Finance chief confirms ‘unprecedented’ overspend as local government crisis hits Hackney

Cllr Robert Chapman, cabinet member for finance. Photograph: Hackney Council

Hackney’s finance chief has warned residents to expect reduced investment in services as a budget “crisis” sweeps through local authorities.

Cllr Robert Chapman said the council expects to spend £36 million more than planned over 2024/25 – confirming what he had first cautioned people about two weeks ago.

An update put out by Chapman on the council website on 23 September warned of “severe” financial challenges faced by councils.

Last night, in a quarterly financial report given to the Town Hall’s scrutiny panel, Cllr Chapman confirmed that, despite already finding £22 million worth of savings, the council is anticipating an “unprecedented overspend”.

“We are a secure, well-managed council as equipped to deal with the situations as best as possible,” Chapman said.

“The new transformation strategy that we agreed this summer sets out how we can deliver our ambitions and work together for a better Hackney in spite of the financial crisis.

“We are also joining with colleagues across local government in making the case for change.

“We need longer-term, more sustainable funding as well as targeted interventions in areas like social care and homelessness, which are decimating council budgets and not just our own.”

In previous financial statements, the council forecasted an overspend of over £21 million.

Jackie Moylan, director of finance, said “significant” cost pressures had outpaced predicted budget growth.

Moylan told the scrutiny meeting that core areas of overspend were in homelessness, health and social care, children’s services and education, and finance and corporate resources.

The Housing Revenue Account, or HRA, which is the ledger for monies received and spent by the council on its social housing stock, also has a projected overspend of more than £3 million.

Cllr Ben Hayhurst, who represents Hackney Central, called for more measures to stabilise the Town Hall’s finances in light of the skyrocketing overspend.

“Any other organisation in this situation—not being able to meet its needs within three years—there would immediately be a stop on all spending.

“There wouldn’t be monthly meetings with the chief executive—they would be daily.

“There needs to be an emergency brake. If it’s gone up from £21 million in the last quarter overspend, what’s it going to be next year?” he said.

Moylan said the sudden increase was due to the finance team accounting for  increased demand for temporary accommodation, which made it unlikely there would be a sustained rise in overspend levels.

“It’s difficult to turn this around, but obviously we are doing all that we can,” she said.

Moylan also highlighted temporary accommodation as the “number one” pressure across London authorities, with an average projected overspend per council of £8.1 million.

The council is planning to expand its temporary housing stock with the purchase of two hostels, with one expected to be ready in the coming weeks.

In the longer term, the Town Hall leadership hopes a transformed housing sector will ease the pressure on council budgets, along with more action from central government.

Mayor Caroline Woodley said: “I hope to see a more stable, responsible landscape of landlords across Hackney, as well as a better offer in terms of temporary accommodation.”

An emergency budget recovery board will meet for the first time today to address the next steps in mitigating the council’s precarious financial situation.

The Town Hall will publish an updated medium-term financial plan in November, outlining how it will manage its finances over the next three years.