Government 'considering further action' after Nottingham Council declared effective bankruptcy

On November 29, chief finance officer Ross Brown issued a Section 114 notice having decided the council would not be able to set a balanced budget as required by law.

All new non-essential spending will now cease, but statutory services will continue to run.

The authority is already being monitored by an improvement board, independently chaired by Sir Tony Redmond.

It was appointed by the Government’s Department for Levelling Up, Housing and Communities (DLUHC) following the collapse of council-owned Robin Hood Energy in 2020, which cost taxpayers over £38m.

The council has narrowly avoided even further Government intervention in the past, but the department now says it is considering whether further action is needed.

Other possible measures may include the appointment of commissioners to effectively take over running of the council, effectively removing full power from elected councillors.

A DLUHC spokesperson said: “We used our statutory powers to intervene at Nottingham Council last year over serious governance and financial issues and have been clear that improvements must be made.

“We have expressed concern over the lack of urgency demonstrated by the council in addressing these challenges, despite the efforts of the Improvement and Assurance Board.

"Ministers have been clear that the onus is on the council to deliver the necessary improvements to the board’s satisfaction.

“We are assessing the situation and will consider whether further action is necessary.”

Nottingham City Council is not the first authority to declare it is effectively bankrupt.

In September Brmingham City Council – the largest local authority in the country – issued a section 114 notice.

The entire local government sector is under immense financial pressures due to service demand and costs.

While the city council has been criticised for historic financial mismanagement, including the unlawful spending of Housing Revenue Account money which has cost upwards of £50m, it too has blamed Government funding cuts.

In Nottingham, revenue support grants have been cut by around £100m over the last decade.

In a statement Nottingham Labour said: “Demand for our services is rising while funding from the Government gets less in real terms each year.

“All councils are facing these pressures and many will be considering the issuing of a section 114.

“The driving force has been pressures in adult and children’s social care and Homelessness, representing over 90 per cent of the council’s in-year overspend.

“This is happening at a time when we have had years of underfunding from the Tory government. Councils cannot cope with an increase in demand coupled to a decrease in funding.”

The Local Government Information Unit (LGIU) said the news comes as ‘no surprise’.

Dozens of other local authorities have either issued, or are at risk of, a Section 114.

Jonathan Carr-West, Chief Executive of the LGIU, added: “Nottingham isn’t the first to issue a section 114 and certainly won’t be the last.

"More and more well-run and effective councils are saying that they could be next.

“The Government is quick to point the finger at ‘failing councils’ but the truth is we have a broken system.”