{{Short description|British local authority financial notice}} {{use dmy dates|date=September 2023}} {{use British English|date=September 2023}}

A '''section 114 notice''' is a report issued by the chief financial officer (or Section 151 officer) of a British public body to prevent certain types of expenditure. It takes its name from section 114 of the Local Government Finance Act 1988 (c. 41).<ref name="LGFA 1988 S114">{{Cite legislation UK |type=act |year=1988 |chapter=41 |act=Local Government Finance Act 1988 |section=114 |access-date=27 November 2021 }}</ref><ref name="Oldham CFO Statement 2020">{{Cite report |url=https://committees.oldham.gov.uk/documents/s112772/4.%20Statement%20of%20the%20Chief%20Financial%20Officer.pdf |title=Statement of the Chief Financial Officer on Reserves, Robustness of Estimates and Affordability and Prudence of Capital Investments|date=26 February 2020 |publisher=Oldham Council |page=28 |access-date=27 November 2021 }}</ref>

The most common type of notice is made under section 114(3) which restricts all spending except for that which funds statutory services.<ref name="LGL Paul Turner 2023">{{cite web |author1=Paul Turner |title=No such thing as a s114 notice |url=https://www.localgovernmentlawyer.co.uk/governance/314-governance-a-risk-articles/54090-no-such-thing-as-a-s114-notice |website=Local Government Lawyer |access-date=19 September 2023 |date=16 June 2023}}</ref><ref name="Oldham S114 Definition">{{cite web |title=Appendix 1 - Definition of a Section 114 Notice |url=https://committees.oldham.gov.uk/documents/s100111/Appendix%201%20s114%20Notice%20definition.pdf |website=Oldham Council |access-date=6 September 2023}}</ref> Despite the fact that local authorities in the United Kingdom cannot go bankrupt,<ref name="HOCL Sandford 2023">{{cite web |author1=Mark Sandford |title=What happens if a council goes bankrupt? |url=https://commonslibrary.parliament.uk/what-happens-if-a-council-goes-bankrupt/ |website=House of Commons Library |access-date=5 August 2023 |date=21 November 2022}}</ref> issuing a section 114 notice is often described in the media as a council effectively declaring bankruptcy. Most councils under a section 114 notice will then pass a new budget to introduce cuts and reduce spending.<ref name="HOCL Sandford 2023" />

Amongst other instances, section 114 notices have been issued by Hackney Council in 2000, Northamptonshire Council twice in 2018,<ref name="PF Brady 2018 Northamptonshire">{{cite web |date = 24 July 2018 |last1=Brady |first1=Dominic |title=Northamptonshire issues second section 114 notice |url=https://www.publicfinance.co.uk/news/2018/07/northamptonshire-issues-second-section-114-notice |website=Public Finance |access-date=13 April 2022}}</ref> Croydon Council in 2020 and 2022,<ref name="BBC Mackintosh 2020"/> Slough Council in 2021,<ref name="HCLGC LA financial stability">{{Cite report |url=https://committees.parliament.uk/publications/6777/documents/72117/default/ |title=Local authority financial sustainability and the section 114 regime |publisher=Housing, Communities and Local Government Committee |publication-date=14 July 2021 |volume=2 |page=31 |format=pdf}}</ref> Thurrock Council in 2022,<ref name="BBC Thurrock issues S114">{{cite news |title=Thurrock Council issues S114 notice of financial distress |url=https://www.bbc.co.uk/news/uk-england-essex-64028633 |access-date=20 December 2022 |work=BBC News |date=19 December 2022}}</ref> and Woking Borough Council and Birmingham City Council in 2023.<ref name="Guardian Partington 2023 Woking">{{cite web |author1=Richard Partington |title=Woking council declares bankruptcy with £1.2bn deficit |url=https://www.theguardian.com/politics/2023/jun/07/woking-council-declares-bankruptcy-with-12bn-deficit |website=The Guardian |access-date=7 June 2023 |date=7 June 2023}}</ref><ref name="Guardian Murray 2023">{{cite web |author1=Jessica Murray |title=Birmingham city council declares itself in financial distress |url=https://www.theguardian.com/society/2023/sep/05/birmingham-city-council-financial-distress-budget-section-114 |website=The Guardian |access-date=5 September 2023 |date=5 September 2023}}</ref>

==Legal basis== Notices can be made under several parts of section 114 of the Local Government Finance Act 1988 (c. 41), with the different types of notice having different effects: *Section 114(2): A notice must be made when the council or someone acting on its behalf has incurred (or is going to incur) unlawful expenditure.<ref name="LGL Paul Turner 2023" /> *Section 114A(2): A notice must be made when the council's cabinet or someone acting on its behalf has incurred (or is going to incur) unlawful expenditure.<ref name="LGL Paul Turner 2023" /> *Section 114(3): A notice must be made when the predicted expenditure of the council during a financial year is likely to exceed its available funds.<ref name="LGL Paul Turner 2023" />

The first two types of notice target specific spending and have to be made in consultation with the head of paid service (commonly referred to as a council's 'chief executive')<ref name="gov.uk Annex 2">{{cite web |title=Annex 2 - Roles and duties of Statutory Officers |url=https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/914651/Annex_2_-_Statutory_officers.pdf |website=GOV.UK |access-date=19 September 2023}}</ref> and the monitoring officer.<ref name="LGL Paul Turner 2023" /> The notice will suspend any relevant expenditure until the decision has been considered by the council (for Section 114(2) notices) or the cabinet (for Section 114A(2) notices), at which point the suspension ends.<ref name="LGL Paul Turner 2023" />

The third type of notice, made under section 114(3), is the most commonly issued and can be made by the chief finance officer without consulting other council leaders.<ref name="LGL Paul Turner 2023" /> Once a notice has been issued, no new expenditure is permitted except to fund statutory services although existing commitments and contracts are honoured and staff wages are paid.<ref name="Oldham S114 Definition" /> Councillors must then meet within 21 days to discuss the situation and consider what action to take; once the notice has been considered, spending controls end.<ref name="LGL Paul Turner 2023" /><ref name="HOCL Sandford 2023" /> Although the original notice may end, if the council does not address the problem another notice may be issued, such as in Croydon in 2020.<ref name=Taylor />

