Islington Council's financial resilience has been praised by its Overview and Scrutiny Committee, with a balanced budget for 2026/27 set to be achieved without drawing on reserves. The council is on track to underspend its 2025/26 general fund budget by an anticipated £5m, which will further bolster reserves and ensure greater stability.
Councillor Flora Williamson, Executive Member for Finance and Performance, presented an annual report to the committee on Thursday, February 5, 2026, highlighting the council's strong financial standing amidst challenging economic headwinds. These headwinds include persistently high gilt rates, inflation, and a difficult jobs market, which are expected to continue putting pressure on demand-led services and reduce opportunities for capital projects.
The council is experiencing rising demand-led service pressures, particularly in Adult Social Care, driven by increasing longevity and complexity of needs, NHS backlogs, and a rising number of working-age adults requiring support. Children's Services and SEND are also facing new pressures of over £1m for 2026/27 due to a growing number of children with Education, Health and Care Plans and increased demand for related services. Furthermore, Temporary Accommodation is seeing a 31% increase in homelessness cases, compounded by soaring private rental costs.
Despite these successes, the report acknowledged ongoing challenges, including the aforementioned economic headwinds and rising demand-led service pressures, alongside the need for continued financial stability. Priorities for the next twelve months include implementing a new financial system and refreshing audit and compliance procedures.
The implementation of a new financial system is anticipated to bring several benefits, including a fully integrated finance system, increased self-service for budget managers, and a move to a full procure-to-pay model to enhance financial control and compliance. The primary challenge lies in the significant operational changes required once the new system is live.
The committee also scrutinised the draft budget proposals for 2026/27 and the Medium-Term Financial Strategy (MTFS), as detailed in the Draft Budget Proposals 2026/27 and Medium-Term Financial Strategy. The report outlined proposed budgets for the General Fund, Housing Revenue Account, and Capital Programme.
- The General Fund Revenue Budget for 2026/27 is projected at £347.053m, with significant growth in Adult Social Care (£3.916m), Children's Services and SEND (£1m+), and Temporary Accommodation (£2.833m). Inflation adds £9.954m to the budget.
- The Housing Revenue Account (HRA) Budget proposes total expenditure of £280.457m for 2026/27, an increase of £10.260m from the previous year, reflecting higher pay, pension costs, inflation, and increased contributions to HRA reserves. The budget includes £56.2m for new-build programmes.
- The Capital Programme Budget spans 10 years and totals £1.179bn. Key allocations include £2.258m for Health and Social Care, £14.403m for Children and Young People, and £44.215m for Community Wealth Building.
The council maintains one of the most generous Council Tax Support schemes in the country, benefiting nearly 25,000 households. This scheme ensures that the most financially vulnerable residents pay no council tax at all.
The Section 151 Officer's comments highlighted the robustness of estimates and sufficiency of reserves. However, they also noted increasing risks within the local government sector, including uncertainty in government funding, potential for inflation and pay awards to outstrip forecasts, continued high demand for services, challenges in delivering savings programmes, and volatile income streams. While contingencies and reserves are in place, they cannot fully mitigate these medium-term risks. A particular concern is the potential 'cliff edge' in funding in 2029/30 when transitional funding protection is scheduled to expire.
