Leicester’s nightmare before Christmas: Section 114 ‘almost inevitable’
The city mayor has written to central government over fears about the councils’ ‘severe budgetary problems’, estimating they will hit bankruptcy within the next 18 months.
The current cost-of-living crisis has taken its toll on various councils across England, with Birmingham having been in the spotlight recently. However, it’s latest victim is Leicester City Council.
Sir Peter Soulsby, the mayor of Leicester, has recently written to Michael Gove, secretary of state for levelling up, housing and communities, to highlight the local authorities dire financial state, claiming they need help to balance the books in 2025-26 – every year councils are asked to present an annual budget, while reserve pots of cash are set aside to help them make up the gap between the money coming in and out from the government.
In his letter, Sir Peter wrote: ‘As of 31st March 2023, our reserve to support the budget stood at £66m. The 2023/24 budget commits £34m to support spending.
‘In 2024/25, in common with many others, we face substantial cost pressures. Savings are increasingly difficult to find.’
‘Without substantial cuts we face a near impossible cliff edge in 2025/26. The remainder of the reserve faces exhaustion in 2024/25.’
Against this backdrop, Leicester City Council is estimating the prices of services to increase, for example the authority expects social care to cost an extra £50m a year by 2025.
Following this, Amy Oliver, director of finance, said: ‘It is a legal requirement for councils to provide some services, such as social care, and if the cost of these services continues to go up, either the government must provide more money or other services will have to be cut.’
In response, a spokesperson from the department for levelling up, housing and communities said: ‘We have made £5.1bn of extra funding available to local authorities through the Local Government Finance Settlement, with almost £60bn available for the sector – up 9.4% on cash terms on 2022/2023.
‘For Leicester City Council, this represents an increase in Core Spending Power of up to £32m or 9.9% – making available a total of up to £356.2m in 2023/24.
‘Councils are ultimately responsible for the management of their own finances, but we will continue to monitor pressures they face and stand ready to talk to any council that is concerned about its financial position.’
To try and take control of the situation, Sir Peter wrote an email to councillors last week where he announced there would be a freeze on spending of more than £5,000 ‘where the expenditure cannot be seen as immediately essential.’
He added: ‘We are a responsible Council. In their recent report our external auditor writes that Leicester City Council has “a strong record of financial and budgetary management” and that they have “not identified any significant weaknesses in arrangements to secure financial sustainability.
‘We have always been prudent in our management of financial affairs. We have none of the attributes the government ascribes to ‘failing’ authorities.
‘Without a dramatic shift in the Government’s position on funding Local Government, I fear for the future of vital local services in Leicester and throughout the country.’
Image: Chronomarchie
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