== Instances of use == {| class="wikitable sortable" |- ! Council ! Date issued ! colspan=2| Party control ! References |- |Brent London Borough Council |{{date|6 December 1988|DMY}} ! style="background: {{party color|Labour Party (UK)}}"| | Labour | <ref name="ES Brent Council 1988">{{Cite news |date=7 December 1988 |title=Director freezes Brent spending |pages=2 |work=Evening Standard |url=https://www.newspapers.com/article/evening-standard-director-freezes-brent/134603768/}}</ref><ref name="Wemb03r ">{{Cite news|url=https://newspapers.com/article/wembley-observer-where-did-the-cash-go/134603978/|date=7 December 1996|page=10|title=Where did the cash go?|newspaper=Wembley Observer|via=Newspapers.com|access-date=2023-11-04}}</ref> |- |Lambeth London Borough Council |{{date|3 July 1989|DMY}} ! style="background: {{party color|Labour Party (UK)}}"| | Labour | <ref name="Guar07l ">{{Cite news|url=https://newspapers.com/article/the-guardian-poll-tax-computer-threat-to/134604066/|date=4 July 1989|page=2|title=Poll tax computer threat to council|newspaper=The Guardian|via=Newspapers.com|access-date=2023-11-04}}</ref>{{refn|group=note|Exceptionally, this notice was issued to force councillors to authorise finances for the poll tax, not for unlawful spending or financial distress.}} |- |Camden London Borough Council |{{date|11 November 1992|DMY}} ! style="background: {{party color|Labour Party (UK)}}"| | Labour |<ref name="Even211ov">{{Cite news|url=https://newspapers.com/article/evening-standard-camden-told-to-stop-all/134603929/|date=12 November 1992|page=74|title=Camden told to stop all spending|newspaper=Evening Standard|via=Newspapers.com|access-date=2023-11-04}}</ref><ref name="Even112ec">{{Cite news|url=https://newspapers.com/article/evening-standard-camden-facing-debt-of/134603904/|date=10 December 1991|page=12|title=Camden facing debt of £6 million|newspaper=Evening Standard|via=Newspapers.com|access-date=2023-11-04}}</ref><ref name="Even11v ">{{Cite news|url=https://newspapers.com/article/evening-standard-demoted-staff-cost-camd/134604216/|date=2 November 1992|page=14|title=Demoted staff cost Camden £250,000|newspaper=Evening Standard|via=Newspapers.com|access-date=2023-11-04}}</ref> |- |Hillingdon London Borough Council |{{date|5 July 2000|DMY}} ! style="background:#000;"| | No overall control |<ref name="NS Hillingdon 2000">{{Cite news |date=14 December 2000 |title='Sorry, we are too broke to clean up' |work=News Shopper |url=https://www.newsshopper.co.uk/news/6439893.sorry-we-are-too-broke-to-clean-up/}}</ref><ref name="PF Dhot 2000">{{Cite news |last=Dhot |first=Neil |date=September 2000 |title=Uxbridge blues |work=Public Finance |url=https://www.proquest.com/docview/212203286 |id={{ProQuest|212203286}} |url-access=subscription |quote="The problems were made public on July 5 when borough treasurer Janice Maule issued a section 114 notice under the Local Government and Finance Act 1988." }}</ref><ref name="Ofsted Hillingdon LEA 2021">{{cite report|title=Inspection of Hillingdon Local Education Authority |url=https://files.ofsted.gov.uk/v1/file/50002021 |publisher=Ofsted |access-date=19 September 2023 |date=June 2001}}</ref>{{rp|9}} |- |Hackney London Borough Council |{{date|17 October 2000|DMY}} ! style="background:#000;"| | No overall control |<ref name="The worst run place in Britain">{{Cite news |last=Rayner |first=Jay |date=2000-11-13 |title=The worst run place in Britain? |work=The Guardian |url=https://www.theguardian.com/society/2000/nov/13/lifeandhealth.foodanddrink |access-date=2023-11-04}}</ref> |- |Milton Keynes Council |{{date|November 2002|DMY}} ! style="background: {{party color|Liberal Democrats (UK)}}"| | Liberal Democrat |<ref name="MKC Murrer 2002">{{cite news |author1=Sally Murrer |title=Council faces a cash crisis |work=Milton Keynes Citizen |issue=1091 |date=21 November 2002 |page=7 |quote=It comes just days after announcements that the only other fund, the Housing Revenue Account, was set to be £2.8 million overdrawn. To rectify this, the council's treasurer issued a legal Section 114 notice warning that such an overdraft would be illegal.|url=https://www.britishnewspaperarchive.co.uk/viewer/BL/0005371/20021121/046/0007| via = British Newspaper Archive|url-access=subscription}}</ref>{{refn|group=note|name=illegalexpend}} |- |rowspan=2|Northamptonshire County Council |{{date|2 February 2018|DMY}} ! rowspan=2 style="background: {{party color|Conservative Party (UK)}}"| |rowspan=2| Conservative |<ref name="Northamptonshire immediate spending controls 2018">{{cite web |title=Immediate spending controls put in place at Northamptonshire County Council |url=http://www3.northamptonshire.gov.uk/news/council-news/Pages/immediate-spending-controls-put-in-place-at-northamptonshire-county-council.aspx |website=Northamptonshire County Council |access-date=19 September 2023 |archive-url=https://web.archive.org/web/20180424060334/http://www3.northamptonshire.gov.uk/news/council-news/Pages/immediate-spending-controls-put-in-place-at-northamptonshire-county-council.aspx |archive-date=24 April 2018 |date=2 February 2018}}</ref> |- |{{date|24 July 2018|DMY}} |<ref name="Northamptonshire 2nd S114">{{cite web |title=Northamptonshire County Council issues second Section 114 notice |url=https://www.northamptonshire.gov.uk/news/council-news/Pages/northamptonshire-county-council-issues-second-section-114-notice.aspx |website=Northamptonshire County Council |access-date=19 September 2023 |archive-url=https://web.archive.org/web/20220619151412/https://www.northamptonshire.gov.uk/news/council-news/Pages/northamptonshire-county-council-issues-second-section-114-notice.aspx |archive-date=19 June 2022 |url-status=dead}}</ref> |- |rowspan=2|Croydon London Borough Council |{{date|11 November 2020|DMY}} ! rowspan=2 style="background: {{party color|Labour Party (UK)}}"| |rowspan=2| Labour |<ref name="BBC Mackintosh 2020"/><ref name="Croydon S114 Report"/> |- |{{date|2 December 2020|DMY}} |<ref name=Taylor /> |- |Slough Borough Council |{{date|2 July 2021|DMY}} ! style="background: {{party color|Labour Party (UK)}}"| | Labour |<ref name="Slough pauses non-essential 2021">{{cite web |title=Council pauses non-essential spending following Section 114 notice |url=https://www.slough.gov.uk/news/article/107/council-pauses-non-essential-spending-following-section-114-notice |website=Slough Borough Council |access-date=19 September 2023 |date=2 July 2021}}</ref> |- |Nottingham City Council |{{date|15 December 2021|DMY}} ! style="background: {{party color|Labour Party (UK)}}"| | Labour |<ref name="Notts HRA account issue 2021">{{cite web |title=Nottingham City Council takes further action on Housing Revenue Account issue |url=https://www.nottinghamcity.gov.uk/hraissue |website=Nottingham City Council |access-date=19 September 2023 |archive-url=https://web.archive.org/web/20220504113408/https://www.nottinghamcity.gov.uk/hraissue |archive-date=4 May 2022 |date=15 December 2021 |url-status=dead}}</ref>{{refn|group=note|name=illegalexpend|This notice was issued to prevent unlawful spending rather than because of financial distress.}} |- |Croydon London Borough Council |{{date|22 November 2022|DMY}} ! style="background:#000;"| | No overall control |<ref name="Croydon S114 report 2022">{{cite web |author1=Jane West |title=Report under Section 114(3) of the Local Government Finance Act 1988 |url=https://www.croydon.gov.uk/sites/default/files/2022-11/Section%20114%20report%20-%2022%20November%202022.pdf |website=Croydon London Borough Council |access-date=19 September 2023 |date=22 November 2022}}</ref> |- |Thurrock Council |{{date|19 December 2022|DMY}} ! style="background: {{party color|Conservative Party (UK)}}"| | Conservative |<ref name="Thurrock S114 report 2022">{{cite web |author1=Jonathan Wilson |title=Report to all Elected Members of Thurrock Council s.114 Local Government Finance Act 1988 |url=https://www.thurrock.gov.uk/sites/default/files/assets/documents/section114-notice.pdf |website=Thurrock Council |access-date=19 September 2023 |date=19 December 2022}}</ref> |- |Woking Borough Council |{{date|7 June 2023|DMY}} ! style="background: {{party color|Liberal Democrats (UK)}}"| | Liberal Democrat |<ref name="Woking S114 report 2023">{{cite web |author1=Brendan Arnold |title=Report to all Elected Members of Woking Borough Council under Section 114 (3) of the Local Government Finance Act 1988 |url=https://www.woking.gov.uk/sites/default/files/documents/S114%20Notice%20Final%20070623%20.pdf |website=Woking Borough Council |access-date=19 September 2023 |date=7 June 2023}}</ref>{{refn|group=note|Woking was Conservative controlled from 2007-2022 which is when the risky investments took place.}} |- |Birmingham City Council |{{date|5 September 2023|DMY}} ! style="background: {{party color|Labour Party (UK)}}"| | Labour |<ref name="Birmingham S114 statement 2023">{{cite web |title=Statement regarding Section 114 notice |url=https://www.birmingham.gov.uk/news/article/1381/statement_regarding_section_114_notice |website=Birmingham City Council |access-date=19 September 2023 |date=5 September 2023}}</ref> |- |Nottingham City Council |{{date|29 November 2023|DMY}} ! style="background: {{party color|Labour Party (UK)}}"| | Labour |<ref name="BBC Notts bankrupt 2023">{{cite web |title=Nottingham City Council declares itself 'bankrupt' |url=https://www.bbc.co.uk/news/uk-england-nottinghamshire-67380096 |website=BBC |access-date=29 November 2023 |date=29 November 2023}}</ref> |}

=== Hackney London Borough Council, 2000 === Hackney London Borough Council issued a section 114 notice on 17 October 2000, predicting that it would have a £15.5m hole in its finances by the end of the financial year.<ref name=PF>{{cite web |title=Hackneys financial crisis deepens as treasurer issues section 114 notice |url=https://www.publicfinance.co.uk/news/2000/10/hackneys-financial-crisis-deepens-treasurer-issues-section-114-notice |website=Public Finance |access-date=5 August 2023 |date=20 October 2000}}</ref> Budget cuts of around £4.5m were needed for the 2000-2001 financial year and £18m for the 2001-2002 year.<ref name=Rayner>{{cite web |author1=Jay Rayner |author1-link=Jay Rayner |title=The worst run place in Britain? |url=https://www.theguardian.com/society/2000/nov/13/lifeandhealth.foodanddrink |website=The Guardian |access-date=5 August 2023 |date=13 November 2000}}</ref>

