A local authority is facing a £17 million hole in its budget by the end of the financial year.

Medway Council’s finance officers have been monitoring the authority’s income and expenditure since March and have predicted that if it continues in the same vein it will be facing the massive overspend.

The council has only £10m in reserves, meaning it would effectively be bankrupt.

Its cabinet will meet next Tuesday to decide what to do.

The council said: “The 2023/24 forecast expenditure will place an unprecedented burden on the council’s general reserves, which is not affordable in the immediate term or sustainable over the longer term.”

Local authorities are required by government to deliver a balanced budget, where anticipated income matches the total planned spending.

However, since 2010/11 central government funding to Medway through the Revenue Support Grant has reduced by 91%, from £85.1m to £7.3m and the council has not adequately increased income elsewhere.

Like other councils across the country, Medway has also suffered heavily from the huge impact of the increasing costs of providing critical social care services for vulnerable members in the community as well as the impacts of inflation and increased construction costs.

The council said that together these factors had “created a perfect storm” resulting in spending demands increasing at a far faster rate than its funding or its ability to find savings from spending reductions.

The Labour leader of the council, Cllr Vince Maple, whose administration took control from the Conservatives after the elections in May, said: “The new administration has inherited a very difficult situation and we are now taking urgent action to address the position this year and plan for the years ahead.

“Tough decisions will be needed in the coming months if we are to continue to provide our most critical, statutory services.

“We are not alone and know that many other councils up and down the country are in a very similarly precarious position.

"We are committed to taking the steps we need to put the council on a more sustainable footing but, longer term, as social care costs continue to increase, the viability of many local authority services will increasingly come under threat for local people and we urge the government to enter into a new deal with local government to increase funding for critical care services alongside sufficient funding for other valued services.”

The choices to be made get harder each year

The council already suffered a significant overspend of just over £6m on the last year’s budget, ending this March, which reduced reserves.

However, there is some room for optimism. A council spokesman said: “The council carries out regular rounds of budget forecasting and this is just the first round for this year.

“Through management action, the financial position generally improves from this early first forecast, although the opportunities to reduce spending are fewer and the choices to be made get much harder each year.

“The council remains completely committed to ensuring that its resources are directed where they are needed the most and urgent steps will be taken to review all areas of expenditure across the council and bring it back within the budget forecast or at least within the amount that could be funded from reserves.”