Leicester’s council is on the brink of bankruptcy and now faces having to make ‘savage’ cuts to services to balance the books, the city’s mayor has warned.
In a blunt assessment of Leicester’s financial future, Sir Peter Soulsby said that without urgent cash from the Government, the Labour-run council would soon face the ‘real prospect’ of a financial meltdown.
In a letter to Levelling Up Secretary, Michael Gove, Sir Peter said Leicester was ‘running out of options’ to balance the books in 2025-26 and warned the budgets covering sports, social care, leisure, parks, museums and libraries could be slashed.
The Leicester mayor added that without urgent additional aid from Whitehall, it was ‘almost inevitable’ the authority would follow the likes of Birmingham City Counciland others in issuing a section 114 notice, effectively declaring it bankrupt.
The Government insisted it was ‘ready to talk to any council concerned about its financial position’, adding it provided £32million more to Leicester this year. However, Leicester warned it is facing a budget shortfall of £34.1million for 2023/24, rising to £64.4million in 2025/26. Meanwhile, its overall debt is £154million.
‘Hardly a week goes by without a local authority warning that it faces financial crisis and the equivalent of bankruptcy, were it a private company,’ Sir Peter added in his letter.
‘Thanks to extremely prudent financial management we are not there yet, but without a serious rethink from the Government, we are rapidly running out of options.
‘The pressures on social care are huge and are being experienced by all authorities.
‘I don’t believe that the Government has the slightest awareness of the impact the rise in costs will have on councils.
‘Indeed, we have been warned to expect a further round of austerity in 2025, which would be disastrous.
‘Previous Government cuts have forced us to reduce spending on our other services by 50 per cent.
‘I now fear for the future of services such as parks, sports, museums, libraries, cultural services and community centres – indeed all those services that make our city a pleasant place to live.
‘Without more Government money, these services face savage cutbacks, and Leicester faces the real prospect that the council will join the ranks of those receiving a section 114 notice before we can set the council’s budget for 2025/26.’
The council has said it is facing large increases in the costs of social care, with more adults and children needing support with day-to-day living and care.
It is estimated that social care services will cost an extra £50million by 2025, with inflation also stoking rising costs.