£10.3m of Lincolnshire Council reserves could be needed to balance budget

A report before councillors put forward three options for council tax rises in the next financial year, including a rise of 2 per cent for adult social care and 0.99 per cent general tax using the £10.3m reserves.

Other options include 2 per cent adult social care and 1.99 per cent general taxation rise resulting in a use of £6.9m of reserves, and 2 per cent adult social care and 2.99 per cent general, which would mean the council needing to use just £3.4m of reserves.

A report from Andrew Crookham, council executive director for resources, noted the “immensely volatile” financial situations, including the impacts of the Covid-19 pandemic and the war on Ukraine.

It also notes high inflation rates which peaked at 11.1 per cent in October and the Bank of England increase of base rate to 3.5 per cent.

Mr Crookham said: “My advice is to maximise the council tax flexibilities available, i.e. consider setting the maximum 4.99 per cent rate if the current circumstances are maintained through to February, to put the council in the strongest position possible from which to navigate the challenges likely to be encountered in the medium-term.

“It is also important to note there is a cumulative impact to not maximising council tax, which could impair the funding base for all future years permanently.”

He said, whichever rate was set, use of reserves “will be required to balance the budget for the first time in five years”.

He said: “Maximising the rate of council tax places a greater burden on residents, at a challenging time economically. However, doing so could ensure the council is able to provide better quality services for a longer duration if austerity is to return from 2025-26.”

The report said the government’s financial settlement for local government provided a “much-needed increase in core spending power” and reduced the deficit.

Analysis warned the council’s deficit could increase by £23m from 2025-26 if there were further impacts.