Telford & Wrekin Council 'nowhere near' declaring bankruptcy over coronavirus crisis

Ken Clarke, the authority’s finance and HR director, told the audit committee that a mid-year budget review would be produced in the autumn to update the cabinet on the impact of the coronavirus pandemic and government assistance measures, but said the authority had started 2020-21 “in a better place than most”.

A report by Shropshire Council Chief Finance Officer James Walton earlier this month warned its cabinet that Covid-19 and the flooding had rendered its previously-agreed budget “obsolete”.

He said he may have to issue a “section 114 notice” if government assistance, long-term borrowing, a spending freeze or the use of reserves failed to plug its £18.5 million 2020-21 shortfall and stop it growing in future years.

Section 114 of the 1988 Local Government Finance Act requires local authority finance officers to make a declaration if spending is likely to exceed resources. Once declared, that authority is barred from entering into any new financial commitments except for safeguarding and statutory services.

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Telford & Wrekin Audit Committee member Kuldip Sahota asked: “We’ve got a next-door council looking at section 114; we’re nowhere near that, are we?”

Mr Clarke said: “I think we were fortunate in that we started the year in a fairly healthy financial position. We’d underspent against our budget for the last 10 years. We have built up some reserves during recent years, so we started in a better place than most authorities.”

He said the authority had received £10.1 million of emergency funding from the government and still had an in-year deficit of “around £18.6 million”, but this figure was compiled before Communities and Local Government Secretary Robert Jenrick MP announced additional measures early this month.

These included £500 million of grants, distributed around England, of which Mr Clarke expected Telford & Wrekin would receive “around £1.5 million”, and the extension of the repayment period on a £8 million council debt from one year to three.

“At the moment we’re not in a position to work out what that means for us,” Mr Clarke said.

“What we are going to do is pull all of this together, into a mid-year budget review, which we’ll bring forward to cabinet in the autumn.

“I can reassure you that we’re nowhere near issuing a section 114 notice, but we do have significant pressure. Obviously, we welcome the additional support the government has announced but we could always do with more of that.”