Manchester town hall faces £108m budget gap within three years – but says it won't go bankrupt like Birmingham

Manchester council is facing the prospect of its budget gap growing to £108m over the next three years. But the town hall says its finances are not as bad as Birmingham council's which effectively declared bankruptcy earlier this week.

The local authority is currently forecasting that the gap in its budget will rise each year and reach £108m by 2026. Some savings have been identified and cash reserves could be used to close the gap – but a £72m shortfall remains.

The savings plan for this year has not been successful so far. In July, the council revealed it was expecting to overspend on its budget by nearly £9m.

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The town hall is now projecting an overspend of £9.6m in this financial year. Almost all of this projected overspend, which is calculated based on spending and income from April to the end of July, is related to rising social care costs.

According to the council this has been fuelled by inflation and 'pressures' in the social care market. But earlier this summer, a council report revealed that demand for long-term care arrangements - both for older people and those with learning and physical disabilities - has been higher than expected.

It comes after town hall bosses said a drop in demand for care homes, which was expected to continue after the pandemic, would save the council millions. But despite 'strong progress' in reducing demand, the report in July said it is 'unlikely' that the planned savings of £5.5m would be delivered in 2023/24.

Higher costs in children's services account for £4.9m over the overspend. This is partly due to the cost of placements in children's homes going up by 44 pc.

Demand continues to