Cornwall Council will be on a financial “cliff edge” within two years. That was the stark message at a meeting of the authority’s economic growth and development meeting last week.

The meeting heard that while the council was not in danger of going bust – “at this stage” – like local authorities in Birmingham, Slough, Croydon, Thurrock, Woking and Nottingham, the financial forecast wasn’t good and there is a very real need for improved funding from Westminster.

As has previously been reported, by month seven of the current financial year Cornwall Council’s overspend had increased to £16-million, with £20.5m of reserves needed to balance the 2024/25 budget.

The council’s net budget for the year is £763-million, which is £55-million greater than in 2023/24. This includes £18-million increased demand in adult social care, £10-million increased demand in children’s social care services, £10-million relating to emergency and temporary housing, £8-million for ongoing demand pressures for school transport and a £0.6-million investment in Cornwall Fire and Rescue Service’s critical control centre.

There are an additional almost 300 special educational needs students year on year adding to the financial pressures on the council.

Phil Mason, strategic director for sustainable growth and development, said at this stage Cornwall Council is not in danger of issuing a Section 114 notice (which bans a council from all new expenditure and fundamentally demonstrates the authority has gone bankrupt). However, he added the financial challenges facing the council in 2024/25 and beyond are “immense” based on current forecasts.

Children and family services are forecasting an overspend of £5.1-million this year but that figure is increasing as is a £5-million overspend in school transport services. Housing, particularly temporary and emergency provision, is expected to go over budget by up to £11-million by the end of the financial year.

Mr Mason told councillors: “We’re starting to see some light in that dark tunnel in that the supply of accommodation in Cornwall and the need for that accommodation has seen some softening in terms of demand versus supply. One of the things we’re currently doing is renegotiating the price of buying nightly accommodation from those people who have contracts with us.”

However, he added: “The cost pressures despite all we are doing are not showing any signs of reducing to any significant degree. We think we are going to have to think about building those cost pressures into the base budget position, which will mean additional savings will have to be made elsewhere.”

He said the council’s ability to counter financial pressures by using reserves and “one-offs” is starting to become untenable, adding that the financial pressures on the council are now proving to be “more difficult and more stubborn to get down than we would have hoped”.

Cllr John Conway said: “We cannot afford to get ourselves in the position that Birmingham is in, that Somerset is likely to be getting in. We must make sure we balance the books.

“Talking about taking money from reserves – you can only do that once. We must make sure that year on year we keep ourselves more or less in the black.”

The council’s deputy leader and portfolio holder for resources Cllr David Harris stressed how much pressure had been put on central government for more financial support: “Our local government settlement was right at the bottom end of what anybody expected.

“There was nothing additional in there at all despite officers, the Local Government Association and me writing to Uncle Tom Cobley and all, and even the chancellor of the exchequer.”

Cllr Peter La Broy said the use of reserves made his “blood run cold because all we’re simply doing is creating a cliff edge and it makes the situation worse”.

He added: “I wonder where that cliff edge is eventually going to be because sooner or later if the funding settlement doesn’t change from government we will have to face that.”

He added that the funding Cornwall gets from the government doesn’t recognise the areas where the council is facing financial crisis such as adult social care, school transport, children’s care, etc. “This is just not sustainable.”

Phil Mason responded that the “cliff edge” would hove into view in 2025/26.

Cllr Harris attempted to inject some positivity into proceedings by saying there could be additional revenue of £20-million if and when the council tax premium of up to 100 per cent on second homes is introduced, which was announced by the government in May and is progressing through Parliament.

He said work was continuing to show the government how Cornwall is different from other counties with the population spread over a huge area, which increases costs, surrounded by water and “literally the end of the line”. “All of these things count against us but we get no credit for it.”

He responded to Cllr Mike Thomas who asked if council tax payments will have to increase for residents of Cornwall to pay for the financial burden: “Would I think that we would be in a position of having to make our council tax increases seven, eight, nine or 10 per cent in two or three years time?

“I absolutely, sincerely hope not so my answer is no because I believe that between officers’ work on finding savings, additional income and a better way of spending our money and increased pressure on government we will come good.”

The committee approved the council’s business and financial plans for 2024-28 and the 2024/25 budget proposals, noting that final details are being presented to cabinet in February.