Councillors in Middlesbrough have been warned they must “bite the bullet” at a crunch meeting and reach agreement over a proposed financial budget or else effective bankruptcy looms.

Middlesbrough Council is attempting to plug a £4.7m budget gap with an application to the Department of Levelling Up, Housing and Communities for exceptional financial support which will allow it to borrow up to £13.4m.

The local authority has drawn up its 2024/25 budget, which includes an overall 4.99% council tax rise, on the assumption that this is successful with the outcome expected in a matter of days.

Councillor Nicky Walker, the executive member for finance and governance, said failure to agree its financial proposals at a meeting of the full council on March 8 would be an “absolute disaster”.

The Northern Echo: Councillor Nicky Walker, Executive member for finance and governance.Councillor Nicky Walker, Executive member for finance and governance. (Image: LDRS)

The town’s mayor Chris Cooke said the only option left would be the issuing of a so-called section 114 notice – when a council declares it can no longer meet its financial obligations.

Such a notice would put a stop on all new spending with the only spending able to take place the minimum needed to maintain critical statutory services.

The council is facing spending pressures amounting to £20.7m in 2024/25 predominantly driven by homelessness, home to school transport, waste disposal, adult social care and children in care, and has been unable to rely on useable revenue reserves to balance the books as these have fallen to a critical level having been plundered over several years previously.

It has proposed a net revenue budget – so the money needed to provide day to day services during the year – amounting to £143.1m, while a medium term financial plan running up to 2026/27 also includes spending on a capital programme worth £174.9m over the period.

Proposed savings as part of a ‘transformation programme’ total £13.9m in 2024/25 rising to £21m by 2026/27.

Other measures set to be introduced include fortnightly waste collections, a £40 annual charge for green waste collection and charging for permits in areas that have residents’ car parking schemes, while various fees and charges will also increase.

The council has already agreed to sell several of its assets to bring in an additional £33m, including TeesAMP business park, the Viewley Centre, in Hemlington, Middlesbrough House and Middlesbrough Municipal Golf Centre.

However, it recently previously rowed back on two elements of its budget proposals after public opposition, deferring plans to close the Captain Cook Birthplace Museum, in Stewart Park, which could have saved £345,000 over two years, and scrapping new parking charges at the park.

All councils are legally required to ensure a lawful and balanced budget is set by March 11, and expenditure is not more than income.

A report agreed by the council’s decision-making executive said that if the council did not accept the amount and terms of the exceptional financial support, or reach agreement on the proposed budget and level of council tax at next month’s meeting it would be unable to do this with “profound adverse implications”.

This would include not being able to bill households to meet a council tax requirement of £71.4m, having “catastrophic cashflow implications for the organisation, putting its ability to deliver all services to the community and to pay suppliers and its staff in jeopardy”.

The report said: “The council’s financial position is critical, given that it is unable to set a robust and balanced revenue budget for 2024/25 and due to its critically low level of revenue reserves, without recourse to exceptional financial support approved by Government."

It also said an “unwavering focus” was needed to ensure planned savings were delivered along with strict cost control on vacancies, other staff costs and expenses.

‘This or section 114’

Mayor Cooke said: “It’s worth saying at this point that it is this – agree the budget – or section 114, I don’t see any other option.

The Northern Echo: Mayor Chris Cooke.Mayor Chris Cooke. (Image: LDRS)

“The reserves position that we have inherited has made it even harder and the ongoing pressures within social care have made it even more difficult.

“What the budget sets out though is that we have safeguarded frontline services such as area care, street lights, youth services and community safety.”

Cllr Walker said many other local authorities were struggling to balance their budgets – a recent survey suggesting half could face bankruptcy in the next Parliamentary term – and praised officers for “working around the clock” to find solutions.

She said recent additional money for councils amounted to £1.6m in Middlesbrough’s case,  which had been used to reduce the budget gap and the amount being sought in exceptional financial support.

She claimed the amount of core grant funding received from central government had been reduced by 44% from £81.2m in 2013/14 to £45.6m for 2024/25.

Warning of the impact of a section 114 notice, she said: “Cuts could include the sweeping of the streets, the removal of fly tipping, the filling in of potholes, street wardens, lollipop ladies, youth clubs closed, community safety reduced and community buildings under threat.

“All the things we have tried to protect.

“If we fail to take action now and bite the bullet and set a balanced budget as a council next week, expensive commissioners could be brought in.

“The other potential impact is on council tax – last year Thurrock, Croydon and Slough [which have issued section 114 notices] had 10-15% council tax increases.

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“So the failure to set a budget next week will be an absolute disaster for Middlesbrough.”

She said she hoped councillors would come together and put any political differences aside, adding: “We can’t any longer as has happened over recent years kick the can down the road, shy away from difficult decisions and leave them for another day.

“The time has come now that we need to bite the bullet and take those decisions now for the people of Middlesbrough while our destiny is still in our own hands.”=

The exceptional financial support would provide funds needed to balance the budget, with the remainder contingency sums intended to cover the risk of slippage on delivering savings and risks associated with how quickly capital receipts will be realised through asset disposals.