Newham Council's Cabinet has adopted an updated Medium-Term Financial Strategy (MTFS) for the period 2027 to 2032, projecting a reduced budget gap compared to previous forecasts. The strategy, adopted at a meeting on Tuesday, July 21, 2026, indicates a projected budget gap of £10 million for 2029/30, rising to £27.089 million in 2030/31 and £27.153 million in 2031/32. The council's financial position has improved since the February 2026 forecast due to several key factors, including the finalisation of the 2025/26 outturn position which revealed underspends, particularly in the cost of providing Temporary Accommodation. Revised forecasts on Temporary Accommodation costs have also been incorporated, reflecting an evidenced trend
of reduced costs partly due to early delivery of savings through reduced rates
.
The updated financial plan includes a proposal to identify savings totalling £10 million to balance the budget in 2029/30, with £6 million of these savings to be implemented early. The strategy also incorporates adjustments for inflation, service pressures, temporary accommodation costs, demographic changes, and capital financing.
Councillor Zulfiqar Ali, Cabinet Member for Finance, presented the updated strategy, noting that the council's financial position has improved since the February 2026 forecast. The MTFS aims to align resources with the council's strategic priorities and support sustainable budget setting.
Factors Influencing the Financial Position
The improved financial position is also attributed to changes in Council Tax Base assumptions. Recent economic conditions have slowed the pace of new home development, leading to a reduction in the assumed annual growth rate for the Council Tax base from 3% to 1% for each year of the MTFS. Furthermore, the Fair Funding Review increased the resources available to the council in the first three years of the MTFS. Capital Programme slippage has also played a role, meaning less borrowing will be incurred in 2027/28, thus reducing capital financing costs.
Service Pressures and Budget Gaps
Despite the improvements, several service pressures are contributing to the budget gap. Adult Social Care faces a forecast overspend of £4.118m due to ongoing demand and cost pressures in care packages and placements
. Children and Young People Services have a forecast overspend of £5.116m, primarily driven by a home-to-school transport cost pressure of £3.000m and further increases in safeguarding demand and complexity of care packages
.
Inclusive Economy and Housing – Property & Building Services face a forecast overspend of £2.479m due to additional regulatory works that do not generate income
and forecast income shortfalls linked to delays in acquisitions and rental voids
. Inflation also remains a factor, with previous assumptions retained due to inflation staying above the Bank of England target rate.
Addressing Temporary Accommodation Costs
Temporary accommodation costs are being actively managed within the MTFS. The budget has been adjusted by reducing the Temporary Accommodation Pressures line by £15.150m in 2026/27 and £12.300m in 2027/28. This reduction is based on the early delivery of savings through reduced rates
and the improved financial position reflects early achievement of budgeted savings actions securing lower-than-expected nightly rates
. The projected trend indicates a continued decrease in these costs over the strategy period, falling from £10.480m in 2029/30 to £8.933m in 2030/31 and £5.000m in 2031/32.
Demographic Changes and Service Needs
Demographic changes are a significant influence on the MTFS, particularly demographic and demand pressures
in Adult and Children's Social Care. The aging population and increasing care needs are driving growth in Adult Social Care budgets. The MTFS includes Demographic Provision and Growth
as a line item, with adjustments made, including an increase of £10.500m in 2031/32. These changes necessitate budget growth to meet increased demand for services, especially in social care, and are projected to contribute to the budget gap in later years if not offset by savings or other income.
Implications of Projected Budget Gaps
The projected budget gap of over £27 million in 2030/31 and 2031/32 is primarily attributed to long-term demographic and service pressures that more than income and resourcing expectations in the model.
The report recommends identifying new savings to close these gaps, implying potential for service reductions or increased council tax if these challenges are not addressed. While specific implications are not detailed, the MTFS does assume a 4.99% Council Tax increase in 2027/28 and 2028/29. However, no increase is factored in from 2029/30 onwards, meaning any decisions made in those years would directly impact the reported budget gap.
Further details on the strategy can be found in the Public reports pack for the Cabinet meeting on July 21, 2026.