'Urgent' cash plea from Shropshire Council to Government in bid to avoid 'bankruptcy'
Shropshire Council has requested emergency funding from the Government as it seeks to avoid financial crisis.
The council's Liberal Democrat leaders, who took over the authority from the Conservatives after winning May's local election, have confirmed an official and "urgent" request to the Government for help.
The council has asked for what is called 'Exceptional Financial Support' as it seeks to avoid the local government equivalent of bankruptcy - issuing a Section 114 notice.
The authority has made no secret of its worsening financial position, declaring a "financial emergency" last month.
But the situation has deteriorated to the point where it has now requested "urgent" help from the Government.
Council leader Councillor Heather Kidd said the administration had inherited a budget that "simply does not add up".
The Lib Dems said that a "deep dive" into the authority's accounts undertaken since May had revealed a "major in-year budget gap".
They said the issues have been caused by rising costs of social care - a recurring theme in local government crises - but also accused the previous administration of "broken promises" over savings plans.
Councillor Kidd said: "The scale of the financial issues we have inherited from the Conservatives is extremely serious. The former Conservative administration repeatedly promised reform and financial discipline but it never materialised, leaving us with a budget that simply doesn’t add up.
“Many of the Conservatives’ savings were never achievable, and when we came in there were no plans in place to achieve them."
She added: "As a new Liberal Democrat administration we are determined to be honest about the scale of the challenge and to take decisive action. Our priority is to protect vital frontline services and to rebuild trust with staff and residents by being transparent about what has gone wrong and how we will fix it.
“We are working closely with the Government and our partners to bring the council back onto a sustainable footing, ensuring Shropshire remains a place where communities and businesses can thrive.”
A report which outlines the council’s financial position, based on information to the end of September, will now be presented to the council's cabinet in November.
The council said the report and projected position will not be finalised and published until November 10, but early indications show that the authority may overspend by £50 million by March 2026 if no alterations are made.
A statement from the authority said: "The council has over £34 million in its savings, otherwise known as its General Fund Balance, to help manage its budget this financial year, but this is not enough to cover the overspending.
"Overspending is not permitted and if not resolved urgently the council may receive what is called a Section 114 report. The Government could then take action to reduce spending by taking control of the council with commissioners."
The statement explained that the council has been in talks with the Government over the issues for several weeks, but that the position has worsened.
It said: "Over the last couple of weeks, the council has had several conversations with representatives from the Ministry of Housing, Communities and Local Government (MHCLG), the government department responsible for funding local councils.
"These discussions initially focused on the ask for longer-term funding the council needs over the next three years to enable it to invest in transformation, stabilise its budget and bring an end to its financial emergency.
"However, the budget pressures this year have meant that the council has also now asked for urgent financial support to help it continue to deliver services until March 2026."
Councillor Roger Evans, Shropshire Council’s cabinet member for finance, said: “For a number of years now the council has been overspending its budget – a budget that was set by the previous administration. Reserves or savings have been used to meet this continued deficit to the extent that all have now been used up. There is none left for us to use to help us meet this shortfall.
“We all, councillors and staff, have been working hard since May to put in place a number of measures to stop all non-essential spend, reduce essential spend, increase income and try to deliver the needed £60 million of savings that were in the budget we inherited.
“Due to the monthly reporting an increasing amount of overspend, emergency actions were agreed. Due to the severity of the situation, we declared a financial emergency in September. My thanks and apologies to all our dedicated staff who have tried to turn this council around in just a few months. I know how hard many of you are working.
“While this does not appear to be enough, we have been very clear on our plans to improve the way in which the council works and what we focus on. We are in the process of developing a plan to improve which will help us to focus on our people, money and priorities over the next 12 to 18 months. This is of course underpinned by a recent Corporate Peer Challenge by the Local Government Association (LGA) and our subsequent action plan.
“Despite our challenges, I truly believe that together we can make Shropshire Council sustainable, fulfil the promises we made in our New Direction paper and create a council we can all be proud of.”
Councillor Evans added that the authority is taking its own actions to tackle spending - but that the issue of 'fair funding' remains a key focus.
He said: “It’s no surprise that the lack of Government funding is contributing hugely to our financial challenge. Year after year, this funding fails to account for additional cost of delivering essential services over a large, sparsely populated area.
“We will continue to lobby the Government for fairer funding allocations that genuinely reflect the needs and challenges of all authorities, including in rural areas with complex challenges such as Shropshire, but we are also determined to reduce our spend to enable us to balance our budget and avoid the issuing of a Section 114 if at all possible.”
