Nottingham City Council 'at risk of having to declare bankruptcy'

Nottingham City Centre Credit: PA Images

Nottingham City Council is at risk of having to declare bankruptcy without a significant bailout, a Government inspector has warned.

If this happened, it would mean all non-essential spending would be suspended which could impact thousands of jobs.

As things stand the council is not in a position to approve a legally-required budget for 2021/22.

If it cannot do this, it would have to issue a Section 114 notice - effectively declaring itself bankrupt. Government support will be needed to avoid this.

The Government should legally limit how much money the city council is allowed to borrow.

A three year recovery plan should be submitted to Government by next month to plug hole of between £53 and £64 million by 2023/24.

And a new Government panel will be set up to monitor progress as financial performance of council-owned companies which 'in many cases were deteriorating' even pre-COVID.

Nottingham City Council building Credit: PA

Four years ago, Nottingham started to lose control of their budget and they were advised that they needed to address the issues.

An inquiry has found: "Today, it is clear that the council cannot balance its 2021/22 revenue budget without support.

"It is some way from producing the elements of a coherent recovery plan which will set out how it will get there over a two to three year period and the staging posts along the way.

"Strong mechanisms to hold the council to account in delivering this recovery are required."

On the issue of the culture of the organisation, it found: "A fundamental culture shift is required together with a much simpler structure, working together, with clear accountability."

In conclusion, it found: "The council approach to companies, its capital programme and revenue budget has layered risk upon risk and the consequences of Covid-19 on the budget has pushed it into the financial position of having a massive ongoing budget gap with depleted reserves.

Nottingham City Council has fully accepted the findings of a rapid review carried out on behalf of the Ministry of Housing, Communities and Local Government.

However, the Council’s Leader has made clear that the authority is not on the verge of bankruptcy.

Councillor David Mellen said: “The report does not use the word ‘bankruptcy’. It does highlight that the Council needs to make savings in order resolve our very difficult budget situation and we are currently developing budget proposals in order to meet that challenge.”

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