Questions have been raised over whether Nottingham City Council should have been declared effectively bankrupt two years ago.
The authority has passed on information to a financial organisation over the decision, which has contributed to further widespread cuts across the city.
Senior councillors say they were prevented from scrutinising the move – highlighting that councils with far greater budget gaps avoided a similar fate.
On 29 November 2023, the Labour-led council’s corporate director for finance – known for legal reasons as its Section 151 officer – issued a notice that, in effect, declared the authority bankrupt.
While councils cannot go bankrupt, the issuing of the Section 114 notice meant the authority was unable to set a balanced budget as required by law.
Ross Brown, who was appointed to the position in December 2022, said at the time that in his opinion “the council is unable to meet its statutory requirement to deliver a balanced budget for 2023/24”.
He said the council had been facing a £56.899m budget shortfall – largely due to soaring costs in people’s services, such as adult social care. While the authority managed to bring this down to £23m, Mr Brown deemed it necessary to pull the final emergency lever.
In response, the former Conservative Government made the decision to appoint a team of commissioners to the council just months later in February 2024, and they have been working to oversee critical improvements ever since – but not without significant cost to the taxpayer.
A council spokesperson said: “Information has been submitted in accordance with the council’s financial and best value responsibilities.”
‘The Section 114 was to a significant extent based on assumptions which were never thoroughly explained to elected members’
Cllr Graham Chapman, a long-standing Labour councillor, former leader and deputy leader, and former accountant, attempted to scrutinise the decision publicly during an extraordinary council meeting on 18 December 2023, during which members had to note Section 151 officer Mr Brown’s report.
He said: “We have more reserves than Middlesbrough. Yet in Middlesbrough, there is no 114. In Bradford, and we’ve heard about Bradford, they are talking £70m (budget gap), we are talking £20m, yet no 114 in Bradford.
“So why no 114 in these places? In my view, it’s because they know what the implications are of next year’s [government] settlement on the existing year, and they are waiting. So why us now? We’ve got to ask that question.”
Cllr Chapman was interrupted by Lord Mayor, Cllr Carole McCulloch (Lab), who said – on the advice of officers – the council was only present to discuss the response and not the merits of the decision to issue the Section 114 notice.
At the same meeting, Cllr Michael Edwards (Lab) asked whether a risk assessment had been carried out regarding the notice’s issuing. After a short adjournment, he was told it had been deemed that no response was required.
Some councillors now claim they were not given enough opportunity to scrutinise the decision to issue the Section 114 notice in their roles as elected representatives.
Cllr Chapman said Mr Brown submitted a formal internal complaint against him for his behaviour and comments made during the meeting on 18 December.
“I had a complaint from Mr Brown that his professional integrity had been undermined,” Cllr Chapman said.
Cllr Andrew Rule, a member of the Nottingham Independents and Independent opposition group, said he learned of the complaint and wrote to the council’s monitoring officer in defence of Cllr Chapman.
“While I did not agree with Cllr Chapman, he absolutely has the right to raise his concerns at Full Council, and I think it is a very slippery slope when you get to the point of officers trying to suppress debate,” Cllr Rule said.
“[The Section 114] was to a significant extent based on assumptions and movements in reserves undertaken by the former head of finance which in my view were never thoroughly explained to elected members, certainly as far as the opposition group were concerned, to allow a degree of challenge, or indeed clarification on the thought process behind them.”
Mr Brown left the council in November 2024. He now works as the corporate director for finance at the London Borough of Bexley.
Mr Brown was approached for comment via Bexley Council concerning information being passed to CIPFA – as well as the complaint against Cllr Chapman – but the authority said it would not be commenting.
A level of cash reserves ‘well above what would typically be kept’
The council’s current leadership says its finances have improved from “terminal to critical” in the months since the Section 114 notice was issued.
The team of three Government-appointed commissioners – led by Tony McArdle – has been providing progress reports since February 2024.
In their second and most recent report, published in May, they said while a raft of problems remain, they were “pleased” with the council’s continued “constructive and co-operative working interaction”.
The council now has a new permanent corporate director for finance and Section 151 officer, Stuart Fair.
The latest council figures show the general fund reserves – which is the pot of money kept aside for unexpected situations that may arise in its day-to-day operations – have increased significantly.
Reserves are split into money that is readily usable and money that is earmarked for specific purposes – and therefore cannot be touched.
Figures show there were £22.719m in general fund reserves – money that can be used for anything – as of 31 March 2024.
But the authority has looked again at what was deemed untouchable, and realised £40.821m was actually usable.
