The next Brent Council administration will inherit a perilous financial situation

 

 Cllr Jumbo Chan at Brent Full Council on September 15th 2025

 Cllr Jumbo Chan, who has quietly and assiduously been doing a very competent job as vice chair of the Audit and Standards Advisory Committee, took just 2 and a half minutes at Full Council to inform his fellow councillors of the upcoming serious financial issues facing Brent Council. There was no reaction or questions from his colleagues. Cllr Chan is one of the recently deselected councillors.

His Committee meets again on Thursday and will consider the Interim Auditor's Annual Report LINK , a report on Council's work on actions following the Social Housing Regulator's finding of serious failings in Brent Housing Management LINK, and the Council's Risk Register.

It is clear that whoever forms the next adminstration after the May 2026 local elections will face a very rocky, if not perilous ride.

 

 The biggest impact and most likely risks include the number of people needing homeless accommodation, the High Needs SEND grant deficit, financial resilience (including the Housing Revenue Account following the repairs needed in the light of the Social Housing Regulator's findings) and a decline in Council reserves. 

The Auditor's report, despite the bland language, suggests that without further cuts and revenue raising the Council might have to  apply for additional emergency government funding (Exceptiona Financial Support) at high interest rates.

AUDITOR'S REPORT 

Here are some of the key points (my highlighting in bold):

Background 

The Council faced continued financial pressures in 2024-25, with a £15.5 million overspend driven largely by rising temporary accommodation costs. While reserves were used to balance the General Fund, the situation remains challenging. Saving plans delivered targeted £8 million in savings. A balanced budget of £431.4 million is set for 2025-26, including an additional £15 million for homelessness, which will cover current demand based upon 2024-25 numbers. However, homelessness pressures are expected to grow, adding further strain. The Dedicated Schools Grant (DSG) and Housing Revenue Account (HRA) also face financial pressure, with deficits and housing regulatory concerns highlighting the need for a robust, long-term financial recovery plan.

 

Key Recommendation 1

The Council must urgently take additional difficult decisions to ensure that a realistic budget can be set for next year and in the medium-term, so this can be delivered without the need to further draw on reserves nor Exceptional Financial Support (EFS) from central government 

 

 

The funding gap 

 

The difference between any council’s annual income and expenditure is the ‘funding gap’. The budget process aims to close this gap by identifying expenditure savings, additional income or using reserves to provide a balanced position. Any increase at the Council in demand or costs, higher than the growth forecast in the Medium Term Financial Strategy (MTFS), will require more savings or additional income to offset.

 

The MTFS, dated February 2025, anticipates a cumulative budget gap of £28 million by 31 March 2029, highlighting increasing financial pressures. Chart 1 sets out the savings and growth delivered to date and projected over a six- year period.

 

• Forecast growth for 2026-27 to 2028-29 in the MTFS is reduced to approximately £26 million per year, which is around 50% lower than the £53.3m million growth budgeted for in 2025-26.

• Forecast savings for 2026-27 to 2028-29 are only marginally higher than those required in 2024-25 and 2025-26.

 

This indicates considerable pressure in the current MTFS with limited scope to absorb unforeseen cost pressures.

 

Current spending levels across the Council are deemed unsustainable and pose a risk to the Council's financial sustainability. Without additional income, additional savings (which links to Key Recommendation 2), or service cuts, the Council is at risk of delivering overspends which cannot be supported by remaining reserves.

 

Impact: If the Council fails to manage demand for services and deliver against budgets the reserves levels will threaten its financial sustainability. Exceptional Financial Support (EFS) may be necessary for 2027-28, which would entail borrowing at a premium to cover revenue costs.

 

Key Recommendation 2: It is critical that savings through the Embrace Change Transformation Programme are quantified and integrated into the Medium-Term Financial Strategy (MTFS) providing a pipeline of sufficient recurrent savings and income generation schemes supported by robust business cases through collaboration and business transformation.

