Luton Borough Council opting for maximum council tax increase to plug budget gap, meeting told

The ever-increasing pressures in demand-led services has resulted in an updated potential core budget deficit of about £12.7m for the year 2024/25, according to a report to the local authority’s executive.

By factoring in £10.7m of transformation savings, the 2025/26 budget can be balanced, said the report. “Delivery of deficit recovery plans and transformation programme savings will be pivotal to set a balanced and sustainable budget over the medium-term.

“The government’s emphasis is on targeting funding to areas with higher levels of need and deprivation. Luton is such a council and as a result receives an increase of £18.5m or 8.8 per cent in core spending power.”

Finance portfolio holder and Labour Northwell councillor Rob Roche told the committee: “Locally there have been some significant events, such as the Stellantis decision to close its Luton van factory and the government has yet to give consent to the expansion of London Luton Airport.

“There’s a need for the council to drive the 2040 agenda to provide economic regeneration and prosperity,” he explained. “With 2024/25 proving a difficult year financially, a growth of £11.6m is required in the 2025/26 budget to cover overspends arising in that year.

“Unavoidable cost increases caused by the growth in demand and rising prices means the general fund net expenditure needs to go up by a further £12.6m or around eight per cent.

“Despite the welcome increases in grant funding and savings identified at £10.7m, this has to be paid for and there’s still a budget gap. This gap necessitates raising the council tax by the maximum permitted without a referendum to generate an extra £7.3m income.

“By the council tax rise and prudent financial management to protect essential services while saving money where we can, the council can set a balanced budget for 2025/26 without any recourse to the general fund reserves.

“The ringfenced public health grant increases for Luton by £925,000. employers’ national insurance £1.805m, which is lower than the budgeted figure of £2.086m.

“A shortfall of around £281,000 will be funded from the contingency, which means the net budget requirement used for setting council tax will remain unchanged.”

The local government finance settlement for 2025/26 will be another one-year settlement, added the report. “This is intended to be followed by a three-year settlement based on the government’s next spending review.

“The certainty a multi-year settlement will bring has been widely welcomed across local government. Indications are that funding will be front loaded, with the most significant increase in 2025/26 and a smaller rise in 2026/27.

“Subsequent years will have a more modest increase, which is likely to amount to a real terms spending cut depending on inflation. Government policy is to target extra resources to local authorities with high levels of need and deprivation and low council tax bases. Luton should gain as it’s such a council.”

The executive agreed the final revenue budget and capital programme for recommendation to full council, along with the council tax resolution.