City council issues section 114 notice due to rising costs of services
Nottingham City Council has issued a report under section 114(3) of the Local Government Finance Act 1988 after finding that it cannot balance its budget amid the rising costs of its children's and adults' social care services, homelessness and inflation.
In a statement on the report, the local authority – which has become the seventh council to issue a s114 report in two years – said the pressures that forced it to issue the notice are problems "affecting councils across the country".
The report, authored by Ross Brown, Corporate Director of Finance & Resources and s151 Officer, comes despite efforts by the council to rectify its financial position, which began in the summer.
The council must now meet within 21 days to discuss the report and any action it proposes to implement.
In the period before the meeting, the council cannot conduct any new spending unless approved by the s151 officer.
In June 2023, the council implemented a financial intervention strategy to tackle the budget pressures, which realised £5m in spending reductions.
However, the subsequent months saw the council face changes in demand, particularly relating to social care and homelessness services.
In response, the council made an additional £13m in year spending reductions, but this was not enough to stave off the section 114 report.
In May 2023, the council's gross forecast' General Fund position' was £28m overspend and its net forecast General Fund position overspend was £25.8m against the approved net budget for the General Fund in 2023/24 of £261.8m.
The report issued by Brown, who joined the council as its s151 Officer in December 2022, said the key drivers of the overspends were:
- Increased demand (Adult social care volume and need, Children's social care package volumes and complexities, home to school transport and temporary accommodation)
- Non-delivery of Transformation savings
- Increased costs (particularly in Children's social care packages and temporary accommodation) and broader provider inflationary pressures
- Nationally agreed pay agreement above the 2023/24 budgetary provision
- Income shortfalls
- Pressures relating to non-qualifying capital recharges
According to Brown, the s114 report was issued following extensive engagement with both the Chief Executive (Head of Paid Service) and the Director of Legal & Governance (Monitoring Officer).
The report notes that Brown will formally engage with the Department for Levelling Up, Housing and Communities (DLUHC) to request 'Exceptional Financial Support'.
Jonathan Carr-West, Chief Executive, LGIU, said: “Sadly this news comes as no surprise. We know that around one in ten councils are at risk of effective bankruptcy. This represents a tragedy for millions of citizens who see the services they rely on at risk even as their bills rise.
“Councils have been continuing to pull every lever available to them to balance their books: raising council tax, cutting services, and spending their finite reserves, and still we are seeing an ever-increasing number of councils unable to make ends meet in the face of central government spending cuts and increasing demand for – and cost of – council services, particularly adult and children’s social care.
“It doesn’t have to be this way. Councils need multi-year financial settlements where funding is connected to service demand not to political expediency and they need more powers over raising and spending their own revenue.”
Carr-West added: “Nottingham isn’t the first to issue a section 114 and certainly won’t be the last. More and more well-run and effective councils are saying that they could be next.
“Government is quick to point the finger at “failing councils” but the truth is we have a broken system.”
Adam Carey
