Council flags up its 'frightening financial situation'

That was the sobering message today from the authority, which warns that the expected shortfall next year between what it needs to spend and its income will jump from £8million to £20million.

County Hall’s cabinet has asked senior finance officers to look at reducing capital expenditure and identify further potential savings in addition to those set out in February in its four-year Medium Term Financial Strategy (MTFS).

National and global events since then have triggered a decline in the overall financial situation affecting all councils including Leicestershire, the authority says.

With inflation already at nine per cent - and expected to pass 11 per cent by October – the costs of providing day-to-day council services, as well a crucial long-term major infrastructure projects to accommodate a growing county population, have surged.

The county council say some capital schemes will need to be ‘cancelled, mothballed or reduced in scope’.

It has committed a multi-million-pound investment in Melton’s partial bypass, the MMDR, but it is unclear at this stage whether the search for savings will have an impact on the scheme.

Leicestershire County Council leader, Councillor Nick Rushton, said: “Though no decisions have yet been taken I want to level with people about the frightening financial situation we face.”

Outlining the new pressures on the budget, the authority points out that each 50p increase in the National Living Wage means an extra £10 million for the council to find.

The cost of providing statutory social care for vulnerable and older adults and children will be the main service costs driven up sharply by inflation.

The knock-on effect of Russia’s invasion of Ukraine has also impacted finances.

Leicestershire, which is the worst funded county council, is continuing to lobby MPs and press the government for a fairer way of funding local authorities but has warned it cannot afford to wait for reforms.

By the 2025/26 financial year, the budget gap is predicted to increase from £40 million to £70 million unless further action is taken.

“In the same way households are struggling with rising costs, it is simply becoming more and more expensive for the council to provide services because inflation is galloping away – with not much prospect of things improving any time soon,” Councillor Rushton said.

“When we set our budget in February we said our situation was bad.

“Then Putin invaded Ukraine creating an economic aftershock that affects us and every council in a way that could not have been predicted.

“This means we are now going to have to consider the kind of savings which will be unpopular and which we try to avoid.”

He added: “Officers have been asked to start working on new savings proposals as a matter of urgency which will have to include popular services such as support to businesses, highways maintenance, waste sites and buses, as well as in the more significant adults and children’s social care budgets.

“The inflationary impact on our £500 million capital programme can’t be ignored and some existing schemes will need to be cancelled, mothballed or reduced in scope.

"This will inevitably mean a pause on non-essential capital schemes."