Councils across England face financial crisis as bankruptcy looms

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Nottingham City Council

8th December 2023 – (Nottingham) Nearly one in five council leaders and chief executives in England are contemplating the possibility of effectively declaring bankruptcy in the near future, following the recent example set by Nottingham City Council. On 29th November, Nottingham City Council issued a Section 114 notice, acknowledging its inability to balance its budget for the remainder of the financial year, which concludes in April.

The council is currently facing a budget shortfall of £23 million, and a meeting scheduled for 18th December will determine the course of action to address this fiscal void. According to the Institute for Government, Nottingham City Council is the 14th local authority to issue a Section 114 notice since the legislation enabling such declarations was enacted in 1988.

However, Nottingham is not alone in its financial struggles. Several other local authorities have expressed concerns that they may find themselves in a similar predicament in the coming months. The Local Government Association reports that nearly 20% of council leaders and chief executives believe it is either very likely or fairly likely that they will be compelled to issue a Section 114 notice within the next year.

Critics have questioned whether Nottingham City Council could have managed its finances more prudently over the past decade, prompting discussions on the matter. Public opinion on the issue remains divided, with some arguing that the council’s financial mismanagement is to blame for its current situation.

The potential bankruptcy of local councils has raised alarm bells, as it could have far-reaching consequences for the provision of essential services. Moreover, approximately 50% of council leaders express a lack of confidence in their ability to secure adequate funding to fulfill their legal obligations in the coming year, including the delivery of statutory services.

In response to these pressing concerns, Ben Bradley, the Leader of Nottinghamshire County Council, has joined forces with other leaders from across the country in calling for increased government assistance. The County Councils Network (CCN) recently sent a letter to the government, emphasizing the need for additional funding to alleviate the financial pressures faced by local authorities. The letter highlights the absence of direct supplementary funds for local government in the Autumn Statement and the unexpected costs resulting from increases to the national living wage.

The CCN asserts that local government plays a vital role in the fabric of the nation and argues that reductions in services erode the ability of councils to fulfil their societal responsibilities. From safeguarding the most vulnerable members of society to facilitating urban regeneration and maintaining cleanliness, councils play a pivotal role in providing crucial services that businesses and communities rely upon.