Councillors in Oldham have taken aim at the local authority’s leadership over the borough’s ‘unsustainable’ financial situation.

Council bosses say they are ‘working on’ reducing a predicted £36m budget hole. 

If they don’t succeed in cutting costs, the council they will use up the majority of its reserves in 2025, leaving it vulnerable to ‘effective bankruptcy’ in future years.  

A financial document published on Friday showed the council is heading for a projected overspend of £26m. The number is based on how much the council has spent in the last three months multiplied across the year. 

The projected overspend adds to an £11m budget gap from last year. 

Council leader Arooj Shah said the figure is due to ‘unexpected pressures’ on Children’s services and adult social care.

The council has so far spent £5m more than expected in those departments, along with £2m more on Economic Growth – which includes services like planning, highways and waste management. 

But the costs add to a long-term issue in Oldham. Because of high levels of unemployment and social need in the borough and a higher proportion of residents living in houses with lower council tax bands, the council struggles to raise its level of income. Meanwhile local deprivation results in a greater need for council services.

Cllr Sam Al-Hamdani said: “If that’s the financial situation, our reserves could be gone in a year or two. Last year, [Cabinet councillors] reported a projected overspend every quarter and each time they said they expected the real figure to be less than predicted – and it wasn’t. 

“If they didn’t manage it last time I have no confidence in them being able to change that this time. And this year is looking significantly higher.” 

He added: “There is some truth to it when the council says they have a duty and legal responsibility to deliver on social care and children’s services. But if we’re overspending every year, if year after year the reserves are coming down, that’s not a sustainable way to do a budget.”

Reserves, also known as ‘rainy day funds’, are savings that are supposed to be used for emergencies and for future planning. But in the last few years, local authorities have had to rely heavily on reserves to plug holes in their budgets, Oldham included. 

Oldham Council currently has £57m in reserves and are expected to end the financial year with £42m. Should this money be used to plug the budget gap as it’s currently projected, the reserves could drop down to as low as £16m. 

But how much of the reserves will ultimately go towards covering the budget gap – and how big the budget gap is – also depends on council revenue and government funding packages. 

In a recent interview, Cllr Shah said she was ‘hopeful for a new settlement’ but that the council has ‘got to be realistic’ and reduce their spending. 

She said: “We’ve spent the last 18 months looking at our budget situation. But the reality is, the money’s not in the system so we are going to have to make some really difficult decisions.”

Last week the council said that they would be encouraging voluntary redundancies across council services in a bid to cut spending and were looking at ‘all options’. 

Deputy leader Abdul Jabbar, who leads on Value for Money, added that the council were taking ‘this year’s budget challenge really seriously’ and have started the budget process early for that reason. 

Cllr Jabbar said: “We’re committed to working hard to bring down the projected in year pressures, and a lot of work has already gone into bringing that down. I do think we need to acknowledge though that there are some things which are just outside of this Council’s control.

“I wish we had the ability to bring down the cost of a placement in children’s social care but the reality is we don’t. If a child in Oldham is in danger, we look after them and we do our best to keep them safe from harm.

“It’s really disingenuous to suggest that this is just an issue here in Oldham, up and down the country Council’s are struggling to make ends meet because of rising pressures in Children’s Services, Adult Social Care and Temporary Accommodation, analysis by the Local Government Association shows that over the next two years councils are facing a blackhole of more than six billion pounds.

“We’re working with the new Labour Government to try and plug some of these gaps, but after 14 years of Tory & Lib Dem austerity there’s no easy fix. The LGA spent over a decade lobbying for fairer funding for local government, but the Tories just didn’t care enough to entertain a conversation.”