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Cash-strapped council warns of consequences of bankruptcy

30 Nov 2023 4 minute read
Conwy Council building in Colwyn Bay. Inset: Charlie McCoubrey

Richard Evans, local democracy reporter

A cash-strapped local authority has warned councillors that bankruptcy would be “horrendous, bloody, and draconian”.

Conwy Council faces a budget black hole of up to £30m next year, alongside a £3m overspend this year.

During a meeting of the council’s cabinet at Bodlondeb this week, councillors were warned they may have to consider cutting statutory services to balance the books.

The council’s head of finance painted a bleak picture of what filing for bankruptcy would look like after council leader Charlie McCoubrey asked him to explain hypothetically what would happen if Conwy issued a 114 notice – declaring itself bankrupt.

The discussion arose the same week that Nottingham City Council declared itself bankrupt.

Severe consequences

Head of finance Gareth Evans said he’d attended a Local Government Association budget seminar in Cardiff where financial experts had spelled out the severe consequences councils could face should they issue a 114 notice – effectively taking most decisions out of councillors’ hands.

Mr Evans explained how council officers had been spoken to by a senior policy advisor from the Chartered Institute of Public Finance and Accountancy (CIPFA) as well as a senior commissioner from bankrupted Birmingham City Council. “I think the advice that they (CIPFA) gave was that it is much better for local authorities to sort it (the budget) out themselves (rather than declare bankruptcy), and they advocated for all local authorities’ need to take that responsibility because ultimately if we don’t those decisions will still need to be taken,” he said.

“A section 114 doesn’t mean any additional money will come our way, and I think that is a key point to make. There are no pots of money coming over the horizon.

“Those decisions will just get made by other people, who haven’t been elected by the local population, and they haven’t got that local community interest that the elected members here have. This is purely just around cost.”

Stark warning

Mr Evans then gave a stark warning to councillors about what he had been told by a senior commissioner at Birmingham City Council.

“The scale of Birmingham is very different,” he said.

“It is massive there. And the scope they have is obviously different to what we have. But the approach would be the same.

“Commissioners will come in. They will present a budget plan to council, and members can either accept it and vote for it, or commissioners will make the decisions and set the budget irrespective.

“The words he (the commissioner) used to describe section 114 were horrendous, bloody, and draconian for those authorities who aren’t prepared to take decisions. And effectively democratically elected members will just end up doing planning and licensing. That’s the reality. We need to do all we can do to avoid it.”

Cllr McCoubrey then referred to a 15% council tax rise in other areas where councils have declared themselves bankrupt.

Slashed budgets

Last year Conwy increased council tax by 9.9%, slashed all service budgets by 10% – with even schools being asked to make 5% cuts – and are facing a £3m overspend this year, and a £20m – £30m budget shortfall next year.

He said: “I think it’s also worth pointing out that, I think, Croydon Council had a 15% council tax rise and all the cuts you are talking about as well. So that was completely taken out of members’ power essentially.

“So it’s not just a matter of selling things off and making cuts. It could actually impact the level of council tax that we levy. And we all know how difficult that is for our residents as we had the highest rise in Wales last year.”

Cllr Goronwy Edwards then said the council must look at cutting statutory services.

“I would like to thank Gareth for that insight into what the effect of a 114 would be,” he said.

“And I think it is important we get that message out to all heads of services that whilst we’ve heard this said many times -‘we can’t touch these things because they are statutory’ – I think we have to question that in this current round.

“That’s got to be a key priority. Otherwise the effect of a 114 is far worse than actually tackling the problem ourselves.”

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Rhufawn Jones
Rhufawn Jones
6 months ago

Shouldn’t have spent 58 million pounds on that horrible greenhouse then. Cwbl warthus.

Richard E
Richard E
6 months ago

CBCC and next door DCC need to link up asp. Too many councilors and too much duplication.

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