BANKRUPTCY-threatened Somerset Council’s budget gap could grow to £130 million next year, interim chief financial officer Maria Christofi has warned.

The council declared a financial emergency in November of last year when it was struggling to bridge a predicted £100 million accounts black hole.

It was able to set a balanced budget in February by agreeing £35 million in savings, devolving numerous services to town and parish councils, and agreeing to sell large numbers of ‘non-operational’ assets.

Its then-chief financial officer Jason Vaughan later took redundancy as part of a senior leadership team reorganisation and a wider ‘transformation programme’, which will see up to 1,200 jobs cut by 2027.

Now, Ms Christofi has warned the unitary authority faces significant financial challenges when it comes to set its next budget in February, 2025.

Ms Christofi said this year as a one-off the Government was allowing £36.9 million of money raised by selling assets to pay for day-to-day services.

However, she said: “There is no one-off funding in next year’s budget, whether as a capitalisation directive or a change of use for reserves.

“Until those sales happen, I do not want to count that money yet.”

She warned even with a maximum possible rise in council tax, and all savings being realised, the council would still not be able to balance the books.

Ms Christofi presented council executive members with three scenarios which could be faced when the 2025/26 budget was being set.

A ‘low’ scenario envisioned lower inflation and the council being able to ‘contain demand pressures to a minor level’, which still saw a budget gap of more than £68 million.

A ‘central’ scenario took a ‘more realistic’ view on inflation and the council’s ability to deliver high-demand services, showing a gap just shy of £89 million.

And a ‘high’, or worst case, scenario showed the council increasingly incapable of meeting demand for services in the face of higher than anticipated inflation with a gap larger than £129 million.

Ms Christofi said rising demand for children’s services and adult social care were largely driving the pressures, while the council was still trying to cope with cuts in Government funding since 2010 as well as the impact of the Covid pandemic and recent high inflation.

Currently, the council was forecasting an £8.4 million overspend, £7.1 million of which was the cost of children’s social care placements.

Ms Christofi said even if the council’s main contingency reserves were used, the in-year overspend would still be in excess of £2.3 million on current projections, with further reserves being raided to balance the budget.

The council had originally estimated there would be a £104 million budget gap in 2025/26, which if left unchecked would rise to nearly £199 million by 2028/29.

Ms Christofi said: “There are a number of actions we are taking across the council, and I want to see us take those actions to the fullest extent that we can – especially around placement costs and commissioning.”