How to read this page#
Every number carries a tag. Council means the figure is the council's own, from the document and page in the sources table. Official means it comes from the Bank of England or the government. Our calculation means we worked it out from those figures; the formula is written out in the arithmetic. None of the paths below is a prediction, and none is given a probability.
The test that misses the biggest exposure#
The council's accounts include the standard test of what a 1% change in interest rates would do. Its answer for the council's own budget is £0.104mCouncil a year, all of it interest the council would earn on money it has invested.
The test treats the council's borrowing as fixed-rate at a single point in time, which is the accounting convention. It does not model what happens when short-term loans come due and have to be replaced. At 31 March 2026 the council held £730.8mCouncil of temporary borrowing, £508.8mCouncil of it from other local authorities. That is where a change in rates reaches the budget first: every percentage point on it is about £7.3mOur calculation a year.
The council borrows short on purpose, and says why:
“the Council will continue to borrow using shorter-dated loans (as much as is possible) until the rates fall and the Council can lock into some longer-term loans at a more beneficial level”
Three paths to 2029#
The strategy Full Council approved in February used its treasury adviser's forecast, which had Bank Rate falling to 3.25%Council by September 2026 and staying there to March 2029. The strategy itself notes that “the risks to the forecasts are to the upside”. On 16 September 2026 the Bank of England held Bank Rate at 3.75%Official, and three of its nine members voted to raise it.
The table measures three paths against the council's own assumption. It assumes temporary borrowing stays at its March 2026 level and reprices one for one with Bank Rate. The third path is one point above today, the same size of shock the council's accounts use, which puts it one and a half points above the council's assumption.
| Path | Bank Rate | Extra a year on temporary borrowing | Share of the General Fund balance |
|---|---|---|---|
| The council's assumptionIts treasury adviser's forecast of December 2025, used in the strategy | 3.25% | The budget's baseline | — |
| Rates stay where they areBank Rate as held by the Bank of England on 16 September 2026 | 3.75% | £3.7mOur calculation | 8.3%Our calculation |
| One point above todayThe 1-point stress the council's own accounts use | 4.75% | £11.0mOur calculation | 24.8%Our calculation |
The 9% limit#
The council caps what borrowing may cost as a share of its budget: financing costs as a share of the General Fund's net revenue, with a limit of 9%Council. Its own estimate for 2028/29, on the adviser's rates, is 8.6%Council, against a net revenue budget of £974.6mCouncil.
If rates stay where they are, the extra refinancing cost would take that ratio up to 8.97%Our calculation. One point above today, it would take it up to 9.72%Our calculation, past the limit. These are upper figures: the council's borrowing is shared with its housing account, which the strategy measures against a separate ratio, so not all of the cost would fall on this one.
Locking in long-term debt#
The strategy plans £500mOur calculation of new long-term borrowing between 2026/27 and 2028/29, taken when long rates fall. Its adviser's target for a 10-year PWLB loan by the end of 2027 is 4.70%Council; the rate on 22 December 2025 was 5.39%Council. If that borrowing were fixed at the December rate rather than the target, it would cost £3.5mOur calculation a year more, for as long as the loans run. (Current PWLB rates are published by the Debt Management Office, whose site we could not read; these are the strategy's own, dated figures.)
Against the reserves#
At 31 March 2026 the council's General Fund balance, its general reserve for unforeseen pressures, was £44.2mCouncil, and its other usable reserves were £252.9mCouncil. The table above sets each path's annual cost against the General Fund balance as a sense of scale. It makes no claim about how the council would meet such a cost.
The council's cash is also falling. The strategy projects its investments dropping from £354mCouncil to £100mCouncil, and says why:
“It is forecast that the Council’s cash investment balance is going to materially reduce over the Medium-term Financial Plan period, mainly due to the impact of the Dedicated Schools Grant deficit.”
Lender-option loans#
The council holds £112.5mCouncil of lender-option (LOBO) loans at rates between 4.01%Council and 4.625%Council, with 39 to 52 years left to run. On set dates, between every six months and every five years, the lender may raise the rate; the council can then accept it or repay the loan.
If every lender used that option and the council replaced the loans at the 50-year PWLB rate of 5.78%Council (22 December 2025), it would pay between £1.3mOur calculation and £2.0mOur calculation a year more. That is an upper figure: it requires every lender to act at once.
The schools deficit#
The council's accumulated deficit on the Dedicated Schools Grant, which funds schools and support for children with special educational needs, was £81.2mCouncil at 31 March 2026. A national rule keeps these deficits off council budgets. The government extended it to March 2028.
The deficit is still growing. The budget set in February 2026 allowed for £45mCouncil or more to be added in 2026/27 alone. The council's first-quarter forecast, to Cabinet in September 2026, puts that year's addition at £56.0mCouncil, which would take the deficit to £137.2mCouncil before any grant. The budget report forecasts £180mCouncil by March 2028, also before any government grant:
“For Cornwall the forecast is a deficit of c£180m which is likely to be in excess of our useable revenue reserves.”
