower than expected interest receivable (£1.00m). While the HRA capital programme anticipates an underspend of £8.61m in year, the overall financial picture remains precarious.

In response to the escalating temporary accommodation costs, the committee approved the formation of a wholly council-owned Special Purpose Vehicle (SPV) Company Limited by Guarantee. This initiative aims to acquire 150 homes, which will then be leased to homeless households at rents aligned with the Local Housing Allowance rate. The council plans to borrow £63.1m from the Public Works Loan Board to fund the acquisitions. The council would look to form the CLG in January 2026 and seek to commence the acquisition of properties with a target of having the first property(ies) being acquired and tenanted by Spring 2026.

The Temporary Accommodation - Special Purpose Vehicle SPV report outlined that this model is projected to generate £278m in cumulative cost avoidance over 40 years, with a Net Present Value of £47m and a retained asset value of £100m. Sensitivity testing has been undertaken to test the assumptions within the model and show the impact of any changes up to and including a 10% reduction in the LHA rate, increase in the operating costs (maintenance and management etc) and increase in anticipated acquisition prices and also the impact of all 3 of these assumptions happening at once. This analysis shows the model remains viable even under stress scenarios and over the long term, the model can withstand changes to the combined assumptions of up to 41% before the model is no longer viable.

In addition to the SPV, the Council is already progressing a range of actions within the HRA and General Fund including acquisitions, prevention initiatives, void works and regeneration projects, including the acquisition of a significant number of new homes being delivered through the regeneration of the Cambridge Road Estate.

Potential risks associated with borrowing £63.1m from the Public Works Loan Board, as detailed in the report, include:

  • Ability to acquire/availability of property
  • Demand/need for places
  • Costs of acquisition
  • Costs of Management and operation
  • Rental assumptions (rents, voids and bad debts)
  • Ability of Council to provide services to required level
  • Potential for company to procure services from elsewhere
  • Potential for company structure to be challenged by tenants/others seeking Right to Buy or secure social tenancy
  • Introduction of 'periodic tenancies' in place of ASTs through the Renter's Rights Bill