Nottingham City Council Announces Effective Bankruptcy

Nottingham City Centre ahead of a national lockdown for England on Nov. 4, 2020. Mike Egerton/PA Media

Another Labour-run local authority—Nottingham City Council—has declared itself effectively bankrupt due to a budget imbalance in the 2023/2024 financial year.

It comes two months after the Birmingham City Council issued a Section 114 notice after it failed to settle a £760 million bill on equal pay claims.

Like Birmingham City Council, the Nottingham local authority is Labour-run, including 50 Labour councillors and five councillors from other parties.

The council leader David Mellen, issued a statement on Wednesday, citing the “combination of Conservative austerity, out of control inflation and rising demand in social care” as reasons for issuing the 114 notice.

According to the council’s chief finance officer, the authority was set for a £23 million overspend in the 2023/2024 financial year.

The council’s “operating environment and the wider economic context” contributed to large financial pressures, particularly in social care and homelessness, the officer reported.

This sector, said Mr. Mellen, represented 90 percent of the council’s in-year overspending. He accused the Conservative government of underfunding the authority. He blamed the Tories for taking away £100 million from Nottingham City Council every year since 2010.

Mr. Mellen also said that Liz Truss’s short-lived government “crashed our economy,” while Prime Minister Rishi Sunak “has little interest in the needs of ordinary working people and cities like Nottingham.”

The council will meet within 21 days to discuss the report and agree on further action.

Meanwhile, under section 114, it will suspend all spending, apart from protecting vulnerable people and providing statutory services.

“Unmanageable Pressures”

Last year, the Department for Levelling Up, Housing and Communities (DLUHC) expressed concern over the council’s management of its governance and financial issues.

“Ministers have been clear that the onus is on the council to deliver the necessary improvements to the board’s satisfaction. We are assessing the situation and will consider whether further action is necessary,” the DLUHC spokesperson said.

In response to the council’s announcement, Nottingham Labour said that all local authorities have been struggling with their finances under “unmanageable pressures.”

The statement went on to say that the “only thing that will save local governments across the country from having to issue more and more section 114s in the future is a Labour Government and proper financial support and funding for local authorities.”

Nottingham Conservatives, on the other hand, said that the Labour-run leadership of the council was responsible for  “effectively running Nottingham into bankruptcy.”

Tory MP Robert Jenrick has called for the Secretary of State to appoint commissioners to “restore order” in the Nottingham City Council.

The government had appointed commissioners to take over the Birmingham city council in September. The commissioners assumed all functions associated with the council’s governance, scrutiny of strategic and financial decisions, and the functions relating to senior appointments.

Meanwhile, the Birmingham council is expected to lay out plans within six months on how it can return to a sustainable financial footing.

Nottingham is the latest council to have announced its effective bankruptcy, following similar cases at Woking and Thurrock councils.

In 2022, the government appointed commissioners to both Liverpool and Sandwell councils to oversee the authorities’ financial management.

As the commissioners seek ways to raise money, they can decide to sell off a council’s assets, such as a city library or land.

Nottingham Council leader Mr. Mellen said the council was not going to close its new £10 million library.

“We will continue to pay our bills, we will continue to pay our staff,” he said.

He also didn’t confirm whether he will be stepping down from his leadership position.

“Today is not about my position. It is about the position of the jobs here at the council. It is about the people receiving services from the council,” Mr. Mellen said.