The council's managing director Max Caller, who had started the job that June,<ref name=Rayner /> blamed the financial situation on previous mismanagement by council officers.<ref name=PF /> A 1997 policy called 'Transforming Hackney' had removed centralised financial management in favour of budgets being set by individual council officials which, according to Jay Rayner, left the council "at the mercy of legions of incompetent council officials".<ref name=Rayner /> Caller also said that previous cost-cutting measures, such as a resolution that no more permanent staff should be employed, had been "not understood, ignored or subverted" by council workers.<ref name=Rayner /> In September 1999, the council had had to implement an internal spending moratorium in order to manage that year's budget deficit.<ref name=PF />

The council's revenue and benefits department and its waste management service were both running deficits of £3m and transport services were £600,000 over budget.<ref name=PF /> Almost half of the council's overall deficit was also caused by the fact that the it had passed its budget on the assumption that 96% of council tax would be collected; instead the collection rate was around 65%.<ref name=LGC>{{cite web |title=HACKNEY COUNCIL AGREES STRATEGY TO TACKLE FINANCIAL PROBLEMS |url=https://www.lgcplus.com/archive/hackney-council-agrees-strategy-to-tackle-financial-problems-21-12-2000/ |website=Local Government Chronicle |access-date=5 August 2023 |date=21 December 2000}}</ref>

Urgent budget cuts were approved on 6 November 2000 and involved cutting back on temporary staff and overtime and car allowances.<ref name=LGC /> In December 2000, the council agreed on a three-year proposal to improve its finances.<ref name=LGC /> The plan led to £4m of cuts for the 2000-2001 financial year and £16m of cuts for 2001–2002.<ref name=LGC /> Further cuts were projected at £9m for 2001–2002, £10m for 2002-2003 and £11m for 2003–2004.<ref name=LGC />

=== Northamptonshire County Council, 2018 === ==== First notice ==== Northamptonshire County Council issued a section 114 notice on 2 February 2018, saying that there was a "significant risk" that the council would not be able to balance its budget for the 2017/18 financial year and could end up with a £10m deficit.<ref name="Guardian Butler 2018">{{cite web |author1=Patrick Butler |title=Tory county council runs out of cash to meet obligations |url=https://www.theguardian.com/society/2018/feb/02/tory-run-council-runs-out-of-money-to-meet-obligations |website=The Guardian |access-date=5 August 2023 |date=3 February 2018}}</ref> Expected savings of £27m that had been forecast for the year did not appear, exacerbating the situation.<ref name="Guardian Butler 2018" /> Sajid Javid, the then-Secretary of State for Housing, Communities and Local Government, had opened an independent investigation into the council's finances in January 2018 after the council had announced the previous month that it would seek to increase council tax by 5% and pursue £34.3m of cuts.<ref name="BBC Javid orders probe">{{cite web |title=Sajid Javid orders probe into county council's finances |url=https://www.bbc.co.uk/news/uk-england-northamptonshire-42629794 |website=BBC News |access-date=5 August 2023 |date=9 January 2018}}</ref>

The Chartered Institute of Public Finance and Accountancy said that the notice was "not surprising" due to general financial strain upon local government, budget pressures from Northamptonshire's education sector and its growing elderly population, and the county's 'transformation programme' which depleted savings reserves.<ref name="CIPFA Northants response 2018">{{cite web |title=CIPFA responds to Northamptonshire County Council being the subject of a Section 114 Notice |url=https://www.cipfa.org/about-cipfa/press-office/archived-press-releases/2018-press-releases/cipfa-responds-to-northamptonshire-county-council-being-the-subject-of-a-section-114-notice |website=Chartered Institute of Public Finance and Accountancy |access-date=5 August 2023 |date=5 February 2018}}</ref>

==== Second notice ==== In July 2018, the council issued a second section 114 notice after a projected budget deficit of between £60m and £70m for the 2018/19 financial year was uncovered. Mark McLaughlin, the council's outgoing finance officer, said that the council had "no financial resilience".<ref name="PF Brady 2018 Northamptonshire" />

The council announced that it was set to lift the section 114 notice in March 2019, with council leader Matt Golby saying that they had "built stability back into the council's finances".<ref name="R151 Colin Marrs 2023">{{cite web |author1=Colin Marrs |title=Northamptonshire set to lift section 114 notice |url=https://www.room151.co.uk/resources/northamptonshire-set-to-lift-section-114-notice/ |website=Room 151 |access-date=5 August 2023 |date=28 March 2019}}</ref>

=== Croydon London Borough Council, 2020 and 2022 === ==== First notice ==== Croydon London Borough Council issued a section 114 notice on 11 November 2020. It was reported that the council looked like it would overspend by £60m by the end of the year and that it had debts of £1.5bn.<ref name="BBC Mackintosh 2020">{{cite web |author1=Thomas Mackintosh |title=Croydon Council bans new spending under Section 114 notice |url=https://www.bbc.co.uk/news/uk-england-london-54897296 |website=BBC News |access-date=6 August 2023 |date=11 November 2020}}</ref> The notice had been drafted in early September 2020 but had not been formally issued due to ongoing conversations with the Ministry for Housing, Communities, and Local Government over a possible solution.<ref name="Croydon S114 Report">{{cite web |author1=Lisa Taylor |title=Report under Section 114(3) of the Local Government Finance Act 1988 |url=https://www.croydon.gov.uk/sites/default/files/2021-03/Section%20114%20notice%20%28appendix%202%29%20-%2011%20November%202020.pdf |website=Croydon London Borough Council |access-date=6 August 2023 |date=11 November 2020}}</ref>

Croydon's finance director Lisa Taylor had warned in August 2020 that it could not be guaranteed that the council would avoid bankruptcy.<ref name="BBC Croydon cannot guarantee">{{cite web |title=Croydon Council 'cannot guarantee' avoiding bankruptcy |url=https://www.bbc.co.uk/news/uk-england-london-53935269 |website=BBC News |access-date=6 August 2023 |date=27 August 2020}}</ref> In October 2020, Secretary of State Robert Jenrick had launched a review into the council's finances, saying the situation was "deeply concerning".<ref name="BBC Cash-strapped Croydon">{{cite web |title=Cash-strapped Croydon Council under fresh government review |url=https://www.bbc.co.uk/news/uk-england-london-54734279 |website=BBC News |access-date=6 August 2023 |date=29 October 2020}}</ref> The council's CEO Jo Negrini had resigned in August and the council's leader Tony Newman, deputy leader Alison Butler and its cabinet member for finance Simon Hall had all resigned in October.<ref name="BBC Cash-strapped Croydon" /><ref name="Guardian Butler 2020">{{cite web |author1=Patrick Butler |title=Croydon council on verge of bankruptcy after risky investments |url=https://www.theguardian.com/society/2020/oct/29/croydon-council-on-verge-of-bankruptcy-after-risky-investments |website=The Guardian |access-date=6 August 2023 |date=29 October 2020}}</ref>

Croydon's external auditors Grant Thornton had highlighted the council's "deteriorating financial resilience" due to increased costs of adult and children's social care and low levels of reserves.<ref name="Croydon public interest report 2020">{{cite web |title=Report in the Public Interest concerning the Council's financial position and related governance arrangements |url=https://www.croydon.gov.uk/sites/default/files/2021-03/Report%20in%20the%20Public%20Interest%20-%20London%20Borough%20of%20Croydon.pdf |website=Croydon Council |access-date=7 August 2023}}</ref> Risky investments were also blamed as a cause of the council's financial problems. The council had borrowed £545m to invest in property, including £30m in the Croydon Park Hotel and £46m on the Colonnades retail park.<ref name="Guardian Butler 2020" /><ref name=Atkins>{{cite web |author1=Graham Atkins |title=Croydon council's bankruptcy is a warning for the UK government |url=https://www.instituteforgovernment.org.uk/article/comment/croydon-councils-bankruptcy-warning-uk-government |website=Institute for Government |access-date=6 August 2023 |date=26 November 2020}}</ref> Both the hotel and the retail park were forced to close due to COVID-19 pandemic restrictions which reduced the income the council received from them and the Croydon Park Hotel fell into administration in June 2020.<ref name=Atkins />

The council prepared to reduce services to the bare legal minimum, focusing on providing social care and waste collection services.<ref name=Butler3>{{cite web |author1=Patrick Butler |title=Croydon council outlines drastic cuts to jobs and services |url=https://www.theguardian.com/society/2020/nov/24/croydon-council-outlines-drastic-cuts-to-jobs-and-services |website=The Guardian |access-date=6 August 2023 |date=24 November 2020}}</ref> Cuts were expected for the borough's 13 libraries and nine children's centres and 35 buildings owned by the council were to be shut or sold off.<ref name=Butler3 /> It also announced it had asked the government for a £134m loan to stabilise its finances as it produced a three-year plan towards budget sustainability.<ref name=Butler3 />

