Devon County Council is facing a funding shortfall of £19.8 million and 'huge financial challenges' in the years ahead, the county treasurer warned today.

County treasurer Mary Davis was commenting on the authority's financial outturn for 2019/20 which showed an underspending of £33,000 on the revenue budget of £509.9 million.

It is the 28th consecutive year that the county council has ended the financial year in the black.

However, in a report to councillors, Mrs Davis said: "The financial impact of the pandemic, the country's departure from the EU, ongoing pressures in social care and the funding shortfall in special educational needs and disabilities (SEND), mean the authority is facing huge financial risk in both the short and medium term.

"This, coupled with ongoing uncertainty over our core funding from Government, makes it very pleasing that we have ended 2019/20 the way we have."

Mrs Davis reveals that the council has £120 million in earmarked reserves. But she adds: "For the first time, the authority now also holds a negative reserve.

"The under funding of the SEND service has resulted in £19.7 million being held on the balance sheet.

"The creation of the negative reserve is in line with Government requirements and, whilst recognising this is a national issue, it is nonetheless a worrying development for local government. It is unclear how Government intends to rectify the historic and projected future under funding."

Mrs Davis will tell Devon's Cabinet next Wednesday: "Throughout the year there has been increasing concern over the funding shortfall relating to SEND.

"At the end of the year this funding shortfall is £19.8 million, mainly due to increased demand and rising costs around high needs and, in particular, independent special school placements.

"This is a national issue but that is little comfort. In line with requirements issued by the Department for Education, the county council must carry forward the whole funding shortfall to the Dedicated Schools Grant budget in future years, which will be held on the balance sheet as a negative reserve."

Mrs Davis says the Covid-19 pandemic started to have an impact on the authority's finances in March just before the end of the financial year when £843,000 of costs and lost income was incurred.