By Carole Dennett
The Isle of Wight Council’s Director of Finance has warned that the 2026/27 budget will be the most challenging it has faced in ten years, with a structural deficit of almost £20 million, and a stark warning that the gap could rise to £65 million by 2029/30 without major intervention.
A report to the Policy, Finance and Resources Committee, by Chris Ward, published today sets out the scale of the financial crisis, and confirms that the council can only legally set a budget this year by accessing a Government approved debt facility known as Exceptional Financial Support (EFS). The facility acts as a temporary loan the council may draw on at the end of the financial year if required.
Before any EFS can be accessed, the council must demonstrate it has taken every possible local measure to close the gap. These include raising council tax by the maximum permitted, 4.99 per cent, selling off surplus assets, and maximising income wherever possible. Government guidance states that EFS should only be used when all other options have been exhausted.
The report highlights three major pressures driving the deficit: a £14.8 million rise in adult social care costs, a doubling of the waste contract costing an extra £6.5 million, and a £3.1 million reduction in Government funding following the Fair Funding Review. Inflation and rising demand across children’s services and Special Educational Needs and Disability transport add further strain.
To stabilise the position, the council plans to use £11 million of one-off savings and reserves, increase general reserves to £16 million, and create a £12 million transformation fund to support long term savings. An Improvement Board, including independent experts, will oversee a new transformation plan aimed at reducing costs and lobbying for fairer funding for the Island.
The report warns that refusing to set a budget would have severe consequences, including the inability to collect council tax, disruption to service contracts, and the risk of Government intervention. A Section 114 notice – effectively declaring the council bankrupt – remains a possibility if reserves fall too low.
While the council may not ultimately need to draw down the full £13 million EFS facility, Mr Ward says the authority must prepare for “exceptional financial shocks” and take every opportunity to reduce spending and increase income.
No details of where the savings axe will fall have been published yet. The detailed budget will be considered by councillors at their meeting on February 25.
