Wednesday 22 May 2024
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City Councillors meet to discuss £23m overspend and Section 114 Report

Nottingham City Councillors will meet next week to consider what further steps need to be taken to tackle a £23m overspend in the authority’s budget caused by issues affecting councils across the country, including increased demand for children’s and adults’ social care, rising homelessness presentations and the impact of inflation.

The council’s Chief Finance Officer issued a Section 114 Report on 29 November due to the council being unable to meet the legal requirement to deliver a balanced budget for this year.

Following the Section 114 Report, the council entered into a 21-day Prohibition Period where spending controls already in place have been further tightened with any spending not already contractually committed, or otherwise agreed by the Chief Finance Officer in his role as Section 151 Officer, immediately stopped.

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Within the 21-day period, the council is required to hold a meeting of all councillors to confirm whether or not it accepts the report and to agree what actions, if any, it proposes to implement.

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This meeting is due take place on 18 December when a recommendation will be considered to take immediate steps to mitigate the forecast overspending through the council’s Financial Recovery Plan and to continue the Spend Control Policy introduced by the Section 151 Officer until 31 March 2025 subject to further reviews.

Under the Spend Control Policy, ‘allowable spending’ is being approved where it is essential to meet the council’s legal duties at the minimum level or to meet existing legal commitments; externally funded spending, where the council would lose external funding if approval were not given; and spend where there is a robust business case.

Other steps proposed include a review of council’s capital programme to assess whether borrowing can be stopped or delayed and borrowing costs reduced including through the sale of assets currently owned by the authority.

In addition, a request for Exceptional Financial Support for the current financial year 2023/24 is being discussed with the Government Department for Levelling Up Housing and Communities.  In practical terms this will be to seek permission to ‘capitalise’ revenue expenditure so that it is treated as capital expenditure and can be met from the council’s capital resources.

A Section 114 Report does not mean the council is “bankrupt” or insolvent. It has sufficient financial resources to meet all of its current obligations, to continue to pay staff, suppliers and grant recipients in this year.

Although not the cause of the overspend, past issues relating to financial governance which led to the appointment of an Improvement and Assurance Board, and an overspend in the last financial year have impacted on the council’s financial resilience and ability to draw on reserves.

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