Auditors warn Tower Hamlets over £19m overspend and worsening finances

Tower Hamlets Council’s auditors have raised significant concerns about its worsening finances. The east London council expects to spend about £19m more than its budget this year.

EY set out the warning in a report to councillors at the council’s audit committee last week. The firm said the overspend was “not consistent with effective financial planning and budgetary control” and questioned how sound the assumptions behind the council’s budget were.

Why Tower Hamlets Council is overspending

In July the council said it expected to go £19.2m over budget in the financial year that ends in March 2027. It spent £19.4m more than planned the year before.

Most of the extra spending comes from rising demand and higher costs in adult and children’s social care, along with temporary housing for homeless residents. Councils have a legal duty to provide these services.

Stephen Reid of EY told the committee that the auditors had not finished their review of the council’s financial management, but had already identified the decline. Chris Leslie, the council’s senior manager for strategic and corporate finance, said the overspends came from demand-led services and that the costs had built up late in the last financial year. “In children’s social care we have a high number of high complexity cases coming in at year-end,” he said. He added that cases which arrived near the end of the year had carried over into this one. He also said the council needed to review how it forecasts demand and costs so that it can set a sound budget in future years.

London councils under financial pressure

London Councils, which represents the capital’s local authorities, says the 33 councils face a combined shortfall of £5.2 billion by 2030.

Nine London councils are now propped up by the government’s Exceptional Financial Support scheme, which allows authorities in serious difficulty to borrow in an emergency so they can balance the books. The City of London, Lambeth, Croydon and Waltham Forest are on the list. So are Haringey, Barnet, Hillingdon, Redbridge and Havering. Tower Hamlets is not among them.