City council set to eliminate need for exceptional financial support after transformation savings and increase in government funding
Southampton City Council has said it can now balance its budget without taking Exceptional Financial Support (EFS) from the Government, although it hopes to use some unused EFS from 2024/25 to cover the costs of equal pay, transformation and restructuring.
In a report outlining the council's revenue budget for 2025/26 and its medium-term financial strategy (MFTS), Southampton's Director of Finance said the council had demonstrated it is "living within its financial means for day to day expenditure".
According to the report, the council can now balance its budget without using EFS or risk reserves partly due to the additional funding for councils announced in the Local Government Financial Settlement in December last year.
The document – which was prepared ahead of a full council meeting to consider the budget next week (26 February) – also credited "significant transformation savings" and the "continued culture of each directorate maintaining spending within their cash limited budgets" for the improved position.
Thirteen per cent of the savings found through its transformation come from a proposed reduction in staff numbers.
However, the council has still requested an extension of EFS into 2025/26 to use unused components from the 2024/25 EFS.
The report said this would be needed for costs such as equal pay, transformation and restructuring.
So far, more than £9m in savings have been delivered through the transformation programme, which was launched in July 2024. These have contributed to a £19m underspend for the month 10 position for the current financial year.
Around £50m of saving opportunities have also been identified across the MTFS through to 2028/29, the report added.
Part of the transformation programme involves reducing the number of permanent jobs by between 135 - 159 full-time roles across seven services.
These services are ASC & health, children's services, schools & SEND, growth and prosperity, residential services, customer & community, and enabling excellence.
Not all positions are currently occupied.
Despite the progress, the Director of Finance said the council "remains in a challenging financial position", adding: "The budget presented in this report will be balanced without the need for EFS nor any utilisation of risk reserves. This budget removes the underlying structural deficit in the council's finances and the reliance on reserves or EFS to support everyday expenditure.
"However, the council should not stop striving to achieve efficiencies and growth as it still carries considerable financial risk. This includes fully achieving significant transformation and consequent savings built into the budget (£34.5M in 2025/26).
"In addition, Directorates are being asked to absorb pressures within their cash limited budgets."
Cllr Simon Letts, Southampton's cabinet member for finance and corporate services, said: "This year's significant increase in funding from Government is worth around £11.3m net to Southampton and has made a massive difference.
"This additional funding, alongside our efforts to make services more efficient, means we are able to balance the budget, not just for 2025/26 but across the subsequent three years."
Adam Carey
