Nottingham City Council declares itself 'bankrupt'

Nottingham City Council has declared itself effectively bankrupt, meaning it will stop all spending other than services it must provide by law.

A recent report said the Labour-run council was set for a £23m overspend in the 2023-24 financial year.

It has been beset by financial issues in recent years, and was already being monitored by the government.

The council's chief finance officer said the authority was unable to deliver a balanced budget.

The officer has issued a report under section 114 of the Local Government Finance Act 1988.

It emerged the council was considering issuing the section 114 notice earlier this month.

The authority cited increased demand for children's and adults' social care, rising homelessness and the impact of inflation as putting extra pressure on its finances.

In addition, it said "past issues relating to financial governance which led to the appointment of an Improvement and Assurance Board", twinned with an overspend in the last financial year, had also impacted on its "financial resilience" and ability to draw on reserves.

A meeting is due to take place within the next 21 days to discuss the situation and the authority said a dedicated page on its website would provide updates.

The council said in a statement: "Senior officers and members remain committed to continuing to work with the Improvement and Assurance Board and the Department for Levelling Up, Housing and Communities to put the council on a stable financial footing for the future."

Nottingham City Council leader David Mellen has told the BBC he will not be stepping down following the news that the authority is effectively bankrupt.

"We will continue to pay our bills, we will continue to pay our staff," he said.

He added the council was not going to close its new £10m library - which officially opened on Tuesday - but said all non-essential spending "has to be considered".

When asked if he considered his position at the council, Mr Mellen said: "Today is not about my position. It is about the position of the jobs here at the council. It is about the people receiving services from the council."

In a joint statement, Nottingham's three MPs - Nadia Whittome, Alex Norris, and Lilian Greenwood - said the "government's failure to get a grip on unprecedented rising demand for social care and homelessness has now pushed the council over the edge, forcing it to issue a section 114 notice".

It read: "Our constituents should not be made to suffer further cuts to local services at a time when they face the biggest drop in living standards since records began.

"We will be working with local councillors to mitigate the impact that today's development has on residents, and in Parliament fighting for proper reform of the social care system, real action to tackle homelessness, and funding for local services."

By Hugh Casswell, BBC Nottingham political reporter

Put bluntly, this doesn't come as any great surprise.

Nottingham City Council has been grappling with multimillion-pound budget gaps for years, and announcing cuts to services has become an annual event.

Inflation and rising demand for services is common of all councils, but what sets Nottingham apart is those high-profile blunders.

They've been acknowledged. They've been apologised for. But they have a lasting impact, not least in terms of how much the council has in its reserves.

A spokesperson for the Department for Levelling Up, Housing and Communities (DLUHC) said: "We used our statutory powers to intervene at Nottingham City Council last year over serious governance and financial issues and have been clear that improvements must be made.

"We have expressed concern over the lack of urgency demonstrated by the council in addressing these challenges, despite the efforts of the Improvement and Assurance Board. Ministers have been clear that the onus is on the council to deliver the necessary improvements to the Board's satisfaction.

"We are assessing the situation and will consider whether further action is necessary."

In a statement issued on social media, Nottingham Labour said the demand for its services was rising, while "funding from the government gets less in real terms each year".

It added: "All councils are facing these pressures and many will be considering the issuing of a section 114."

The party cited increased demand in adult and children's social care and homelessness, representing "over 90% of the council's in-year overspend".

Councillor Kevin Clarke, the leader of the council's opposition Nottingham Independents group, said: "I think it was inevitable. One thing led to another and they can't meet the budget."

He said the council's past misspending left the authority with "no resources to rely on".

Reacting to the news, Nottingham Conservatives said vulnerable residents, children in schools, and hard-working families would be the "hardest hit by Labour's failure to balance the books in Nottingham".

Follow BBC East Midlands on Facebook, on X, or on Instagram. Send your story ideas to [email protected].