The Cabinet of Worcestershire County Council met on Tuesday 13 January 2026 to discuss the draft budget and medium-term financial plan for 2026/27, and the fair funding arrangements for schools in the same year. Key decisions included the approval of the draft net budget requirement of £618.670 million for consultation, and the recommendation to Full Council to approve variations to the Capital Programme and identified savings totalling £9.1 million. The Cabinet also noted the significant financial challenges facing the council, including a projected budget gap of £71.9 million for 2026/27, and the ongoing pressures within the Dedicated Schools Grant (DSG) High Needs block.

Draft Budget and Medium-Term Financial Plan (MTFP) 2026/27

The Cabinet discussed the draft budget and MTFP for 2026/27, highlighting the significant financial pressures facing the council. Councillor Rob Wharton, Deputy Leader and Cabinet Member for Finance and Corporate Services, moved the recommendations, noting that the proposal for car park charges at Countryside centres had been removed following feedback from the Overview and Scrutiny Performance Board (OSPB).

Phil Rook, Chief Financial Officer, presented the report, outlining the council's financial position at the end of November. He highlighted the reliance on Exceptional Financial Support (EFS) and reserves, with significant overspends forecast in Adults and Children's Services. The Dedicated Schools Grant (DSG) High Needs block was identified as a major concern, with a projected deficit of £194 million by the end of 2026/27. Despite a three-year settlement from the government, the net increase in grant funding was £6.9 million, which was £7 million less than anticipated in the MTFP calculations. This shortfall means that the council faces pressures of £111 million in 2026/27, resulting in a budget gap of £71.9 million after proposed savings and council tax increases. The council has applied to the Ministry of Housing, Communities and Local Government (MHCLG) for EFS, including a capitalisation direction and permission to increase Council Tax above the 5% referendum limit.

Councillor Tom Wells, Chair of the OSPB, provided feedback from scrutiny meetings, expressing satisfaction that the proposed car park charges at Countryside centres had been dropped. He also acknowledged the £2 million saving from pension fund management. Other points raised included the need for an updated corporate plan and greater clarity on the distinction between statutory obligations and discretionary spending.

Councillor Justin Bowen, Cabinet Member for Children and Families, echoed the sentiment of listening to feedback and highlighted the pragmatic approach being taken to resolve the financial emergency. He also noted the importance of Councillor Nik Price's role as Cabinet Member for Strategic Delivery, Operations, Governance and Efficiency in driving efficiency across the council.

Councillor Karl Perks, Cabinet Member for Highways and Transport, supported the report, emphasising the stark financial reality and the need for structural change and sustained savings. He stressed that the gap could not be closed by efficiencies alone and that the council was at risk of a Section 114 notice if difficult choices were not made.

Councillor Adam Kent, Leader of the Conservative Group, raised concerns about the high needs funding and the significant overspends in Children's and Adults' Services. He questioned the monitoring and control of figures, suggesting that substantial council tax increases would be required to address the deficits. He also queried whether staff reductions of up to 50% would be necessary to achieve a balanced budget.

Phil Rook, Chief Financial Officer, clarified that the DSG deficit is off-balance sheet until 2028, but the council incurs costs in the interim. He confirmed that the numbers quoted by Councillor Kent were correct but stressed the need to understand the context of each figure. He also highlighted the auditors' recommendation to slow the growth of DSG spend.

Councillor Adrian Hardman raised concerns about the DSG deficit management plan, asking when it would be presented to Cabinet. Councillor Rob Wharton assured that conversations were ongoing and the plan would be brought forward soon.

Councillor Richard Udall thanked the Cabinet for listening to concerns, particularly regarding the car park charges at Countryside centres, and expressed gratitude for the removal of this proposal. He also raised the possibility of reconsidering a budget amendment from two years prior that could have generated significant income through capital receipts.

Councillor Andrew Cross also expressed reassurance about the car park charges being dropped and sought clarity on the DSG deficit management plan and the potential consequences if external auditors felt it was not being addressed with sufficient urgency. Phil Rook explained that the auditors wanted to see a plan to slow the growth of the DSG deficit, and that statutory recommendations on budget sustainability were also in place.

Councillor Martin Allen questioned how the council had reached its current financial position, specifically asking about the impact of not increasing council tax in previous years. Phil Rook responded that a 5% council tax increase would generate £14.2 million extra income, but that current pressures were primarily due to demand in statutory services post-Covid, which were not being adequately funded by the government.