==== Second notice ==== A second section 114 notice was issued on 2 December 2020 after councillors met the day before (as required by the initial notice) but failed to agree a suitably balanced budget.<ref name=Taylor /> Taylor stated that "without external support ... it will now be impossible for a balanced budget to be delivered" in the 2020/21 financial year and predicted an overspend of £66m.<ref name=Taylor>{{cite web |title=Report under Section 114(3) of the Local Government Finance Act 1988 |url=https://www.croydon.gov.uk/sites/default/files/2021-03/Section%20114%20report%20-%202%20December%202020.pdf |website=Croydon London Borough Council |access-date=6 August 2023 |date=2 December 2020 |author=Lisa Taylor}}</ref>

==== Third notice ==== After the 2022 council election, the council moved to no overall control being led by new Mayor of Croydon Jason Perry. The council issued a third notice on 22 November 2022 due to a projected £130m budget deficit.<ref name="MyLondon O'Connor 2022">{{cite web |author1=Tara O'Connor |title=Croydon Council forced to declare bankruptcy again despite £120m bailout |url=https://www.mylondon.news/news/south-london-news/croydon-council-forced-declare-bankruptcy-25575659 |website=MyLondon |access-date=6 August 2023 |date=22 November 2022}}</ref>

In February 2023, Croydon was given permission by central government to increase council tax by 15%, 10 percentage points over the normal raise cap of 5%.<ref name=Burford>{{cite web |title=Croydon gets special permission to put council tax up 'staggering' 15% |url=https://www.standard.co.uk/news/london/croydon-council-tax-bankrupt-special-permission-rise-government-funding-b1058355.html |website=Evening Standard |access-date=6 August 2023 |date=7 February 2023 |author=Rachael Burford}}</ref> In March 2023, it was announced that the Department for Levelling Up, Housing and Communities was proposing intervention to put the council into special measures.<ref name=Butler4>{{cite web |author1=Patrick Butler |title=Croydon and Thurrock councils put into special measures |url=https://www.theguardian.com/society/2023/mar/17/croydon-and-thurrock-councils-put-into-special-measures |website=The Guardian |access-date=6 August 2023 |date=17 March 2023}}</ref> The intervention did not mean that government commissioners would take over the day-to-day running of the council; instead, management decisions would be subject to strict oversight from a government appointed panel.<ref name=Butler4 /> The proposals were put into place on 20 July 2023 when Secretary of State Michael Gove used powers under the Local Government Act 1999 to give Croydon's Improvement and Assurance Panel a statutory footing, allowing the panel to direct rather than guide the council's activities if needed.<ref name="Croydon Explanatory Memo 2023">{{cite web |title=London Borough of Croydon Directions under Section 15(5) OF the Local Government Act 1999 |url=https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1172473/Croydon_Explanatory_Memoradum_20_July_2023.pdf |website=GOV.UK |access-date=6 August 2023}}</ref> The Written Statement accompanying the directions cited the discovery of significant additional historic issues as the reason for moving the intervention to a statutory footing.<ref name="HoC Gove Croydon update 2023">{{Cite web |last=Gove |first=Michael |date=20 July 2023 |title=Update on the Intervention in the London Borough of Croydon |url=https://questions-statements.parliament.uk/written-statements/detail/2023-07-20/hcws985 |access-date=7 August 2023}}</ref>

=== Woking Borough Council, 2023 === In May 2023, a government review revealed that the Woking Borough Council would have debts of £2.4&nbsp;billion by 2026, 100 times the size of its annual £24&nbsp;million budget, including investments in hotels and residential skyscrapers, and a £6.4&nbsp;million loan to a local private school.<ref name="GetSurrey Curley 2019">{{Cite web |last=Curley |first=Rebecca |date=17 December 2019 |title=Woking council slammed for lending £11 million to private school |url=https://www.getsurrey.co.uk/news/surrey-news/woking-borough-council-slammed-lending-17432747 |access-date=25 May 2023 |website=SurreyLive |language=en}}</ref> Risky property deals were attempts to offset the impact of UK Government funding cuts.<ref name="Guardian Butler Walker 2023">{{Cite web |author1=Patrick Butler|author2=Peter Walker|title=Ministers step in at Woking council as debts forecast to reach £2.4bn {{!}} Local government {{!}} The Guardian |url=https://www.theguardian.com/society/2023/may/25/ministers-step-in-at-woking-council-as-debts-forecast-2bn |access-date=25 May 2023 |website=amp.theguardian.com}}</ref> The Minister for Local Government Lee Rowley announced that the council was to be overseen by a team of expert commissioners until the council could "address their commercial and financial challenges, and make transformative change across its entire operations."<ref name="Local Government Update 2023">{{Cite journal |last=Rowley |first=Lee |date=25 May 2023 |title=Local Government Update |url=https://questions-statements.parliament.uk/written-statements/detail/2023-05-25/hcws813 |journal=Written Questions, Answers and Statements |issue=UIN HCWS813 |via=UK Parliament}}</ref>

On 7 June 2023, Woking Council issued a section 114 notice after forecasting a deficit of £1.2&nbsp;billion for the year ending 31 March 2024 due to losses on risky investments involving hotels and skyscrapers instigated by a former Conservative administration.<ref name="Guardian Partington 2023 Woking" />

In February 2024, the government permitted the council to raise its council tax by up to 10%, above the normal 5% limit.<ref name=Webb>{{cite web |author1=Caitlin Webb |title=Four out of five council tax referendum requests confirmed |url=https://www.lgcplus.com/finance/four-out-of-five-council-tax-referendum-requests-confirmed-05-02-2024/ |website=Local Government Chronicle |access-date=10 February 2024 |date=5 February 2024}}</ref>

=== Birmingham City Council, 2023 === Birmingham City Council issued a section 114 notice on 5 September 2023 due to a budget deficit "in the region of" £87 million,<ref name=BCC>{{cite web |title=Statement regarding Section 114 notice |url=https://www.birmingham.gov.uk/news/article/1381/statement_regarding_section_114_notice |website=Birmingham City Council |access-date=5 September 2023 |date=5 September 2023}}</ref> forecast to rise to £164.8 million in the 2024/25 financial year.<ref name=Stacey /> The council blamed the deficit on liabilities over equal pay claims, problems with the installation of a new IT system and government cuts amounting to £1 billion over ten years.<ref name="Guardian Murray 2023" /><ref name=Asthana /> John Cotton and Sharon Thompson, the council's leader and deputy leader, stated that the authority had fallen victim to "a perfect storm" of financial challenges including increases in adult social care expenditure, reductions in business rates revenue and high inflation.<ref name="Guardian Murray 2023" />

The council's equal pay claims, some dating back to a 2012 Supreme Court case, were estimated to be between £650 million and £760 million by March 2023.<ref name="Personneltoday Walker 2023 Birmingham">{{cite web |author1=Ashleigh Walker |title=Birmingham City Council effectively bankrupt after equal pay claims |url=https://www.personneltoday.com/hr/birmingham-city-council-equal-pay-bankruptcy/ |website=Personnel Today |access-date=5 September 2023 |date=5 September 2023}}</ref> An external audit statement made by Grant Thornton on 6 September said that revelations that would "significantly increase" the council's equal pay liabilities meant that its 2020/21 and 2021/22 accounts were "materially misstated".<ref name=GT>{{cite web |author1=Jon Roberts |author2=Mark Stocks |title=External audit landscape for Birmingham City Council |url=https://birmingham.cmis.uk.com/Birmingham/Document.ashx?czJKcaeAi5tUFL1DTL2UE4zNRBcoShgo=FJtIxotjx%2fPWj%2fHeucwYaMS5jpykNqK6q0odCHtJsFvAaCfUudLw9Q%3d%3d&rUzwRPf%2bZ3zd4E7Ikn8Lyw%3d%3d=pwRE6AGJFLDNlh225F5QMaQWCtPHwdhUfCZ%2fLUQzgA2uL5jNRG4jdQ%3d%3d&mCTIbCubSFfXsDGW9IXnlg%3d%3d=hFflUdN3100%3d&kCx1AnS9%2fpWZQ40DXFvdEw%3d%3d=hFflUdN3100%3d&uJovDxwdjMPoYv%2bAJvYtyA%3d%3d=ctNJFf55vVA%3d&FgPlIEJYlotS%2bYGoBi5olA%3d%3d=NHdURQburHA%3d&d9Qjj0ag1Pd993jsyOJqFvmyB7X0CSQK=ctNJFf55vVA%3d&WGewmoAfeNR9xqBux0r1Q8Za60lavYmz=ctNJFf55vVA%3d&WGewmoAfeNQ16B2MHuCpMRKZMwaG1PaO=ctNJFf55vVA%3d |publisher=Grant Thornton |access-date=18 September 2023 |date=6 September 2023}}</ref>{{rp|3}} The auditors said the equal pay claim was "one of the most significant challenges that any Council in England has ever faced".<ref name=GT />{{rp|9}} The council stated that, with its equal pay liabilities accruing at a rate of between £5 million and £14 million per month, it did not have the resources to pay the claims.<ref name=BCC />

