Nottingham City Council 'fighting huge battle' as it faces £23m budget gap

Coun David Mellen (Lab), council leader, said it is possible the authority’s chief finance officer could issue a Section 114 notice if a £23m budget gap in the current financial year cannot be closed.

While councils cannot legally go ‘bankrupt’, a notice can be issued if one has no prospect of setting a balanced budget.

If a notice is issued, services would continue to run, and existing agreements would continue to apply, but all new non-essential spending may cease.

Government commissioners may also be appointed to temporarily run a council which declares a Section 114, taking power away from local elected councillors, as is the case at Birmingham City Council.

A report published by the council shows it has so far managed to bring the in-year deficit of £26m down to just over £23m.

During a meeting of the executive board on Tuesday, November 21, Ross Brown, the director of finance and Section 151 officer, said it had previously stood at £57m before a ‘whole host’ of corrective actions were applied.

He said: “This report clearly articulates the very, very challenging environment we are operating in.

“Even with the deployment of management corrective actions and technical items being deployed, that still leaves us with a net forecast overspend of circa £23.4 million pounds.

“The council, as people will be aware, has a legal responsibility to deliver a balanced budget in-year and the ability of the council to deliver that from an in-year perspective remains under active consideration by myself.”

Documents show more than 80 per cent of financial pressures are related to adults’ and children’s social care as well as homelessness.

Coun Mellen added: “Clearly these are issues not just facing Nottingham.

“We saw at the weekend the leaders of Derbyshire and Leicestershire Councils both talking about the overwhelming costs of social care dominating their budgets.

“We will continue to try and bring this overspend down between now and the end of the year, but we are fighting a huge battle and it is not our own to fight.”

Coun Mellen further criticised the ‘broken’ children’s care market, within which he said private firms are making large sums of money from the care of vulnerable children.

On November 20, a response to a Freedom of Information (FOI) request, submitted by the Local Democracy Reporting Service, revealed that in 2022-23 private care providers were paid a total of £45m by the council, or around £3.7m every month.

The average cost of a child in care also increased over the same period from £68,141 to £81,058.

The council, which is already being overseen by a Government-appointed improvement board following the £38m collapse of Robin Hood Energy, said reduced Government funding since 2010 means most of its budget is now spent on statutory services such as social care.

The reduced funding, by more than £100m per year over the last decade, paired with soaring demand in social care services, have contributed to the creation of extremely difficult conditions for the authority to operate in, reports say.