Council "crossing our fingers to avoid a S114 situation"

Cheshire East Council is now predicting that it's financial shortfall will be less than previously expected as a result of approved budget changes.

But one councillor described the situation as still "very very gloomy" stating "we're crossing our fingers to avoid a S114 situation." *

Their current forecast for the financial year 2024/25 based on income, expenditure and known commitments is £20.1m overspend against a net revenue budget of £395.4m, an improvement of £6.5m from their earlier figure of £26.6m.

Deputy Director of Finance Paul Goodwin said "Whilst efforts continue to be made to reduce overspend if we did end the year with a £20.1m overspend that would need to be covered by a combination of exceptional financial support, of which we have provisional approval of £17.6m and reserves to which we forecast we would have £10m in hand.

"I think it is important for me to say something about the national context. It is widely reported on a weekly basis by the local government media and occasionally the national media, that the local government finance system is under significant pressure and an increasing number of local councils are experiencing similar challenging positions to ourselves.

"In simple turns the controls on local government finance system have not enabled councils to fully keep pace with exceptional levels of cost inflation and interest rates over the last couple of years in particular nor the increases in demand and cost of provision of essential care. Many local authorities are facing the same pressures on their approved budgets and utilisation of reserves. It is important that our position is understood in that national context."

Councillor Ken Edwards said "At the moment I am very very gloomy and I think we are going to need the additional financial support."

Adding "Frankly I think we're crossing our fingers to avoid a S114 situation."

Cilr Reg Kain commented "I want to know why exceptional financial support, which is still going to bring about the cuts we are going to suffer, is a better situation than a 114 because from where i am sitting at the moment I can't see us really avoiding a 114 in the future."

Cllr Jill Rhodes replied "Exceptional financial support requires us to increase our fiscal borrowing but a 114 section it's commissioners coming in, those commissioners have to be paid by the council and you lose control, that's politically control of your council and it is run by commissioners. So democracies will not be best served by a 114 notice and commissioners."

Cllr Clowes added "It is not a place we want to be. We think this is bad enough. We think this is death by a thousand cuts. It is infinity better than the violence, slash burn approach which tends to be what happens when government officials come in because basically all they're interested in is balancing the books whatever it takes and I think we need to do everything in our power to avoid a 114 but it on the other hand it would be quite wrong to ignore the elephant in the room, it is there."

* UK local authorities cannot go bankrupt. A section 114 notice indicates that the council's forecast income is insufficient to meet its forecast expenditure for the next year. A section 114 notice means the council cannot make new spending commitments and must meet within 21 days to discuss what do next. Most councils under a section 114 notice will then pass a new budget to introduce cuts and reduce spending.