Problems with a new Oracle IT system were set to cost up to £100 million to fix according to Cotton.<ref name=Stacey /><ref name=BBC2 /> BBC News reported that the system was so broken that council staff could not produce accounts detailing the council's financial situation, leading to financial statements being unable to be signed off by auditors.<ref name=BBC2>{{cite web |title='Bankrupt' Birmingham council's IT system cannot show accounts |url=https://www.bbc.co.uk/news/uk-england-birmingham-66818464 |website=BBC News |access-date=18 September 2023 |date=15 September 2023}}</ref>

Anushka Asthana reported that the council had been effectively operating under section 114 spending controls for two months before the notice was officially issued.<ref name=Asthana>{{cite web |author1=Anushka Asthana |author1-link=Anushka Asthana |title=The equal pay scandal that drove Birmingham Council to the edge of bankruptcy |url=https://www.itv.com/news/2023-09-05/the-scandal-that-drove-birmingham-council-to-the-edge-of-bankruptcy |website=ITV News |access-date=5 September 2023 |date=5 September 2023}}</ref>

On 17 September, ''The Sunday Times'' reported that housing secretary Michael Gove was to appoint commissioners to take over running Birmingham City Council who would make recommendations on what assets needed to be sold to balance the council's finances.<ref name=Wheeler>{{cite web |author1=Caroline Wheeler |title=What could bankrupt Birmingham council be forced to sell off? |url=https://www.thetimes.com/business-money/money/article/what-could-bankrupt-birmingham-council-be-forced-to-sell-off-wcwf8kcl2 |website=The Sunday Times |access-date=18 September 2023 |date=17 September 2023}}</ref> A government source was reported to have said that the "scale of mismanagement" was "much worse than we thought".<ref name=Wheeler /> It was suggested that targets for a "fire sale of assets" could include the 54,000 council houses owned by the city, Birmingham's main library, Birmingham Museum and Art Gallery, Aston Hall and Sarehole Mill.<ref name=Wheeler /><ref name=Stacey>{{cite web |author1=Kiran Stacey |title=Michael Gove to appoint commissioners to run Birmingham city council |url=https://www.theguardian.com/uk-news/2023/sep/17/michael-gove-to-appoint-commissioners-to-run-birmingham-city-council |website=The Guardian |access-date=18 September 2023 |date=17 September 2023}}</ref>

==== Responses ==== =====Conservative===== The Prime Minister's spokesperson acknowledged that the notice would be "concerning" for residents but said that the government had "stepped in to provide support" pointing to an additional £5.1 billion it had provided to councils for the 2023/2024 financial year and adding that "it's for locally elected councils to manage their own budgets".<ref name="Guardian Murray 2023" /> In Prime Minister's Questions on 6 September, Nicola Richards, Conservative MP for West Bromwich East, asked "Does the Prime Minister agree that Labour have demonstrated yet again that they always run out of other people's money?"; Rishi Sunak responded that she was "exactly right" and that "they [Labour] have bankrupted Birmingham, we can't let them bankrupt Britain".<ref name=Madden-Gall /> Chancellor of the Exchequer Jeremy Hunt said the government would "do what is right" for Birmingham but said that no request for emergency funding had been made to the Treasury.<ref name=Cook-Leach>{{cite web |author1=Allen Cook |author2=Harry Leach |title=Government will 'do what is right' for Birmingham - Jeremy Hunt |url=https://www.bbc.co.uk/news/uk-england-birmingham-66742480 |website=BBC News |access-date=18 September 2023 |date=7 September 2023}}</ref>

The council had previously described its 2022 financial plans as a "bold budget" that would "maximise the potential of a golden decade for the city"; following the section 114 notice, Robert Alden, the Conservative opposition leader on the council, accused the administration of "lying to the people of Birmingham" and calling the idea of a 'golden decade' "fools' gold".<ref name="Guardian Murray 2023" />

Andy Street, the Mayor of the West Midlands, said that the notice was "deeply disturbing" and that Birmingham "deserves so much better".<ref name="DT West Midlands Mayor 2023">{{cite web |title=City council's financial issues 'deeply disturbing', West Midlands Mayor says |url=https://www.derehamtimes.co.uk/news/national/23769703.city-councils-financial-issues-deeply-disturbing-west-midlands-mayor-says/ |website=Dereham Times |access-date=5 September 2023 |date=5 September 2023}}</ref> Street said that the region's combined authority may have to step in to fund certain projects if Birmingham City Council could no longer afford them.<ref name=Madden-Gall>{{cite web |author1=Sophie Madden |author2=Caroline Gall |title=Birmingham Commonwealth Games was a mistake - ex-adviser |url=https://www.bbc.co.uk/news/uk-england-birmingham-66724469 |website=BBC News |access-date=18 September 2023 |date=6 September 2023}}</ref>

=====Labour===== Labour leader Keir Starmer told ''BBC Breakfast'' that "[taking] a step back from Birmingham, you'll see there are versions of this across the country and that is because for 13 years local authorities have been stripped of the funding they need".<ref name=Madden-Gall />

The council's Labour leader John Cotton apologised to residents, pledging to protect "the things that matter most".<ref name=Madden-Glinka>{{cite web |author1=Sophie Madden |author2=Elizabeth Glinka |title='Bankrupt' Birmingham council leader apologises to city |url=https://www.bbc.co.uk/news/uk-england-birmingham-66818302 |website=BBC News |access-date=18 September 2023 |date=17 September 2023}}</ref> Cotton had been on a family holiday abroad when the section 114 notice was issued but said that he had had "no prior notice" of it and that he took "immediate steps to grip the situation".<ref name=Madden-Glinka />

Jess Phillips, Labour MP for Birmingham Yardley, said that the long-term pressures on councils would result in "more of this to come" and that other local authorities would also end up having to issue section 114 notices.<ref name=Cook-Leach /> Khalid Mahmood, Labour MP for Birmingham Perry Barr, said that he believed the government would eventually have to bail out the council.<ref name=Cook-Leach />

=====Others===== Birmingham Liberal Democrats released a statement calling the situation a "failure of Titanic proportions" and Roger Harmer, the leader of the Liberal Democrat group on the council, said that "every one of Birmingham's citizens will feel the pain of this decision" and called on council leaders to apologise.<ref name="Independent McGrath 2023 Birmingham">{{cite web |author1=Dominic McGrath |title=Birmingham City Council in financial distress over equal pay claims |url=https://www.independent.co.uk/news/uk/birmingham-city-council-birmingham-europe-northamptonshire-county-council-hackney-council-b2405062.html |website=The Independent |access-date=5 September 2023 |date=5 September 2023}}</ref>

Sharon Graham, the general secretary of the Unite union, said that council workers "must not pay the price" for the council's "incompetence and financial mismanagement".<ref name=Madden-Gall /> A statement from the GMB union called the situation a "humiliating admission of failure" and said the council was responsible for the crisis because it had "stolen wages from its low-paid women workers".<ref name="GMB response to Birmingham S114">{{cite web |title=GMB response as Birmingham City Council issues S114 notice |url=https://www.gmb.org.uk/news/gmb-responds-to-birmingham-city-council-issuing-a-section-114-notice |website=GMB |access-date=18 September 2023 |date=5 September 2023}}</ref>

BBC News reported that residents were worried about cuts in youth services leading to rising crime,<ref name=Godfrey>{{cite web |author1=Ben Godfrey |author2=Sophie Madden |title=Residents fear a rise in crime and taxes as Birmingham declares 'bankruptcy' |url=https://www.bbc.co.uk/news/uk-england-birmingham-66777536 |website=BBC News |access-date=18 September 2023 |date=11 September 2023}}</ref> increases in business rates,<ref name=Godfrey /> the closure of Birmingham Museum and Art Gallery,<ref name=Cook-Leach /> cuts to park services and the future of Perry Park.<ref name="BBC Madden 2023 Birmingham">{{cite web |author1=Sophie Madden |title=Worries over Perry Park amid council 'bankruptcy' |url=https://www.bbc.co.uk/news/uk-england-birmingham-66778945 |website=BBC News |access-date=18 September 2023 |date=13 September 2023}}</ref>

Organisers of the city's Christmas Market announced that the market would be held and that an agreement for it to continue up to 2027 would remain in place.<ref name="BBC Woods 2023 Birmingham">{{cite web |author1=Rebecca Woods |title=Birmingham Christmas market still on despite woes |url=https://www.bbc.co.uk/news/uk-england-birmingham-66746749 |website=BBC News |access-date=18 September 2023 |date=8 September 2023}}</ref>

