Harrow Council has reported a £3 million revenue underspend for the 2025/26 financial year, a surplus that will be allocated to the business risk reserve to help fund the dedicated schools grant (DSG) deficit.
The final revenue outturn report for 2025/26, presented to the Cabinet on Thursday, July 9, 2026, detailed a £3,001,000 overall revenue underspend. This figure was achieved despite directorates experiencing an overspend of £12.6 million, which was offset by underspends of £15.6 million in corporate budgets.
The most significant contributor to the corporate underspend was an unbudgeted payment from the Department for Environment, Food & Rural Affairs (DEFRA) related to extended producer responsibility for packaging. This payment, notified in July 2025, amounted to £3.5 million.
Councillor David Ashton, Portfolio Holder for Finance and Highways, presented the findings. He also clarified that a previous parking overspend from the prior year had been largely balanced in the current year due to increased income from tariff changes. He confirmed that the current in-year position for parking shows no overspend.
Councillor Ashton explained that the extension of paid-by-phone parking hours in Rayners Lane Town Centre from 6:30 pm to 8:30 pm was implemented following surveys that indicated high demand throughout the evening. The primary aim of this change was to manage parking demand, improve space turnover, support businesses, and reduce congestion, rather than to generate additional revenue.
The £3 million surplus will be added to the business risk reserve. This reserve is intended to support any in-year financial risks and demand fluctuations beyond those already factored into the budget-setting process. Following this allocation, the business risk reserve will be replenished to £1 million, before the addition of the 2025-26 underspend.
This allocation is set to assist in funding the dedicated schools grant deficit, which overspent by £14.5 million in 25-26, bringing the cumulative DSG deficit to £28.67 million as of March 31, 2026. The report indicates that £2.874 million, which is 10% of this cumulative deficit, must be funded from the general fund reserve once the statutory override for DSG accounting arrangements ends in March 2028. The £3 million underspend is proposed to be set aside in the reserve to cover this requirement, thereby clearing the balance sheet of unhelpful debit balances.
The statutory override for DSG accounting arrangements has been extended until March 2028, allowing these deficits to be held separately within the Council's accounts. The report does not provide a specific timeline beyond March 2028 or detail the expected impact of this allocation on that timeline.