In February 2026 the government set out a grant covering 90% of each council's eligible deficit as it stood at 31 March 2026, paid only once the Department for Education approves a local SEND reform plan. As at the accounts, issued on 29 June 2026, Cornwall's Cabinet had approved its plan for submission, and the council said that if it is approved it could receive about £70mCouncil. That would leave roughly £11.2mOur calculation of the March 2026 deficit with the council.
The grant covers the deficit as it stood at 31 March 2026, not what is added after that. Set against the council's forecast for March 2028, the expected grant leaves about £110mOur calculation for which no funding has been announced. The council's budget report says:
“the Government has provided far less clarity on how it intends to address the unfunded element of deficits accrued to the end of 2025/26, or any further deficits that arise in 2026/27 and 2027/28 before the end of the statutory override in March 2028.”
The deficit reaches borrowing directly. The budget already provides for the ongoing cost of financing 50%Council of the deficit forecast to March 2028, from 2028/29, on the prudent assumption that the council will have to fund part of it. Writing about councils being reorganised, the government's note sets out the approach it applies to every council:
“successor local authorities will need to plan to be able to meet the cost of the residual deficit from their own resources in 2028-29, including setting aside appropriate reserves in the preceding years, in line with the approach for all other councils.”
The council's accounts add:
“A major risk remains the Special Educational Needs (SEND) deficit, forecast to grow significantly if not addressed nationally.”
What the council's own safeguards say#
Two people are required by law to give a view on the council's finances: its chief finance officer, who reports on every budget, and its external auditor. This page does not predict their judgement. It reports it.
The chief finance officer, February 2026
By law the council's Section 151 Officer must say whether the budget's estimates are robust and its reserves adequate. Their opinion on the 2026/27 budget:
“The budget estimates for 2026/27 are reasonable and achievable subject to robust financial management and a sustained reduction in demand pressures.”
“The budget assumes a national funding solution is implemented to address SEND deficits beyond 2025/26 up to when the statutory override ends in March 2028.”
The same statement says the council's risk profile will increase materially over the plan, naming three causes: demand for adults' and children's services, the savings to be delivered, and loans to the council's companies. On the first:
“Continuing levels of demand in Adults and Children’s services driving significant cost pressures that must be mitigated otherwise reserves will become depleted and inadequate.”
The minimum General Fund balance was set at £44.3mCouncil. The council's own assessment puts its residual financial risk for 2026/27 at about £52mCouncil, more than that balance. The budget responds by moving money from two other reserves into its Financial Sustainability Reserve.
Three months into the year, the council's first-quarter report forecast an overspend of £17.0mCouncil for 2026/27, reduced to £10.9mCouncil by the mitigations it had identified by then. The report says:
“However, after current mitigations, a revised projected forecast overspend of £10.857m remains, which is in excess of the balance of the Financial Sustainability Reserve.”
The external auditor, December 2025
Grant Thornton's report on 2024/25 found a significant weakness in the council's arrangements for financial sustainability, for the second year running, because of the schools deficit:
“We have concluded that the significant weakness in arrangements remains and have retained a Key Recommendation in this area.”
“If the statutory override is not further extended in April 2028 the Council will become liable for the DSG deficit. This would present a material risk to long-term financial sustainability, with potential implications for wider council services.”
It also found that “the Council’s high level of net debt remains a concern for long-term financial sustainability”. It found no significant weakness in the council's governance or in how it secures value for money, and it said it did not expect to use its statutory powers:
“We are not expecting to make any written statutory recommendations under Schedule 7 of the Local Audit and Accountability Act 2014.”
“We have not identified any issues that required us to issue a Public Interest Report (PIR) under Schedule 7 of the Local Audit and Accountability Act 2014.”
The council's own assessment
Accounting rules require the council to say in its accounts whether it might need to issue a particular statutory notice. Its accounts explain it:
“in recent years, a number of Authorities have issued what is known as a Section 114 notice. Such a notice is given when, in the opinion of the S151 Officer (statutory financial officer), the Authority has, or is about to, incur unlawful expenditure.”
And conclude:
“The Council will continue to plan robustly, both for its services and its financial management and considers that the likelihood of it needing to issue a S114 notice in the short to medium term as “low”.”
Cornwall does not appear on the government's lists of councils given exceptional financial support for 2024-25, 2025-26 or 2026-27.
Read together, the two safeguards name the same threat: the schools deficit, the date in March 2028 when the national rule ends, and a budget that depends on a national solution not yet announced.
Savings#
All of this sits on top of a savings requirement of £154mCouncil over the three years of the council's financial plan. The council's internal auditors rated delivery of those savings high risk; see the 2025-26 audit investigation.
What to watch#
- Bank Rate. Each decision moves the gap between the budget's assumption and reality. The Bank of England publishes its decisions and votes.
- The 2027/28 Treasury Management Strategy. Approved with the budget next February, it will show whether the council has changed its rate assumption, and what it now expects financing costs to be against the 9% limit.
