Council facing bankruptcy unless services and jobs are cut, admits leader

Richard Evans, local democracy reporter

Councillors have been warned that the top priority for Denbighshire’s cabinet is to avoid going bankrupt, a private letter from the leader to councillors has revealed.

The council has confirmed it will now look to increase council tax and cut both services and jobs in a bid to make ends meet. Charges for services could also be introduced as the local authority tries to deal with high inflation and increased demand.

In a letter to councillors handed to the Local Democracy Reporting Service, leader Cllr Jason McLellan warned that Denbighshire council faces a shortfall of £20-26m for 2024/25.

Denbighshire is expecting just a 3% rise in its next annual settlement from Welsh Government, and the leader warned councillors in the letter that the list of potential savings included ‘everything we do’.

There were even hints of job losses with the leader asking councillors to treat future information confidentially or else risk causing uncertainty to council staff – but job losses have since been described as inevitable.

In his letter, paraphrased below, Cllr Jason McLellan warned: “The main priority for cabinet at this point is to stop the council from going bankrupt, which has happened recently to other local authorities across the UK as they have been unable to balance their books.

“Latest forecasts predict pressures of £26m in 24/25, and there is no expectation that the 3% indicative settlement from Welsh Government will change. Before any increases in council tax, that would result in a gap of £20m.

“Due to the unprecedented scale of the problems we face, we are unable to follow a similar process to that which has been followed in previous years, when the requirement for savings was much less, even in the period of austerity.”

Uncertainty

The leader’s letter then asks councillors to treat future information confidentially, relating to ‘potential measures’ that could impact upon staff and service users during a consultation stage – causing uncertainty.

The Local Democracy Reporting Service approached Cllr Huw Hilditch-Roberts, the leader of the opposition, who said the letter was worrying for communities and staff in the county.

Cllr Hilditch-Roberts has now written to the chairman of the council, calling for an urgent meeting.

“The email that all councillors received last week is the first thing we’ve heard about the Labour and Plaid cabinet that their priority is to stop the council going bankrupt,” he said.

“As an independent group, we are calling for an urgent extraordinary meeting of the council so that all councillors can be put into the picture of the situation that is facing Denbighshire County Council and the cabinet’s priority of protecting the council from going bankrupt.

“When the council tax was set earlier this year six months ago, we asked for reassurance going forward, and now this emerges.

“We need to have an open and transparent process for all councillors to be told what exactly is going on.”

He added: “When you see an email that mentions bankruptcy, you worry for staff; it is going to be a worry for residents; it is going to be a worry for councillors; it is going to be a worry for everyone. The word bankruptcy is a serious situation, and that is why we need a meeting to discuss the seriousness of the situation.”

Cllr Brian Jones also felt strongly.

“I got re-elected on 9 February this year. Denbighshire’s council tax rise was only 3%, one of the lowest in Wales,” he said.

“The impression I got was the finances of the council were in order. Here we are now on Monday 16 October, and the email is going out painting a different picture with the word bankruptcy used.

“The question is what on earth’s happened from January to the middle of October.”

He added, “There will be a lot of people worried. People working for the council will be worried about job security, and the public will be worried about what is going to happen to services.”

Budget pressures

A spokeswoman for Denbighshire County Council commented, “Denbighshire County Council, like local authorities across Wales, is facing a series of continuing budget pressures due to rising costs and demand for services.

“It is estimated that delivering day-to-day services – including social services, waste collection and schools – will cost an extra £26m due to price increases, inflation, and pressure on demand.

“Despite an expected increase in funding of £5.6m (3%) by Welsh Government, this still leaves a funding gap of £20.4m. The council must find additional money through savings and efficiencies, charges for services, increases in council tax, or by reducing or cutting services.”

Leader Cllr Jason McLellan, who is also cabinet member for economic growth and tackling deprivation, said: “Like all councils across Wales and England, we face the most challenging of times. Over a decade of constant austerity cuts from UK Government has taken its toll on local authorities, and as a result we have to make very difficult decisions.

“We have already been looking at every council function to identify budget savings. We have asked staff internally to propose ideas; we are considering what we can do differently, what we can reduce and what we can stop. On the basis of these considerations, we are working to come up with a list of potential savings across everything we do. The current financial position is incredibly challenging, and as a result, the need for significant budget savings is unprecedented.”

Cllr Gwyneth Ellis, cabinet member for finance, performance and strategic assets, said: “The main priority for cabinet at this point is ensure the council can balance the books.

“Denbighshire wants to avoid arriving at a situation where external commissioners are sent in by government to reduce spend with little or no reference to the elected members or the local communities. This is the reality of what could happen should we fail to balance the books.”

She added: “That is why we must start making difficult decisions now. We need to be able to agree to implement significant savings over the next few months to enable us to set a balanced budget for 2024/25. We also know there are likely to be similar challenges facing us for 2025/26.”

Cllr Jason McLellan went on to say: “Failure to set a balanced and sustainable budget could have severe consequences for the council. Some councils in the UK have found themselves in situations where they have had to actively consider issuing notices of effective bankruptcy in recent weeks and months. This council is in control of the situation and will avoid such measures by acting decisively over the next few months.

“Officers and elected members are working hard to identify and implement the level of savings required to meet the unprecedented financial challenges that currently exist. These savings will almost inevitably impact upon the level of services that can be provided and the number of people employed by the council.”