Lambeth Council is grappling with a substantial financial deficit, projecting an overspend of nearly £11 million for the current financial year and a cumulative budget gap exceeding £93 million over the next three years. The escalating demand for adult social care services is a primary driver of these rising costs.

The council's Cabinet convened on Wednesday, July 22, 2026, to deliberate on the financial forecast and medium-term financial strategy. Councillor Zvikomborero Chihoro, Cabinet Member for Finance and Community Wealth Building, presented the early year-end forecast, highlighting pressures in areas such as temporary accommodation, income shortfalls in Growth and Environment, and continuing demands on children's and adult social care.

Addressing Financial Pressures

To mitigate these financial challenges, the council is implementing a series of management actions. In Adult Social Care, a review of high-cost care placements is underway, encompassing Care Package Reviews to ensure appropriateness and value for money, Right Sized Care reviews for Learning Disabilities, and Ordinary Residence and Care Refinement reviews. Efforts are also being made to increase the uptake of direct payments and monitor personal budget usage. Furthermore, Transitions Management is being enhanced through joint work with Children's Services to ensure proportionate care packages for young people with learning disabilities transitioning into adulthood. The council is also focusing on Preventative Intervention, increasing initial contact with social care services and reablement referrals to foster independence and avoid long-term care. Weekly management scrutiny of new care packages and placements is also in place to ensure cost-effectiveness. These actions are expected to contribute to a broadly balanced position within Adult Social Care.

The Growth and Environment directorate faces a projected adverse position of £7.884 million, largely due to income shortfalls. These include a £1.227 million shortfall in Parks events income due to cancelled major summer events, and unachievable income targets within Sports Facilities (£0.340m). Planning and Sustainability is experiencing shortfalls in Highways, particularly DRW income (£0.782m) due to lower development activity. Regeneration, Growth & Capital Investment has unachievable MTFS savings (£0.882m) related to Civic Centre lettings and Brixton House Theatre income. Community Services also reports income shortfalls against MTFS targets within Libraries (£0.448m). A significant pressure of £6.212 million arises from parking income shortfalls due to paused schemes, increased compliance, and a reduction in PaybyPhone transactions, with no clear mitigation currently identified. Events are facing a £1.308 million shortfall due to event cancellations and planning application delays. Markets have a £0.510 million shortfall due to a lack of identified delivery mechanisms. Additionally, the EV charging points programme, despite a £2.6 million investment, is expected to yield a part-year saving with a £400,000 shortfall against target.

Measures to address these income shortfalls include income generation initiatives across all directorate areas, the resumption of the EV charging infrastructure programme, and the development of further parking-related income streams. The council is also reviewing library operating arrangements, including reduced Sunday and Monday opening hours, and is actively seeking to maximise external funding and review fees and charges to improve cost recovery.

Medium-Term Financial Strategy and Funding Outlook

The Medium Term Financial Strategy (MTFS) update reveals a projected budget gap of £19.096 million for 2027-28, escalating to a cumulative shortfall of £93.217 million by 2029-30. A significant factor contributing to this outlook is the anticipated impact of the Fair Funding Review 2.0, which is expected to lead to a substantial reduction in Lambeth Council's core funding. The withdrawal of transitional protection funding in 2029-30 will further exacerbate this, resulting in a £37.582 million drop in government funding compared to the previous year.

Children's Social Care Pressures

Children's Social Care (CSC) continues to face significant budget pressures, stemming from recruitment and retention challenges that are described as reflective of sector-wide pressures that are heightened in London. Strategies to address this include an action plan and a Workforce Strategy 2024-27 aimed at increasing the proportion of permanent staff.

Debt Burden

Councillor Martin Abrams, Leader of the Council, highlighted the council's substantial debt burden, stating that it costs nearly £60 million a year to service the debt accrued by the previous administration. This equates to approximately £500 for every council tax-paying household in Lambeth.

Commitment to Savings and Reserves

The Cabinet acknowledged the budget gaps for 2027-28 and the MTFS period. The council remains committed to delivering existing agreed revenue savings totalling £53.193 million from 2027-28 to 2029-30, with £31.132 million planned for 2027-28. These savings are intended to contribute to closing the budget gap.

Regarding reserves, the recommended level for General Fund balances is 10% of net revenue expenditure. As of March 31, 2026, the council held General Fund balances of £45 million and HRA balances of £7.517 million. While General Fund balances have been restored to a sustainable level through Exceptional Financial Support (EFS), earmarked revenue reserve levels remain low and offer little financial resilience in the context of the challenges ahead.

Provider Market Challenges in Adult Social Care

Challenges within the provider market for Adult Social Care are contributing to rising costs. Providers are experiencing increased expenses due to workforce issues, inflation, and regulatory demands. The council's more controlled approach to fee uplifts, while promoting financial discipline, introduces operational and market risks, potentially impacting capacity and the availability of provision, especially for complex needs. Workforce capacity remains a constraint across the sector, and ongoing changes within the NHS and wider integrated care system create uncertainty around future funding and partnership arrangements. These factors are driving up the unit costs of care packages and placements.

For more details, refer to the Public reports pack.