Leicester City Council admits it's on edge of bankruptcy

Now Labour-led Leicester city council admits it’s on the edge of bankruptcy and warns it could be forced to make ‘savage’ cuts to services including social care, parks, sports, museums and libraries without extra cash

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.

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The Leicester mayor added that without urgent addition aid from Whitehall, it was ‘almost inevitable’ the authority would follow the likes of Birmingham City Council and 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. 

Sir Peter Soulsby said without urgent financial aid from the government, the city’s Labour-run council faces a ‘real prospect’ of financial oblivion

The city mayor warned budgets for libraries, social care, parks, sports and museum’s could face ‘savage’ cuts (pictured, Leicester City Council’s HQ)

In a letter to Levelling Up Secretary, Michael Gove (pictured), Sir Peter said Leicester was ‘running out of options’ to balance the books in 2025-26

But in his letter, Sir Peter said: ‘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.

READ MORE: Bankrupt Birmingham Council faces calls to explain gaping £116MILLION black hole in its school taxi spending figures – but Labour authority is still yet to publish the audit reports…

‘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.

Leicester warned it could declare itself effectively bankrupt – similar to the announcement made by Birmingham’s council in September. Pictured is a graphic showing how Birmingham built up its debt spending on various ‘vanity’ projects 

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

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

READ MORE: Revealed: How ‘bankrupt’ Birmingham council spent millions on botched IT system, ‘inclusive’ new street signs, and the Commonwealth Games – while also blowing £50m from the hated Clean Air Zone on hydrogen buses… as rubbish piles up and violence soars

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Amy Oliver, the Leicester’s director of finance, said: ‘Councils are under unprecedented financial pressures.

‘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.’

In a dramatic statement last month, Birmingham declared itself essentially bankrupt, halting all but the most essential spending. 

The troubled council blames a £760million equal pay bill for causing its financial misery. It came after years of criticism over the woeful cash management record. 

Birmingham is facing a budget shortfall of £87million and, as well as the equal pay fiasco, it has blamed the introduction of a new IT system which saw costs skyrocket from £19million to £100million. 

This week, fresh questions were raised over Birmingham after MailOnline revealed a £116million black hole in the council’s school taxi bill.

A Department for Levelling Up, Housing and Communities (DLUHC) spokesperson said it will respond to the letter in due course, and that it was committed to improving the ‘local government finance landscape’ in the next parliament.

A spokesperson said: ‘We have made £5.1billion of extra funding available to local authorities through the Local Government Finance Settlement, with almost £60 billion available for the sector – up 9.4 per cent on cash terms on 2022/2023.

‘For Leicester City Council, this represents an increase in core spending power of up to £32million or 9.9 per cent – making available a total of up to £356.2million 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.’

Spending beyond 2024-25 would be assessed in the next spending review, the department said.

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