Council to avoid declaring effective bankruptcy

Finances at City Hall, Leicester, are being supported with one-off payments next year

Leicester City Council can now balance its books for the next three years, the city's mayor has said.

However, Sir Peter Soulsby warns the authority will still have to find £20m in savings every year, which he describes as "painful".

He said a one-off shift of money from capital to revenue budgets would help keep the city afloat financially - thanks to some central government budget rule flexibility.

It means the council will not now issue a section 114 effective bankruptcy notice - as Birmingham and Nottingham have done in recent years as they failed to balance their books.

City mayor Sir Peter Soulsby says future cuts will be "painful"

This year's proposals include a maximum 4.99% increase in council tax - making the charge for a Band D property £2,020.85 from April. The authority is already planning cuts to council tax support, which could see 13,500 households left worse off, to be introduced from April.

Cuts to capital spending - money for improving the council's assets - are proposed, as well as selling land and buildings and finding further cuts in service spending.

Borrowing to plug a gap in capital spending will add £5m a year to the budget woes.

The city council has made it clear how a "decade of austerity between 2010 and 2020" has reshaped it.

The latest budget papers show services other than social care have already been reduced by 53% in real terms, and 2,000 jobs have been lost, including a third of senior management roles, in that time.

It leaves few areas left to cut back - but the council has listed what services it provides that are "above and beyond what others do" - which includes local libraries, community centres, its concert hall De Montfort Hall, museums and council-run leisure centres.

Soulsby says the present government is "talking sensibly with us, is listening to us".

He recognises the damage of austerity cannot be repaired overnight.

"That's why we're looking now to buy some time to make sure we don't go over the cliff edge," he says.

The council is expected to have provisional details of central government funding for the next financial year within the next two weeks.

The budget can then be finalised and put to a full council meeting next February for approval.