Brighton and Hove City Council faces a £40 million financial black hole next year in part because of the rising costs of caring for children, adults and people with disabilities and supporting the homeless.
The Labour deputy leader of the council, Jacob Taylor, spelt out the key challenges when the council’s People Overview and Scrutiny Committee met at Hove Town Hall on Monday (15 September).
A report to the committee said: “The context for budget-setting is very challenging. There are significant budget pressures arising from increases in demand from statutory services, particularly temporary accommodation, adults and children’s placements and home to school transport.
“Compounding this, a reduction in resources is anticipated as a result of the government’s fair funding review, particularly as a result of the re-baselining of business rates, and changes to the indices used for local government funding that may not be beneficial to the council.
“These pressures and possible reductions in funding lead to a budget gap of nearly £40 million in 2026-27.”
The report added that the budget gap would be more than £95 million over the medium term – the four years from 2026-27 to 2029-30.
The committee was told that the council’s “general fund”, which pays for day-to-day spending, is expected to total £281 million next year, up from £264 million this year.
More than half of the money comes from council tax – with fees and charges, business rates and government grants making up the rest.
But spending is rising faster than income, with inflation and increasing demand for services adding an extra £56 million to the council’s estimated costs for the financial year starting next April.
The council expects income to increase by about £16 million, leaving a budget gap of about £40 million.
Councillor Taylor told the committee that higher costs and growing demand for temporary housing and rough sleeper services were adding about £12 million “pressure” to the budget next year.
The financial pressures were about £9 million for adult social care, £1.2 million for home to school transport and £4.6 million for placements for children in care and children with disabilities.
Councillor Taylor, the council’s cabinet member for finance, said that there would be no repeat of the home to school transport fiasco in 2019.
At that time, the council tried to cut the cost of the home to school transport for children with special educational needs and disabilities but the changes led to an “epic failure” and ended up costing the council significantly more.
Councillor Taylor said: “When we talk about these pressures, we’re not blaming service users for increased costs.
“We’re just transparently saying here are the areas where there are increased pressures which are not the fault at all of the residents accessing those services – homeless families being a prime example.
“It’s certainly not their fault that the housing market is in such a difficult position and they’re facing homelessness.”
Councils across the south east were working together to increase the supply of children’s placements rather than placing children in homes run by private equity companies, he said.
Places tended to cost £340,000 to £370,000 a year although the council had worked hard to try to reduce the need for placements.
With temporary housing, the council was looking at whether buying more properties to use as temporary housing would help provide the services in a more cost-effictive way.
Councillor Taylor said: “I’m certainly in favour of it if we can get the finances to stack up. The financing costs of buying … could be less than the price of procuring (homes from private landlords).”
Green councillor Ellen McLeay said that the cost of temporary accommodation was doubling annually and similar increases were possible in the future.
Councillor McLeay said: “This is a national issue. It’s not just here so what’s being done in terms of representation to address and manage this nationally?”
Councillor Taylor said that the only way out of the housing crisis was to build more social and affordable housing.
He was pleased to see the government doubling the capital available for social and affordable housing to £39 billion, which was more than many expected, and he thanked former Deputy Prime Minister Angela Rayner for allocating the money.
Brighton and Hove is bidding for a portion of this money to build long-term social housing for families on the waiting list.
Councillor Taylor said that if the government wanted to hit numerical targets, it would be cheaper to build in other parts of the country.
But building in the south east help was necessary to tackle the acute housing crisis in areas such as Brighton and Hove.
Conservative councillor Anne Meadows ask about the effects of local government reorganisation and devolution, saying: “What impact will that have on future budgets? It won’t be just be this year but it will follow on to the following year’s budget.
“I am a little worried about the government’s intention to redistribute the wealth and take it from the south and local councils down here to fund up north.”
Councillor Taylor said that the government was focusing on deprivation while saying that parts of the south had areas of deprivation just as there was affluence in the north.
He was not expecting an “up-tick” in funding because Brighton and Hove was “mid-table”, compared with the rest of the country, because there was a mix of high deprivation as well as affluence.
At this stage, the council did not know how much money would come from the government for next year which was currently subject to a consultation.
Councillor Taylor told the committee that he wanted to bring a draft budget before councillors for detailed scrutiny as soon as possible.
The council’s £281 million general fund would be the focus of any proposed cuts and savings as the council tries to close the £40 million gap in its £1.1 billion budget.
