Leicester city mayor warns council on edge of financial crisis

The mayor of Leicester has said the city council is looking at effective bankruptcy within the next 18 months.

Sir Peter Soulsby said the council was facing "severe budgetary problems".

Sir Peter has written to Michael Gove, Secretary of State for Levelling Up, Housing and Communities, to ask for help to balance the books in 2025-26.

The government said it was "ready to talk to any council concerned about its financial position", adding it provided £32m more to Leicester this year.

In his letter to Mr Gove, Sir Peter wrote it is "almost inevitable" the council will issue a section 114 notice before setting its budget for 2025-26.

A section 114 report is issued by a council's finance officer, signalling that it cannot balance its budget.

It then has 21 days to come back with a new budget, in which it can meet its spending commitments.

Sir Peter wrote: "As of 31 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."

The city council expects social care to cost an extra £50m a year by 2025.

Director of finance Amy Oliver said the council was facing "unprecedented financial pressures".

She 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."

Sir Peter told BBC Radio Leicester the issuing of a section 114 notice would be "dreadful".

He said: "It means the loss of parks, sports, museums, libraries, cultural services, theatres - all the things that make our city a liveable place.

"With a section 114 notice, all of these things are seen as optional extras and they have to go."

A Department for Levelling Up, Housing and Communities spokesperson 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."

Follow BBC East Midlands on Facebook, on X, or on Instagram. Send your story ideas to [email protected].