For those of you not aware how Council’s finances work:
- Revenue (salaries, social care, refuse collection etc.) is funded by government grants, council tax, and fees.
- Capital (long-term assets like the new temporary housing, refuse trucks, repairs to Gun Wharf etc.) is funded by borrowing, grants and asset sales.
The headlines expose the failure of Medway Labour’s second full year revenue budget: –
The Revenue Crisis: Reserves Wiped Out to Fund Overspends
- Bailout Addiction: The Council was forced to balance its budget this year by borrowing £18 million via Exceptional Financial Support (EFS) in the form of a Capitalisation Direction. This brings the Labour Administration’s total EFS borrowing to £32 million in just two years—debt used purely to cover structural revenue deficits.
- Losing Control of Spending: There is an additional in-year deficit of £9.948 million—overspends not predicted in the budget. This deficit has only improved by a pitiful £1 million since Round 1, confirming the Administration has failed to implement sufficient corrective action.
- Reserves at Risk: The Council’s limited reserves of £10.011 million are now in direct danger of being wiped out by the projected £9.948 million overspend. It is unlawful for a Council not to have a balanced budget, making a request for more EFS borrowing before year-end highly likely.
- The Crisis Drivers: The Council has lost control of statutory spending:
- Adult Social Care: Overspending by £8.7 million, primarily driven by spiralling placement costs and unbudgeted average weekly cost increases (including high-cost Mental Health and Learning Disability cases).
- Children’s Services: Overspending by £2.4 million, due to staffing pressures, high market pay demands, and heavy reliance on expensive agency staff.
- SEND Assessment: Overspending by £0.9 million due to the crisis caused by the doubling of statutory Education, Health and Care (EHC) needs assessment requests.
- Housing: A £0.962 million overspend due to delays in the Temporary Accommodation (TA) property acquisition plan, forcing the reliance on high-cost, nightly private rentals.
The Capital Disaster: Leaving Behind a Mountain of Debt
The Labour-led Council’s strategy has been to borrow heavily without fiscal discipline.
- Debt Escalation: The Council’s total commitment to external borrowing has exploded, with an additional £58.3 million added to the debt in the 2024/25 financial year alone. The total approved cost of all capital programmes now stands at £489 million.
- Hidden Debt Bomb: Labour in Government have created significant uncertainty in the housing Market as interest rates remain high and fiscal policies are creating higher unemployment and crushing confidence. As a consequence the Council’s Auditors have warned that loans of £115 million made to the Council’s subsidiary, Medway Development Company (MDC), presents a serious financial risk.
- The Price of Failure: This deficit is now being aggressively stoked by the cost of servicing this excessive debt, with the Interest & Financing budget projected to rise by a further £3.5 million next year.
- Asset Sales Failure: The capital budget relies on disposal of assets no longer required by the Council. There is a significant, high-risk chance of not meeting the asset disposal target, which will force the Council to take on even more debt to fill the gap.
The Reckoning: What This Means for Medway Residents
The reality is Medway Council is trapped in a spiral of spending, debt, and structural failure. The initial budgets for 2026/27 forecast a revenue deficit of £25 million, driven in part by the increasing cost of borrowing and which will require even more borrowing in order to prevent a significant financial event.
To stand still, the Council would need to find massive new income. The cost of this debt crisis is being hidden by the hope that the Labour Government will provide a politically expedient bailout. Given the national financial position, that outcome is highly unlikely.
The Medway Labour Cabinet seem incapable of finding ways to solve the financial crisis which they have plunged the Council into. It maybe diverse as Council Leader Vince Maple is fond of telling us but that does not make it competent. Despite calling in CIPFA, the professional body for Local Government Finance and a much trumpeted FIT Plan Cllr Maple and colleagues seem a long way off solving the problem.
Relief may come when Medway ceases to exist in May 2028 and the new North Kent Unitary takes over—transferring a debt burden doubled by profligate Labour Politicians spread over 500,000 residents instead of 300,000. But here, the labour Government’s reorganisation of local government (LGR) does not solve the biggest issue of fiscal failure and funding; it just creates bigger organisations designed to fail.
