Middlesbrough Council facing £11.5m predicted overspend

The local authority said there may be a requirement to issue a so-called section 114 notice – essentially when a council admits it can no longer meet its financial obligations – should “robust and timely” action not be taken.

Despite setting a balanced budget for 2023/24 in February as required by law, the council said a combination of factors had thrown it off course, including: continuing inflationary pressures; increasing demand for children’s and adult social care; home-to-school transport costs; and homelessness provision.

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Savings measures worth £2.5m have been identified from actions taken by senior management in various departments so far, leaving a further £9m to be found.

Section 114 notices have only been issued in a handful of cases over the past 20 odd years with Croydon and Woking councils being among the latest to take this step, which puts a stop to all new spending with the only spending able to take place being that which is needed to maintain critical statutory services.

A report for members of the council’s executive said the council’s revenue reserves were also “critically low”, amounting to £14.8m, with officials fearing that a £2.7m sum described as usable, earmarked reserves could soon be exhausted if action is not taken to balance the books.

It said “rigorous” spending restrictions had been implemented and would remain in effect until further notice. The predicted overspend amounts to 9.2 per cent of the previously approved £126m annual budget for 2023/24.

Earlier this year the Department of Levelling Up, Housing and Communities wrote to the council formally notifying it of its concerns about management and governance and reminding it of its ‘best value’ duty, with changes being required to avoid intervention. Meetings have since been taking place on a monthly basis so the Government can be provided with regular updates about the position.

A report previously warned that robust cost controls would be necessary this year, something endorsed by current interim chief finance officer Debbie Middleton. Pressed by the Local Democracy Reporting Service about the potential of a section 114 notice being issued, she said it could not be ruled out with the next step being to apply for financial support from the Government should it be required.

Middlesbrough Mayor Chris Cooke said: “This is a really serious position for the council.

“The simple fact is due to the overspending and depletion of reserves in the last few years if we want to keep the council going we need to reduce our expenditure and look at delivering services in a different way – if we don’t do that, someone will come in and do it for us.

“It isn’t impossible, but it is going to be tough. Throughout that process our focus will be on maintaining front-line services wherever we can.”

Mr Cooke, who was only elected in May, replacing previous elected mayor Andy Preston, claimed his administration was already moving in the right direction for the betterment of the town and trying to make sure it spent within its means.

The Labour mayor said the council wanted to invest in the likes of children in care, by providing more of its own provision in order not to over-rely on agencies or external organisations.

Mr Cooke said the council’s reserves – which he described as a “safety net” – had been depleted by some 75 per cent since 2019 as the local authority attempted to keep its head above water.

He added: “We need to make sure that we get the balance right. We need businesses to come into the town and be here and thrive, but the council also has a role in looking after some of the most vulnerable people.”

The mayor also said more money was required on a “needs basis” from the Government with more services being “meaningfully funded” without cuts being made elsewhere.

Council chief executive Clive Heaphy said: “We are working very closely with the Government to demonstrate how we are going to get out of this situation and how we are going to manage things for the residents of Middlesbrough.

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“Our aim is to make sure we are a financially sustainable council and that we do the right things to make sure the services we can and should provide are going to be there for the future.”

Plans are also being developed in order to meet a further potential budget gap of around £14m in the council’s 2024-25 budget, rising to £24.5m by 2026/27, as part of the medium financial planning process. Councillor Nicky Walker, Middlesbrough Council ’s executive member for finance and governance, said: “This is a very critical position and there was very little left in the tank from last year in terms of the funds available to us.

“We’ve identified emerging pressures and are putting stringent measures in place to recover the financial position. That inevitably means reducing spending substantially as quickly as we can this year.”