Hampshire County Council bankruptcy expected in 2026

A cabinet report has revealed that Hampshire County Council is considering issuing Section 114 notice for 2026/27 since it will not be able to deliver a balanced budget as it is legally required to do.

In the last year, the administration has been working on how to generate the extra income it needs to plug the now £182.2m budget deficit for 2025/26.

Some of its savings proposals, which aimed to generate an extra £84m, were strongly criticised by residents. 

However, despite the savings generated, only £66m will be delivered in 2025/26, leaving a budget gap of £116.2m.

The report said that given the size of the shortfall, “it is pretty clear the county council has reached the point where it is unable to find the level of savings required to balance the budget on a recurring and sustainable basis”.

Leader of HCC, Cllr Nick Adams-King Although the gap is significant, the council is “confident” that it can balance next year’s books by, possibly, using all the £92m set aside in the budget bridging reserve (BBR), effectively the council’s piggy bank, which would leave a gap of £24m that the council thinks it could find.

By using what is left in the BBR, the council will not have that lifejacket in the upcoming years; as the report said, this would “seriously deplete financial resilience” and leave the council with “very little wriggle room”.

If the cabinet and full council do not consider drawing the £92m, other options such as further lobbying to the government with possible exceptional finance support (EFS), or a council tax referendum, with rises normally capped at 5 per cent without one.

Since EFS is normally provided in the form of capitalisation direction – allowing a council to meet everyday revenue costs through capital resources, such as money set aside for major projects or that raised from the sale of buildings, the council is clear that it would not want this. Instead, it would want a council tax rise above the referendum limit of 5 per cent as Woking, Birmingham and Slough councils have recently.

Hampshire County Council said that each one per cent increase in the council tax was worth around £8.2m. Therefore, a 15 per cent increase would generate an extra £82m that would help the administration to close the 2025/26 deficit with only a small draw from the BBR.

However, the position worsens for 2026/27, where a gross budget deficit is forecasted to be £266.4m, which could be reduced by  £185.3m by ‘SP25 phase 1 savings’.

For months, the administration has been urging the Government to allow local councils freedom and flexibility over charging services, implement legislative changes to give more powers to councils, increase funding, and change the allowable council tax above 5 per cent.

Therefore, without these changes, Hampshire County Council warns that “then it is pretty clear that the council would need to issue a Section 114 notice for 2026/27″.

Leader of the council, Nick Adams-King, reiterating its pledges, said that the government “must” provide Hampshire with the freedom and flexibility to allow reform in services and its financial position.

Cllr Adams-King said: “The threat to our finances is a stark warning to the Government that they must provide Hampshire with the freedoms and flexibilities for which I have been asking since becoming leader in May. These would allow us to be more innovative, commercial and reform our services and therefore financial position.”

About the report, he said it is a “snapshot” in time that warns about the “stark” of the financial challenge, but “it is not one about which we are inactive”. 

He added: “It points to the crisis point potentially coming in two years time.”

“There is much we can yet do, we have begun looking at our own organisation once again, we are working more closely with our district, borough and parish colleagues, we are looking for every opportunity to find efficiencies, reduce costs and increase income. 

“And we remain committed to our core purpose: caring for our most vulnerable residents, evidenced by the further commitment in the report to employ more social workers to protect and support the growing number of children at risk of harm in the county.”