STAFF cuts could be made at Southampton City Council as the authority scrambles to draw up a fresh budget amid a major spending review just weeks after councillors hiked council tax.

The revelation was made in an external auditor's report into the council's finances discussed at a public meeting on Monday night.

External auditor Ernst & Young has urged the Labour-run council to include new cost savings in an updated medium-term financial strategy in July - and draw up more savings on top - in a bid to battle the "very serious" situation.

As reported, the council's former chief financial officer's last act was to warn it could be forced into effectively declaring bankruptcy.

READ MORE: Labour denies responsibility for budget crisis

On Monday night auditor Kevin Suter said there was "a clear risk" and said the council "needs to take action".

He said it could be "too late" if councillors wait to address the shortfall in a budget next year. The 2023/24 budget in February increased council tax by 4.99 per cent and saw streetlights in many areas turned off between 1am to 4am.

He told the Governance Committee: "We wish to leave you with no doubt of the seriousness of the situation."

The council is now carrying out a spending review as part of looking again at its medium-term financial strategy.

READ MORE: What we know so far as council told to make cuts or risk going bankrupt

This is expected to involve a review "to determine how reductions can be made" in "staffing and procurement" and how income can be increased in "fees and charges," the audit report said.

It added: "We have been informed that the council did not include all of the cost-saving options that were potentially identified, within their 2023/24 budget.

"Given the financial position, this has left the council more vulnerable than the position could have been, with more time to consider the implement them during 2023/24, and we believe these should savings should be brought forward."

A spokesperson from the council told the Daily Echo that officers are currently working on "future budget proposals", but said it would be "inappropriate" to share the details at this time.

Auditors said they were aware the budget taken to cabinet in February 2023 would reveal the council is in "financial difficulties".

READ MORE: City council could go bankrupt by next year, chief finance officer warns

They note that the council is using reserves of £23.7m on a "one-off" basis to balance the budget for 2023/24.

Predicted reserves at the end of 2023/24 are £21.0m, a reduction of £65m over the previous five years from £86m at the end of 2018/19.

In the governance meeting, Mr Suter said that using reserves like this is "unsustainable," adding "once they're gone, they're gone".

The report states that the council's cost pressures are due to various national issues.

They include the cost of living crisis, an increase in the cost of energy, higher than expected nationally set pay awards, rising interest rates, high demand for council services, inflation, and the ongoing impact of the Covid-19 pandemic.

Directors are now being given targets to cut spending, capital investment is being looked at, and individual budgets are under review.

The audit report also says the council must "ensure that it has fully considered the underlying reasons for not delivering the planned budget and savings in 2022/23".

Council leader Satvir Kaur said she was “not aware” of the report.

A spokesperson from Southampton City Council said: "The budget pressures being experienced by local authorities across the country have been well documented recently and Southampton City Council is not immune to these.

"Our budget proposals for the current financial year (2023/24) were published and agreed by Full Council in February.

"Officers are currently working on future budget proposals that will be discussed with the new Cabinet following the local elections next week and it would be inappropriate to discuss details of those proposals at this time.”

Leader of the Tory opposition, Cllr Daniel Fitzhenry, said that the Labour Council has offered "no clear plan" on how to rectify the budgeting issues. 

He told the Daily Echo: "It's clear the auditors see that the Labour council is in a very difficult position and that immediate action needs to be taken. 

"That will either mean Labour has to cut services or increase council tax to solve this."