Papers published today (1 July ) show the challenge that inflation is presenting to council budgets.

The team putting together the budget for the new Somerset Council will be bringing together the budgets of the five current councils and delivering the planned £18.5 million in savings from the move to a single unitary council. However, the dramatic rise in inflation is making the already complex budget programme hugely challenging.

Councillor Liz Leyshon, Somerset County Council Deputy Leader and Executive Lead Member for Finance and Resources said: "Setting the budget for the new Somerset Council was already complex. We knew at the start of this process that all five councils were carrying potential budget deficits into the new council and that we would have to identify £28 million in savings for the coming year. Just bringing those five separate councils' budgets into one body was always going to be difficult.

"The move to a single council will deliver savings in buildings, senior staffing and contracts over the next three years. However, like other councils we currently face a further difficult combination of challenges.

"Most dramatically, inflation is eating away at our budgets and is already hitting us hard in demand driven care services and in construction projects."

"At the same time, proposed changes to the "fair cost of care" in social care, and regulatory changes in children's services are not properly funded, leaving the new council with a potential £20 million cost at a time of rising demand."

Papers published today by Somerset County Council as part of the process for setting next year's budget show the scale of the challenge facing the new Somerset Council. While officers had previously identified the need to make £28 million of savings for the new council, inflation and demand for services have increased that budget gap to £44 million.

Budget tracking for the County Council also shows a potential £14.4 million overspend for the current financial year if action is not taken to limit spending. This is driven largely by inflation and particularly by rising costs in demand-led services such as adult and children's social care as regulatory and market changes hit these departments. District Councils will report their current year budget projections in a month's time.

Councillor Leyshon added: "Good financial management and very thorough monthly budget monitoring at the County Council has meant that we have identified potential overspend early and I expect tough financial management this year to bring spending back down. But rampant inflation is hitting all businesses and inevitably those businesses will be passing costs on to the public sector.

"Obviously Somerset isn't alone in facing this challenge and the Local Government Association this week suggested that the sector as whole will have a £3.6 billion budget gap within two years. We will be lobbying government for greater clarity about funding and making the case for the support needed, particularly around "fair cost of care".

"But this doesn't hide the fact that this will be a very challenging budget for the new Somerset Council and will require very clear planning. We are starting that planning in good time."