With Birmingham set to host the 2026 European Athletics Championships, the European Athletic Association said it had confidence in the council's ability to hold the championships and was "actively assessing" the situation. When bidding for the competition, the council had agreed to underwrite contributions of £13.7 million to fund the event. Tony Hadley, the chair of Birchfield Harriers, said that the three years until the competition were "a long time in sport, ... [and] a long time in politics" and that the council should be given time to sort out their finances.<ref name="BBC Madden 2023 Birmingham athletics">{{cite web |author1=Sophie Madden |title=Bosses 'assessing' 2026 athletics event amid Birmingham crisis |url=https://www.bbc.co.uk/news/uk-england-birmingham-66796213 |website=BBC News |access-date=18 September 2023 |date=14 September 2023}}</ref>

On 28 September, Historic England published a joint letter with Arts Council England and the National Lottery Heritage Fund calling on Birmingham's commissioners to ensure the city's heritage and culture is "protected and prioritised" and that "Birmingham's financial reconstruction must not come at the cost of its priceless heritage".<ref name="AC HE HF joint letter">{{cite web |title=Joint letter Arts Council, Historic England, Heritage Fund |url=https://historicengland.org.uk/content/docs/whats-new/joint-letter-arts-council-historic-england-heritage-fund-birmingham/ |website=Historic England |access-date=28 September 2023 |date=28 September 2023}}</ref><ref name="Guardian Murray 2023 2">{{cite web |author1=Jessica Murray |title=Arts groups urge bankrupt Birmingham not to sell its heritage |url=https://www.theguardian.com/uk-news/2023/sep/28/arts-groups-urge-bankrupt-birmingham-not-to-sell-its-heritage |website=The Guardian |access-date=28 September 2023 |date=28 September 2023}}</ref>

====Draft budget==== In February 2024, the council published its budget proposals for 2024/2025 and 2025/2026.<ref name="Birmingham budget proposals">{{cite web |title=Budget proposals 2024/5 and 2025/6 |url=https://www.birmingham.gov.uk/news/article/1430/budget_proposals_20245_and_20256 |website=Birmingham City Council |access-date=23 February 2024}}</ref> The government commissioners said the budget was "deliverable", but that "the real work of delivery needs to take place with discipline and pace" and that "[t]here are no other choices available".<ref name="Birmingham CMIS commissioner review">{{cite web |title=Commissioner Review: 2024/25 Budget Setting for General Fund Revenue Account, 2024/25 to 2027/28 Capital Programme and 2024/25 Treasury Management Strategy and Policy |url=https://birmingham.cmis.uk.com/Birmingham/Document.ashx?czJKcaeAi5tUFL1DTL2UE4zNRBcoShgo=iTfJxpJ%2fduaE4C7oUVrPEOIV%2fUqu1uSKPxQrbGQSSWgAihiJaBYuqw%3d%3d&rUzwRPf%2bZ3zd4E7Ikn8Lyw%3d%3d=pwRE6AGJFLDNlh225F5QMaQWCtPHwdhUfCZ%2fLUQzgA2uL5jNRG4jdQ%3d%3d&mCTIbCubSFfXsDGW9IXnlg%3d%3d=hFflUdN3100%3d&kCx1AnS9%2fpWZQ40DXFvdEw%3d%3d=hFflUdN3100%3d&uJovDxwdjMPoYv%2bAJvYtyA%3d%3d=ctNJFf55vVA%3d&FgPlIEJYlotS%2bYGoBi5olA%3d%3d=NHdURQburHA%3d&d9Qjj0ag1Pd993jsyOJqFvmyB7X0CSQK=ctNJFf55vVA%3d&WGewmoAfeNR9xqBux0r1Q8Za60lavYmz=ctNJFf55vVA%3d&WGewmoAfeNQ16B2MHuCpMRKZMwaG1PaO=ctNJFf55vVA%3d |website=Birmingham City Council |access-date=23 February 2024}}</ref>

Proposals in the budget included: *Writing off the entire of the 2023/2024 savings plan as undeliverable.<ref name=BirmBudget>{{cite web |title=2024/25 Budget Setting for General Fund Revenue Account, 2024/25 to 2027/28 Capital Programme and 2024/25 Treasury Management Strategy and Policy |url=https://birmingham.cmis.uk.com/Birmingham/Document.ashx?czJKcaeAi5tUFL1DTL2UE4zNRBcoShgo=57dLUgfYSn9F3fq69m9feOX2LbWPY8wqfbWgNIO0bsW241KaeDVjnw%3d%3d&rUzwRPf%2bZ3zd4E7Ikn8Lyw%3d%3d=pwRE6AGJFLDNlh225F5QMaQWCtPHwdhUfCZ%2fLUQzgA2uL5jNRG4jdQ%3d%3d&mCTIbCubSFfXsDGW9IXnlg%3d%3d=hFflUdN3100%3d&kCx1AnS9%2fpWZQ40DXFvdEw%3d%3d=hFflUdN3100%3d&uJovDxwdjMPoYv%2bAJvYtyA%3d%3d=ctNJFf55vVA%3d&FgPlIEJYlotS%2bYGoBi5olA%3d%3d=NHdURQburHA%3d&d9Qjj0ag1Pd993jsyOJqFvmyB7X0CSQK=ctNJFf55vVA%3d&WGewmoAfeNR9xqBux0r1Q8Za60lavYmz=ctNJFf55vVA%3d&WGewmoAfeNQ16B2MHuCpMRKZMwaG1PaO=ctNJFf55vVA%3d |website=Birmingham City Council |access-date=23 February 2024}}</ref>{{rp|29}} *Requesting 'Exceptional Financial Support' funding from the government totalling £225.9 million.<ref name=BirmBudget />{{rp|62}} This would include changing the cap on council tax increases, a government-backed contingency fund, funding to cover the costs of the council's redundancy programme and its equal pay liabilities, and a capitalisation direction to permit asset sales to be able to fund council expenditures.<ref name=BirmBudget />{{rp|61-62}} *Increasing the level of the council's general fund balance to 5% of net expenditure as suggested by CIPFA guidance as well as amending and streamlining the council's processes regarding its financial reserves.<ref name=BirmBudget />{{rp|50-51}} *Reduce budgets for highway maintenance,<ref name=BirmBudget />{{rp|87}} tourism,<ref name=BirmBudget />{{rp|96-97}} street cleaning and graffiti removal.<ref name=BirmBudget />{{rp|90}} *Increasing fees at leisure centres,<ref name=BirmBudget />{{rp|91}} Birmingham Wildlife and Conservation Centre,<ref name=BirmBudget />{{rp|99}} and for garden and bulky waste disposal,<ref name=BirmBudget />{{rp|89}} as well as introducing charges to car parks at Sutton Park, Lickey Hills Country Park, and Sheldon Country Park.<ref name=BirmBudget />{{rp|89}} *Stopping funding cultural projects and phasing out cultural grants.<ref name=BirmBudget />{{rp|93}} Affected organisations include City of Birmingham Symphony Orchestra, Ikon Gallery, Birmingham Repertory Theatre, Birmingham Royal Ballet, Birmingham Opera Company, Sampad Arts, Ex Cathedra, and Legacy Centre of Excellence.<ref name="BBC Sandiford 2024 Birmingham">{{cite web |author1=Josh Sandiford |title=Budget cuts mean city faces 'cultural deprivation' |url=https://www.bbc.co.uk/news/articles/c51ee94ywj2o |website=BBC News |access-date=23 February 2024 |date=21 February 2024}}</ref>

The government permitted Birmingham City Council to raise its council tax by up to 10%, above the normal 5% limit, despite having expressed concern about "the significant financial mismanagement at the council".<ref name=Webb /> It was estimated that this would raise an extra £21.8 million of revenue.<ref name=BirmBudget />{{rp|42}} Michael Gove said it was "disappointing" that taxpayers would have to "foot the bill for the council's poor governance".<ref name=Webb /> The council confirmed that it would increase council tax by 21% over two years.<ref name="BBC Gall Gilbert 2024 Birmingham">{{cite web |author1=Caroline Gall |author2=Simon Gilbert |title='Bankrupt' Birmingham reveals 21% council tax rise |url=https://www.bbc.co.uk/news/uk-england-birmingham-68342493 |website=BBC News |access-date=23 February 2024 |date=20 February 2024}}</ref>

=====Responses to budget===== Over 100 doctors in Birmingham signed an open letter to the council warning that the £51 million cut to children's services would put the "ability to keep our children safe and well" at risk.<ref name="BBC Gall Ball 2024 Birmingham">{{cite web |author1=Caroline Gall |author2=Elliot Ball |title=Doctors call on Birmingham City Council to reconsider £51m cuts |url=https://www.bbc.co.uk/news/uk-england-birmingham-68384630 |website=BBC News |access-date=23 February 2024 |date=23 February 2024}}</ref>

