Council reassures residents that local authority is not in danger of going bust

Nicholas Thomas Local Democracy Reporter

A council’s top finance officer has reassured residents the local authority is not in danger of following several English councils into a major budget crisis.

In the face of “unprecedented financial challenges”, Caerphilly Council has warned that several local authorities in England have already issued so-called Section 114 notices, effectively announcing that they are unable to deliver a balanced budget.

It is “anticipated that a number of other councils will issue Section 114 notices moving forward”, according to Caerphilly Council’s draft budget proposals.

Reassurance

At a meeting of the council’s voluntary sector liaison committee on Tuesday (February 6), councillor Judith Pritchard asked head of financial services Steve Harris to explain the Section 114 process and “reassure” Caerphilly residents.

Section 114 notices are issued when a council “cannot balance its budget”, he replied.

In such a situation, a council then has a “short window of opportunity” to develop a recovery plan, and if that fails a team of “commissioners” is called in to take over running the local authority until it can “turn the balance around”.

Despite news of a number of councils – a Caerphilly Council report names Birmingham, Croydon, Northumberland, Nottingham, Slough and Thurrock – issuing Section 114 notices, Mr Harris said none in Wales had done so to date.

This was partly because Welsh councils were “more heavily reliant” on central government funding, he suggested.

Generally speaking, he said councils that had issued Section 114 notices may have experienced financial difficulties arising from “risky” investments, pay awards, and rising costs of social care and temporary accommodation for homeless people.

Those last two cost issues are “the same in Wales”, Mr Harris explained, adding that while he could not speak on behalf of other councils regarding their finances, local authorities would “all be watching closely” if the Welsh Government was required to step in anywhere in future.

Funding gap

Caerphilly’s budget proposals for 2024/25 include the use of £11 million of the council’s reserves, and warnings the authority must address a £46m funding gap over the next two years.

But despite that bleak outlook, Mr Harris insisted there was no need to worry about Caerphilly Council pressing the panic button – and councillor Teresa Parry warned colleagues against “scaremongering”.

“I’m not in a position to consider issuing a Section 114 notice at this time,” Mr Harris reassured the committee.