Lambeth Council could spend £47million more than planned on pay-outs to people abused in its care as kids.

The South London Council established a compensation scheme for people who claimed to have suffered abuse in its children's homes between the 1950s and 1980s in 2018. An independent inquiry which published its findings in 2021 concluded children in Lambeth residential and foster care suffered levels of cruelty and sexual abuse "hard to comprehend".

Lambeth officials thought they would have to set aside £125m for pay-outs to alleged victims but the council could now end up spending as much as £172m on compensation claims, after a surge in last-minute applications to the scheme before it closed on January 1, 2022. 

A total of 220 applications for pay-outs from the council were made by alleged victims in December 2021, almost the same number as received by the council over the previous 11 months. 

Overall, 2,235 applications for compensation were made by alleged victims over the four years the Lambeth Redress Scheme was open between January 2018 and January 2022. 

The predicted overspend was outlined in Lambeth Council's 2023/24 budget report. The document reads: "Although it was always forecast that there would be an increase in application numbers towards the end of the scheme the volume of applications received in the last few days before closure was significantly greater than expected.

"Previous forecasts of the costs of the scheme were in the region of £125m… Our actuaries have remodelled the costs and the revised forecast is for total redress costs of between £155m and £172m." 

The council has asked the government for £47m extra in financial support to cover the unexpected additional costs. Government officials have already given Lambeth £125m in support to cover the original predicted cost of pay-outs.

The support is being provided through capitalisation direction – a loosening of accounting rules whereby councils can use borrowing and capital receipts to fund short-term costs. It allows local authorities to avoid using reserves to fund these costs and can help them set a balanced budget. 

The council's budget document continues: "We have submitted an application to the Department of Levelling Up, Housing and Communities for additional capitalisation direction up to the projected £172m and are awaiting the outcome of their discussions with [the] Treasury."

Thousands of people claim to have been subjected to sexual and physical violence at Lambeth Council children's homes between the 1950s and 1980s, in one of England's worst child abuse scandals.

As of October last year, the council had paid out over £87m to victims. The council has agreed to issue all known victims with a formal apology, offer them counselling and provide them with independent legal representation when applying for compensation. 

Cllr Holland, leader of Lambeth Council, said: "We have apologised to the victims and survivors for the inexcusable and appalling mistreatment they were subjected to. On behalf of this council, I wish to restate our sincere and heartfelt apology to all victims and survivors of abuse and neglect whilst in Lambeth's care."