The total defunding of arts and cultural organisations was criticised by Nick Rhodes and Roger Taylor from Duran Duran, director of the Birmingham Royal Ballet Carlos Acosta, artist Pogus Caesar, and comedian Joe Lycett.<ref name="Guardian Bakare 2024 Birmingham">{{cite web |author1=Lanre Bakare |title=Lycett, Acosta and Duran Duran condemn Birmingham's 100% arts budget cut |url=https://www.theguardian.com/uk-news/2024/feb/23/joe-lycett-others-condemn-100-budget-cut-birmingham-arts |website=The Guardian |access-date=23 February 2024 |date=23 February 2024}}</ref>

===Nottingham City Council, 2023=== Nottingham City Council issued a section 114 notice on 29 November 2023, saying it was on track for a £23 million overspend for the 2023-24 financial year.<ref name="BBC Bevis 2023 Nottingham">{{cite web |author1=Gavin Bevis |title=Nottingham City Council declares itself 'bankrupt' |url=https://www.bbc.co.uk/news/uk-england-nottinghamshire-67380096 |website=BBC News |access-date=29 November 2023 |date=29 November 2023}}</ref> In a statement, the council said that the budget gap was down to social care cost, rising homelessness and the impact of inflation.<ref name=Scott>{{cite web |author1=Jennifer Scott |title=Nottingham City Council effectively declares bankruptcy over 'significant gap' in budget |url=https://news.sky.com/story/nottingham-city-council-declares-itself-effectively-bankrupt-13018935 |website=Sky News |access-date=29 November 2023 |date=29 November 2023}}</ref> The council noted that "past issues relating to financial governance [...] and an overspend in the last financial year" had affected its financial resilience.<ref name=Scott />

By halfway through the 2023-24 financial year, the council was forecasting an overspend of around £57 million, which was later cut to around £23 million by making savings and using its reserves.<ref name="MNN S114 2023 Nottingham">{{cite web |title=Section 114 report issued for Nottingham City Council |url=https://www.mynottinghamnews.co.uk/section-114-report-issued-for-nottingham-city-council/ |website=Nottingham City Council |access-date=29 November 2023 |date=29 November 2023}}</ref> A report earlier in November had shown the council to be considering issuing a notice with council leader David Mellen saying that £21 million of the excess spending was on social care and tackling homelessness.<ref name=Casswell>{{cite web |author1=Hugh Casswell |author2=Will Jefford |title=Nottingham City Council considering effective bankruptcy |url=https://www.bbc.co.uk/news/uk-england-nottinghamshire-67412641 |website=BBC News |access-date=29 November 2023 |date=14 November 2023}}</ref> Mellen had said that councils not being funded properly was the main reason for Nottingham's financial problems and that mistakes such as the defunct Robin Hood Energy firm were "small in comparison" to funding cuts,<ref name=Casswell /> despite the Local Democracy Reporting Service reporting that taxpayers were on the hook for £38.1 million after the energy company collapsed.<ref name="BBC Robin Hood Energy 2020">{{cite web |title=Nottingham council 'sorry' as Robin Hood Energy collapses |url=https://www.bbc.co.uk/news/uk-england-nottinghamshire-54015033 |website=BBC News |access-date=24 April 2024 |date=4 September 2020}}</ref>

Financial problems were expected to persist for several years; the council had estimated a gross budget deficit of £50.903 million for the 2024-25 financial year by July 2023 which, even with initial cost-cutting measures being put in place and council tax being increased by the maximum 4.99%, would leave a funding gap of £16.213 million.<ref name=Kausar>{{cite web |author1=Shabana Kausar |title=Budget Strategy and Medium Term Financial Plan (MTFP) 2024/25 to 2027/28 |url=https://committee.nottinghamcity.gov.uk/documents/s154302/Budget%20Strategy%20MTFP%20202425%20to%20202728%20Final.pdf |website=Nottingham City Council |access-date=23 December 2023 |date=19 December 2023}}</ref>{{rp|12}} By December 2023, this expected funding gap had increased to £33.215 million.<ref name=Kausar />{{rp|15}}

Redundancies in around 550 jobs, hiring freezes, service cuts (including to libraries, public transport, community centres, and Colwick Park Activity Centre) and potential sales of council assets were reported as part of the council's cost cutting plans.<ref name="BBC Watson 2023 Nottingham">{{cite web |author1=Greig Watson|title='Bankrupt' Nottingham City Council outlines major cost-cutting plans |url=https://www.bbc.co.uk/news/uk-england-nottinghamshire-67683329 |website=BBC News |access-date=23 December 2023 |date=12 December 2023}}</ref><ref name=Butler5 />

In December 2023, it was announced that spending on improvements on Colwick Woods Court, a tower block in Sneinton, had been approved by the council's section 151 officer.<ref name="NP Hartley 2023">{{cite web |author1=Joshua Hartley |title=Colwick Woods Court: Renovation of 'prison-like' tower to go ahead as spending approved |url=https://www.nottinghampost.com/news/nottingham-news/colwick-woods-court-renovation-prison-8987900 |website=Nottingham Post |access-date=23 December 2023 |date=20 December 2023}}</ref>

====Responses==== Robert Jenrick, government minister and MP for Newark, said that Labour had shown themselves to be "utterly unfit" to govern Nottingham and called on the government to appoint commissioners to take over financial decision making.<ref name=Scott />

The Local Government Information Unit said in a statement that Nottingham's notice "comes as no surprise" and highlighted how around one in ten councils were at risk of not being able to balance their budgets.<ref name=LGIU>{{cite web |author1=Jonathan Carr-West |title=LGIU Response: Nottingham City Council issues section 114 |url=https://lgiu.org/press-release/lgiu-response-nottingham-city-council-issues-section-114/ |website=Local Government Information Unit |access-date=29 November 2023 |date=29 November 2023}}</ref> The organisation said that while the government was "quick to point the finger at 'failing councils'", in reality the system was broken and more secure local council funding was needed.<ref name=LGIU />

In an analysis piece, Patrick Butler, ''The Guardian's'' social policy editor, commented that Nottingham City Council's notice was an example of "a more mundane town hall insolvency" where a lack of funding rather than financial mismanagement causes councils to go effectively bankrupt.<ref name=Butler5>{{cite web |author1=Patrick Butler |title=Nottingham city council wasn't reckless. It was hollowed out by austerity |url=https://www.theguardian.com/society/2023/nov/29/nottingham-city-council-wasnt-reckless-it-was-hollowed-out-by-austerity |website=The Guardian |access-date=23 December 2023 |date=29 November 2023}}</ref>

== Warnings == Some local authorities have warned that they are at risk of insolvency without actually having to issue a section 114 notice.

In May 2018, Somerset County Council said that unless it met its "ambitious financial savings targets" it would be unable to balance its budget and would have to issue a section 114 notice.<ref name="Guardian Butler 2023 Somerset">{{cite web |author1=Patrick Butler |title=Tory council at risk of bankruptcy calls for funding system fix |url=https://www.theguardian.com/society/2018/may/18/tory-council-at-risk-of-bankruptcy-slams-broken-funding-system |website=The Guardian |access-date=19 September 2023 |date=18 May 2018}}</ref> In February 2024, the government refused to allow Somerset to raise its council tax by 9.99%, above the normal 5% limit.<ref name=Webb />

In November 2018, Kingston London Borough Council leader Liz Green said that the authority was "about two years behind Northamptonshire" and that if finances were not brought under control, the council would "be in effective bankruptcy by 2021".<ref name=Rutter>{{cite web |author1=Calum Rutter |title=Kingston Council could face bankruptcy in two years warns leader |url=https://www.mylondon.news/news/west-london-news/kingston-council-could-face-bankruptcy-15361002 |website=MyLondon |access-date=19 September 2023 |date=1 November 2018}}</ref> The Liberal Democrats, who had come into power after the 2018 council election, blamed the former Conservative administration.<ref name=Rutter /> The former Conservative council leader Kevin Davis said that the comparison with Northamptonshire was "just rubbish" and that the council's finances were fine.<ref name=Rutter />

