Nottingham City Council effectively 'declares 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.

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

It now means the authority can continue to provide services and existing agreements required by law, but all new non-essential spending must cease.

In a statement on its website, the council said: “The council’s chief finance officer, has today (Wednesday, November 29) issued a report under Section 114(3) of the Local Government Finance Act 1988 because, in his professional opinion, the council isn’t able to deliver a balanced budget for this year, which is a legal requirement.

“A report discussed at the council’s executive board meeting on November 23 outlines the council’s latest financial position and highlights that a significant gap remains in the authority’s budget, due to issues affecting councils across the country, including an increased demand for children’s and adults’ social care, rising homelessness presentations and the impact of inflation.

“At the halfway point of the year, the council is forecasting a gross general fund pressure of circa £57m which is partly being mitigated from one-off in-year management and corrective actions (including use of previously approved reserves) reducing the net forecasted pressure for the year to circa £23m.

“Past issues relating to financial governance which led to the appointment of an Improvement and Assurance Board, and an overspend in the last financial year have also impacted on the council’s financial resilience and ability to draw on reserves.

This situation has led the council’s corporate director for finance and resources and section 151 officer, Ross Brown, to issue a Section 114(3) report to all councillors today (Wednesday).

“The council is not ‘bankrupt’ or insolvent, and has sufficient financial resources to meet all of its current obligations, to continue to pay staff, suppliers and grant recipients in this year.

“A meeting of all councillors will now need to take place within 21 days to consider the report and an immediate prohibition period takes effect from Wednesday, November 29.

"Until councillors have met, the spending controls already in place will be further tightened, with the practical impact being that all spending that is not already contractually committed or otherwise agreed by the section 151 officer is immediately stopped.

“A dedicated page on the council’s website at nottinghamcity.gov.uk/section-114-report-updates/ will be regularly updated with key information relating to the report and the council’s response.

“Senior officers and members remain committed to continuing to work with the Improvement and Assurance Board and the Department for Levelling Up, Housing and Communities to put the council on a stable financial footing for the future.”