North East council seeks to address £11.5m overspend amid section 114 notice fears

Middlesbrough Council has become the latest council to warn that it could be forced to issue a section 114 notice, as it seeks to recover an £11.5m forecast overspend against its budget.

The local authority insisted that “robust and timely action” was being taken to tackle the issue.

The council said: “The projected overspend is significant at around 9% of the council’s 2023-24 budget and must be addressed to avoid exhausting the council’s limited revenue reserves by the end of the year.”

Savings measures totalling £2.5m have been identified so far, leaving a further £9m to be found.

Middlesbrough said: “Failure to manage within the budget could trigger the need for further intervention and possible financial support being required through the Department for Levelling Up Homes and Communities (DLUHC) to prevent the need for the council’s Chief Finance Officer to issue a Section 114 Notice to the council as required by law.

“Council officers are in regular communication with both DLUHC and the External Auditor in relation to the council’s financial position and measures to address it.”

The local authority added that a balanced budget was set by full council in February 2023 as was required by law, but admitted that a combination of factors had “thrown [its] finances off course”.

These were mainly related to pressures facing many local authorities in the current economic climate, it said. “They include continuing inflationary pressures upon the cost of delivering all services, combined with increasing demand for children’s and adult social care, home to school transport services and homelessness provision.”

Plans are also being developed in order to meet a further potential budget gap of around £14m in the council’s 2024-25 budget rising to £24.5m by 2026/27 as part of the Medium Term Financial Planning process.

Cllr Nicky Walker, Middlesbrough Council’s Executive member for Finance & Governance, said: “This is a very critical position, and there was very little left in the tank from last year in terms of the funds available to us.

“Other local authorities are dealing with the impact of Government cuts and rising costs and Middlesbrough is not alone in this, but this is the second year running where the council has had to deal with a large overspend in the first few months of the financial year.”

Cllr Walker added: “We’ve identified emerging pressures earlier this year and are putting stringent measures in place to recover the financial position. That inevitably means reducing spending substantially as quickly as we can this year.

“Executive members will continue to work very closely with officers to ensure we get back on track as soon as possible.

“We’re all in this together and all councillors also have a role to play in helping to restore our financial resilience.”

Middlesbrough Mayor Chris Cooke added: “This is a really serious position for the council.

“The simple fact is due to the overspending and depletion of reserves in the last few years if we want to keep the council going we need to reduce our expenditure and look at delivering services in a different way – if we don’t do that, someone will come in and do it for us.

“It isn’t impossible, but it is going to be tough.”

Mayor Cooke added: “Throughout that process our focus will be on maintaining front-line services wherever we can.”

The reports will be considered at a meeting of Middlesbrough Council’s Executive on Wednesday, August 23.