Nottingham Labour MPs have urged the Government to come to the city council’s aid after it was forced to effectively declare bankruptcy, while Conservatives called for commissioners to be brought in to take over the running of the authority.
Nottingham City Council issued a Section 114 notice on Wednesday (November 29), declaring it would not be able to set a balanced budget in the financial year as is legally required.
The deficit is £23m for this year, which the council says is due to soaring costs including social care spending, combined with years of Government cuts to its funding.
The Labour MPs representing Nottingham, Nadia Whittome, Lilian Greenwood and Alex Norris, issued a joint statement saying: “We urge the government to provide our city council with the funding it requires to be financially sustainable and deliver the services that our constituents rely on.
“Our constituents should not be made to suffer forced cuts for local services at a time when they face the biggest drop in living standards since records began.
“We will be working with councillors to mitigate the impact that today’s development has had on residents, and in Parliament fighting for proper reform of the social care system, real action to tackle homelessness and funding for local services.”
A letter to city council partners, signed by both chief executive Melbourne Barrett and leader David Mellen, outlines the current budget pressures but also confirms the financial impact of the council’s previous financial failings is linked to the timing of the notice being issued.
The collapse of council-owned Robin Hood Energy in 2020 left the council with a bill totalling up to £38m, and and misspending of other funds was linked to the timing of the notice.
It was also found to have misspent money from the Housing Revenue Account, which is a fund collected from council housing rent. The cost of correcting this totals up to £51m.
This led to a Government-appointed improvement board, which is still in post, monitoring the council’s financial performance.
The letter from Cllr Mellen and Mr Barrett states: “While not the cause of the council’s overspend in the current year, the situation in Nottingham is further compounded by … the use of significant financial reserves to cover the historic losses of the council’s arm length company Robin Hood Energy which ceased trading in 2020.
“The council has also needed to make good Housing Revenue Account funds historically unlawfully used to support the council’s General Fund for several years from 2014/15 to 2019/20.
“This means that we have less reserves available to smooth the current financial pressures experienced compared to others.”
The leader of Nottinghamshire County Council, Councillor Ben Bradley (Con) posted on X, formerly Twitter: “This is very sad news for the city, though not unexpected after many recent stories about financial issues. Unfortunately it will be local residents that will see the impact.
“Projects like the Broad Marsh or the Island Quarter must be able to be fully delivered, or the city and its economy will suffer further, and local residents, in turn.
“Government have given me reassurance that this situation will not impact on our major devolution investment.”
Robert Jenrick, Newark MP (Con) and the Minister for Immigration, called for the government to step in, saying: “Labour leadership have proven themselves utterly unfit to govern this great city.
“Their breathtaking waste and incompetence have let residents down for long enough. It’s time for the Secretary of State to appoint commissioners to restore order.”
Nottingham City Councillor Andrew Rule (Ind) said: “It is important to remember that this is the second S114 notice that has been issued since the Improvement Board has been in post.
“The first one related to the discovery of past unlawful spending of the council’s housing revenue account. The fact it was related to past spending seemed the to be the main justification for avoiding the appointment of commissioners previously.
“It’s hard to see how, given this latest S114 relates very much to the here and now, how the appointment of commissioners will be avoided.”
Unison, the UK’s largest union, said the Government must fix the ‘broken’ funding for local authorities.
Rachel Hodson, the East Midlands head of local government, said: “However well prepared council staff were for this inevitable announcement, it won’t stop hundreds of workers panicking about losing their jobs and paying the bills. The fact that this has happened so close to Christmas only makes this news worse.
“Unison is committed to working with the council leadership to deal with the impact of the Section 114 notice being issued and will support council workers in any way possible.”
Councillor Linda Woodings (Lab), the Portfolio Holder for Adult Social Care and Health, said the council wasn’t alone in struggling with adult social care costs.
“At the budget last Wednesday, Jeremy Hunt made no mention of the pressures councils are facing on care packages for people,” she said.
“We’re not the only council in this position and this fundamental inability to find a solution for the funding of adult social care is why we’re in the situation we’re in.
“We are really suffering with 12 years of austerity.
“People shouldn’t be worried about the services they receive, they will still be taking place.”
Councillor Cheryl Barnard (Lab), the Portfolio Holder for Children, Young People and Education, said: “Adult social care, children’s social care and homelessness are the three drivers.
“We’ve kept our levels for children in care stable but the costs are just going up and up.
“The children coming into care are older children with complex needs so it is more likely they are going into residential care.
“Most of it is private providers and they’re able to name their price so we’re looking at increases of over 80 per cent in the last few years.
“We’ve been trying to balance the budget this year in terms of overspend.
“We’re not bankrupt, we’ve got assets, we’ve got money to pay staff but we’re overspent this year.”
A spokesperson for the Government’s Department for Levelling Up, Housing and Communities said: “We used our statutory powers to intervene at Nottingham City Council last year over serious governance and financial issues and have been clear that improvements must be made.
“We have expressed concern over the lack of urgency demonstrated by the council in addressing these challenges, despite the efforts of the Improvement and Assurance Board. 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.”
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