Cheshire East Council forecasts reduced deficit amidst warnings of potential bankruptcy

Cheshire East Council projects a smaller financial deficit for the current year than initially anticipated, though a councillor expressed that the authority is “crossing its fingers” to prevent what would amount to effective bankruptcy. The council reported its current year’s shortfall is now estimated at £20 million, a reduction from the £26 million projected three months prior. However, a Labour councillor stated he was “very, very gloomy,” while a Conservative representative emphasized the need for the authority to do “everything in its power” to prevent the issuance of a section 114 notice, which signifies a council’s effective bankruptcy. Having experienced financial challenges in recent months, the council has approved over £90 million in spending reductions to be implemented over the coming four years. During a finance meeting, Ken Edwards of the Labour party conveyed that he was “very, very gloomy,” adding, “I think we’re crossing our fingers to avoid a S114 situation.” Concurrently, Janet Clowes, representing the Conservatives, stated: “We need to do everything in our power to avoid a 114.” A section 114 notice is issued when a council is unable to balance its budget, effectively declaring it bankrupt. Should such a notice be issued, authorities are prohibited from undertaking new spending commitments and are required to present a revised budget within 21 days, a process that often entails significant reductions to frontline services. The council has sought exceptional financial assistance from the government. At the meeting, Liberal Democrat Reg Kain questioned: “I want to know why exceptional financial support, which is going to still bring about the cuts that we’re going to suffer, is a better situation than a 114 because, from where I’m sat at the moment, I can’t see us really avoiding a 114 in the future.” Conversely, Labour’s Jill Rhodes pointed out that while exceptional financial support would necessitate the council increasing its borrowing, a S114 notice would lead to the appointment of commissioners. She elaborated that “Those commissioners have to be paid by the council, and you lose political control of your council, it is run by commissioners,” concluding, “So, democracy is probably not best served by a 114 notice and commissioners.” Several local authorities, among them Birmingham and Thurrock, have issued section 114 notices in recent years.