Leicestershire County Council says 'a grip on finances', in the face of spiralling costs, is why it has not hit crisis point after publishing a new budget plan.

The authority adds that the four-year proposals reveal rapidly rising demand for services, and inflation, are increasing costs by £217m, compared to expected extra income and savings of £122m.

It points to a combination of innovative initiatives and a reduced back office – which are both driving down costs by £33m - plus a Council Tax rise, means the books will balance next year - but it also warns that relentless pressure on services could create a £95m budget gap by 2029.

The plan includes earmarking just under £100m more to support vulnerable children and adults.

An extra £12m of capital is also proposed to help fix potholes and repair roads, taking the total spend on roads, major schemes and tackling flooding to £125m over four years.

A proposed 4.99 per cent Council Tax increase from April (including two per cent for adult social care) will increase bills by £1.54 a week for a band D house.

Generating £20m, it only covers the National Living Wage and National Insurance rises.

Acting council leader, Councillor Deborah Taylor, said: "Our financial position remains extremely challenging, although the strong grip we've maintained over our finances has ensured we are not at crisis point.

"I'm proud that pioneering work to drive down costs is paying off but the stark reality is that surging demand is not receding.

"This squeezes what we can spend elsewhere but we're still fixing 7,300 potholes a year, supporting over 1,000 households to stay warm, gritting 1,300 miles of road each night during winter, and much more.

"That's why it's vital an overhaul of local government funding tackles the big issues. A focus purely on deprivation will disadvantage rural counties."

Key budget pressures include:

• Children's social care – a 60 per cent rise in demand and a 33 per cent increase in prices for placements have pushed up costs by £15m over the last two years
• Special educational needs and disability support - with 90 per cent more children having education, health and care plans compared to five years ago
• Construction price rises – costs for infrastructure schemes have been driven up significantly with inflation

Councillor Lee Breckon, cabinet member for resources, said: "Despite being the lowest funded county, we're high performing. And have saved £276m since 2010, showing how efficient and lean we are.

"We heavily rely on Council Tax to fund vital services. I know wallets are stretched but without an increase, we couldn't deliver the level of service we know our residents need.

"Twenty million pounds sounds a lot, but is wiped out by the National Living Wage and National Insurance rises. The 'new' money the Government announced for councils doesn't shift the dial – and won't cover all the extra costs from the autumn budget.

"The funding system must change to benefit low-funded councils. If we were funded at the same level as neighbours Nottinghamshire and Derbyshire, we'd have around £100m more each year, and this can't be right."

Projects which the council says are helping it to make ends meet include:

• Streetlight switch - upgrading 68,000 streetlights from sodium lamps to LEDs is cutting carbon emissions by a massive 85 per cent compared to 2008 and driving down costs by over £2m a year. The project has just scooped the prestigious Highway Electrical Association award for Sustainable Project of the Year.
• Helping people live at home - rolling out 'care tech' - over 2,600 pieces of equipment, including falls detectors and GPS location trackers – is helping over 1,000 people to live independently at home for longer and reducing adult social care costs by £1.25m. 
• Barnardo's - teaming up with Barnardo's to run eight children's homes locally is on track to generate savings of £2.25m over four years.