The leader of Leicestershire County Council remains defiant in the face of the most challenging budget he has ever encountered, saying the authority will not end up in a position where it has to declare bankruptcy.

But, to stave off that threat, North West Leicestershire District councillor Nick Rushton warned tough and radical spending decisions will have to be made.

Leicestershire County Council yesterday set out (Wednesday) its draft budget for next financial year, 2024/25.

Despite having already identified £36 million of potential general savings and a further £40 million of savings related to special educational needs and disabilities (SEND) spending, a further £85 million of savings needs to be found over the next four years, council officers said.

To balance the books next year, £12 million will need to be taken from the council's reserves. Cllr Rushton said, in his 18 years as first deputy leader and then leader of the council, this is the first time the authority has had to dip into that pot of cash to close the gap between its income and outgoings.

He said: "[The financial situation is] worse than we've ever had.

"All years have been bad since I've been leader and this is the most challenging.

"Not only have we this year had to use £10 million of reserves, next year we're projecting [using] £12 million reserves and then it gets exceedingly difficult moving forward. When you see the numbers, we will have to make some radical decisions. And of course, we'll also have to put council tax up by the maximum allowable."

The high rates of inflation in both general costs and in construction costs have placed an added burden on council budgets this year, he added. The national living wage increased announced in the Autumn Statement is also adding to the strain.

Those pay rises are set to cost the council an additional £20 million. Comparatively, hiking council tax by the highest amount possible – three per cent towards general spending and an additional two per cent towards social care costs – will bring in around £18 million. The proposed council tax increase is set to cost a Band D property £76 more next year.

Cllr Rushton said: "When you give people a 10 per cent jump in the national living wage, it's not only the ones at the bottom who have struggled and probably needed, but it also b****** up all the differentials moving up beyond the national living wage. You've got to then move the other people [on higher wages] up a commensurate amount to maintain differentials and it's like a domino effect. It goes all the way through.

"So the National Living Wage announcement unfunded cost us £20 million, which we weren't expecting. And if we were expecting it, we were expecting to get some funding for it."

He added: "The problem is I've got no more income. I can put council tax up by the five per cent. But that amount only covers the national living wage increase.

"So all the other demands – in adult social care, children's social care, highway construction inflation, staff shortages – we get no more money for that. It's really difficult as a county, when your expenses go up with demand and yet your income is controlled by the government."

Despite the challenging position of the council, Nick Rushton has previously stated hell would freeze over before he filed a section 114 notice – essentially declaring the council bankrupt. He repeated that sentiment in response to the draft budget.

"Declaring a S114 does not solve anything," he said. "All it does is send unelected accountants and commissioners in to deal with the problems that you have not dealt with.

"They don't come with any money. There's no magic money tree that comes with commissioners. Otherwise a lot more councils would call commissioners in."

He added: "Also, to be honest, it's about prestige and reputation. To say we're bankrupt, it destroys your reputation with the government, it destroys your reputation with members of the public who elect you and expect you to run a balanced budget.

"That is why we will not do it. We will make the decisions necessary to ensure that our budget washes its face. It's pride, it's principle."

There is a lot of uncertainty at the moment around local government funding reforms. Promised in 2016, they have since been pushed back and are now not expected until after a General Election.

Cllr Rushton said he wants that next Government to carry out a "root and branch review" of social care and how it's funded – the single biggest expense for most councils. He added: "They really do need to address the massive increase in social care, be it children or adults.

"Councils are really struggling to cope with the increase without sufficient resources. The NHS moans every year and they just give them a load of money whereas they don't do anything to help us.

"And the NHS cannot survive without us providing the social care. I mean, we can't survive without the NHS, don't get me wrong, but they seem to give favouritism to hospitals and not enough to the people that provide the social care, both for elderly adults and children."

He concluded: "We're going to do our best with the money we've got to provide the best service we can and not declare ourselves bankrupt, but it will necessitate tough choices. There's no point beating around the bush."