Leicestershire residents remain without answers over potential increases to council tax as Leicestershire County Council looks to bridge a £106 million budget gap. 

Documents published by the Reform-led authority assume a 3 per cent rise in the tax for residents, rather than the full 5 per cent allowed, but stress that "no decisions" have been made on this and the figure is simply for "illustrative purposes". 

If the 3 per cent increase is taken forward, this would cost residents in a Band D home £50.45 more over the year. 

Reform UK had pledged to cut the tax for residents prior to this year's local elections, but leader Dan Harrison has now warned they are facing a "massive problem" and "real crisis" financially. 

The council is currently looking at a £23 million budget gap for the coming financial year (2026/27), which would have to be plugged through the use of reserves – one-off pots of cash.  

This gap is expected to rise to £106 million at the end of four years if nothing is done to cut costs or bring in more money. Each one per cent increase brings in around £4.2 million a year for the council. 

The authority has, in part, blamed Westminster for the lack of answers at this stage, saying it still has not received confirmation of how much money it will be receiving from central government. 

Officers claimed this budget comes with "perhaps the most uncertainty" councils have experienced for many years. Settlements for councils are expected to be released next week, with a Government spokesman saying this was "in line with usual timings". 

advertisement

The authority has also launched an efficiency review, being undertaken by contractor Newton, in a bid to cut costs and improve its financial standing. 

It hopes the first findings from this will be announced by February, which in turn would affect the final budget.  

However, documents published by the authority include stark warnings from the council's finance team. 

Using reserves to balance the books – something councils are legally required to do – is not a "sustainable position" from a "good financial management viewpoint", the budget report states.  

It is "clear" that "significant additional savings" or additional income will be "required" over the coming years, officers added. 

But they fear this will be a "challenging task" as £290 million in savings have already been delivered over the last 16 years. 

The report continued: "While there is a significant budget gap, the right course of action for sound financial management is to maximise the increase [of council tax] up to the referendum limit [of 5 per cent] to avoid more pressure on the council's ability to provide its current range of services." 

A full 5 per cent increase in council tax would cost residents in a Band D home £84.08 more for the year. 

advertisement

Leicestershire County Council makes up just one part of county residents' bills, with the district and borough councils, and the police and fire services all charging on top. 

Despite the scale of the challenge, Cllr Harrison remains confident the authority can overcome it, pledging to residents that the authority would not have to declare a Section 114 notice – essentially declaring itself bankrupt.  

He added: "I'm sitting here with a massive problem. [It's] £100 million of debt facing us. 

"It's a real crisis in a way, but we know we are confident we can deal with it." 

Cllr Harrison continued: "Don't forget we're new in this business from May, so there's lots of running and trying to catch up at speed to understand and identify. 

"But we are blessed with a great team here at County Hall, to be able to advise and support and give guidance in all of this. 

"It's the efficiency [review] which will help us. It is something different to what anybody else has got. Probably after a few more months everybody will be thinking 'wow, how can we do that?' 

"And it can be done and we will do it. I'm absolutely confident this is going to be an amazing breakthrough for us." 

advertisement

A spokesman for the Ministry of Housing, Communities and Local Government said: "We're turning the tide on decades of underfunding in councils in England so we can give people the high-quality public services they deserve. We've made £69 billion available this year for councils, including £596m for Leicestershire Council, and will go further by fixing an outdated funding system. 

"The provisional Settlement is being published in mid-December in line with usual timings, and we have communicated this to councils regularly."