Savings schemes at risk of delivery

Lambeth Council is grappling with significant financial challenges, with 21 savings schemes at risk of not being delivered, potentially creating a £18.157 million gap in the council's finances. The council's Cabinet met on Wednesday, July 22, 2026, to discuss the dire financial forecast and its medium-term financial strategy, as detailed in the public reports pack. ¹

A projected overspend of nearly £11 million for the current financial year and a cumulative budget gap exceeding £93 million across the next three years were highlighted as major concerns.

Councillor Zvikomborero Chihoro, Cabinet Member for Finance and Community Wealth Building, attributed the overspend to pressures in temporary accommodation, income shortfalls in the Growth and Environment directorate, and delays in implementing new savings proposals. He noted that some savings require upfront investment, and the council is seeking approval to use flexible use of capital receipts, up to £2.5 million, to support budget proposals, including £0.891 million for the finance improvement programme. An additional £2.6 million is earmarked for a capital scheme to install electric vehicle charging points, aiming to generate income.

Temporary Accommodation Pressures

The temporary accommodation (TA) sector continues to account for the majority of the Housing Services budget and spend. Primary reasons for the pressures include the cost of nightly paid temporary accommodation (NPTA). While some NPTA properties are being replaced with less expensive leased properties, incentive payments to help move people into the private rented sector (PRS) are also a factor. An additional £3 million in incentive payments is expected to reduce nightly paid costs by £6 million annually, though the reduction will be £4 million in the first year (2026/27). Delays in progressing new saving proposals related to service transformation, such as reducing households in TA and implementing new procurement models, are also contributing to the overspend, with these savings now expected to be fully realised in 2027-28.

Growth and Environment Directorate Challenges

The Growth and Environment directorate faces the most significant challenges in savings delivery, with a forecast adverse position of £7.884 million. This is primarily driven by undeliverable legacy medium-term financial strategy (MTFS) income savings proposals and a shortfall in the capitalisation of salaries due to a pause in the capital programme. Specific areas of pressure include:

• Public Realm Services: £4.1 million shortfall, largely due to a £1.227 million reduction in parks events income as two major summer events are no longer proceeding due to planning issues. Unachievable income targets within sports facilities (£0.340 million) also contribute, reflecting the removal of maintenance budgets.
• Planning & Sustainability: £1.982 million pressure, mainly within Highways, driven by shortfalls in capitalised salaries (£0.604 million), the capital delivery team (£0.993 million), and DRW income (£0.782 million) due to lower development activity and an overstated income budget.
• Regeneration, Growth & Capital Investment: £1.225 million pressure, stemming from unachievable MTFS savings (£0.882 million), particularly concerning Civic Centre lettings and Brixton House Theatre.
• Community Services: £0.533 million shortfall, primarily from income shortfalls against MTFS targets within libraries (£0.448 million).

Within Growth and Environment, specific pressures related to parking, events, and staffing are hindering savings delivery. Parking income has a Red status with a savings gap of £6.212 million, attributed to paused schemes, increased compliance, and a reduction in PaybyPhone transactions. A restructure that would have yielded £650,000 in savings was also paused. The Events savings proposal is also Red with a £1.308 million gap. Income delivery remains challenging against targets, with one planned major summer event cancelled due to planning considerations and another facing additional costs that reduced net income. Staffing pressures include savings targets related to senior management costs and ongoing reviews with contractors.

Future Financial Outlook

The MTFS paints a grim picture for future years. A projected budget gap of £19.096 million is anticipated for 2027-28, rising to a cumulative shortfall of £93.217 million by 2029-30. This is largely attributed to a substantial reduction in core funding following the Fair Funding Review 2.0. Furthermore, the withdrawal of transitional protection funding in 2029-30 will result in a significant drop of £37.592 million in funding compared to the previous year.

Councillor Chihoro emphasised the need for prudent financial planning. While the council is assuming maximum council tax increases for planning purposes, the final decision rests with the full council. He also confirmed the council's commitment to delivering existing agreed revenue savings.

Council Reserves

As of March 31, 2026, Lambeth Council held General Fund balances of £45 million and HRA balances of £7.517 million. However, the report notes that earmarked revenue reserve levels remain low and offer little financial resilience in the context of the challenges ahead. HRA unearmarked reserves are also considered low.