Labour-run Nottingham City Council declares itself effectively bankrupt

Authority accused of ‘breathtaking waste’ as it heads towards a £23m overspend

Nottingham City Council has been forced to cancel any new spending
Nottingham City Council has been forced to cancel any new spending Credit: SAKhanPhotography

Nottingham City Council has declared itself effectively bankrupt, meaning it will have to halt all new spending.

The Labour-run council’s chief finance officer issued a section 114 notice and said that the authority was unable to deliver a balanced budget for the 2023-24 financial year.

The council becomes the eighth to declare a section 114 notice in three years after Birmingham City Council took the step this September.

A report issued earlier this year forecast that the Nottingham authority was heading for a £23 million overspend for 2023/24. Nottingham cited increased demand for social care, rising homelessness and the impact of inflation as putting extra pressure on its finances.

In a statement released on Thursday, the authority insisted that it “is not ‘bankrupt’ or insolvent”, adding that it 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 be held within 21 days to consider the report.

The council added: “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.”

‘Waste and incompetence’

Robert Jenrick, the immigration minister, said that the authority’s “breathtaking waste and incompetence have let residents down for long enough”. He called on the Government to intervene by appointing commissioners “to restore order” to the authority.

“Nottingham City Council and its Labour leadership have proven themselves utterly unfit to govern this great city,” he said.

The Department for Levelling Up, Housing and Communities has said it is “assessing the situation and will consider whether further action is necessary” after it used statutory powers to intervene last year.

A spokesman for the department said: “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.”

Labour-run Birmingham City Council, the largest local authority in Europe, said in September that it had been pushed over the edge by equal pay claims totalling £760 million, plus the £100 million cost of a botched IT scheme.

In March, Slough Council, which issued a section 114 notice in July 2021, was given permission by the Government to put up council tax by 10 per cent for 2023-24. Normally, councils are limited to a rise of just five per cent, including a precept for social care.

Nottingham City Council said that “no decisions have yet been made” about council tax rises because the report relates to the current financial year.