- The SEND reform plan. Whether the Department for Education approves it decides whether the grant of about £70mCouncil arrives.
- 27 November 2026. Grant Thornton's report on 2025/26 is due at the council's Audit Committee, with its next verdict on financial sustainability.
- March 2028. The end of the national rule that keeps schools deficits off council budgets.
This page will be revisited after the 2027/28 strategy is published. The council's own figures each quarter are tracked on Cornwall Council's finances, quarter by quarter.
The arithmetic#
Every figure tagged “our calculation”, with the sum behind it.
| £7.3m | £730.8m of temporary borrowing × 1 percentage point |
| £3.7m | £730.8m × (3.75% − 3.25%) |
| £11.0m | £730.8m × (4.75% − 3.25%) |
| 8.97% | 8.6% + £3.654m ÷ £974.6m net revenue budget |
| 9.72% | 8.6% + £10.962m ÷ £974.6m net revenue budget |
| £500m | £700m planned by 2028/29 − £200m by 2025/26 |
| £3.5m | £500m × (5.39% − 4.70%) |
| £1.3m | £112.489m × (5.78% − 4.625%) |
| £2.0m | £112.489m × (5.78% − 4.01%) |
| £11.2m | £81.152m deficit − c£70m expected grant |
| £110m | c£180m forecast to March 2028, before the grant (budget, Feb 2026) − c£70m expected grant (accounts, June 2026) |
| 8.3% | £3.654m ÷ £44.249m General Fund balance |
| 24.8% | £10.962m ÷ £44.249m General Fund balance |
Sources and method#
Council figures come from Cornwall Council's own published papers; official figures from the Bank of England and GOV.UK. Every source was read on 27 September 2026, except the first-quarter 2026/27 report and its Appendix 4, read on 11 October 2026, and every figure checked against the page given.
| Source | Detail |
|---|---|
| Treasury Strategy 2025/26 — Out-turn Report (Appendix 3 to the Council Performance Report 2025/26 Q4), Cabinet 17 June 2026 | Portfolio mix: temporary borrowing and its lenders (p12) |
| Cornwall Council Statement of Accounts 2025/26 (unaudited) | Reserves (p10); savings requirement and SEND risk (p11); commentary on the risk of a statutory notice (p12); DSG deficit and the expected grant (p80); interest-rate sensitivity (p116–117); LOBO loans (p117) |
| Treasury Management Strategy 2026/27 — Appendix 5 to the budget, Full Council 24 February 2026 | Financing-cost ratio and its limit (p10); net revenue budget (p11); investments (p19); adviser's rate forecast and PWLB rates (p22–23); borrowing strategy (p24) |
| Cornwall Council Comprehensive Spending Review: Budget Proposals 2026/27 to 2028/29 — report to Full Council, 24 February 2026 | Section 151 Officer statement on the robustness of estimates and adequacy of reserves (paras 2.95–2.104, PDF p23–24); minimum General Fund balance (para 2.89, p22); DSG (paras 2.105–2.109, p24–25; para 2.119, p27) |
| Budget Proposals 2026/27 to 2028/29 — Appendix 1 (Medium Term Financial Plan and Reserve Statement) | Residual financial risk exposure for 2026/27 (p48) |
| Council Performance Report 2026/27 (Quarter 1) — report to Cabinet, 23 September 2026 | Revenue forecast and mitigations (para 1.4, p3); overspend after mitigations against the Financial Sustainability Reserve (para 6.3, p22) |
| Council Performance Report 2026/27 (Quarter 1) — Appendix 4, Cabinet, 23 September 2026 | High Needs in-year deficit and the cumulative DSG deficit (p11) |
| Grant Thornton, Interim Auditor's Annual Report, year ending 31 March 2025 (16 December 2025), Audit Committee 13 January 2026 | Financial sustainability (p8, p17–21); statutory powers (p9); net debt (p19) |
| Grant Thornton, Audit progress report and sector update, Audit Committee 25 September 2026 | Date for the 2025/26 Auditor's Annual Report (p15) |
| Exceptional Financial Support for local authorities for 2026-27 (GOV.UK) | Councils given exceptional financial support; Cornwall is not listed here, nor on the 2024-25 and 2025-26 lists |
| Bank of England, Monetary Policy Summary, September 2026 | Bank Rate held at 3.75% on 16 September 2026, by a 6–3 vote |
| Explanatory note on the government's approach to Dedicated Schools Grant deficits (GOV.UK, 9 February 2026) | High Needs Stability Grant: coverage, conditions, the residual deficit |
| Local government finance policy statement 2026-27 to 2028-29 (GOV.UK, 20 November 2025) | Paragraph 113: the DSG statutory override extended to March 2028 |
Corrections and right of reply
The calculations on this page are ours, built on the council's published figures. The council is welcome to respond to any of them, and this page will be corrected or updated with any comment it provides. Contact us.