02.07.18
Struggling council could follow in Northamptonshire footsteps with section 114 spend ban
A cash-strapped south west authority has failed to align spending with its annual budgets, with the Cabinet now being urged to take “immediate actions” to address a projected overspend.
Somerset County Council, which was forced to reject claims of bankruptcy in May, is projecting an overspend of £14.3m on children’s services alone this year, which would account for the majority of the authority’s total deficit.
Council papers note that if the authority’s balancing of the books does not improve urgently, it could be forced to issue a section 114 notice, which imposes severe spending restrictions on the authority and brings into effect an emergency budget.
This would make it the second-ever council in 20 years to issue the notice, following on from Northamptonshire – which later had to empty its reserves and welcome in government commissioners to help fix its bleak financial position.
“Work is underway to reduce the predicted overspend but if that work does not materially change the prediction by the end of quarter 2 (October), there is a risk that the council may have to take a number of urgent decisions to rectify the financial position,” board papers said.
It continued: “We cannot end the year with such a level of overspend and we know from our experiences in recent years that we have the skills and tools to try and deliver underspends elsewhere in the authority’s services to assist in delivering a balanced budget.”
Somerset added that “a reset [of the local government funding system] is what is required” to help the struggling authority reduce its deficit – a call it made earlier this year when the media claimed the council was close to collapse.
Its chief executive, Pat Flaherty, has confirmed the primary focus of the authority is to now find mitigating actions to deliver underspends across the whole council, despite board papers forecasting that the children’s services deficit for 2018-19 is even higher than last year.
The leadership team has been meeting weekly to try to identify ways of cutting spend. Board papers revealed there is a “high probability” that extra savings will need to be made from existing staffing budgets.
“There are effectively two tests ahead though to be clear,” the papers continued. “The first is managing the in-year position and at the same time identifying what we need to be to present a robust and deliverable budget for 2019-20. “This approach will be presented to Cabinet in September allowing time for the interim director of finance to influence its strategic direction and to take stock of the in-year progress.”
Mark Ford, manager of communications operations at Somerset County Council, said: “We know we need to make savings and bring down overspends – but we’ve found more than £130m in savings and efficiencies in the last 8 years so we have a track record of doing this.
“We have plans and we’re confident we will deliver them, but it has never been harder and local authorities across the country face similar challenges. We believe the system by which local government is funding is broken and call on the government to address this as a priority as part of its Fairer Funding Review.”
A spokesperson for Somerset County Council in May said there are “clearly pressures” on budgets, as there are on all local authorities up and down the country as government funding falls and demand grows. But they added: “Despite this pressure we are delivering improved children’s services and trail-blazing work in adult social care; and our closing financial report will show slightly increased levels of reserves compared to last year.”
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