There could be further cuts made to public services in Hampshire as the county council tries to avoid effectively declaring bankruptcy.

County councillors will discuss the crisis at a Cabinet meeting on Tuesday.

Currently facing a whopping £56.7m deficit in 2025/26, Hampshire is now embarking on a comprehensive review to find potential new cuts to alleviate the pressure as current savings proposals will fall short of the level needed.

Some of those cuts would only be made in the face of a section 114 notice – in effect declaring itself bankrupt – which could see government-appointed commissioners come in to run the council in the event it could no longer pay for services.

The county council announced a projected budget gap by 2025/26, primarily attributed to escalating costs associated with adult social care, school transport, and special educational needs. To try to plug the gap, the council developed a savings program with which £90.4 million were identified through the cuts and changes in all directorates’ services.

Some of the proposals include making cuts to public transport, turning off street lights and removing school crossing patrols, suspending all non-statutory local bus and community transport services, reducing staffing at headquarters, and ending homelessness support services.

In November 2022, in a call for urgent financial help from the government to help them avert a “disaster”, council leader Rob Humby and the leader of Kent County Council, Roger Gough, sent a joint letter to the Prime Minister lobbying for more support to local authorities and outlined the “drastic budget implications” they were facing.

Even though all hopes were pinned on what turned out to be a “disappointing” 2023 autumn statement, council chiefs say inflation and a higher-than-expected rise in the minimum wage are piling pressure on already stretched finances.

As part of the financial outturn reporting process for 2022/23, most of the additional funding required to bridge the £86 million gap for 2024/25 was identified, but £2.4 million is still needed.

The updated medium-term financial strategy (MTFS) position, together with savings proposals for the 2025/26 financial year document, indicated that even if all of the savings proposals were implemented, there would still be a recurring gap of £41.6 million and a total gap in 2025/26 of £56.7m due to the “timing of savings delivery”.

Considering this, the county council said it will continue looking at “what options are available to help close this gap on an ongoing basis”.

For that reason, the corporate management team has implemented a work to look closely at what a legal minimum service level looks like across the council’s full range of services by next autumn.

This document includes two main options. The first implies further service changes or reductions that could be implemented to help close the remaining gap for the 2025/26 budget.

The second option is to seek options for service reductions that would only be implemented in the face of a section 114 notice, such as reviewing members’ devolved budgets, which currently total £624,000, or the withdrawal of the annual contribution towards capital spending.

The council’s financial update and budget setting and provisional cash limits 2024/25 said: “Clearly, longer term, this does not make sense as it only stores up financial problems for the future, but in the face of a section 114 notice, there are options we would have to consider.”

Issuing a section 114 notice at this stage is deemed counterproductive, as it would not address the underlying financial challenges the council has. However, it remains a possibility if the budget gap remains.

The financial update continues: “It is not expected that this work will find the full remaining £41.6m of savings needed to balance the budget in 2025/26 but is an important part of the evidence we need for government and in reviewing submissions we therefore need to be able to apply the ‘commissioner test’.

“In essence, if commissioners were sent in to review our financial position, they should not be able to find any instance of expenditure that was not already at the LMSL (legal minimum service level).

“With this in mind, the intention would be to consider any added value of having external validation of the work that had been completed as this would form a very important part of our submission to the government in advance of the comprehensive spending review, highlighting that the county council is unable to balance its budget with the funding it has and cannot make any more savings to close the financial gap.

“At this stage, it would be pointless issuing a section 114 notice (albeit the regulations would require us to) since issuing an instruction to the county council to address the budget shortfall when we had already exhausted all options for saving money would clearly not achieve anything.”

The council’s cabinet will consider the paper on Tuesday (December 12).