Welwyn Hatfield Borough Council plans to dip into reserves to fund day-to-day services in the medium term.

Local authorities must set balanced budgets each year and can declare themselves in a position similar to bankruptcy – known as a section 114 notice – if they cannot.

Richard Baker, the council’s executive director for finance, has prepared a draft statement which confirms the 2024/25 budget – due to begin in April – is balanced and “achievable given the political and management will to implement them”.

In his statement, Mr Baker wrote: “Even with the reserves strategy, there are challenging financial targets for 2025/26 and beyond.”

He confirmed “efficiencies” will be needed to balance the books in the near future.

At a meeting on Tuesday, January 9, the political leader in charge of the budget, Liberal Democrat councillor Duncan Jones (Peartree) said: “The council’s ability to deliver a balanced budget has become more challenging every year as government funding has reduced, inflation has increased, and we have continued uncertainty over our funding in the medium term.”

Cllr Jones added: “The strategy includes for the first time a planned use of reserves in future years.

“These are in response to funding reductions expected.”

He said the plan “aligns with the views of the community that we should be using our reserves to help close the budget gap”.

According to draft budget documents, Welwyn Hatfield Borough Council will “start the next three years in a reasonably strong financial position with healthy reserves”.

They note that when a business rates funding system changes, the authority anticipates a funding cliff edge of £1m.

“We will make a £600,000 drawdown from reserves in 2025/26 and a £300,000 drawdown from reserves in 2026/27, which will smooth the impact of this reduction over the medium-term planning period.”

They add: “For our general grant reductions, we are anticipating a £500,000 loss of available income in 2025/26, rising to a loss of £1.1m by 2026/27.

“In response to this, we will draw down £300,000 from our reserves in 2025/26 and a further £500,000 in 2026/27.”

The strategy would leave a remaining £3.4m in reserves, which is below the current minimum requirement which the authority sets itself – currently £3.9m.

But with less reliance on business rates in the future, the authority could reassess the risks to its budget and move the goalposts to set its “assessed minimum” at a lower £2.8m, to create headroom.

The documents adds Welwyn Hatfield Borough Council’s share of council tax is set to increase by 2.96 per cent – a £6.84 rise for an “average” band D property, taking the total to £237.60.

Efficiencies identified by finance chiefs include a rise in some fees and charges, such as parking charges and prices at Campus West in Welwyn Garden City, and “reviews” of internal services such as ICT, human resources and customer services.

The medium-term budget gap for day-to-day services is a cumulative £5.704m by 2027/28.