A small budget surplus was recorded by Devon County Council in the last financial year following an unprecedented cost-cutting programme.

It finished the 2022/23 financial year with an underspend of £156,000 of its revenue budget of almost £630 million.

It comes less than a year after Devon's finance chief warned councillors that Devon faced a £30.5 million overspend with a potential further £10 million on top because of soaring inflation.

That led to Angie Sinclair calling for urgent action to cut costs, with a group of leaders from each council department set up to go through the budget line-by-line to identify savings as part of a 'financial sustainability programme'.

In a report to Devon's ruling Conservative cabinet on Wednesday [14 June], Ms Sinclair said it meant the authority avoided overspending, while it also managed to increase income and make more use of funding sources.

But she warned that – in common with councils across the country – Devon continued to face financial challenges.

"Demand for services is higher than ever before, prices continue to rise and labour market shortages are still being experienced," she said.

"This is being felt acutely within our adults and children's services. This trend of rising demand pressure and rising prices is expected to continue into 2023/24 which will create a very challenging financial environment for the council going forward."

Cabinet member for finance, Councillor Phil Twiss (Conservative, Feniton), told the meeting: "If we hadn't responded, the alternative would have been a significant budget overspend and we would today be taking tens of millions of pounds out of our diminished reserves.

He added: "The work in the 2022/23 financial year has bought us time to truly start transforming our services, investing in new systems, and streamlining our operations.

"This is only the end of the beginning, make no mistake,  as recovery continues and DCC is put back onto a medium and long-term sustainable track.

"However, there is no sugar-coating that 23/24 financial year is clearly going to be very tough with very difficult choices to make on how we deliver services to the residents of Devon."

But opposition leader Julian Brazil (Lib Dem, Kingsbridge) highlighted the "elephant in the room" – a growing overspend on Devon caring for children with special educational needs and disabilities (SEND).

Councils across the country have been told by the government to put their overspends into separate ring-fenced accounts while it develops a new funding model – an arrangement recently extended to 2026.

Since 2020, Devon's total running overspend on the SEND service – effectively debt – has risen to around £127 million, and is projected to increase to £153 million by next March. The amount is more than the county has in reserves.

"We haven't underspent, we've overspent," Cllr Brazil said. "We've overspent by tens of millions of pounds."

He questioned whether discussions between Devon and the Department for Education about the debt would "save us," warning: "Until we have a much more candid approach to our budget position and our revenue budget we will continue to go merrily on until we hit the buffers."

Cllr Brazil added: "I just worry for the most vulnerable and needy people in Devon because they, inevitably, will suffer the most when we make the cuts."

Meanwhile, Labour's Carol Whitton claimed it was an "absolute disgrace that the [SEND] overspend is sitting there and has not been sorted."

She was in "absolute support that there has to be more work done to control spending and to create a sustainable budget in future years" but believes there is a "lack of appreciation" of under-funding from central government.

In response, chief executive Donna Manson said a first formal meeting with government civil servants will take place about the overspend next week.

Cabinet member for children's services, Cllr Andrew Leadbetter (Conservative, Wearside & Topsham) added he didn't share the "pessimism" of the two opposition leaders and is "confident" a solution will be found.