Worsening financial situation revealed at Leicester City Council

Leicester City Council is experiencing financial difficulties, projected to worsen in the coming years.

The authority anticipates exceeding its budget by £12.7m in the fiscal year 2023/24, primarily due to overspending in various departments, totalling approximately £17m.

Although the £12.7m overspend can be covered this year by departmental reserves, these reserves are not a sustainable solution for a positive financial outlook for the future.

A significant portion of the overspending, nearly £10m, is related to education and children’s services.

Specifically, around £9.2m is expected to be spent on children’s well-being, primarily because placement costs have risen more rapidly than anticipated.

Another overspend of £4.9m  is expected in the city development and neighbourhood budget, mainly due to the pressing issue of homelessness, which is a significant national concern.

About £3m of this additional cost comes from spending on temporary accommodation in the city, and this pressure is likely to persist.

Additionally, there’s an anticipated increase in this year’s spending by £2.2m due to a probable higher-than-expected pay award for council staff.

In February, this year’s budget was approved, featuring significant council tax increases for Leicester residents and reliance on central reserves to maintain financial balance.

Utilising these reserves allowed the council to avoid what the city mayor, Sir Peter Soulsby, referred to as “crisis cuts” to essential services.

Using around £34m of the available £55m reserves came with a caution from the council that these funds were projected to be depleted in the middle of the 2024/25 fiscal year.

They have identified some savings that will alleviate the pressure on reserves this year by approximately £2.8m.

Officials have said, this situation will be discussed in the next budget planning meeting.