The council has now increased the usable amount of general fund reserves to £63.540m as of 31 March 2025.
While there is no legal minimum, the council internally recommends that it maintains a level of reserve at 7.5 per cent on its overall revenue budget as a minimum, to ensure it has money available for a “rainy day” and can be financially sustainable.
Nottingham now has a level of reserves equivalent to around 18 per cent, which one independent expert source suggests is well above what would typically be kept and required to be prudent.
It is understood that some at the council believe a similar movement of reserves could have been done to avoid the Section 114 notice in November 2023.
However, in his Section 114 report at the time, Mr Brown said corrective actions had included the use of reserves of £9.492m to try to bring down the significant budget gap.
And while his report added that hypothetically a large sum of £13.165m of reserves “could technically be deployed in-year”, he concluded “this would not only be insufficient to close the gap, it would also significantly undermine the financial resilience of the council, as the consequences of not keeping a minimum prudent level of reserves can be serious.”
While the council’s general fund reserves are healthier and the projected budget gap for the current financial year for 2025/26 has fallen from £69m – it still stands at more than £20m.
Similarly, the gap over the next four-year period to 2029 has been reduced by 60 per cent since Mr Fair joined the authority. While it has been reduced from £172m, that too still stands at over £50m.
The authority is also relying on Exceptional Financial Support (EFS) – an accounting mechanism where the Government gives the council permission to use asset sales to fund day-to-day costs.
This emergency measure was only granted after the issuing of the Section 114 notice in 2023.
Under Mr Brown’s oversight, the council asked the Government for permission to use £41m raised from asset sales to help balance the budget last year – but in the end only £7.7m was needed.
Accurate forecasting of the council’s finances has regularly been brought into question before – including by the Government-appointed Improvement and Assurance Board (IAB), which preceded the commissioners and was established upon the collapse of Robin Hood Energy in 2020.
Cllr Rule questioned the forecasting again and said: “The variance between recent financial performance and [Mr Brown’s] assumptions would indicate that at best they were somewhere between the pessimistic and unrealistic end of the spectrum.”
However, the independent expert said: “It is pretty unusual for a council to go back and say to the Government that when we asked you for support, we weren’t in as bad a situation as you thought, we thought, and we agreed at the time, and we confidentially agreed figures. I know of no council that has done that.
“The people who were getting those figures at the time had a statutory duty. I just don’t think they are appreciating the strain on a statutory officer to get those things absolutely right.”
The source said some within the council could be “positioning” as a political strategy ahead of local government reorganisation.
Council boundaries will be completely redrawn by the end of the decade in favour of larger, unitary authorities to replace the current two-tier structure in Nottinghamshire at the moment.
Under the Labour Government’s plans, the city’s boundaries must expand to create a new authority large enough to meet its requirements.
“You cannot say for sure but the positioning around who is going to be in a position to both be a candidate when LGR boundaries have been established, and whether city councillors, who probably feel their reputation has suffered because they have been in engagement with the Government since 2018, feel they are more competent and experienced to take forward any new authority,” the source said.
‘To be clear, these decisions are not being made out of necessity. They are deliberate and political’
While some councillors have questioned whether the reserves could have been used to prevent a Section 114 being issued, one councillor says they could have been used to prevent cuts.
In March, the council agreed on a budget for the 2025/26 financial year, which included a 4.99 per cent council tax rise and the requirement to deliver £18m in savings.
Before that, tens of millions of pounds in cuts had been made to the city’s libraries service, community centres, youth services, and jobs.
City Green Party councillor and former Sheriff of Nottingham, Shuguftah Quddoos, raised the issue at a council meeting early in 2025.
She reiterated her point and said: “The council has now moved more money into the unearmarked reserves pot so it is now £64m, equal to 18 per cent. The cuts being voted on could easily be covered by the reserves, and we could still have comfortably enough left over for unforeseen circumstances.
“To be clear, these decisions are not being made out of necessity,” she said. “They are deliberate and political. The harm and damage is avoidable and the people of Nottingham deserve better.”
A council spokesperson added: “We are yet to achieve a fully balanced budget and have a continuing structural deficit which means we still need to use Exceptional Financial Support in the current year, although to a significantly lesser degree than anticipated.
“Our financial performance has not been overstated in any way and has been fully reported in accordance with standard accounting practice. The council’s accounts as recently published are subject to external audit scrutiny as well as being open for public inspection.
“It would not be appropriate or financially responsible to use reserves to fund a continuing budget gap.”
The Chartered Institute of Public Finance and Accountancy said it does not comment on individual cases.