 

 

Areas for Improvement - disposal of property assets

 

Using the property strategy to identify assets that are not operational and not required for service delivery could provide the Council with a pipeline of potential capital receipts which could support the financing of the capital programme. This could reduce long-term borrowing and mitigate additional financing costs. Any plans for asset disposal should be built into the Medium-Term Financial Strategy with realistic timescales, to mitigate potential Exceptional Financial Support needs in 2027-28

 

Improvement Recommendation 1

 

Area for improvement: Using the property strategy to make best use of assets, including the identification of non-operational assets.

 

 

Area for improvement: Strengthening the medium-term financial strategy to reflect and mitigate risks from the Direct Schools grant (DSG) and Housing Revenue Accout) HRA balances.

 

The statutory override on Dedicated Schools Grant (DSG) deficits is extended to 2027-28, but the Council’s £13.6 million cumulative deficit remains unresolved, posing a material risk to the MTFS beyond the override period. Alongside pressures in the Housing Revenue Account (HRA), where compliance risks and rising costs threaten long-term sustainability, these issues require urgent financial planning and reserve management.

 

Evidence: Many councils are reporting significant deficits in their DSG accounts due to rising demand for SEND services, especially Education, Health, and Care Plans (EHCPs).

 

Management has actively managed the cumulative deficit DSG position from a high of £15.9 million in 2021-22 to £13.6 million at 31 March 2025. It is a strong achievement to have reduced the cumulative deficit and curtailed significant increases, with £1 million received from the Department for Education to mitigate in- year overspends, helping to maintain the deficit and prevent further growth. The Council's DSG Deficit Management Plan has been updated to cover up to and including 2027-28, in line with the extension to the statutory override, by which time the forecast DSG cumulative deficit could be £20.3 million mitigated or £31.3m unmitigated. Uncertainty remains around how the DSG deficit will be managed if the statutory override is not extended beyond 31 March 2028, and this is not built into the MTFS.

 

Meanwhile, the HRA shows a provisional £2.1 million surplus for 2024-25, but long-term sustainability is threatened by housing stock refurbishment costs and debt.

 

The HRA faces significant risk, indicated by the Council's self-referral to the Regulator of Social Housing which resulted in a “C3 – significant improvement needed” grading for failing to meet the Safety and Quality Standard in relation to accuracy and completion of fire safety data and housing repairs, highlighting compliance risks and potential cost increases.

Continuous monitoring and assessment are necessary as the Council develops a recovery plan which needs to be funded by the HRA reserve.

 

BRENT HOUSING MANAGEMENT 

The Brent Housing Revenue Account (HRA) had an underspend of £2m in financial year 2023-24 but will be under strain as a result of the works needed to satisfy the Social Housing Regulator and to ensure tenants and leaseholders safety, which is the main consideration.

 

The Action Plan on the issues raised by the Regulator was due early this summer and delayed until September the but still not published. The report before the Audit Committee threfore does not contained a costed programme to ensure compliance and we don't yet know its impact on repairs and rents.

 

Extracts from the report:  [My coments in square brackets]

 

The Health and Safety Specialist have been contracted to support ongoing improvement work, providing additional objective and independent oversight, as well building safety expertise.

 

Caldiston Ltd have carried out an independent forensic audit across all key compliance workstreams (including fire, gas, electrical, water, asbestos and decent homes requirements) which was completed in August 2025. The audit involved desktop reviews, staff interviews and validation of data from multiple systems in use by the service, including True Compliance, NEC, and LifeSpan. [Will audit and recommendations be made public?]

 

The audit aligned with officers' concerns, validating the referral to the regulator confirming that there were significant systemic issues, particularly in data management, governance, and policy implementation. The overall outcome of the audit was that the housing management service has inadequate assurance in relation to managing building safety and compliance.

 

Key recommendations from the audit include developing a comprehensivecompliance framework, resolving data integrity issues, closing overdue fire risk assessment actions, establishing central registers for smoke and CO detectors,and providing staff training on compliance processes. It is also recommended to implement dashboards for real-time KPI monitoring and align the Strategic Risk Register with actual risks.

 

The findings from the audit have highlighted and clarified several areas that the service had already identified as needing focus as well as some additional key learning. These findings will now feed into the development of a robust action plan for improvement. [Publication  when?] This action plan will also include root cause analysis (as recommended by The Regulator), to ensure permanent solutions are in place to prevent similar issues arising in the future and will form a key part of the agenda and monitoring for the relevant project board under the newly established Housing and Tenant Improvement Programme. 

