Lambeth Council is facing a significant £15.9 million overspend on its General Fund for the 2025/26 financial year, despite improvements noted in the fourth quarter. The Quarter 4 2025/26 Budget Monitoring Report, presented to the Cabinet on July 1, 2026, revealed a draft outturn overspend of this magnitude.
While this figure represents an improvement of £1.2 million since the previous quarter, substantial pressures persist, particularly within demand-led services such as adult and children's social care. The significant overspend in these areas is primarily attributable to sustained underlying demand and increasing complexity of need, as well as pressures in Temporary Accommodation.
To manage budget shortfalls and bolster reserves, the council has secured £116 million of Exceptional Financial Support (EFS) for the period 2024-25 through to 2026-27. This temporary financial assistance enables the management of budget shortfalls to ensure essential services continue to be delivered while plans are implemented to return to a sustainable balanced budget position. EFS allows councils to capitalise expenditure to fund day-to-day services, which then require financing through borrowing or capital receipts. If funded by borrowing, there will be a cost of interest to be paid while the debt is outstanding, normally to be repaid over 20 years, as well as increased Minimum Revenue Provision that has to be set aside. The council expects to fund EFS through a planned programme of asset disposals.
Beyond securing EFS, the council is implementing several measures to address the overspend in the short to medium term. A savings target of £46 million for the current year still needs to be delivered as part of the Savings Programme. Councillor Danial Adilypour sought confirmation that both the Savings Programme and the asset disposal strategy are non-negotiable to ensure the council maintains financial stability. Furthermore, work continues on the Council's Transformation Programme, with external support secured to identify cost reductions and savings requirements through demand management and data-led approaches for prevention and early intervention in demand-led services. Spend controls requiring approval from a spend control panel continue at a reduced threshold of £5,000.
An independent financial review has also been commissioned to conduct a more in-depth analysis of the financial situation. The application of EFS for both 2024/25 and 2025/26 has strengthened the council's overall financial position, including reserves, increasing resilience and the ability to manage pressures in the coming years. After fully utilising the approved EFS for 2025-26, the closing reserve balance is projected to be £114.613 million, subject to audit. Without EFS, the overspend would have required at least £15 million of reserves to be used, bringing them to a dangerously low level. However, the report concludes that reserve levels remain low and offer little financial resilience in the context of the challenges ahead.
