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An insider’s view of Nottingham City Council

A member of the effectively bankrupt local authority on life after a Section 114 notice.

By Kirsty Lemara Jones

Editor’s note: This article was originally published on 29 February. Today the council approved cuts to jobs and services to make up for a £53m budget shortfall.

I knew Nottingham City Council was under financial pressure before I was elected councillor in May 2023. In 2015, the authority had launched the UK’s first council-run energy company, with the ambitious aim of saving local people money on their energy bills. But by 2020 the ill-fated Robin Hood Energy was closed, having lost the local authority £38m. An Improvement and Assurance Board (IAB) – a non-statutory government intervention to help councils achieve value for money – had been in place since 2021.

I was part of a significant new cohort of Labour councillors – more than 20 of us swelled the authority’s Labour ranks in May 2023 – but the previous majority Labour group had set the budget for 2023-24, and this was judged to be balanced by Nottingham’s finance officers. Only two months after we were all elected – and only four months after the 2023-24 budget was set – it became clear, from meetings and Labour group briefings, that there was already a predicted budget gap of £25m.

In Nottingham’s case, overspend in adult and children’s social care and the rising costs of temporary accommodation for homeless households were the leading causes of the budget shortfall. This is a problem for councils across England. Inflation has driven up costs everywhere. There may also have been other issues specific to Nottingham, however. A report by the accountancy firm EY into the authority’s financial management – commissioned by the council – detailed problems including management overriding financial controls. This is not something that elected council members have any control over. Elected members make decisions at a strategic and policy level, but it is council officers who deal with the day-to-day operations of a local authority.

Councils have always used money from their reserves to deal with unexpected costs in a financial year. But when it comes to maintaining resilience, the steady reduction in this reserve cushion pales in comparison with the drastic underfunding of local government we have seen since 2010. For Nottingham, the money previously lost from the reserves would only have delayed the issuance of a section 114 (S114) notice, the instrument that notifies when a council will be unable to meet its expenditure commitments from its income, by one year. The rising costs of service provision and the lack of funding from central government would still have presented serious problems.

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It was no surprise, then, when Nottingham City Council issued the S114 notice in November 2023. Subsequent budget updates confirmed that it had indeed been a case of when this would happen, not if. Anticipating the S114 notice, many councillors were worried about the impact this would have on council services. We were in the middle of considering proposals from council officers to set the budget for the following financial year. Drastic cuts to jobs and services were being put to us by officers, and councillors were acutely aware of how spending controls could impact discretionary services, such as parks, community centres and libraries.

Many councils across England are facing these same pressures. What is causing the crisis? The centralisation of decision-making and the narrowness of the scope of local democratic power are the real issues.

Legislation places statutory duties on local authorities. The Local Government Finance Act requires councils to set and deliver balanced budgets and specifies how money can be used. There are clear boundaries, for instance, between capital and revenue spending. Other legislation, such as the Children’s Act, Care Act and Housing Act, put further statutory responsibilities on local authorities, particularly in areas where demand pressures have increased significantly in recent years.

I am unusual in that I used to be an officer in the council for which I am now a member. I worked in the homelessness department for four years before being selected as a candidate for Labour. As such, I am familiar with the duties placed on local authorities under the Housing Act. Many of these statutory obligations, such as the duty to provide temporary accommodation for homeless households, cannot be avoided, particularly in the wider context of the housing crisis. The cost of provision is high, especially when councils are reliant on nightly-paid accommodation.

But despite all the statutory duties placed on local authorities, they have had funding cut by central government for more than a decade under a policy of austerity in the public sector. This dates back to the 2008 financial crisis. At Nottingham City Council, this has worked out as around £100m lost each year for the past ten years. Furthermore, a significant amount of the money local authorities obtain from central government is from a system of bidding for ring-fenced funding. This means that local authorities are competing against each other for money which they cannot choose how to spend. This system takes political power away from local authorities and deprives their communities.

If, as polling indicates, Labour forms the next government, the party should prioritise reforms to local government funding.

Following legal advice, we were forced to accept the S114 report and spending controls issued by the chief financial officer. The IAB then issued instructions which meant that the chief financial officer puts forward the budget, rather than it being the political decision of councillors. We were notified about the appointment of commissioners on 22 February 2024, and they will have authority over many functions of Nottingham City Council. Effectively, central government has abolished any remaining power for councillors at Nottingham City Council to represent the residents of Nottingham.

The spending controls imposed since the S114 notice mean that services provided by the council have been reduced. We are yet to hear about any difference it has made financially. The proposed cuts to parks, highway maintenance, libraries, community centres, care homes and grants to arts and cultural organisations and voluntary organisations will destroy the things about Nottingham that both residents and the councillors love. This situation will impact everyone in our city, and this angers all of us.

Ideals of minor tweaks to improve Nottingham residents’ lives, let alone the municipal socialism that I dream of, seem to be unachievable in this context without strong political organising. However, the responses to consultations, letters, protests and meetings from community groups, unions and individuals show that we have a population in Nottingham that is not prepared to take the cuts to services and assets demanded of us by the pressures beyond our control.

I support this fight because we need change. Nottingham knows what is best for Nottingham, not Westminster.

[See also: Local authorities warn they have “little choice” but to raise council tax]

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