Folkestone & Hythe District Council Budget 2026/27: Council Tax Rises, Services, and Risks

Folkestone & Hythe District Council published its 2025/26 Budget Strategy last December and its 2026/27 Budget Strategy this October. Read together, they show a Council holding the same course—balance the books, protect essentials, borrow prudently—while sailing into rougher seas. This layman’s guide sets out the key similarities and differences, the role of reserves in 2024/25 and 2025/26, and why balancing the budget by dipping into savings isn’t a great look.

The Rules Which Never Change

Both strategies start from the same legal anchor: the Council must set a balanced budget and consult taxpayers each year. It’s a “statutory requirement” under the Local Government Finance Act 1992, the duty repeated in both reports as the foundation of the process. 

Both documents also set out the Council’s financial objectives—maintain balance, safeguard public money, align resources to priorities, raise fees where appropriate to cover costs, and keep an adequate level of reserves—again a constant across both years. 

The Backdrop: Costs Up Funding Flat

If 2025/26 hoped for stabilisation after a turbulent couple of years, 2026/27 assumes pressure continues. The newer strategy bluntly lists “continued high inflation” (CPI 3.6% in June 2025) and long-term borrowing at “<6.0% on 30-year loans.” It also assumes the Local Government Finance Settlement will be “cash flat…with no new funding or increase in core spending power.” 

Meanwhile, long-trailed national reforms—the Fair Funding Review and a Business Rates reset—are still pending, leaving medium-term planning uncertain in both years. The 2026/27 report underlines the need to stay “flexible and adaptable” amid change with “limited new financial resources” likely.

What that means in practice: prices for contracts, materials and staffing are higher and likely to stay that way; extra help from Whitehall isn’t baked in.

Income Levers: Council Tax, Business Rates, Fees

Council Tax. Both strategies assume the maximum annual rise without a referendum—2.99% (or £5 on Band D, whichever is higher)—and rely on modest growth in the tax base. The 2026/27 paper assumes a 1% rise in Band D equivalents (around 415), which slightly boosts income. 

Business Rates. The 2025/26 report explains today’s system: the Council collects c. £30m, passes 50% to central government, 9% to Kent County Council, 1% to Kent Fire, then pays a tariff—retaining around £4m net. The 2026/27 strategy adds a sharper warning: after a national reset, “there remains a risk that this council may no longer retain any Business Rates in the future,” which would create a funding gap needing “additional income or further savings.” A Business Rates reserve is earmarked to cushion any near-term hit. 

Fees and charges. The approach tightens from one year to the next. For 2026/27 the Council assumes at least a 3.6% uplift (June CPI) for discretionary fees or full cost recovery, and promises a full review. 

Spending Pressures: Familiar List, Sharper Edges

Both years cite the same national pressures—ageing population, housing and homelessness, climate and coastal duties, maintenance backlogs, cyber/digital needs, recruitment and retention. 

But in 2026/27 several issues are more acute:

• Pay bill. The second year of a two-year pay deal adds “£1,500…to every salary point…or 3.5%, whichever is the greater”—about £850k extra in 2026/27. 

• Temporary accommodation. Demand is up and central government does not fully fund private-sector placements, creating a “subsidy gap.” The Council will again use grants (where possible) to offset costs. 

• Waste & leisure. New in 2026/27 are potential changes to waste/recycling collection and a new leisure strategy, both of which could alter costs and service models. 

The Funding Gap: The Slope Just Got Steeper

The 2025/26 strategy’s medium-term forecasts (as at early 2024) showed only a modest shortfall. One year later, the updated MTFS (printed in the 2026/27 report) shows a cumulative gap of £5.52m to 2028/29. It lists a £723k deficit in 2026/27, rising to £2.887m and £1.913m in the following two years—£5.523m in total. The report is clear that items like the finance settlement, council tax limits, homelessness pressures, waste/leisure choices and asset maintenance could move the dial further. 

Reserves: Necessary Safety Net – Not A Habit

Both strategies carry the same warning in almost identical words: “use of reserves is only a one-off (one year option)… The only way to introduce a permanent reduction… is to reduce the baseline budget… or introduce a… source [of] income… that provides a permanent, year on year level of funding.” 

Did The Council Use Their Reserves in 24/25 and 25/26 to support a balanced budget

• 2024/25. The 2025/26 strategy shows total General Fund reserves of £16.55m at 1 April 2024 and a projected £14.67m at 31 March 2025—a fall driven by earmarked reserves. That is, reserves were used in-year to support the budget and other pressures. 

• 2025/26. The 2026/27 strategy states plainly that “a balanced budget (including the use of earmarked reserves) was set for 2025/26.” In other words, reserves are explicitly part of closing the gap in 2025/26. 

The 2026/27 report also notes that total General Fund reserves stood at £21.55m on 1 April 2025, of which £5.89m was the General Reserve; it then reiterates policy to maintain the General Reserve at a minimum of 10% of net cost of services, using anything above that, where sensible, for “invest to save” initiatives. 

Plain-English verdict on reserves: it is legal to use them and sometimes sensible during a shock; but repeatedly using savings to meet recurring costs is not sustainable and is a warning sign. The Council’s own wording makes the point: reserves are one-off tools, not a substitute for permanent fixes.

Capital Plans: Invest, But Make it Pay

The capital test is consistent across both years: new schemes must support corporate objectives and be affordable. The £19.8m Levelling Up Fund for Folkestone town centre remains a flagship grant-funded project that doesn’t load day-to-day budgets. 

Where borrowing is needed, both strategies emphasise prudential borrowing for “invest to save” projects—such as Otterpool Park, Oportunitas Ltd and the Coast Drive scheme—because they “provide a net long-term financial return” that helps cover debt costs and the required Minimum Revenue Provision. The multi-year borrowing need has risen with inflation and pipeline schemes (from roughly the mid-£80m range to around £90m), making that “only if it pays for itself” discipline even more important. 

What Residents Should Expect

• Bills: Another near-3% council tax rise (within national limits) and some fee increases aligned to inflation or full cost recovery. 

• Services: Priority services should be protected, but there may be tighter processes, more digital delivery, and possible changes in waste and leisure models to manage costs.

• Projects: Town-centre regeneration continues with external funding; borrowing is focused where investments can pay back. 

• Risks: A Business Rates reset could reduce what the Council keeps; homelessness pressures and maintenance backlogs remain real. 

Bottom Line

The Council’s strategy is steady: balance the budget, protect core services, use reserves carefully, borrow only when investment pays, and chase external funds. What’s changed is the pressure: pay and contract costs are higher, inflation is stickier, and Whitehall support looks flat. The medium-term gap is now £5.52m by 2028/29 if nothing else changes.

The Council’s own caveat should guide the debate: reserves are a one-off fix. Relying on them to “balance” a budget may be legal, but it’s not a great look—and not sustainable. Lasting balance means permanent changes: lower ongoing costs, or reliable new income. As consultations open, residents’ priorities—bins, parks, town-centre improvements, support for vulnerable people—should shape those choices. 

The Shepway Vox Team

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