Is Derbyshire County Council on the brink of bankruptcy?

210923 - DERBYSHIRE CC HERO - ITV News Central - Ellen Knight
The council has predicted an overspend of £46 million Credit: ITV News Central

Derbyshire County Council could be on the brink of bankruptcy with a £46 million 'black hole' in its finances - and a crucial meeting this afternoon could decide its future.

The Conservative-controlled council is the most recent local authority to admit its financial problems after Birmingham City Council declared bankruptcy on Tuesday 5 September.

Twenty other councils across the country - including Derbyshire's - have stated that they, too, face financial crises.

Has Derbyshire County Council declared bankruptcy?

No - the council hasn't issued a Section 114 notice, effectively declaring bankruptcy.

But last week the council stated that all non-essential spending will be stopped in an effort to repair the £46 million dent in its budget.

What is Thursday's meeting about?

The council is expected to put forward proposals to reduce its overspend at a meeting at 2pm today.

If these measures are approved, this will bring an end to new projects, a freeze on recruitment, and an end to all non-essential spending.

Birmingham City Council declared effective bankruptcy in September. Credit: PA

Where has this debt come from?

The £46 million gap in the budget arose despite nearly £30 million of council reserves being used to balance the books - and a further £55 million used last financial year.

A report published by directors of the council blamed inflation and demand pressures - particularly in adult and children's social care - which is responsible for more than £20 million of the overspend.

They also stated that the nationally-set pay award for 2023-24 had created a "significant financial pressure" and that using reserves for the past few years to balance the budget had "depleted [reserves] significantly."

The council reserves are now just £28 million - so the predicted overspending of £46 million would "more than deplete" the funds, which the council uses to fund emergency and unexpected issues.

What is non-essential spending?

This is spending that isn't deemed statutory - meaning spending that the council doesn't legally need to provide.

For example, museums; Buxton Museum and Art Gallery has been closed since June as work is needed to protect the building. Support for voluntary groups and charities is also deemed non-essential.

Will Derbyshire County Council declare bankruptcy?

The meeting today will determine whether the council will go ahead with measures that will attempt to prevent bankruptcy.

If these solutions don't work, the council may have to issue a Section 114 notice, effectively declaring bankruptcy and instigating Government intervention.

"We have always been a [...] financially stable council"

In a statement to the council's Cabinet, leader Councillor Barry Lewis, said: "We have always been a well-managed, efficient and financially stable council which has balanced our books, maintained a robust level of reserves and been able to support vital, high quality, value-for-money services for our residents across Derbyshire.

"However, the reality is that the financial pressures we are facing, along with other councils and households, are now greater than ever experienced before, with most of these pressures being simply outside our control", Councillor Lewis said.

He continued: "We’ve been taking many measures over the past few years to make sure we carefully control our costs, such as vacancy control measures, but now we need to do much more.

"We are continuing to lobby the government for extra funding so that we can continue to run vital services to those who need them most, but we also recognise that even more difficult decisions will be needed to be made to try to balance the books."

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know...