The general fund covers day-to-day spending. The budget also includes a dedicated “housing revenue account” and, among other things, the council receives ring-fenced grants of about £200 million for schools.
Projects such as the new swimming pool at the Withdean Sports Complex, the Valley Gardens revamp and the A259 cycle lane are capital projects, funded mainly by loans and government grants.
Based on the current spending proposals, the council plans to put up council tax bills by 2.99 per cent for each of the next four years, plus 2 per cent for adult social care.
I’m sorry but a council who chose to write off a £50m debt owed from the i360 are in absolutely no position to complain about a £40m deficit.
This level of basic incompetence is also why those of us directly outside of Brighton & Hove don’t want anything to do with unitary authorities, merging of councils or anything that inflicts this parade of buffoons upon the rest of us.
OK. Explain how you would have recouped £50m from an insolvent company. And please don’t say you’d never have loaned them the money in the first place. We all know that was a bad decision, but it was done before the current Council was in power.
The council basically gave the i360 away. The new owner will make a profit out of it, and the city will be lumbered with the debt. Not quite sure how Jacob, Bella and co will talk themselves out of that one when it happens and the new owner has a nice and healthy balance sheet. It was irresponsible and rushed for the council to give it away like they did – discussions were held behind closed doors and it’s scandalous the way Jacob and co handled it all.
It was also wholly irresponsible of Peter Kyle, right at the point when the i360 was trying to attract a buyer to keep talking it down just to try and score political points. He actually referred to it at that important time as “a decaying structure, no one can use”. Now he’s business secretary in Keir’s disastrous Government, so god help us all when he’s acted against the best interests of the city at a critical point when the council should have concentrated their efforts on getting a better deal and outcome for the city.
It was a private company. It was not the Council’s to sell. The owners, or the administrators were obliged to make it a going concern, sell it or close it. Their duty is to the shareholders. They were under no obligation to consider the debtors. That’s the nature of private business. It might not be what we wanted, but that’s how it was. At least the Council now gets a proportion of the takings.
Would any buyer have gone for it with the whole debt outstanding, unlikely. The council was at the forefront of conversations because they were a key stakeholder and interested party, so their role in what happened was crucial in the outcome, and they would have been in close contact and discussion with the company overseeing the sale.
Would any buyer have negotiated a different outcome, quite possibly, we will never know because of the rushed sale, the secrecy around it. The lack of foresight and worked up plans on the council’s part to have different options worked up is alarming, and it was the council’s choice alone to absorb the WHOLE debt. They did not have to do that. They could have also haggled for a greater share of profits by way of compensation for taking on the debt. They didn’t. The council could have worked up better bail out options in good time, including keeping the ‘the asset’ and physical land and a greater share of ticket sales or other profits from food and drink purchases, they didn’t.
As much as you try and square it, the council negotiated a bad deal for residents, which councillors were at the very heart of.
The idea of the i360 sprang up way back in 2006 and the Labour leader at that time said “It will generate huge amounts of cash and benefit the city’s economy all year round”. Labour championed the project for a whole 9 more years and only 1 year before the local elections in 2015 (coincidentally at a time when Labour were desperate to regain control of the council from the Greens) did they change their position. Ever since, they have determinedly distanced themselves from the project they supported and pushed for, and they dug themselves into a hole. Labour claimed at the outset that it was a profitable project. They also accepted in 2012 that some public loan would be needed and they believed it was STILL a viable project.
From everything I’ve read (council papers, news reports etc), I’ve not seen anything from the council that they had any option worked up whereby there could have been greater negotiation over the debt. Even if their change of position in 2014 wasn’t politically motivated ahead of the 2015 elections, if they believed the i360 was a viable project in 2012 with a loan equating to 40% of the cost of the project (which they did), then it was irresponsible to not have been better prepared that it may not come out of the pandemic well and could be problematic, and to have alternative options worked up. Giving the i360 away and lumbering residents with the debt I maintain was a scandalous decision and v questionable.
Trevor, I think it’s also important to note that the idea of the i360 went through several iterations. The original idea was fairly reasonable, but bloated over time, and you can explain the switch from support to resistance came from the numbers spiralling.
Greens councillors have a poor track record of money management, and continuing with this new bloated version was ultimately another piece of evidence of that.