 

Ongoing improvement work

 

Whilst the reflective audit work is vital for lesson learning and effectively mapping robust and long-term improvements to our management of building safety, it has been important to us as a service to ensure we are driving forward rapid improvements on the ground to strengthen oversight quickly and provide re-assurance for our residents
 

The Compliance Team have been onboarding additional contractors to expedite the completion of works as a consequence of Fire Risk Assessments, and as of 1 September it is confirmed that all outstanding high-risk fire actions in high-rise blocks have been satisfactorily addressed; either closed with evidence, completed and closed with evidence or work booked. [Figures for each category?]

The rebuild of True Compliance and the NEC asset register is underway [Expected completion date?], and additional governance has also been implemented around the management of data, in particular restricting property creation access which provides a more controlled approach to new properties being added to the system and feeding into compliance workstreams accurately.

 

The compliance team has been progressing with recruitment. A Compliance and Contract Manager, a dedicated electrical manager, a Quality and Delivery Manager and an interim Contract Officer all started in September. Two permanent Contract Officers are being shortlisted currently, all with a focus on compliance and safety.

 

Furthermore, the Housing & Tenant Satisfaction Improvement Board met for its initial meeting in September. [Please publish Minutes for transparency and accountability]

This Board, chaired by the Chief Executive, will oversee and drive initiatives aimed at improving the quality of housing services and increasing tenant satisfaction.

 

The Board will provide governance and oversight by monitoring the progress of improvement initiatives and ensuring compliance with housing standards. [Will results be pubished?]

 

Significant progress has been made in addressing the data issues highlighted in the audit report. Our priority has been to validate the ownership and the council’s compliance responsibilities of all properties on our Housing Database, NEC. This work is essential to build confidence in our data and provide a reliable foundation for reporting.

 

We are currently in the process of systematically reviewing each compliance stream, starting with Gas. This will confirm the properties that fall in or out of scope, and importantly, for what reason. Whilst the audit highlighted that confidence in the reporting number is low, we are using these figures as a baseline so that improvements can be clearly appreciated as our validation work progresses. This will result in the reported asset numbers changing as properties are validated and confirmed in work streams, and percentages fluctuating because of this.

 

This data correction work is not limited only to the properties we report on to the Regulator (i.e. council owned homes) but has been expanded to all residents in our properties e.g. leaseholders, i4B and FWH tenants etc. This ensures a consistent, council-wide approach that strengthens both safety andassurance moving forward.

 

A section of the report deals with financial considerations but not in detail:

 

Financial Considerations

 

 Like other local authorities, Brent is facing significant financial pressures and is continuously needing to look for efficiencies to address budget challenges. Some of the main challenges that could affect the long-term viability of the HRA Business Plan along with rent levels are major works and repairs.[How, increased rents and reduced works and repairs as in Kensington and Chelsea?]

 

As the Council adds more stock to its portfolio and complexities of new additional requirements to building standards are increasing, such as fire safety works and decarbonisation, the cost of major works are rising. At the moment, there is insufficient government subsidy available to address these changes.

 
 

The Asset Management Strategy and investment plans must be approached cautiously and allow for flexibility to scale back on schemes where required. Careful budget monitoring and financial planning are crucial. With a current 5.75% loan rate for the HRA, £1m in borrowing costs the HRA circa £28k per annum in interest costs.

 

The specialists that have been appointed to assist with the recovery of the compliance breaches, are currently undertaking an initial assessment of the situation with the intention of developing a recovery programme. [Cost of specialists?[

 

Upon completion of the initial assessment, a paper will be presented setting out the anticipated costs and financial implications. For comparative purposes, a registered provider with 21,000 homes that were in a similar situation, spent £2.3m on their recovery programme. [Brent Housing Management manages approximately 8,000 council homes, 4,000 leaseholds, and 31 Gypsy and Traveller pitches]

  

It should be noted that whilst operating under a regulatory notice, access to grant funding for housing developments may be reduced or ceased, until the council can evidence a position of compliance.