John Redwood's Diary

The Worcestershire budget shows a major financial deterioration

By johnredwood on November 17, 2025

Reform led Worcestershire County inherited a tight budget with rising spending for 2025-6 from the outgoing Council when it took over at the beginning of the new financial year. Councillors rightly argued for lower spending to get elected.

Instead of making early spending reductions which were clearly needed in its first year in office it has allowed spending to rise more, well above its income growth. It inherited a maximum increase in Council tax bringing in considerable extra revenue. The Council has also drawn down more reserves to pay some of the bills over and above the tax rise.

It has now asked for a Capitalisation Directive from the government. This is an emergency device which allows a Council to borrow to pay the running bills, where under the rules they are only usually allowed to borrow for capital investment. They are meant then to take action to control future costs to avoid further overspending in later years. If the Council carries on borrowing to cover running costs of services it can get into an unaffordable debt spiral, with interest costs taking up more and more of the income.

For 2025-6 its first year the new Council will use £23 million from inherited reserves for current spending, and will borrow a further £33.6m under this special permission from government. This borrowing will need to be repaid with interest over the following 20 years. This has happened despite receiving the extra tax from a full 5% Council Tax rise this year imposed by the outgoing Council.

The Council is now consulting on its 2026-7 budget. It says it wants an additional £98 m to spend on a net revenue budget of around £500 m. It asks for views on Council tax rises below the 5% maximum, at the 5% maximum and at the higher levels of 7.5% and 10% where they would need government permission. Assuming the 5% rise, they say they will still have a gap of £66m between their wish to spend and their income. From the look of the document they think their tax choice rests between 5% and higher.They are consulting on another Capitalisation Directive, to borrow an additional £43.6 m to cover current spending.

The document mentions the possibility of reducing the growth in spending, but sets out no options on how to do this. It argues that corporate overheads have been cut in previous years and are under good control. They are stated as just 3% of the budget total, whilst soaring debt costs as they borrow more are now 5% of the budget. It is unlikely the public will write in with a costed schedule of spending cuts. This surely should be the job of the Councillors to set them out with the officers, and to consult the public on them.

I urge the Council to identify the savings necessary to avoid more emergency borrowing and to keep the Council tax rise down . The government back up of allowing emergency borrowing for cost over runs must not become a regular event as that is the route to the public sector equivalent of bankruptcy.