Leicestershire County Council's leader says tough decisions must be made, but the authority will not declare bankruptcy

The leader of Leicestershire County Council says tough spending decisions must be made, but the authority will not end up in a position where it has to declare bankruptcy.

The council last week set out its draft budget for the next financial year.

Despite having already identified £36 million of potential general savings and a further £40 million of savings related to special educational needs and disabilities (SEND) spending, a further £85 million of savings needs to be found over the next four years, council officers said.

To balance the books next year, £12 million will need to be taken from the council’s reserves.

Council leader and leader of the local ruling Conservative party, Nick Rushton, says this is the first time the authority has had to dip into that pot of cash to close the gap between its income and outgoings.

He said: “[The financial situation is] worse than we’ve ever had. All years have been bad since I’ve been leader and this is the most challenging.

“Not only have we this year had to use £10 million of reserves, next year we’re projecting [using] £12 million reserves and then it gets exceedingly difficult moving forward. We will have to make some radical decisions. And of course, we’ll also have to put council tax up by the maximum allowable.”

The high rates of inflation in both general costs and in construction costs have placed an added burden on council budgets this year, he added. The national living wage increased announced in the Autumn Statement is also adding to the strain and expected to cost the authority an extra £20million.

Hiking council tax by the highest amount possible – three per cent towards general spending and two per cent towards social care costs – will bring in around £18million. The proposed council tax increase is set to cost a Band D property £76 more next year.

Coun Rushton said: “When you give people a 10 per cent jump in the national living wage, it’s not only the ones at the bottom who have struggled and probably needed, but it also affects up all the differentials moving up beyond the national living wage. You’ve got to then move the other people on higher wages up to maintain differentials and it’s like a domino effect. It goes all the way through.”

He added: “The problem is I’ve got no more income. I can put council tax up by the five per cent. But that amount only covers the national living wage increase.

“So all the other demands – in adult social care, children’s social care, highway construction inflation, staff shortages – we get no more money for that. It’s really difficult as a county, when your expenses go up with demand and yet your income is controlled by government.”

Despite the challenging position of the council, Nick Rushton says he will not file a section 114 notice – essentially declaring the council bankrupt.

“Declaring a S114 does not solve anything,” he said. “All it does is send unelected accountants and commissioners in to deal with the problems that you have not dealt with.

“They don’t come with any money. There’s no magic money tree that comes with commissioners. Otherwise a lot more councils would call commissioners in.”

He added: “Also it’s about prestige and reputation. To say we’re bankrupt, it destroys your reputation with the government, it destroys your reputation with members of the public who elect you and expect you to run a balanced budget.

“That is why we will not do it. We will make the decisions necessary to ensure that our budget washes its face. It’s pride, it’s principle.”

There is a lot of uncertainty around local government funding reforms. Promised in 2016, they have since been pushed back and are now not expected until after a General Election.

Coun Rushton said he wants the next Government to carry out a review of social care and how it’s funded – the single biggest expense for most councils. He added: “They really need to address the massive increase in social care, be it children or adults.

“Councils are really struggling to cope with the increase without sufficient resources. The NHS moans every year and they just give them a load of money whereas they don’t do anything to help us.

“And the NHS cannot survive without us providing the social care. I mean, we can’t survive without the NHS, don’t get me wrong, but they seem to give favouritism to hospitals and not enough to the people that provide the social care, both for elderly adults and children.”

He concluded: “We’re going to do our best with the money we’ve got to provide the best service we can and not declare ourselves bankrupt, but it will necessitate tough choices. There’s no point beating around the bush.”

But Leicestershire Labour leader Amanda Hack is says urgent help is needed to address the financial issues.

She said: “The Conservative government in Westminster has ignored repeated calls from local authorities like Leicestershire for the cash needed to meet our statutory obligations – everyday things like adult social care and school transport.

“Council officers in Leicestershire have worked extraordinarily hard to balance the books, but what was a difficult task, is now practically impossible thanks to the Tories’ disastrous budget in 2022, which sent interest rates soaring, crashed the economy and made the cost-of-living crisis even worse.

"Once again local taxpayers are being asked to pick up the bill, but the deficit cannot be covered.

“Leicestershire needs urgent help to bridge the gap. The Conservatives at County Hall must pick up the phone and talk to their colleagues in Westminster to work out a rescue plan. After all, they got us into this mess, and they have a responsibility to get us out of it.”