Councillors told financial ‘bomb’ growing bigger

A watchdog committee has been told there is little Dudley Council can do to defuse a financial ‘bomb’.

A meeting of the authority’s Audit Committee on September 29 heard funds to pay for education was forecast to slip further into the red by a whopping £15.1m.

The Dedicated School Grant reserve at the council had a £38.1m deficit at the end of the last financial year but by the end of 2025/26 the black hole would total £53.2m.

The deficit is not currently counted as part of the council’s general debt due a temporary government rule referred to at the statutory override which was recently extended but councillors are concerned about what happens when the special measure is removed.

Cllr Jackie Cowell said: “It’s growing rapidly and growing rapidly nationally, at some point it is going to be like a bomb going off. Has anybody managed to work out what the direction of travel will be, are we any clearer about the longer term situation?”

Lisa Kitto, Dudley’s interim director of resources, said: “It is a national problem, Dudley is not the only council in this situation.

“The statutory override is like a sticking plaster, we have been lobbying along with other councils for a solution, there isn’t one at the moment other than an extension of the statutory override.

“Somebody has got to make a decision in terms of how we treat it, until that comes through there is very little we can do.”

Without the override councils would have to include the debt in their general fund and experts say that could push many authorities into effective bankruptcy because they would be unable to set a balanced budget.

A Chartered Institute of Public Finance and Accountancy report in February 2025 said: “Deficits are accumulating in the high needs block of the Dedicated Schools Grant, driving local authorities to a financial cliff edge. 

“The system is not fit for purpose and it is financially unsustainable.”

The override is currently in place until the end of the 2027/28 financial year, by which time the Local Government Association predicts 63 percent of councils that provide SEND provision and responded to a survey on the issue would not be able to set a balanced budget.