I don’t think there was any version of the i360 sale that could be accurately described as a win, just “lose less” scenarios.
The council did not give the i360 away, it was never owned by the council. A private company borrowed money from the council.
The business itself called in the Administrators, who made the decision to sell it on and of course the council were involved because something had to be done.
It was clear to most of us it was never going make the numbers needed and no-one wanted to buy it with the huge debt hanging over it, so the decision to get rid of it, a good one despite the £2m p/a for the next 20 years price tag.
Trevor.
No buyer would have gone for it with the whole debt outstanding.
The council had to be involved because they are a key stakeholder and interested party however, their role in the sale would be limited as the administrators were overseeing the sale and getting the best deal for the benefit of all parties and not the councils.
It is a known fact, no interest was shown from anyone in buying the i360 hence it went into administration. There was no secrecy around it, and single offer was made and accepted by the administrators.
You say a lack of foresight and plans on the council’s part to have different options, what options ?
The council didn’t own the i360 only the loan.
The council haven’t absorbed the whole debt, only the initial loan of £42m.
The council would have little dealings with the details of the actual sale, that’s between the buyer and administrators.
You say keeping it as an ‘asset’. We never owned it in the first place.
From a strictly business point of view, nobody is going to agree a share of their profits for a project that they had nothing to do with and acquired as a going concern. I certainly wouldn’t.
Correct, the Labour group backed this project and agreed a public loan would be needed right up until a private investor pulled out. They did not agree with the additional loan that was proposed after this event and made their feelings clear.
Your talking about elections in2015 and then reference the pandemic, nobody could have known we were facing a crisis five years in the future so could hardly have planned for it and the i360 didn’t open until 2016, so nothing could have been planned or known at that stage.
#sendkitcatthebill
The i360 was never going to make the estimated numbers and most of us knew that before the thing was built.
The amount of funding that has gone into the thing since to keep it going could have been used on more important things and a liability and a huge burden to the tax payers.
It was never ever going to make enough money to cover the debts it owed and I wasn’t surprised when I read the key headline ‘Insolvent’.
The way to look at it, no more additional funding is being wasted. The council could have taken it over, but it still would not have made the numbers required and would have cost tax payers to run it.
The decision to sell it off and take a loss imo is a good one and makes good business sense.
For those directly outside B&H and don’t want anything to do with us, should, imo, mind their own business and worry about their own immediate area and fight hard to remain independent if that’s what you want.
The Labour governments plan to ‘redistribute’ funds from the south to the midland and north is nothing but bribery to purchase votes.
It’s so transparent it’s embarrassing……
So when the Greens had a £3 million budget gap during the Tory government austerity years, Labour councillors huffed and puffed and cited financial incompetence.
Now when the Labour council under a Labour government have a £40 million budget gap it’s nothing to do with them, and it’s simply an increased “demand from statutory services”. WE ARE NOT STUPID LABOUR. THIS IS AUSTERITY IN LABOUR’S NAME.
So if you read the reporting by this news website, the £3 million announced by the Greens was, in fact, incorrect maths, and was much worse. Clearly evidence of financial incompetence, you’d be hard pushed to argue anything other than incompetence, because if you can’t even get your numbers right, that’s incompetence 101.
However, having to do more with less is indeed austerity, and is very easily linked to the backlash from a Conservative government, because, as you know, those consequences happen well after and endure for years after they’ve left power. It’s an inherited challenge.
It does seem a pattern with the Labour admin though…. Announce ludicrously exaggerated overspend figures, create a climate of fear in the council and the city to help them drive through their controlling and dictatorial management structure and power grab ambitions, and then – as if by magic – vanish away the overspend and congratulate themselves on their fiscal skills.
Cloak & mirrors.
I think that perspective comes from a misunderstanding of how council finances work – there’s always a difference between early forecasts and the actuals. Initial figures are meant to highlight risks, not serve as a final bill, and when costs come in lower, it’s not ‘cloak & mirrors’ but the whole point of responsible forecasting.
But the process is certainly weaponised by the current administrations fear mongering approach – it is not run as a neutral administrative process, but as an aggressive, self righteous bit of boosterism. It is starting to have the appearance of a fix due to this over-egging
It’s a fair point. I would also state that fearmongering is used on both sides of an argument, and ultimately, it works because of a misunderstanding, lack of knowledge, or inability to understand a topic, not helped by propaganda and a lack of local independent layman explanation.
