Cuts and savings totalling £70 million will have to be found if Brighton and Hove City Council is not to join the ranks of “bankrupt” local authorities like Birmingham, Croydon and Slough.
It may mean that the council can only provide “core” services – or those required by law – such as adult social care.
The budget gap could also be bridged in part by big increases in fees and charges as well as cuts to discretionary services such as beach lifeguards and public toilets.
Previous attempts to save money in these areas earlier this year sparked outrage but the council’s external auditors have issued a stark warning.
A report from Grant Thornton said: “The council is now in a position where it must consider a realignment of priorities to coincide with securing financial sustainability.
“This may involve making politically unattractive or undesirable decisions in the interests of the authority’s future viability.”
Grant Thornton warned of a £70 million budget gap between now and the end of March 2027 – the period covered by the council’s medium-term financial strategy.
The firm’s audit report said that the council’s General Fund, which is used to pay for day-to-day spending, was on course to overspend by £14 million in the current financial year. And the budget gap for next year, 2024-25, was forecast to be £25 million.
In the past three years, the council had set significant savings targets but managed to achieve only about 70 per cent of the planned savings in the 2020-21 and 2021-22. Last year, 2022-23, the figure was just 57 per cent.
Last year, the council overspent by £3 million and had to dip into its financial reserves to balance the budget.
Grant Thornton director Darren Wells told the council’s Audit and Standards Committee on Tuesday said that the council’s financial reserves were below the minimum level required.
Mr Wells told councillors: “You just do not have the flexibility any more to continue to use reserves to meet any forecast overspend.
“In our view, the council is at a tipping point and the position is as bad as I think it can be.”
He said that it was “not an exact science” but the forecasts were realistic and showed the challenges faced by the council in the next few years.
Mr Wells added: “It does mean as a council that you are going to have to make some hard decisions about the level and the breadth of services that you currently provide.
“I do anticipate those judgments will be difficult to make but, unfortunately, I don’t think there is any other choice than for the council to discuss and debate those decisions it wants to make to ensure it continues to be sustainable in the medium term.”
Green councillor Pete West, who chairs the Audit and Standards Committee, said that the situation had reached a “new magnitude of concern”.
He criticised Labour claims that the Greens had been financially lax and said that the budget set in February had been agreed by the whole council, with input from Labour councillors.
Councillor West said: “It is entirely unprecedented what we’ve had to face, with rising demand and inflationary pressures … we moved to reduce spending in-year and there was some success with that.
“It is a truly scary position the council finds itself in. We were saying this a year ago, all of us on the same page.”
Labour councillor Joy Robinson said that the council had to make savings of £13 million last year and “unpalatable” parking charge increases.
Councillor Robinson said: “To make the budget balance is a difficult thing but perhaps we need to man up – or girl up – and actually organise our finances around what we can actually afford.
“We know that’s not going to be a particularly nice thing to do.”
She said that the council needed to keep tight control so as not to end up like the recently “bankrupt” Birmingham City Council – and it needed to keep the public informed so that people understand the seriousness of the situation.
The council’s chief financial officer Nigel Manvell said: “Demand has become a bit of an issue. There are quite significant increases in demand for home to school transport.
“(The number of) children with statements of special needs has increased by 260 per cent over five years.
“These are unprecedented increases in demand – not just suffered by this council – but are regional and national issues.”
Mr Manvell said that long-term budget planning had become harder because the government had reverted to setting council the level of grant funding annually.
The autumn statement is expected in November this year, leaving council officials and political leaders just weeks to prepare the budget to be decided by the full council in February.
Since 2010, Mr Manvell said that the council had made an accumulated £200 million in cuts and savings to its annual budgets.
The council’s annual spending had increased over the same period – and now topped £1 billion including housing and capital spending – but higher inflation meant that costs had risen.