Nottingham City Council has filed bankruptcy by filing a section 114 notice on 29th November 2023 under Local Government Act 1988 which means that the council has insufficient funds to operate as they had planned. Ross Brown, Corporate Director of Finance & Resources at Nottingham City Council initiated the notice. Chief financial officers have a lawful duty to issue a ‘section 114 notice’ if they believe the council will be unable to meet its expenditure and commitments from its income. Section 114 notice according to England’s Law means the council cannot make new spending commitments and must meet within 21 days to discuss what to do next.
Nottingham City Council which is run by Labour Party Leaders have declared the reasons for bankruptcy as a shortfall and overspend of more than £23 millions. The overspending has happened because of spending in adult social care, children’s social care and funding in supporting the homelessness in the city. The inflation in the United Kingdom and rising cost of living has been a driving factor for the situation. David Mellen, leader of Nottingham City Council said he will not step down and will continue in his role as the leader. The council is evaluating their position and situation to manage their future.
Council authorities in England have a statutory duty under the law to provide a range of services to their communities. These include: education services, children’s safeguarding and social care, adult social care, waste collection, planning and housing services, road maintenance, and library services.
This situation in Nottingham could result in cuts in services, higher council tax and more expensive council services for the residents and for the future of the council this will result in all expansion and development plans to be freezed.
Now the options Nottingham City Council have is to look towards the Central Government and request support from them in providing grants. Moreover raising council tax could also be an option which will also include other services the council provides becoming more expensive.
However, according to a statement in “House of Commons Library”, UK local authorities cannot go bankrupt. A section 114 notice simply indicates that the council’s forecast income is insufficient to meet its forecast expenditure for the next year.
References:
https://lordslibrary.parliament.uk/research-briefings/lln-2019-0006/
https://commonslibrary.parliament.uk/what-happens-if-a-council-goes-bankrupt/
