By Joe Locker, Local Democracy Reporter
The leader of Nottingham City Council says past mistakes such as the collapse of Robin Hood Energy ate into the authority’s financial reserves – but said the declaration of effective bankruptcy points to a worsening national crisis in local government.
On Wednesday (November 29), council chief finance officer Ross Brown issued a Section 114 notice, having decided the council would not be able to set a balanced budget as required by law.
A report published by the council revealed it has so far managed to bring an in-year deficit of £26m down to just over £23m.
It had previously stood at £57m before a “whole host” of corrective actions and the use of reserves totalling around £9m.
In his Section 114 report, Mr Brown noted the authority had lower reserves due to historic accounting treatments and “major project challenges and failure”.
This meant the authority had fewer reserves to use and poor financial resilience.
In an interview with the Local Democracy Reporting Service, leader of the council Cllr David Mellen (Lab), admitted reserves had been lower due to past decisions, including the collapse of Robin Hood Energy, which cost taxpayers £38m
“Some decisions in the past which were well documented, have meant our reserve levels are lower than some other councils,” he said.
However, Nottingham City Council is not the first authority to declare it is effectively bankrupt.
In September Birmingham City Council issued a section 114 notice and local government organisations have been warning of a “broken” Central Government funding system.
The entire local government sector is now under immense financial pressures due to service demands and soaring costs of private social care.
In Nottingham, the city council receives £100m less every year from Government following the cutting down of the revenue support grant.
Cllr Mellen said using reserves does not solve the long-term problem and added: “Councils are using their reserves in greater value than us this year to solve their budget problem, and unless the Government come forth with proper funding of social care, they will be in problems next year.
“Other council leaders, not just Labour council leaders, have been on the media talking about this problem. This is a national thing where local government is being starved of resources.”
A meeting of all councillors will now take place within 21 days to consider the Section 114 report and an immediate prohibition period takes effect from today.
Until councillors have met, the spending controls already in place will be further tightened.
Cllr Mellen issued his reassurance to those working for the council and taxpayers in the city.
“If you work for Nottingham City Council, if you receive a service from Nottingham City Council, if you have done some work for the city council and are owed money, you will continue to receive your service or to be paid as appropriate,” he said.
“It will have to go through a process of being agreed and much non-essential spending will cease.”
The Government’s Department for Levelling Up, Housing and Communities (DLUHC), which appointed an improvement board to oversee the council upon the collapse of Robin Hood Energy, says it is now considering if any further intervention is required.
Cllr Mellen added: “This overspend is not down to the council wasting money.
“This is about adult social care overspending, this is about being greater demand for children in care and placements being made more expensive.
“This is because many more people are presenting to us as homeless and we have a duty to house them, and it is because the rate of inflation over the last year have sky-rocketed.”
Answering a question as to if he will remain as leader of the council, he said the situation requires leadership and that he would be the one delivering that.
Robert Jenrick, the Conservative MP for Newark and former Local Government Secretary, posted on X, formerly Twitter:
“Nottingham City Council and its Labour leadership have proven themselves utterly unfit to govern this great city.
“Their breathtaking waste and incompetence have let residents down for long enough.
“It’s time for the Secretary of State to appoint commissioners to restore order.”