Lewisham Council expects to overspend by £7.0m this year, up from £3.1m in May, on care costs, school transport and a parking contract. What the report says.
Lewisham Council now expects to end the financial year £7.0 million over budget. In May the forecast was £3.1 million. The gap has grown by £3.9 million in two months.
The figures are in the council’s Period 4 financial monitoring report, covering the position at the end of July 2026. Mayor and Cabinet noted it on Wednesday 7 October (Lewisham Council, Financial Monitoring 2026/27 Period 4). The overspend is 1.6% of the council’s £424.8 million net budget.
The report blames three things for the jump since May:
- higher costs in the parking contract
- rising demand for adult social care
- children’s care placements and school transport
The same meeting approved writing off £350,291.80 of unpaid business rates on one office premises, built up between April 2016 and July 2025, and £60,701.78 of debts for children’s short breaks, most of them more than three years old (Period 4 appendix).
Where the overspend is
Two directorates account for almost all of it. Children and Young People and Adult Social Care and Health are each forecast to overspend by £4.2 million.
Children’s services are £4.2 million over. Family Help and Care alone is £4.7 million over, with more children placed with external fostering agencies rather than the council’s own foster carers, and rising costs for care leavers over 18. Education Services is £1 million over on school transport. The report says 1,270 pupils were receiving transport in July 2026, against 1,172 in June 2025. A further £0.5 million goes on housing families who present as homeless. A £2 million inflation reserve released by the directorate pulls the total back.
Adult social care is also £4.2 million over, on care packages and placements. That is after £6.5 million of extra budget granted for growth when the budget was set. The report says the pressure is being seen across London boroughs and nationwide. Actions listed to hold it down include a management sign-off on every recruitment request, panels checking that proposed care matches assessed need, putting supported living ahead of care home placements, and “AI assessment tools to increase staff productivity”.
Place is £1.3 million over, all of it in Public Realm. The report says the parking contract is costing more than anticipated and “not performing as envisaged”. On top of that, the parking contractor is claiming about £1 million for costs from last year. The council has rejected the claim and the report says it is under dispute.
Corporate Resources is £0.8 million under, mostly through staff vacancies. Corporate items are £2.1 million under, because the council expects to earn £1 million more interest on its cash balances and has released a £1.1 million Recovery Grant uplift it had been holding back for risks.
The Chief Executive’s directorate is a small overspend overall, but Law and Corporate Governance is £0.6 million over after £0.9 million of unbudgeted external legal fees.
Savings slipping
The 2026/27 budget relied on £30.07 million of savings. The report now expects £20.38 million of them to be delivered. The achievable total has fallen by about £7.7 million since May.
Children’s services are the problem. Of £8.16 million of savings planned there, only £1.47 million is rated amber or green. A £6.29 million saving on “placement sufficiency” and a £0.4 million saving on school transport are both rated red.
A £2 million adult social care saving, on prevention and technology, is also rated red. The service has found about £0.7 million of alternative savings against it.
Risks not yet in the forecast
The report lists what could push the figure higher:
- Children’s social care: estimated risk £7.4 million. Costs for over-18s “are increasing at a rate significantly higher than the rest of London”.
- Adult social care: estimated risk £5.1 million. The forecast “allows no headroom for additional growth” and hospital discharge demand is “very high”.
- Parking: estimated risk £1 million, the disputed contractor claim. The report adds that the council “cannot be assured” it is receiving all the parking income it is due, because of uncertainty over how the contractor manages debts.
- Council tax: every 1% shortfall in collection costs £1.5 million. By the end of July the council had collected £73.6 million, which the report puts at 94% of what was needed to be on track for its 96% annual target.
- Inflation: CPI was 3.1% in August 2026. The budget assumed 3.0%.
- The new administration: the forecast does not yet include any transition costs or new priorities of the administration elected in May 2026.
Business rates are doing better than council tax. £31.6 million had been collected by the end of July, a 103% collection rate against a 99% target.
Schools: a £34 million deficit by March
The Dedicated Schools Grant is separate from the council’s general budget, and it is forecast to overspend by £10 million this year, all on the high needs block.
The driver is the number of children with an Education, Health and Care Plan. There were 4,003 in July 2026, up 259 on July 2025. The report puts the average cost at £15,000 for an in-borough place and £27,000 for a place outside the borough.
The cumulative schools deficit is expected to reach about £34 million by 31 March 2027. A statutory override keeps that deficit off the council’s main accounts until 31 March 2028. The council submitted its SEND reform plan to the government in June 2026. If it succeeds, the government would fund up to 90% of the eligible part of the £24.4 million deficit as it stood in March 2026. The outcome is not expected until this autumn.
Twenty-four Lewisham schools finished 2025/26 in deficit, down from 25 the year before.
Council housing: reserves fall to £14 million
The Housing Revenue Account, which pays for the council’s own homes, is forecast to overspend by £2.3 million. Repairs and maintenance is £4.1 million over, largely on the council’s disrepair project. The council also budgeted £5.9 million of major works charges to leaseholders, but has averaged £2.5 million a year over the past five years, which the report calls a £3.4 million shortfall if that pattern holds.
The housing reserves started the year at £45.9 million. They are forecast to end it “in the region of £14m”, which the report says is only slightly above the recommended 10% minimum, because £25 million of revenue is going into the capital programme.
One housing figure is moving the right way. The number of households in nightly-paid temporary accommodation peaked at 1,512 in August 2024. It was 869 in July 2026. The report says the cost of a two-bed nightly-paid property in the borough has risen from about £60 a night two years ago to £90 to £100 now.
What it means for you
- Council tax payers: the overspend will have to be covered from reserves or further savings. The budget for 2027/28 is set in February. Our council tax bands page has this year’s charges.
- Families with an EHCP or waiting for one: the £10 million schools pressure is driven by plan numbers and placement costs. The council’s SEND reform funding decision is due this autumn.
- Drivers: the parking contract is both over budget and in dispute. Our parking in Lewisham page covers permits, CPZs and fines.
- Council tenants and leaseholders: housing reserves are being run down to fund the capital programme. The council’s own satisfaction figures are in our tenant satisfaction report.
- Town centre: the capital programme pressures sit alongside the £30.5 million Lewisham town centre scheme and the Catford regeneration reset.
The next monitoring report, for Period 6, is due to go to the Public Accounts Select Committee and then Mayor and Cabinet later in the autumn.
Sources
- Lewisham Council, Financial Monitoring 2026/27: Period 4 Monitoring, report to Mayor and Cabinet, 7 October 2026 (forecast, directorate tables, savings, risks, DSG, HRA, collection)
- Lewisham Council, Financial Monitoring 2026/27: Period 4 Monitoring, appendix (write-offs, placement and accommodation numbers)
- Lewisham Council, Mayor and Cabinet, 7 October 2026: decision on item 6
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