One in ten SIGOMA councils facing Section 114 notice
Posted on August 29, 2023
in ten SIGOMA councils are considering making a Section 114 notice, a new
report can reveal.
council with no prospect of meeting its existing budget will issue a “Section
114” notice. This is a statutory trigger issued by the council's Chief Finance
Officer which prevents all new authority spending with the exception of
spending for statutory purposes and highlights that the council is not able to
achieve a balanced budget for the year. Councillors must meet within 21 days of
the notice and produce a budget that then makes the cuts necessary to local
services to reduce spending.
recent survey by SIGOMA, (the Special Interest Group of Municipal Authorities
representing 47 urban authorities in the northern, midlands and south-coast
regions of England), which looked at the state of their local councils’
finances, found that ten per cent of members were considering making a Section
114 (S114) this year, while close to 20 per cent said it could be possible in
the next year.
councils said this was the first time they were having to consider these
drastic actions due to their lack of cash reserves to balance the current
highlighted that the most common cause of pressure was demand for children’s
social care. Our members have called for the government to treat this service
with the same importance as adult social care and provide additional grant
energy costs and wage rises were also significant factors, with the situation
set to get worse as high-interest rates will soon begin to impact as existing
loans mature, bringing more financial pressure.
increase is despite changes to guidance in 2020 by Chartered Institute of
Public Finance and Accountancy which gave authorities the ability to raise
their financial distress with the Department for Levelling Up, Housing and
Communities (DLUHC) before issuing a notice. Since 2020, 16 councils have
received exceptional financial support from DLUHC, with seven announced this
Sir Stephen Houghton, Chair of SIGOMA, said: “The Government needs to recognise the
significant inflationary pressures that local authorities have had to deal with
in the last twelve months. At the same time as inflationary pressure, councils
are facing increasing demand for services, particularly in the care sector. Pay
increases are putting substantial pressure on budgets, and so the government
must ensure that local authorities have the additional funding they need to
fully fund these pay increases or risk impacting future service delivery.
funding system is completely broken. Councils have worked miracles for the past
13 years, but there is nothing left.
government should provide additional in-year funding to relieve inflationary
pressure, including for the pay deal this year. This additional funding should
also be targeted toward children’s services, which is the greatest area of
pressure for our members.
are facing severe uncertainty - the government must deliver clarity on funding
in the coming years, including on proposed reforms that are long
Read coverage of our survey below:
- Sky News: Nearly a third of councils in poor areas considering bankruptcy within next two years
- ITV News: https://www.itv.com/watch/news...
- Guardian: At least 26 English councils ‘at risk of bankruptcy in next two years’
- Mail: A third of councils in some of the poorest parts of the UK could declare bankruptcy this year or next
- The Independent: Nearly a third of councils in poorest areas on verge of bankruptcy
- Yorkshire Post: Third of councils in poor areas set to go bust, new research suggests (front page)
- Yorkshire Post: Research highlights the need to act on funding for local authorities - The Yorkshire Post says
- Morning Star: Nearly a third of councils in poor areas facing bankruptcy