York’s finance executive has called for an “urgent rescue plan” for councils as one in five fear going bust.
Cllr Katie Lomas, the finance executive at City of York Council, told the Local Democracy Reporting Service she’s “seriously concerned” about balancing the books in the next four years without further support from central government.
Labour was elected to run York in May, but its first six months have been blighted by cuts due to financial constraints.
In September, the council warned it forecasted an £11.4m overspend this financial year without further action, which it has since reduced to £11.1m.
“I’m definitely confident we won’t be issuing a 114 notice this financial year,” Cllr Lomas said.
“And we’re working as hard as we can to make sure that it won’t happen next year.
“But the situation is dire and like many councils, we are seriously concerned about the medium term [the next four years] in terms of being able to set a balanced budget and keep adrift each year.”
Northamptonshire County Council issued a section 114 notice in 2018, the first time a local authority had done so in two decades.
Since 2020, a further seven councils in England have issued section 114s, four of which were in the last 12 months.
The Local Government Association estimates that councils in England face a £4bn funding gap over the next two years and almost one in five councils think it is very or fairly likely that their chief finance officer will need to issue a section 114 notice this year.
Needs £10m a year
City of York Council needs to make £10m in cuts each year to stay afloat, including curtailing spending on non-statutory services, holding vacancies, not recruiting and reducing the use of agency staff.
In January, more plans will be considered by the council’s executive, but without a change to how local authorities are funded, Coun Lomas believes this will be a common theme in councils across the country.
“I think it’s really important that the next government has a specific plan to deal with the issues that councils are facing,” Cllr Lomas said.
Rachel Reeves, the shadow chancellor, when asked what a Labour government would do about poor council finances cited extra cash going into the NHS.
Cllr Lomas said: “Of course injecting that money into the NHS will help but the majority of social care is not delivered by the NHS, so we need specific plans for local authorities to support them in their delivery of statutory services.
“I think there needs to be an urgent rescue plan for local authorities and it needs to come soon to avoid more local authorities being in the same situation as Nottingham and those other councils that have had to issue their 114 notices.”
Shaun Davies, LGA chair, said: “No council is immune to the risk of running into financial difficulty.
“Many now face the prospect of being unable to meet their legal duty to set a balanced budget and having section 114 reports issued.
“Local government is the fabric of our country, with councils providing hundreds of services that our communities rely on every single day.”