Hounslow Council is grappling with a significant budget shortfall, projected to reach £91.3 million by the 2028/29 financial year, according to a revised medium-term financial strategy presented at a recent Cabinet meeting. The council faces increasing demand for services and inflationary pressures.
Specific local challenges relate to the numbers of Unaccompanied Asylum-Seeking Children (UASC) children in the borough plus the potential impact of the Home Office's announcement that it will cease to use hotels to accommodate asylum seekers, both of which place extra demand on council services locally. Adult Social Care and Children with Disabilities services are experiencing the greatest increase in demand, with increases in Nursing and Direct Payments provision.
Councillor Tom Bruce, the Deputy Leader of the Council, addressed the challenges during the meeting, assuring members that the council would continue to manage its budgets prudently. He acknowledged that Hounslow is not alone in facing financial difficulties, attributing the situation to the broader economic climate.
The One Hounslow Financial Strategy (OHFS) report highlighted that the recurrent budget gap stands at £51.5 million for 2026/27, escalating to £91.3 million by 2028/29. The report was delivered in place of Councillor Shantanu Rajawat, Leader of the Council.
Several factors contribute to the growing budget gap. The Bank of England's revised inflation forecast, now projecting a peak of 3.5% in the final quarter of 2025, adds further pressure. This increase translates to approximately £4 million in additional costs for the council. Additionally, rising demand for services, particularly in temporary accommodation, is exacerbating the financial strain.
Despite these challenges, the council is actively exploring strategies to mitigate the impact. Councillor Bruce emphasised the importance of efficient resource management and financial transparency. The council is also undertaking a service planning review to identify potential savings and improve operational efficiency.
To address the budget shortfall, the council is exploring options for increasing interest receivable on balances, reviewing Council Tax and business rates income, treasury management activity, capital financing, and alternative funding opportunities.
Specific savings initiatives being considered include a cost reduction strategy for Children with Disabilities spot purchases, expecting to save £100,000 in 2025/26 and £150,000 in 2026/27. Additionally, the council is redesigning the Children's Home-Based Care (CHBC) commissioning model to achieve a 7.5% cost reduction, translating to an annual cost reduction of £104,000, totalling £312,000 over three years. The HRA is also committing to a £3m programme of savings delivery.
The One Hounslow Financial Strategy also takes into account the Housing Revenue Account (HRA) and the Dedicated Schools Grant (DSG). The recommended reserve level for the Housing Revenue Account (HRA) is £14 million, equivalent to 15% of turnover. The current surplus is £4.9 million, which is significantly below the recommended level. The HRA, while reporting a surplus, remains below the recommended reserve level.
The DSG faces ongoing pressures in special needs budgets, with a cumulative deficit of £12.3 million. The council remains on target to eliminate the cumulative deficit by March 2028 through the safety valve programme. The government has extended the statutory override arrangement that offsets the cumulative deficit impact for a further two years, until 31 March 2028.
In response to the financial challenges, Hounslow Council is committed to a comprehensive approach that includes prudent budget management, strategic savings initiatives, and ongoing monitoring of key financial indicators. The council aims to ensure financial sustainability while continuing to deliver high-quality services to its residents.