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The City Council of Nottingham is the most recent local government to release a Section 114 notice, citing a decrease in government funding and an increase in demand for services as the cause of their financial struggles.
The governing body stated that the action, which is seen as equivalent to declaring insolvency, is a reaction to an expected overspending of £23 million in the current budget year.
According to an official statement, the council, which is run by the Labour party, stated that it has enough financial means to fulfill its current responsibilities of paying employees and suppliers. It also refuted claims of being “bankrupt” or insolvent.
The announcement stated that the council is predicting a gross General Fund pressure of approximately £57 million at the midpoint of the year. This pressure is being partially relieved through one-time management and corrective measures.
The planned measures, which involve utilizing reserves that have already been approved, are anticipated to lower the projected net pressure for the year to approximately £23 million.
The council’s corporate director for finance and resources, Ross Brown, has issued a Section 114(3) report to all councillors today due to the current circumstances.
The council is not financially unstable or unable to pay its debts. It has enough money to fulfill all of its present commitments and to keep paying employees, suppliers, and those who have received grants this year.
Nottingham’s ruling Labour group released a statement explaining the reason for this is due to an increase in demand for services coupled with a decrease in government funding.
“All local governments are experiencing these challenges and some may be contemplating the implementation of a Section 114.”
“The main contributing factor to the council’s overspending this year is the demands in Adult and Children’s Social Care and Homelessness, accounting for more than 90% of the total.”
The statement further expressed that for several years, efforts have been made to safeguard the services that the residents of Nottingham depend on and take pride in. However, the current pressures are beyond our control.
It is believed that Nottingham City Council is the third governing body to release a Section 114 notice in the current year, bringing the total number of such reports to 12 since 2018.
In September, Birmingham City Council released a Section 114 notice, revealing a projected equal pay liability of £760 million and a budget deficit of £87 million for the current fiscal year.
The notifications mandate that councils adhere to spending regulations and restrict certain forms of fresh expenditures.
The CEO of the LGIU, Jonathan Carr-West, stated that this news is unfortunately not unexpected.
“Approximately 10% of councils are facing the possibility of bankruptcy, which is a devastating situation for the millions of citizens who rely on their services. This is especially concerning as their expenses continue to increase.”
Local governments require long-term financial agreements that are based on the level of service demand, rather than being influenced by political convenience. Additionally, they should have increased authority over managing and utilizing their own funds.
“Other councils have also utilized Section 114 and Nottingham will not be the only one. Many efficiently managed and successful councils are acknowledging the possibility of facing similar circumstances.”
This information is from the Independent, a British online newspaper.
The source of this data is the Independent, an online newspaper based in Britain.