Lambeth Council is facing a projected overspend of £15.9 million for the financial year 2025/26, a figure that, while improved from previous forecasts, highlights significant financial challenges.
The draft outturn for the General Fund indicates the overspend, with pressures particularly acute in demand-led services such as temporary accommodation, and adult and children's social care. Councillor Zvikomborero Chihoro, Cabinet Member for Finance and Community Wealth Building, presented the Quarter 4 Budget Monitoring Report, noting that while the position had improved by £1.2 million since Quarter 3, the council continues to grapple with these pressures.
The ongoing housing crisis and wider cost-of-living pressures are driving increased demand in these essential services. To address the financial difficulties, the council has secured £116 million in Exceptional Financial Support (EFS) from the Ministry of Housing, Communities and Local Government (MHCLG) in principle. This support, approved in February 2026, will be provided across the 2024-25 to 2026-27 financial years in declining amounts. The EFS is intended to manage budget shortfalls and rebuild reserves, strengthening the council's overall financial position and resilience. Additionally, the Housing Revenue Account (HRA) has received £40 million of EFS for 2025-26 to balance its budget and manage a backlog of disrepair.
During the Cabinet meeting on July 1, 2026, councillors raised concerns about the council's financial stability, particularly regarding savings programmes and asset disposal strategies. A total of £99 million in savings are required between 2025-26 and 2028-29 to close the budget gap. The council plans to fund the EFS through a programme of asset disposals, which will be subject to formal approval and aligned with the Council's Strategic Asset Management Framework. However, a gap of £24.956 million exists between proposed savings and those likely to be delivered, with £14.87 million attributed to the Target Operating Model saving. Councillor Danial Adilypour sought confirmation that these savings and disposal strategies are non-negotiable to avoid issuing a section 114 bankruptcy notice.
Questions were also raised about workforce plans and savings from parks and leisure budgets. While staff costs reduced by £1.868 million compared to Quarter 3 due to recruitment delays and lower agency usage, additional staff have been employed to manage the reduction in temporary accommodation numbers and costs. The Dedicated Schools Grant (DSG) closed 2025-26 with an in-year overspend of £8.475 million, primarily within the High Needs Block. The DSG is projected to be in deficit by the end of 2026-27 and will rely on statutory override arrangements. The council is developing a SEND Reform Plan, supported by the High Needs Stability Grant, to improve outcomes for children with SEND and enhance the long-term sustainability of high needs spending.
Councillor Zvikomborero Chihoro assured residents of transparency, stating, This won't just be a report that sits on the website for people to go and have a look. We will put it in people's doorsteps. It will be all over social media. We want to explain exactly what led to this financial situation and what the situation is. And we just believe the public deserve to know this in the most transparent and way they can understand.
An independent financial review has also been commissioned to further analyse the situation.
For more details on the council's financial position, refer to the Quarter 4 2025/26 Budget Monitoring Report, available within the Public reports pack for the Cabinet meeting on July 1, 2026.
