Leeds City Council recently updated its five-year medium-term financial strategy, highlighting the daunting task of achieving balanced budgets amidst ongoing substantial cost-saving requirements.
At the executive board meeting, the council outlined the need to find an additional £273.7 million in savings over the next five fiscal years. This need arises as councils nationwide grapple with escalating costs and increased demands for services, particularly for vulnerable demographics. Significant challenges include the support for looked-after children, particularly those with high needs requiring expensive external placements, and adult social care, where there is a rising demand for services for older people, adults with learning disabilities, and individuals requiring mental health support.
This financial strain continues as the council has already been compelled to implement savings of £794.1 million from 2010 through the end of the 2024/25 financial year, underscoring the severe fiscal pressures facing local authorities.
In response to the report and the challenges confronting local authorities, Leeds City Council Deputy Leader and Executive Member for Resources, Councillor Debra Coupar, stated:
“It is not an overstatement to say that this is the most challenging financial period so far facing local authorities, following on from more than a decade of needing to make major savings year on year.
“Over the last four years alone six councils have issued section 114 notices, in effect declaring that they cannot achieve a balanced budget, and a survey from the Local Government Association at the end of last year indicated that as many as one in five thought it was likely or very likely that they would have to do the same before the end of the next financial year.
“Following fifteen years of sustained reductions in local government funding, we are now reaching a stage where councils simply cannot continue to balance their budgets in the face of escalating demand for some of the most costly services for our most vulnerable adults and children.
“In Leeds the reductions equate to a real-terms decrease in funding of £465.9m or 70 per cent over those fifteen years. Whilst we’ve made significant savings already of £730.2million, including reducing the council’s workforce by nearly a fifth, we need to find a further £63.9million of savings this year and then in addition to that over £273million more across the next five years. It is an incredibly difficult situation.”
The primary challenges currently confronting the council include:
1. A rise in the number of children needing care due to an increase in those with significant needs, coupled with substantial cost hikes for placements through private providers. The average cost for external residential placements now stands at £350,000 per year for each placement.
2. Ongoing escalating demands within adult social care for older individuals, which have already resulted in an increased expenditure of £600,000 so far this year.
3. A sharp increase in the need for support services for adults with learning disabilities and those with mental health needs.
The medium-term financial strategy of the council details the need for additional savings amounting to £273.7 million over the next five years. This year’s required savings of £63.9 million represent 10% of the council’s annual net revenue budget. The anticipated savings for the forthcoming years are distributed as follows: £106.7 million in 2025/26, £45.7 million in 2026/27, £42.1 million in 2027/28, £37.3 million in 2028/29, and £41.9 million in 2029/30.
To address these financial challenges, the council is continuously evaluating and reviewing all assets and services to identify potential cost reductions. Additionally, it will maintain its current hiring freeze and restrict non-essential expenditures, except where necessary for health, safety, or legal obligations.
Despite these financial constraints, Leeds continues to have the second-lowest council tax among England’s eight core cities. This year, the tax increased by 4.98%, which includes a 1.99% allocation specifically for adult social care. While there has been an increase in revenue from council tax and business rates in recent years, these gains have been offset by reductions in government grants, alongside rising costs related to pay, service delivery, the impact of the cost of living, and increased demand pressures.
Despite these financial challenges, the council is steadfast in its commitment to the Best City Ambition, which aims for Leeds to be a welcoming city with a robust economy that offers opportunities for all. This ambition focuses on tackling poverty and inequality through key pillars such as health and wellbeing, inclusive growth, and achieving zero carbon emissions.
To realize this vision, the council will continue its ‘Team Leeds’ approach, working strategically with partners, stakeholders, and the community to leverage all available resources throughout the city. This strategy underscores the city’s strengths and opportunities, emphasizing a collaborative effort among people, partners, and businesses to foster a shared vision for Leeds.
To view the council’s medium-term financial strategy report, visit the Council and Democracy section at www.leeds.gov.uk and refer to agenda item 14.
Since February 2018, seven councils in England have issued section 114 notices due to their inability to balance their budgets. The Local Government Association’s survey of local councils regarding their financial status, conducted in December 2023, can be accessed at ‘Section 114 fear for almost 1 in 5 council leaders and chief executives after cashless Autumn Statement’ on the Local Government Association website.
