£18.5m government boost for Luton - but council says maximum allowed council tax rise still necessary

But the local authority says it still needs to its share of council tax from residents by 4.99 per cent – the maximum rise it can introduce without the need to hold a referendum.

“The challenging economic environment has resulted in increased demand for core council’s services, evident in children and adult social care, special educational needs and disabilities (SEND) transport, and supported living and homelessness,” according to a report to LBC’s scrutiny finance review group.

“The increasing pressures in demand-led services has resulted in an updated potential core budget deficit of about £12.7m for the year 2024/25,” said the report. “The 2025/26 budget has only been balanced by factoring in £10.7m of transformation savings, including deficit recovery plan and use of one-off collection fund surplus of £479,000.

“Delivery of deficit recovery plans and transformation programme savings will be pivotal to setting a balanced and sustainable budget over the medium-term. Any further use of reserves would be an early warning sign of risk regarding the council’s financial resilience.

“The provisional 2025/26 funding settlement released by central government provides local authorities with £69bn in funding, representing on average a six per cent increase in core spending power in 2025/26.

“Closer analysis shows that councils in deprived and urban areas are set to receive greater funding increases than those in more affluent and rural parts of England.

“Data from the Institute for Fiscal Studies (IFS) shows core spending power is set to rise by 6.4 per cent in real terms for the most deprived tenth of councils, compared to just 2.6 per cent for the least deprived tenth.

“Luton is such a council and as a result receives an increase of £18.5m or 8.8 per cent in core spending power. While the increase in core funding is welcome, this only accounts for a small proportion of the council’s net revenue budget.

“That means LBC has no option but to increase council tax by the maximum permitted percentage without a referendum to safeguard essential services.”

Director of finance, revenues and benefits Dev Gopal told the group: “The fundamental principles guide the decision-making process and we always say we’d like to protect the vulnerable and needy, as far as possible.

“That’s where the bulk of the resources is going, towards them,” he explained. All the decisions are aligned to the council’s objectives and strategic priorities. We’re not using reserves to balance the 2025/26 budget.

“There’s extra funding for the 2024/25 pressures around homelessness, adult services and children’s. The national increase is 3.2 per cent. Luton is getting 8.8 per cent.

“If it was 3.2 per cent nationally in the past, Luton was receiving 2.9 per cent. That’s what we were all hoping for, more money coming for councils in deprived areas.”

Pay awards are assumed to be three per cent for 2025/26 and two per cent in 2026/27 and following years, added the report, while general fund borrowing is up to £922m by April 2026, including £507m to LBC’s airport company.