RESOLVED that Cabinet:

• 1a) approved for consultation the draft Net Budget Requirement of £618.670 million, as set out in Appendix 1.
• 1b) requested that Cabinet Members continue to work with their respective Strategic Directors and Assistant Directors to identify further options to reduce the current reported gap by either additional savings or agree strategies to reduce the current growth and demand assumptions prior to the final budget report which is due to be presented to Cabinet on 5 February 2026.
• 1c) noted the earmarked reserves schedule as set out in Appendix 4.
• 1d) noted the current MTFP position as set out in Appendix 5.
• 1e) noted the outcome of the budget consultation set out in Appendix 7.
• 1f) noted that under his powers as Section 151 Officer, the Chief Financial Officer has written to Government to request Exceptional Financial Support (EFS) in the form of a capitalisation direction and increase in Council Tax above 5% to support the budget in 2026/27 with a letter to Ministry of Housing, Communities and Local Government (MHCLG) attached at Appendix 8.
• 2. The Cabinet Member with Responsibility for Finance and Efficiency recommended that Cabinet recommends to Full Council on 15 January 2026 the approval of the variations to the Capital Programme as identified in paragraphs 150 to 158, namely:
  • a. reduce the expenditure funded by borrowing totalling £1 million relating to the scheme entitled Improve Accessibility for SEND in Mainstream Schools (paragraph 150);
  • b. reduce the expenditure funded by borrowing totalling £1 million relating to the scheme entitled Post 16 Additional Specialist Provision (paragraph 151);
  • c. reduce the expenditure funded by borrowing totalling £1 million relating to the scheme entitled Social Care Projects (paragraph 152);
  • d. remove the £12 million borrowing from the Redditch Railway Station budget and replace with a £1 million scheme funded by the 2026/27 Local Transport Grant allocation (paragraph 153);
  • e. reduce expenditure funded by borrowing by £1 million relating to Railway Station Upgrades (paragraph 154);
  • f. remove the expenditure funded by borrowing by £1.485 million relating to Shrub Hill Frontage (paragraph 155);
  • g. reduce the expenditure funded by borrowing by £0.1 million relating to the Rail Investment Strategy (paragraph 156);
  • h. change in funding for the scheme entitled Hampton Bridge from £6 million of borrowing to £6 million from within the Local Transport Grant from the DfT (paragraph 157) and
  • i. reduce the expenditure funded by borrowing by £2.5 million in 2026/27 relating to the Structural Carriageway works with £1 million of this being funded by the increase in the DfT Highways Maintenance Funding (paragraph 158);
• 3. The Cabinet Member with Responsibility for Finance and Efficiency recommended that Cabinet recommends to Full Council on 15 January 2026 the approval of the savings identified by Strategic Directors to reduce the revenue budget by £9.1 million as identified in paragraphs 106 to 110 and in detail at Appendix 3 namely:
  • a. Consolidation of Adult Replacement Care Provision (Learning Disabilities)
  • c. Reduction in Hive Business Rates
  • d. Deletion of vacant posts in HR
  • e. Deletion of vacant posts in IT
  • f. Changes in Pension Contributions
  • g. Deletion of vacant posts in Finance
  • h. One off Reduction in spend on Monitoring and Evaluation within E&I
  • i. Highways Re-Organisation
  • j. Staffing reductions in Economy
  • k. Reduction in use of Consultants within E&I
  • l. Increase in income for highways development management
  • m. Pollution Control reduction in budget
  • n. County Hall decommissioning additional savings
  • o. Additional income generation from tenancy at Wildwood
  • p. Facilities Management: Restructure
  • q. HTST: Severn Card income
  • r. HTST: Review Programme
  • s. HTST: Unavailable Routes

Fair Funding for Schools 2026/27 - National and Local Funding Arrangements for Schools

Councillor Stephen Foster, Cabinet Member for Education and Special Educational Needs and/or Disabilities, presented the report on fair funding for schools. He highlighted that Worcestershire is one of the 40 lowest-funded authorities in the country and that schools face significant pressures despite increased funding. The Dedicated Schools Grant (DSG) for High Needs is a particular concern, with an accumulated deficit that the provisional allocations do not address. A meeting with the Department for Education (DfE) was scheduled for 21 January to discuss SEND deficits. Councillor Foster thanked school leaders, staff, and officers for their work.

Councillor Adrian Hardman inquired about the provision of a table detailing the impact of the funding formula on individual schools, particularly small rural schools. Assurance was given that this information could be provided upon request.

RESOLVED that Cabinet:

• (a) noted the Department for Education policy for school and Local Authority funding for 2026-27 detailed in Appendix 1.
• (b) noted the involvement of the Worcestershire Schools Forum members and schools during the engagement process.
• (c) noted the views of the Worcestershire Schools Forum on the Local Schools Funding Formula issues for 2026-27 and other matters which are outlined in Appendix 2.
• (d) approved the Local Schools Funding Formula for Worcestershire mainstream schools from April 2026 to apply for 2025-26 and other matters as detailed in paragraphs 34 to 44, to include the DfE Minimum Funding Levels (MFL's) for Primary £5,115; Key Stage 3 £6,388; Key Stage 4 £7,018; Secondary £6,640 having regard to feedback from schools and the views of the Worcestershire Schools Forum in Appendix 2, to be based as far as is practicable and affordable upon the Department for Education (DfE) National Funding Formula (NFF) parameters; and authorised the Director of Children's Services in consultation with the Cabinet Member with Responsibility for Education to make the required submission to the national executive body, the Education and Skills Funding Agency (ESFA) by 22 January 2025 for the approved Local Schools Funding Formula for 2025-26 taking account of any impact and change on the approved units of resource, Minimum Funding Guarantee and capping arrangements in paragraph 34 as a consequence of the October 2024 census and other 2024 data changes and the final 2025-26 Dedicated School Grant (DSG).