Nottingham City Council considers declaring effective bankruptcy over £23m budget gap

Documents published by the Labour-run authority on November 13 show it has so far managed to bring an in-year deficit of £26m down to just over £23m.

It had previously stood at £57m.

Despite the ‘extensive efforts’ to bridge the gap, significant financial pressures remain.

There has so far been no additional funding from the Government to help the current situation, documents say.

The council, which is already being overseen by a Government-appointed improvement board following the collapse of Robin Hood Energy, says a significant reduction in Government funding, inflation and staff pay-rise pressures continue to pose a challenge.

And during a full council meeting on November 13, Coun Graham Chapman (Lab) said the council is now looking at the issuing of a section 114 notice.

A section 114 notice generally demonstrates a council is facing effective bankruptcy unless it quickly gets its finances in order.

Local authorities cannot technically go ‘bankrupt’ in the same way a company or an individual can, but instead a notice is issued by a council’s chief finance officer if it has no prospect of setting a balanced budget.

Coun Chapman said: “We are left in a position where we are having to look at issuing the section 114.

“The problem with 114s is they were originally aimed at egregious activity, not mainstream activity of a council.

“The problem we have got now is with a 114, even if it is served, it is not going to solve the problem.

“It is not going to solve the massive problem of massive demand for children’s services, massive demand for homelessness and massive demand for adult social care.

“So there is, at the moment, no particular solution.”

Documents, published ahead of a meeting of the executive board on November 21 reveal that, despite a substantial number of mitigating and corrective actions being identified, the council is still left with a ‘substantial unbalanced position’.

People services is forecasting the most significant pressures with a predicted net pressure of £18.752m, up from £14.537m earlier in the year

A further £13.507m relates to children’s social care, mainly due to demand and cost of care placements.

Around £900,000, up from £463,000 earlier in the year, relates to pressures arising from Special Educational Needs and Disabilities (SEND) transport costs.

The growth and city development department is forecasting a net pressure of £3.444m, up from £2.946m earlier in the year, largely due to increased demand and the costs of using emergency hotel and B&B accommodation for those facing homelessness.

Documents also highlight that of the £15.671m savings needed as part of ongoing transformation work, only around £6.155m (39.2 per cent) have been delivered or are on track.

Higher interest rates on cash balances, including in the Housing Revenue Account (HRA), have helped bring down the overall budget gap this year so far.

The council’s director of finance Ross Brown, will be making a formal assessment of the council’s ability to deliver a balanced budget in year as required under the Local Government Act 1988.

If a balanced budget cannot be set, Mr Brown has the power to issue a section 114 notice.