Somerset's new unitary authority will have to find £42m in savings next year to balance its budget.

Somerset Council was created on April 1, with Somerset County Council and the four district councils all being abolished, with their assets and finances all moving across automatically.

The council set its first budget in February 2023, balancing its books through the maximum possible council tax rise and committing to delivering savings over the following 12 months.

It has now emerged that the council will have to find an even larger amount of savings for its 2024/25 budget – with a budget gap which could balloon dramatically as demand for services grow.

The council's medium-term financial plan (MTFP) predicts how much money will be needed to balance the books (including repayments on any external borrowing) over a three-year period (i.e. until April 2026).

The current MTFP predicts that, unless savings are identified, the council faces a revenue budget gap of £42m in 2023/24 – a gap which could grow to nearly £99m by 2025/26 if nothing is done.

The council's earliest predictions, made shortly after the budget was set, expected the gap in 2023/24 to be around £40m before savings.

However, this is now forecast to be higher in light of persistently high inflation, rising interest rates and increasing demand for both children's services and adult social care (which form the bulk of the council's day-to-day spending).

This does not include an expected in-year budget gap of around £20m, which unless demand slows will have to be plugged by the council's existing reserves.

Councillor Liz Leyshon, the council's portfolio holder for resources and performance, told the council's executive committee on Monday morning (July 10) that the council's financial issues reflected a wider national problem regarding local government.

She said: "This may not be what we would want to be reading at this moment, but we are where we are, nationally as well as locally.

"We are now working with one team, whereas this time last year of course we were working across five teams.

"There is going to be a great deal of work going on – it is not going to be easy, and there is no one answer to our problems."

To address the expected budget gap, the council is carrying out an early review of its finances, with 17 different prongs of attack to bring costs and spending town.

The 17 areas where potential savings can be found are as follows:

1. Adult's services: a early review by Newton Europe identified that up to £14.2m of savings could be delivered by 2027, with much of the money coming from short-term interventions designed to address problems before they escalate into more complex needs
2. Children's services: a similar review by Impower Consultancy concluded that savings of £8.1m over three years may be deliverable – with a focus on reducing the cost of care placements and looking after more children within the county (since external placements are often more expensive)
3. The schools high needs block: up to £22.7m could be saved over three years by cutting costs within high needs provision in schools – meaning tough decisions will be needed about providing schooling for children with special educational needs and disabilities (SEND)
4. School transport review: at least £600,000 a year could be saved by reviewing school transport contracts, seeing if cheaper transport for pupils can be arranged and encouraging walking and cycling to and from school wherever possible
5. School capital projects: the council's capital programme for schools (i.e. the construction of new schools, or extending existing ones with new classrooms) will be reviewed, with one eye on pupil numbers – which are predicted to decline in rural areas in the coming years
6. School budget reviews: a number of schools are already spending more than their current budgets, with the council seeking to direct support where it is most needed and see what additional support it can secure from central government
7. Staffing controls: tight control will be maintained over staff vacancies and pay levels to ensure the council is not overly reliant on expensive agency workers and can deliver saving as part of the unitary business case
8. Commercial investments: the council's commercial investment portfolio (the majority of which were inherited from the district councils) will be reviewed to ensure the highest possible returns are being secured to fund services
9. Asset review: existing council assets and buildings will be reviewed, which may lead to underutilised buildings (such as the Petters Way offices in Yeovil) being sold off
10. Council tax and business rates review: both council tax rates and business rates will be reviewed to ensure that the largest possible amount is being collected, ensuring smooth day-to-day funding for public services
11. Capital programme review: the £258m capital programme will be thoroughly re-examined, with the programme being restricted to those which address urgent health and safety concerns or have fully external funding (i.e. government grants or developer contributions, rather than council borrowing)
12. Reserves review: the council's existing reviews will be comprehensively reviewed to ensure that there is sufficient funding (which should be around £30m-£50m according to government guidance)
13. Capital receipts: officers will ensure that any money generated from the sale of land, buildings or other assets is most effectively used – with the current administration already committing to not sell off county-owned farmland
14. Treasury management: the council's existing borrowing and investments will be rationalised to lessen the impact of rising interest rates
15. Review grant schemes: the community grant schemes which the new council inherited will be rationalised to ensure remaining funds are directed where they will have the greatest impact
16. Transformation programme: as part of the unitary transition, ongoing savings will be delivered by streamlining the delivery of front-line services and ensure staff functions are not being needlessly duplicated
17. Financial sustainability review: a thorough review will be carried out of the budgets inherited from the previous councils to ensure that there are sufficient resources available

Councillor Federica Smith-Roberts, portfolio holder for communities, housing and culture, said: ""How should I talk to my friends or my husband about the fact that they are going to pay their council tax but maybe get less services?

"The public needs to understand the predicament that we're in and the ambitions that rise out of it."

Councillor Mike Rigby, portfolio holder for transport and digital, said there was "a systemic and existential threat to local government" which could only be avoided by a fundamental change in central government policy.

Councillor Ros Wyke, portfolio holder for economic development, planning and assets, agreed: "This is a government which has systematically reduced the powers and funding of local government. This is a centralist government and we are in a period of real crisis at the moment.

"Local government is on its knees – it's not allowed to do very much and what is does is often just statutory in light of the funding cuts. We should be very honest with the public about that."

Councillor David Fothergill – who served as county council leader until the 2022 local elections – said a solution could not be found by constantly blaming Whitehall, pointing to his experience during the authority's severe financial difficulties of 2017/18.

He said: "I can understand why we'd want to blame the government. But as someone who has led a council through a potential Section 114 situation [effective bankruptcy], you have to get over blaming other people and get a grip on your finances.

"I am with you, and I am seeing Michael Gove [the levelling up secretary] again tonight, but we have to to do something internally. That's how we got through in 2017/18."

Ms Leyshon responded: "We need our solution to be sustainable. The actions taken back in 2017/18 are not helping us now.

"We need to have our eye on savings being identified and implemented as soon as possible."

Updates on the MTFP and possible savings will come before the executive later in the year.