Surrey County Council is staring down a £21.3 million black hole in next year’s budget. 

The council’s draft 2026/27 budget shows rising costs, soaring demand for social care and falling Government support. All this has combined into what senior councillors described as a “perfect storm”. 

At the point of writing, before the new national budget, Surrey has a £21.3 million black hole it needs to plug to be financially stable. Senior council officers said the authority needs to deliver £73.5 million of efficiencies next year on top of savings already made while absorbing £84 million of new pressures. 

One of the key causes of the council’s headache is the Fair Funding Review: the review is aimed to simplify and equalise the amount of money each council gets from central government based on indicators such as population, deprivation and rurality. 

Surrey expects to receive no increase in government funding next year, despite inflation still running above 3 per cent and pressures on children’s and adults’ services continuing to grow.

“[We] will be the single biggest loser of all councils across the country,” council leader Cllr Tim Oliver said at a cabinet meeting on November 25. He revealed the early indication from the government suggested Surrey would lose around £50 million a year through Fair Funding reforms over the next three years.

Cllr Oliver warned that projections show up to 98 percent of the council’s income is likely to come from Council Tax by 2029. Effectively, without the government’s funding boost more strain will be put on residents not only make ends meet for the council but to manage any cuts to services as well.

The draft budget assumes a 2.99 per rise in Council Tax (below the maximum 4.99 per cent increase the Government has used in its own calculations) but even with this rise, the council is left with a £21.3 million gap to fill.

Surrey could increase bills further using a 2 percent social care precept among a list of other measures including looking at the reserve fund. Cllr Oliver added he expected the final Government settlement, due in mid-December, to offer only “slight” improvement and “very unlikely” to close the gap. 

Cllr David Lewis, Deputy Leader and Deputy Chief Executive, said residents, businesses and the council were all facing “incredibly challenging” economic conditions. He said people he spoke to locally were finding life “more difficult today than during the pandemic”.

Alongside day-to-day budget pressures, Surrey is also preparing for Local Government Reorganisation, which will dissolve the county council in 2027 and replace it with two new unitary authorities for East and West Surrey. 

Although this will be this Surrey council’s final budget, it will set the tone and financial baseline for the new councils. The council will also have to set aside reserves to cover reorganisation costs, which are expected to rise sharply once shadow authorities are created next May.

Members were warned the next three years of transitional support will soften the blow of Fair Funding only temporarily. Once it ends, the new unitary councils will rely almost entirely on council tax from residents.

Despite the bleak outlook, Surrey county council plans to continue investing in priority capital projects. These include extra SEND school places, road improvements, children’s homes, library upgrades, green initiatives and adult social care accommodation. Officers report the £277 million capital programme is still affordable, but rising construction and borrowing costs remain a risk.

People can comment on the budget from tonight (November 25) until early January. Councillors urged residents to take part, with digital screens in libraries set up to help vulnerable or digitally excluded groups respond.

A final budget will go to Cabinet in January before being recommended to full council in February 2027.