In September 2023, Surrey Heath Borough Council's Liberal Democrat administration which had come into power at the 2023 elections warned that the local authority could be effectively bankrupt within two years due to debts of £165 million.<ref name="Guardian Partington 2023 Surrey Heath">{{cite web |author1=Richard Partington |title=Michael Gove's local council warns of bankruptcy risk after failed Tory investments |url=https://www.theguardian.com/business/2023/sep/13/michael-goves-local-council-warns-of-bankruptcy-risk-after-failed-tory-investments |website=The Guardian |access-date=28 September 2023 |date=13 September 2023}}</ref> The council's leader, Shaun Macdonald, blamed the former Conservative administration and Michael Gove, the local MP and the Secretary of State for Levelling Up, Housing and Communities, for being "asleep at the wheel". The council had bought The Square shopping centre in 2016 for £94 million; by 2023, it was valued at only £30 million.<ref name=Riley>{{cite web |author1=Henry Riley |title=Michael Gove's local council 'faces bankruptcy within two years', due to Tories' 'horrific financial mismanagement' |url=https://www.lbc.co.uk/news/michael-goves-surrey-heath-council-faces-bankruptcy/ |website=LBC |access-date=28 September 2023 |date=13 September 2023}}</ref> A House of Fraser building was bought at the same time for £18.5 million but was assessed in 2023 as having asbestos in the walls and being worth just £2.92 million.<ref name=Riley /><ref name=Caulfield-Blunt>{{cite web |author1=Chris Caulfield |author2=Rosie Blunt |title=Surrey Heath Borough Council could move into asbestos lined former shop |url=https://www.bbc.co.uk/news/uk-england-surrey-66852391 |website=BBC News |access-date=28 September 2023 |date=19 September 2023}}</ref> The council suggested it could refurbish and move to the House of Fraser site in order to cut costs.<ref name=Caulfield-Blunt />

In September 2023, the leader of Havering London Borough Council warned the authority could be six months away from triggering a notice because of the increasing cost of social care and housing.<ref name="PF Rudgewick 2023 Havering">{{cite news |last1=Rudgewick |first1=Oliver |title=London borough at risk of S114 this year |url=https://www.publicfinance.co.uk/news/2023/09/london-borough-risk-s114-year |access-date=30 September 2023 |work=Public Finance |date=28 September 2023}}</ref><ref name="RR Mellor 2023 Havering">{{cite news |last1=Mellor |first1=Josh |title=Havering could be 'six months' away from 'bankruptcy' notice |url=https://www.romfordrecorder.co.uk/news/23819331.havering-six-months-away-bankruptcy-notice/ |access-date=30 September 2023 |work=Romford Recorder |date=28 September 2023}}</ref>

In December 2023, leaders of Cheshire East Council said that they faced issuing a notice due to the cancellation of the northern part of HS2 after they had spent £11 million preparing for the rail line.<ref name=HallidayHS2>{{cite web |author1=Josh Halliday |title=Cheshire East council says it faces bankruptcy due to HS2 link cancellation |url=https://www.theguardian.com/society/2023/dec/14/cheshire-east-council-says-it-faces-bankruptcy-due-to-hs2-link-cancellation |website=The Guardian |access-date=15 December 2023 |date=14 December 2023}}</ref> £8.6 million of the expenditure had been funded by borrowing which would have to be made up from the local authority's remaining budget, risking the council's solvency.<ref name=HallidayHS2 />

A 2023 poll of English councillors for ''The New Statesman'' found that a quarter of them believed that their council would soon go bankrupt, with 6% saying it was "very likely" to occur.<ref name="NS Kenyon Clarke-Ezzidio 2024">{{cite web |author1=Megan Kenyon |author2=Harry Clarke-Ezzidio |title=Council bankruptcy tracker: authorities under increasing financial strain |url=https://www.newstatesman.com/spotlight/economic-growth/regional-development/2024/01/council-bankruptcy-tracker-local-government-authorities-finances |website=The New Statesman |access-date=10 February 2024}}</ref>

In January 2024, Bournemouth, Christchurch and Poole Council announced it could have to issue a notice within the year due to a £60 million deficit in its education budget from overspends to fund special educational needs and disability accommodations.<ref name=Jayanetti>{{cite web |author1=Chaminda Jayanetti |title=UK council could go bust due to £60m hole in special needs spending |url=https://www.theguardian.com/education/2024/jan/13/uk-council-bournemouth-christchurch-poole-could-go-bust-due-to-60m-hole-in-special-needs-spending |website=The Guardian |access-date=13 January 2024 |date=13 January 2024}}</ref> The deficit is exempt from currently being assessed as part of the council's overall financial health due to a 'statutory override' which the government put in place in 2020.<ref name=Jayanetti /> However, this exemption is set to run out in March 2026 (just within the 2025-2026 financial year).<ref name=Jayanetti /> BCP Council said in a report that, because when the override runs out the council would be effectively insolvent, a notice would have to be issued in December 2024.<ref name=Jayanetti />

Over 40 Conservative backbench MPs (including Greg Clark, Robert Jenrick, Jake Berry, Priti Patel, and Damian Green) wrote to Prime Minister Rishi Sunak in January 2024, warning that more emergency support was needed for local councils and threatening to vote against the Local Government Settlement unless more funding was made available.<ref name="Independent Wingate 2024">{{cite web |author1=Sophie Wingate |title=Tory MPs urge Sunak to boost funding for cash-strapped councils |url=https://www.independent.co.uk/news/uk/rishi-sunak-mps-jake-berry-government-priti-patel-b2482375.html |website=The Independent |access-date=10 February 2024 |date=21 January 2024}}</ref>

In February 2024, the Levelling Up, Housing and Communities Committee released their third ''Financial Distress in Local Authorities'' report.<ref name="LUHaCC report 2024">{{cite web |author1=Levelling Up, Housing and Communities Committee |author1-link=Levelling Up, Housing and Communities Committee |title=Financial distress in local authorities: Third Report of Session 2023–24 |url=https://committees.parliament.uk/publications/43165/documents/214689/default/ |website=Parliament.uk |access-date=10 February 2024 |date=1 February 2024}}</ref> Among its recommendations was that the government should make £4 billion of funding available to councils for the 2024-2025 financial year to prevent more bankruptcies and cuts to local services.<ref name="CSW Dunton 2024">{{cite web |author1=Jim Dunton |title=£4bn funding gap puts councils at 'tipping point', MPs warn |url=https://www.civilserviceworld.com/professions/article/4bn-funding-gap-puts-councils-at-tipping-point-mps-warn |website=Civil Service World |access-date=10 February 2024 |date=1 February 2024}}</ref> Clive Betts, the committee's chair, said that the financial crisis in local government was "out of control" and that without emergency funding, "well-run councils could face ... going bust".<ref name="Independent Bankroft 2024">{{cite web |author1=Holly Bancroft |title=Ministers must fix the £4bn hole in council funding or risk more going bankrupt, MPs warn |url=https://www.independent.co.uk/news/uk/home-news/council-bankrupt-housing-funding-tax-b2488002.html |website=The Independent |access-date=10 February 2024 |date=1 February 2024}}</ref>

In December 2024, the Royal Borough of Windsor and Maidenhead issued its draft budget for 2025/26, warning that a "significant increase to council tax bills" would be required because the council was "on the brink of effective bankruptcy".<ref name="RWBM draft budget 2025-2026">{{cite web |title=Draft 2025/26 budget sets out need for significant council tax increase to avoid bankruptcy |url=https://www.rbwm.gov.uk/news/2024/draft-202526-budget-sets-out-need-significant-council-tax-increase-avoid-bankruptcy |website=Royal Borough of Windsor and Maidenhead |access-date=1 February 2025 |date=10 December 2024}}</ref> In February 2025, ''The Guardian'' named Windsor and Maidenhead as one of the councils "considered to be in serious financial difficulties" alongside Hampshire County Council and Bradford City Council while suggesting that the government would allow councils to increase council tax by up to 25% to avoid issuing Section 114 notices.<ref name="Guardian Inman Butler 2025">{{cite web |author1=Phillip Inman |author2=Patrick Butler |title=Ministers could allow council tax to rise by up to 25% to prevent bankruptcies |url=https://www.theguardian.com/society/2025/feb/01/council-tax-rise-bankruptcies-local-authorities-england |website=The Guardian |access-date=1 February 2025 |date=1 February 2025}}</ref>

==See also== * Oflog * Local government in the United Kingdom

==Notes== {{reflist|group=note}}

== References == {{reflist}}

== External links == *{{UK-LEG|type=ukpga|path=ukpga/1988/41/section/114|title=Local Government Finance Act 1988, section 114}} * {{Cite report |url=https://committees.parliament.uk/publications/6777/documents/72117/default/ |title=Local authority financial sustainability and the section 114 regime |publisher=Housing, Communities and Local Government Committee |publication-date=14 July 2021 |volume=2 |page=31 |format=pdf}} * [https://commonslibrary.parliament.uk/what-happens-if-a-council-goes-bankrupt/ What happens if a council goes bankrupt?] ''House of Commons Library''

{{UK legislation}}

Category:United Kingdom Acts of Parliament 1988 Category:Local government legislation in England and Wales