Nottingham City Council considering effective bankruptcy

Nottingham City Council is considering issuing a section 114 notice - effectively declaring itself bankrupt.

Council leader David Mellen said the body's chief financial officers could make the move as the authority tries to balance its books.

A report said the authority is set for a £23m overspend in the 2023-24 financial year.

Mr Mellen said about £21m of the overspend was on social care and tackling homelessness.

By issuing a section 114 notice, the council would have to halt all new spending other than for services it must provide by law.

This includes social care, waste collections, and protecting vulnerable people.

Other councils to have issued such notices include Croydon Council, and more recently, Birmingham City Council.

Mr Mellen said the council was "working hard" to balance the budget, but said the move was an option if the council needed to take further measures to reduce spending.

"We do need to take measures, and we're already doing so, to do what we can to balance that budget in extremely trying times," he told BBC Radio Nottingham.

"At the end of the day, you can't cut things beyond the bone or the city stops working in the way that it should be."

Mr Mellen said local authorities were "not properly funded" and blamed the government for taking away £100m from Nottingham City Council every year since 2010.

Expecting councils to deal with increasing costs and pressures was "unrealistic", he added.

Mr Mellen said financial "mistakes" such as the failed Robin Hood Energy project were "small in comparison to the year-on-year reduction" of funding.

He confirmed the council would continue to pay staff but would have to stop recruiting for all non-urgent roles.

The council will also look at the potential sale of any asset worth more than £1m.

Documents show the Labour-run authority has so far managed to bring an in-year deficit of £26m down to just over £23m.

It had previously stood at £57m, the Local Democracy Reporting Service said.

There has so far been no additional funding from the government to help the current situation, according to documents published by the council.

With a significant amount of the overspend being a result of social care costs, a sector the council legally has to fund, councillor Graham Chapman said issuing a section 114 notice "is not going to solve the problem".

It comes as a percentage of its net budget continues to put it at a risk of being unable to balance its budget in-year.

People Services, which includes adult social care and children's social care, is forecasting the most significant pressures.

By Hugh Casswell, BBC Radio Nottingham political reporter

I know what you're thinking - a council with a huge black hole in its budget? Heard it all before…

Well, this is different.

Usually, when you hear those big numbers, they tend to be a forecast for the next year, or the year after that - then they get to work trying to bridge the gap.

But in this case, this £23m overspend is for the current financial year - which we are more than halfway through.

And that's a big problem because all councils, by law, have to set a balanced budget each year.

If they cannot plug the gap - and plug it quickly - that dreaded section 114 notice looks unavoidable.

The council's director of finance and Section 151 Officer, Ross Brown, will be making a formal assessment of the council's ability to deliver a balanced budget in year as required under the Local Government Act 1988.

If a balanced budget cannot be set, Mr Brown has the power to issue a section 114 notice.

Senior councillors will discuss the financial issues at a meeting of the executive board on 21 November.

The government's Department for Levelling Up, Housing and Communities has been contacted for comment.

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