Southampton City Council has approved a budget for 2025/26 which relies on significant transformation savings – as opposition groups voiced fears the authority has not escaped the financial mire yet.

The Labour administration’s £230.78million budget plans are underpinned by building the recurring transformation savings to £35million, as well as handling £12.72million of pressures across departments.

Residents will see their council tax increase by 4.99 per cent as part of the plans.

A Band D property will pay £1,903.14 to the city council, which represents an additional £1.74 a week from the current year.

The budget, medium-term financial strategy and capital programme were approved at full council on Wednesday through Labour’s strong majority, with all opposition groups voting against.

The Liberal Democrats tabled an alternative budget that featured a £150million investment fund, but this failed to gain any support from the other parties.

Labour deputy leader and cabinet member for finance Cllr Simon Letts said it was the first time in 14 years that the medium-term financial strategy was balanced over its full five-year period.

“This is a point of tilt for us,” Cllr Letts said.

“I think we are now going to go on to an era where we will be able to invest in Southampton and its citizens rather than remove services and make cuts.”

Cllr Letts said this “step change” was only possible after last year’s general election, with the local government finance settlement providing an additional £11.3million net.

He confirmed exceptional financial support (EFS) had been extended for a second year by the government to cover an equal pay claim, transformation and restructuring.

This extension does not include any additional borrowing above what was granted for the current year.

The 2025/26 revenue budget does not require any EFS or reserves to balance.

Cllr Letts said the finance plans depended on the “full delivery” of the transformation programme, while other risks includes local government reorganisation, inflation, pay rises and the relatively small amount of reserves compared to historical levels.

Leader Cllr Lorna Fielker said: “Transforming how the council operates is the backbone of our financial recovery but a core focus has always been on improving and modernising the services we offer to local people.”

She added: “I have to say the budget we have before us today is a major achievement.

“It is not just a one-off fix but a return to long-term financial sustainability.”

Liberal Democrat group leader Cllr Richard Blackman said the situation now was very different to 12 months ago when there was “uncertainty” and “fear” in the chamber.

However, he said: “The situation does remain challenging if not precarious.”

Cllr Blackman said his group were concerned about a lack of clarity around the impact transformation would have on some of the most vulnerable residents in the city.

Fellow Liberal Democrat member Cllr Thomas Gravatt said Labour in Southampton had taken the council to the brink of bankruptcy.

“This city can’t take much more of Labour’s cuts, waste and inaction,” Cllr Gravatt said.

Conservative group leader Cllr Peter Baillie said the budget needed “favourable” winds to survive the year “unscathed”, adding that a £50million reduction in the base budget year-on-year could not happen without pain for Southampton residents.

Cllr Baillie said Labour got the council into the financial mess and the party did not deserve any credit for the signs of progress.

“It is no different to if Cllr Fielker and her team were driving a car, smashed up the car because of their poor driving and then think people should applaud them for repairing the car,” Cllr Baillie said.

Conservative group deputy leader Cllr Jeremy Moulton hit out at Labour’s record on the council’s finances.

He said the budget had “plenty of transformation” but “plenty of cuts to frontline services”, suggesting areas like street cleaning, fixing roads and park maintenance had deteriorated.

Green councillor Katherine Barbour said there was still a lot of work to be done in the city and it was sad that staff would be lost through redundancies as part of the transformation programme.

Cllr Barbour said: “The most important strategy, what really needs to be focused on is how we going to deal with flooding and the implementation of the green city plan.”

She added: “If we want to get the confidence of businesses wanting to set up in our city, they need to be assured particularly when you look at the maps of the areas that they are looking to develop, that these aren’t areas that are going to flood.”