By Joe Locker, Local Democracy Reporter
From serious financial mishaps and soaring demand for services, to over a decade of declining Government funding, it seems it was almost inevitable Nottingham City Council would have been left unable to balance its budget. Local Democracy Reporter Joseph Locker looks at what lies ahead for the Labour-run council, which issued a notice to declare effective bankruptcy at the end of November.
Nottingham City Council took the extraordinary step of effectively declaring itself bankrupt on Wednesday, November 29.
While local authorities cannot go bankrupt or insolvent in the same way a person or company can, primarily due to the valuable assets they own, a Section 114 notice can be issued if a council doesn’t have enough money in the current financial year to cover its collective costs.
The City Council’s chief finance officer, Ross Brown, issued the notice in November over a £23m budget gap in the current financial year, meaning all new non-essential spending has stopped and any new spending must now be approved by a Spend Control Board.
Spending controls will be in place until 2025.
How did we get here?
The authority is in this situation because of a number of factors.
It has made a series of poor decisions in the past which have drained its reserves of cash, which it could otherwise have used to temporarily balance its budget.
These include Robin Hood Energy, the council-run energy company which collapsed in 2020 leaving the council with a bill of up to £38m, and unlawful spending of money from its Housing Revenue Account.
The cost of correcting this is estimated to be in the region of £51m.
However, perhaps the most pressing issue is one in which many local authorities have been raising alarm bells over for a long time: soaring demand for services and a decade of Government funding decline.
Section 114 notices are now becoming more commonplace, with 14 issued in total and more anticipated soon.
While they were designed to be issued if a council had engaged in specific unlawful or illegally incurred expenses, they are now being used simply because a council cannot balance its budget as legally required due to external pressures.
The Institute for Government says: “There is no correlation between the party that has political control of an authority and the likelihood of issuing a section 114 notice.”
The Government has reduced the funding it gives to councils over the last decade as part of austerity measures, and it now encourages them to raise cash by selling assets, using reserves and hiking council tax instead.
Nottingham’s central government funding is down from £123m in 2013 to £27m this year, but the city struggles to raise money through council tax because 80 per cent of all homes in its boundaries sit in bands A and B, which pay the least.
This, coupled with soaring demand for services such as adults and children’s social care and homelessness support, has led the council to a financial knife-edge.
The high costs of these services, particularly social care which has largely been privatised, only adds to the pressures.
Recent figures show around 700 Nottingham children are in the care of the authority, up from just over 600 in 2016.
Last year the council paid private providers almost £45m to look after these children, up from £33.4m the year before.
Similarly private companies were paid £112m to look after vulnerable adults last year, of which there are 7,000 requiring adult social care services in the city.
The costs have prompted concerns that private providers have been making profit off vulnerable children, and renewed calls for adult social care reform, which has been discussed but not enacted for more than 11 years now.
What lies ahead in 2024?
Despite already being overseen by a Government-appointed improvement board, which was put in place upon the collapse of Robin Hood Energy, the Secretary of State for Levelling Up, Michael Gove MP (Con), decided in December further intervention was necessary to make critical changes.
“The Secretary of State is minded to appoint commissioners to exercise certain and limited functions as required, for two years,” the Government said.
The move would effectively remove power from Nottingham’s elected councillors and place it in the hands of a board of officials, in a bid to “ensure that the necessary improvements are made for the benefit of the local community.”
Major decisions to cut services to save money, as well as get rid of or employ staff, can be made by unelected officials who cost taxpayers anywhere between £900 and £1,200 a day.
In Nottingham, the commissioner team, if appointed, would consist of three appointments including a lead commissioner, a commissioner for finance, and a commissioner for transformation.
The council, and other interested parties, now have until January 2 to make representations to the decision.
Previously responding to the decision, council leader Cllr David Mellen (Lab), said: “Clearly the appointment of commissioners would be very disappointing and not something we would want to happen.
“Any decision that reduces democratic accountability, however limited and temporary this may be, should not be taken lightly.”
A consultation has also been taking place to ask Nottingham residents their thoughts on a raft of service and job cuts amid a separate £53m gap in the council’s budget for the next financial year, starting in April 2024.
Some of the savings include a review of the libraries service, which could result in the loss of 31 jobs to save £1.5m, cutting down road sweeping, reducing community protection to save £3m at a loss of 63 jobs and stopping some Linkbus services.
Linkbus cuts could impact those who use services, particularly people who have difficulty using conventional public transport as the Easylink service, which offers door to door travel, could be stopped entirely.
The Queens Drive and Racecourse Park and Ride sites could also be closed as part of the budget proposals, meaning commuters may have less options.
A number of in-house services may also be entirely closed, including the Jackdawe home care service for people with dementia and the Barkla Close respite care for adults with learning disabilities.
It has also been proposed the Ridge Adventure Playground and Bulwell Play and Youth Centre close too.
Furthermore, the council is planning to cut all budgeted money given to the culture sector.
Stephanie Sirr, the chief executive of Nottingham Playhouse, said the proposal would “really impact our work”.
“Culture is the jewel in the crown of this city, generating millions of magical visits, fantastic engagement with every member of our community and multi-millions of economic impact,” she said.
“These are terrible times but saving zero point four per cent of the total needed is not the answer.”
Out of the 554 job cuts, a total of 187 jobs will be cut without the requirement of public consultation, with savings totalling £20.6m.
It has also been proposed council tax will increase by 4.99 per cent, meaning higher bills for residents.
However, even with the proposed cuts a budget gap of £33.2m remains, and more work is now taking place in a bid to find additional savings.
This includes working out how much additional funding the Government has given the council in the latest settlement announced in December.
The results of the consultation will help inform decisions going forward, with the new budget expected to be approved by Full Council in March.
As well as keeping an eye out for the decision on commissioners and the results of the consultation on the budget proposals, there are some positives to look out for.
Work on the Green Heart is beginning, with plans to transform a section of the former Broadmarsh Centre into green open space.
A play area outside the newly-opened Nottingham Central Library will soon open, as part of the pedestrianisation of Collin Street and Carrington Street.
In the same area, a national retailer will also be moving into a number of empty units under the Broadmarsh Car Park.
Then, in May, an election to choose a mayor for the new East Midlands Combined County Authority is due to take place.
The devolution deal is expected to give Nottingham, Nottinghamshire, Derby and Derbyshire power to make more decisions locally, and the combined authority will receive £38m annually for 30 years to spend on transport, education, housing, and the environment.
