Hampshire County Council seeks government approval for a 15% tax hike to address a significant budget deficit.
The council’s chief financial officer, Rob Carr, sent a request letter on December 23. He explained that the council has a budget deficit of £182 million for 2025/26. This deficit could grow to £266 million by 2026/27.
Despite being well-managed, the council lacks enough savings to cover this gap. Even with maximum savings, the deficit would still be around £62 million for 2025/26 and £112 million for 2026/27.
Rob Carr mentioned that the council has reached a “tipping point.” They can’t find enough savings to balance the budget while meeting their legal duties. This is why they are asking for a tax increase above the 5% limit.
He also noted that using reserves to balance the budget isn’t a long-term solution. It would weaken the council’s financial stability and increase risks.
If the government approves the request, the council could raise taxes by 15% in 2025/26 and another 10% in 2026/27. This would help avoid using reserves for the next two years.
The proposed tax increase would generate £83.5 million in additional income for 2025/26. The following year’s increase would reduce the recurring budget deficit to £53.6 million.
Since they haven’t received a decision yet, the council has two options for the 2025/26 tax precept.
‘Set A’ suggests a 14.99% increase if the request is approved. If not, they recommend a 15% increase and a referendum on May 1, 2025. Any increase over 5% needs government approval or a local vote.
A referendum could cost over £2 million and, if it fails, could lead to re-billing costs of £400,000. This option would help close the budget and add a small amount to reserves.
‘Set B’ proposes a 4.99% increase if the request is denied. This would require drawing £68.2 million from reserves to balance the budget.
The cabinet will discuss these options on February 4.
