By Joe Locker, Local Democracy Reporter
A package of emergency financial support to help Nottingham City Council balance its budgets comes with its own serious financial consequences, a senior councillor has warned.
The Labour-run authority is facing a £23m in-year budget gap and a £53m gap in the 12 months beginning April 2024.
The council issued a Section 114 notice, effectively declaring bankruptcy, in November, while a series of significant cuts to libraries, care homes and jobs have been proposed next year.
However, even with the sweeping cuts the budget hole cannot be entirely filled, meaning the council has requested a mechanism known as Exceptional Financial Support (EFS) from the Government for £25m for the current year and £40m for the next.
The support will not come in the form of a Government grant. Instead the council will be loaned money to balance its budget with the expectation it will pay it back by selling property assets over a number of years.
Special permission will be given to use these ‘capital receipts’ for day-to-day operational costs.
Senior councillor Steve Battlemuch (Lab), whose portfolio covers property, said: “This is not a Government bail out, this is not new money, but this is money the Government will expect us to pay back by either increased borrowing which we have a cap on at the moment or by asset sales.
“The problem with that from an assets point of view is you can only sell things once. If the Government seriously thinks you can run councils using capital receipts to plug revenue budget gaps they are seriously mistaken because you might be able to plug it for a year but never year-on-year.
“The other consequence is that in a normal cycle of events, if we weren’t in this scenario, we do look for capital asset sales but some of that will be to replenish the capital programme the council has, because we have to spend money on capital whether that is to build up a fund for Broadmarsh in the future or whether it is to replace or refurbish buildings we own.
“Lets say we have to sell £65m-worth of assets. Next year that is £65m that won’t go into the capital programme.”
The council has already been engaged in an asset-sale programme as a way to reduce its overall debt.
While its debt has been reducing as a result, some difficulties have been encountered.
The selling of the former Central Library in Angel Row fell through, while the sale of the landmark Guildhall building was delayed due to the protected listing of the neighbouring police and fire station headquarters in Shakespeare Street.
“The situation we would be in is clearly those asset sales would need to keep coming through, but what we know of asset sales from our own experience is it is not a straight line,” Cllr Battlemuch said.
“You cannot just put something on the market and think well, in three months it will be sold and we will get all the money, because that did not happen with Angel Row, it did not happen with Guildhall.
“Some of those bigger projects are now coming about and we are on the verge of a deal with Guildhall and Angel Row, but we are going to have to do a lot more if the Government insists on funding EFS through asset sales.”
EFS packages are typically only granted on the condition council tax is increased over and above the allowed amount.
Local authorities can usually only raise council tax by up to 4.99 per cent.
However, other crisis-hit authorities in Birmingham and Croydon have received permission to hike it by 10 and 15 per cent respectively in recent years.
The Department for Levelling Up, Housing and Communities says it is ready to speak to any councils that have concerns about finances or pressures it has not planned for.
It says EFS is “a measure of last resort, and local authorities should take every possible step locally to minimise the need for support via the process”.
An additional £600m was recently announced on top of the £64 billion Local Government Finance Settlement for 2024-25 to support struggling councils.