How will the repair of the Madeira Drive arches, which will interest few Brighton residents, and the rebuilding of the King Alfred in Hove, which will give people living by the sea somewhere to swim, impact on the council’s budget?
None as the MT restoration is paid for and will bring in an income . KA is a ow rate government loan that will be paid back through charging fees to use KA facilities
The repair of the MD arches has already been partly funded by various means and it’s great to see work has started at long last.
You say this will interest few Brighton residents, do you have any evidence of that or just stating a personal feeling.
There are plenty of residents who want to see the MD terraces back in action, in fact there was plenty of shouts for the MD terraces to be rebuilt but instead BHCC chose Valley Gardens that generates nothing in revenue but contributes plenty in congestion and pollution.
The MDT would have been reopened for businesses to open up, that means rent and contributions to the local economy and I’m sure some contributions in to the pot for further repairs could have been arranged, but poor forward planning by BHCC rears it head time after time.
King Alfred, a valid shout, but there again, it will generate revenue and should pay for itself in the long term.
It does sound like there is cross-party agreement that temporary and emergency housing is an exceptional burden on the budget, as one of the most expensive ways to procure housing.
When considering commissioned TA projects, in my experience, they are profit-focused and aim to squeeze as much out of the system as possible, with little motivation to progress people out of temporary roles. I’ve spoken to many who are more than capable of doing so, but state they are stuck within that ecosystem, feeling that what should be a haven is not safe.
I do think some national-level adjustments could help. For example, I think we need more council tax bands at the far end. Is it fair that a £2 million property is taxed the same amount as a £320,000 one? I would argue this is a highly regressive system, and a product of a deeply unequal society, something that Cllr. Taylor wrote about on this website previously.
There are plenty of other examples like this. The benefit of progressive reforms is not just fairness in taxation, but that they can reduce the pressure on already costly council services. Otherwise, are councils just facing an ever-increasing burden? When you consider authorities like Lewes District Council, which are on a financial cliff-edge when it comes to their adult social care bill, to me, that signals a clear need for change to benefit the many.
£1,000 a day to look after kids, wow.
And there’s VG3…costing local taxpayers £7million – that’s over and above the govt grant
thats a loan that has to be paid back
Incorrect, the project is costing £14m, we only got a £6-7m loan, the rest is coming from other recourses the majority from council tax, so £7m is correct.
Last week BHCC were £420m in debt for next year. Is this £40m part of that figure or separate to it? Either way, the last thing BHCC should be doing is borrowing £65m to erect a replacement King Alfred leisure centre. They should put the brakes on ALL capital projects except for restoration works to existing structures and focus on delivering their statutory goods and services. As for the i360, talk about the scandal that keeps on giving, even 11 years after the first disastrous decisions. How it was legal for a private company to obtain a £36m loan at minimal interest from the public works loan board is a conundrum I will never get my head around. Also if it was that easy why was Jubilee Library not financed via the PWLB rather than via a library-budget crucifying PFI deal which up to half the Libraries budget still goes down the drain servicing to this day.
Correction, the i360 didn’t get a loan, the council did, that’s why we have the debt.
That’s right blame the most vulnerable in society for government and local councils failures. Why don’t we talk about all the council social care being privatised and paying over £65mill for the new king alfred?
Because people didn’t want the cheaper option, according to the consultation results, Al.
I gave him 2 fund raising suggestions, lets hope he uses them.
Firstly, with regards to the i360 – let’s be honest, it should never have been built. Nobody wanted it, and it certainly hasn’t brought in the income the council promised it would.
Secondly, having worked with the homeless, I’ve seen firsthand how badly they are treated, especially during SWEP (Severe Weather Emergency Protocol). People are given a hotel room for one night, then kicked out during the day, only to return again in the evening – usually between 7pm and 8am. The only hot meal they get is from local charities, who I must say do an absolutely amazing job, but they can’t be expected to fill all the gaps left by the system.
When you look around the city, you see so many abandoned hotel buildings boarded up along the seafront and on Grand Avenue. Wouldn’t it make far more sense to purchase these, or even reclaim them, and use them to house the homeless? Not only would this provide dignity and security for those in need, but it would also make better use of the buildings, rather than leaving them to decay and make the city look neglected.
I think combining that with a strategy to reduce TA and EA usage, makes really good long-term financial sense, H.