Lead Member – Cllr Roger Evans, Portfolio Holder for Finance

Lead Officer – James Walton, Executive Director (S151 Officer)

REPORT TO FOLLOW

RESOLVED:

A.    To ensure emergency action is continued by all Officers in the second half of the financial year to improve further the Quarter 2 forecast of a projected spend over budget of £47.069m (30th September 2025). Such action should predominantly focus on reducing spend, increasing income, delivering remaining savings and significant mitigating actions to control in-year spending pressures.

B.    To support the continued use of Operations Boards, which have been in place from August 2025, to challenge all in-year spending, and more recently have been further enhanced to bring greater Service Director scrutiny. Further details to be included in future Finance Monitoring reports.

C.    To consider the Period 6 position (as at the end of September) forecast indicative level of savings delivery of £21.304m (36%),

D.    To continue to review the projected General Fund Balance which is forecast to be negative (-£12.789m), indicating a potentially illegal financial position by the end of the financial year if proposed action does not improve this position.

E.    To continue to support, in light of the Council’s current financial position and ongoing engagement with MHCLG, the active discussions regarding Exceptional Financial Support (EFS) are continuing.

The Portfolio Holder for Finance introduced the Quarter 2 Financial Monitoring Report which revealed a worsening financial position for Shropshire Council, with a significant overspend and depleted reserves.  The discussion focused on the causes, including national pressures, previous budgeting practices, the actions being taken – seeking government support and a deep dive review, and the challenges ahead – in relation to staffing, service delivery and the need for savings.   There was a strong emphasis on transparency, realism in budgeting, and the need for structural change.

The Portfolio Holder for Finance presented the Quarter 2 Financial Monitoring Report, highlighting that the council was facing an increased overspend, with the forecast rising from £35.5 million in period 5 to £47.1 million in period 6. This increase was attributed to a more detailed and realistic review of the council’s finances, revealing that some previously assumed savings were not deliverable and that delivery plans for certain savings were not in place. The report detailed steps being taken to control spending, including the establishment of financial boards and ongoing discussions with the government for exceptional financial support (EFS) of £15 million to avoid issuing a Section 114 notice.

It was noted that the council’s reserves were extremely low, with a projected balance of just £2.2 million by March, leaving little room for unexpected costs such as winter pressures or emergencies. Members discussed the causes of the financial situation, with the current administration attributing much of the problem to previously set unrealistic savings targets and use of reserves.

The report also highlighted the impact of staff reductions and the strain on remaining staff, with concerns raised about the council’s capacity to deliver services. Members agreed on the need for more realistic budgeting and for lessons to be learned from past financial management. All present acknowledged the seriousness of the financial position and the need for urgent action to restore stability.

RESOLVED:

A.    To ensure emergency action is continued by all Officers in the second half of the financial year to improve further the Quarter 2 forecast of a projected spend over budget of £47.069m (30th September 2025). Such action should predominantly focus on reducing spend, increasing income, delivering remaining savings and significant mitigating actions to control in-year spending pressures.

B.    To support the continued use of Operations Boards, which have been in place from August 2025, to challenge all in-year spending, and more recently have been further enhanced to bring greater Service Director scrutiny. Further details to be included in future Finance Monitoring reports.

C.    To consider the Period 6 position (as at the end of September) forecast indicative level of savings delivery of £21.304m (36%),

D.    To continue to review the projected General Fund Balance which is forecast to be negative (-£12.789m), indicating a potentially illegal financial position by the end of the financial year if proposed action does not improve this position.

E.    To continue to support, in light of the Council’s current financial position and ongoing engagement with MHCLG, the active discussions regarding Exceptional Financial Support (EFS) are continuing.