Maximum tax and rent rises agreed for Leicester as council fights to stave off bankruptcy

Leicester’s city mayor Sir Peter Soulsby

Leicester residents are facing council tax hikes after the city council voted to put up the charge by the highest possible amount amid warnings it is facing a financial cliff’s edge. Councillors last night approved the 4.99 per cent increase in the portion of tax paid to it by local households.

Some 3 per cent of the increase will go towards general spending and 2 per cent is earmarked for social care. It works out as an increase of just shy of £61 per year for the majority of households in the city, as most Leicester homes fall into Band A on the council tax scale of charges.

Rent rises were also approved last night for people in council housing. Again, the authority agreed the highest possible hike, 7.7 per cent, which will see average rents go up by £6.58 per week higher with an overall average rent of £85.48 a week. A 6.7 per cent increase in service charges for council tenants was also agreed.

The police and fire service also collect tax from residents in the city. Councillors voted to approve Leicestershire Police’s share of council tax for the next financial year at the maximum possible amount of £13 per Band D property, representing an increase of 4.76 per cent. The fire service’s share is increasing by 3 per cent – also the highest possible amount – working out at £2.36 a year more for Band D properties. .

The increase in the council’s share of the tax comes amid warnings over the dire state of the city’s finances. The authority has previously warned it will have to dip into an emergency pot of money to balance the books in 2024/25 – but will not have enough left to do so in 2025/26.

The council is legally bound to present a balanced budget each year. If it does not, it will have to file a Section 114 notice, essentially declaring itself bankrupt. The expected budget gap for the coming financial year is £61 million. At the end of this financial year 2023/24, it is predicting it will have £53.9 million left in its reserves, a pot of money used to bridge the gap between income and spending.

In addition to wiping out its reserves, then, the council will in 2024/25 have to take funds from an emergency account which has £15 million in it. This leaves the authority with just £7.9 million to meet costs in future years with a shortfall of £78 million in 2025/26 already predicted.

The council has previously said it would be tightening its belt throughout 2024/25, with cuts expected in all service areas, to help reduce the gap in 2025/26. City mayor Sir Peter Soulsby has said these cuts would likely be along the same lines as what is currently happening in Nottingham.

Nottingham City Council declared a S114 notice last year after being unable to put up the money to cover a £23 million overspend in its budget for this financial year. Nottingham set out its savings plan, with proposed sweeping cuts including pulling funding from bus services, the closure of care homes, removing funding from community centres, increasing car parking charges, cutting street sweeping to just four times a year and culling around 500 council staff roles.

Speaking at last night’s meeting, Sir Peter said reduced grants and rising costs had put the council in a “very difficult and painful position”. He said: “Councils across the country are facing very similar circumstances and some have actually plunged over the edge and had to have their finance officer issue a section 114 notice. We are in a somewhat more favourable position because while we are approaching a cliff edge, the management of our budget over recent years has been very far-sighted.”

“We do find find ourselves here despite the responsible steps we have taken over the past 10 years to control our spending and produce balanced budgets,” he added. “We haven’t, unlike some authorities, made unwise investments. We have built up reserves and we’ve avoided crisis cuts.”

“This year, the pressures are going to be even more severe if we are to avoid going over that cliff edge some 12 months from now,” Sir Peter added. “It’s not a situation of our making, but we can’t shy away from the harsh reality this is going to be a very, very difficult year for us with some very difficult decisions to make.”

However, opposition councillors disagreed with the city mayor’s claims the council has handled its money wisely. They accused him of having wasted millions of pounds over the past 10 years.

Green councillor Patrick Kitterick raised the Jewry Wall Museum, the opening of which has been delayed after issues with the contract. He said: “We have a council which has spent years and between £10 million and £15 million renovating the Jewry Wall Museum, which, by the time it is ready to open, we will not actually be able to open it because we won’t have the money for the running costs.”

Liberal Democrat councillor Nigel Porter claimed millions had been “wasted” on the Haymarket Theatre consortium and said the authority had written off a multi-million pound loan to the Space Centre. He claimed spending this year was around £140 million more than when Sir Peter took over leadership of the authority, and it was now the people of Leicester who were left picking up the bill through increases in council tax and rent.

Coun Porter said: “I would much rather see that money in the pockets of the poorest people in this city, rather than being wasted by Sir Peter and this council… This proposal will make the poorest people in this city poorer.” He also called for an external organisation to examine the council’s accounts to “what has been going on” with spending.

Leader of the Conservatives – the main opposition on the council – Deepak Bajaj referred to the plans for a new shopping link in Cank Street in the city centre, saying Sir Peter wanted to spend millions more pounds “on shipping containers”. He accused the city mayor of “blaming the Government” for cuts to local government spending to hide the financial cost of his own decisions.

Coun Bajaj added: “This Labour administration is not capable of protecting our much-needed frontline services which matter the most to the people in our city.” Ultimately, councillors voted to support the budget with 29 votes for and 17 against.