£20m overspend, £1.1bn debt, £40m housing loan: Lambeth Council’s finances are a masterclass in running out of road

Lambeth Council’s finances remain in crisis, with the latest Quarter 1 Budget Monitoring Report forecasting a £20.38 million overspend for 2025/26.

The grim figure, due to be signed off by Cabinet on 22nd September, lays bare the scale of the borough’s continuing struggle to balance the books.

A major contributor is the Dedicated Schools Grant (DSG), which is forecast to overspend by £4.65m.

This shortfall is concentrated in the High Needs Block – the pot of money used to support children with special educational needs – and is being temporarily covered by surpluses rolled over from previous years.

But the report warns the DSG gap is structural, not a one-off, and will continue to impact council finances.

The situation in housing is no better. Lambeth’s Housing Revenue Account (HRA) – the ring-fenced budget for council housing – is only balanced this year because of a highly unusual intervention from central government.

Lambeth successfully lobbied for permission to borrow against the HRA using a £40m Exceptional Financial Support arrangement, effectively a loan that will need to be repaid in future years.

It’s a short-term fix that raises long-term risks. As Brixton Buzz previously reported, the “lifeline” could simply be kicking the can down the road, storing up further pain for tenants and leaseholders when the debt is due to be repaid.

The politics of the deal are just as sensitive. Lambeth’s new point of contact in Westminster is none other than Streatham and Croydon Northl MP Steve Reed, who has taken on the role of Communities and Housing Minister in Keir Starmer’s Labour government.

Reed now faces the delicate balancing act of championing his local borough while avoiding the perception that Lambeth is receiving preferential treatment from Whitehall.

Elsewhere in the Q1 report, the numbers paint a bleak picture across services:

Housing Services (General Fund) is £19.99m in the red, almost entirely due to the spiralling cost of temporary accommodation. Even with fewer households entering the system this year, the high price of nightly paid properties continues to blow a hole in the budget.

Adult Social Care is facing an £8m overspend, driven by costly residential and supported living placements, particularly for older people and those with learning disabilities.

Children’s Services are forecast to overspend by £6m, with pressures in high-cost care placements, special needs transport, and families with no recourse to public funds.

Debt financing costs are up by £14m, reflecting the impact of Lambeth’s £1.12bn (!) debt pile and rising borrowing costs. This is not a good look.

On the surface, the Council’s Capital Programme shows an underspend of £18.2m. But this is nothing to celebrate.

The report admits the underspend stems from delays and paused projects rather than efficiencies, with key regeneration and infrastructure schemes now stalled while the programme is reviewed.

Despite these pressures, the Council insists it is acting. Management “spend controls” remain in place across departments, with new savings plans being drawn up to try to claw back £11m of at-risk savings.

A £4m “Transformation Reserve” is also being created, funded by capital receipts, to bankroll external consultants tasked with finding further cuts in housing, adults and children’s social care.

Read that sentence again: consultants are being parachuted in to carry out cuts to housing, adults and children’s social care.

We’re On Your Side, etc.

The bottom line is that Lambeth’s reserves remain well below recommended levels, leaving little room for manoeuvre if costs rise further.

The report makes clear the Council’s financial resilience is at risk, with any further shocks likely to force painful decisions about frontline services.

For residents, the financial crisis means more than just grim spreadsheets.

It translates into higher temporary accommodation rents, ongoing risks to social care and children’s services, and potential cuts in everyday services such as libraries, parking, and street lighting savings that are already behind schedule.

The message from Town Hall is blunt: Lambeth is in the red and running out of road.