City council becomes latest to warn of potential s114 notice

Nottingham City Council could be on the brink of issuing a section 114 notice declaring effective bankruptcy, a council report has warned.

If it took this step Nottingham would join Birmingham, Croydon, Slough and Thurrock in declaring it could not set a balanced budget.

A report to the council’s executive said Nottingham was neither as yet bankrupt nor insolvent, as it had sufficient resources to meet all current obligations.

But a forecast £23.3m overspend on its £26.83m budget meant section 151 officer Ross Brown, “will need to consider the appropriate next steps for the authority, which will include a further assessment of the council’s ability to deliver a balanced budget in year”. 

If Mr Brown concluded this was impossible, “consideration of the issuance of a report under Section 114(3) of the Local Government Finance Act 1988 will need to be made”, it said.  

Nottingham is already working with an improvement and assurance board imposed by the Department for Levelling Up, Housing and Communities after earlier financial problems.

The report said the vast majority of the overspend arose in adult and children’s care services.

Despite efforts to manage its finances the council’s operating environment was volatile “with small changes in cost and demand disproportionately materialising in large financial pressures, especially in children’s social care”, with no additional government support as yet available, the report said.

Inflation, demand increases, costs of social care, and transport and temporary accommodation costs for those with special education and disability needs all affected important income streams of the council.

Among factors in social care driving the overspend were £13.5m for children’s services - mainly related to children in care placements - £4.9m for adult external care placement costs and £900,000 of net pressure in education mainly arising from around £1.1m overspending on special education needs and disabilities transport costs.

There was also a £1.05m overspend across the legal and governance service caused by caused in part by a £700,000 pressure from additional specialist legal work within children and adult services.

Mark Smulian