Council responds to S114 speculation

Cheshire East has responded to speculation the council is about to go bust, saying it is working extremely hard to address financial pressures without triggering a Section 114 notice.

Speculation was rife in the national press just before Christmas that the cash-strapped council may be forced to declare bankruptcy following the government’s ‘devastating’ decision to scrap the northern leg of HS2.

The council had already spent £11m on the back of HS2 coming to Crewe – and there are fears £8m of that may now have to be written off

Following questions from local media seeking clarification, a council spokesperson today (Friday) said: “While financial pressures are very real for Cheshire East Council, and for many other councils across the country at this time, the council is working extremely hard to address those pressures without triggering a Section 114 notice.”

A S114 notice can be triggered when a council’s spending decisions could exceed the available resources of the council.

Under these circumstances statutory services would continue and existing contracts and commitments must be honoured.

But any spending that is not essential or which can be postponed must not take place.

Further consequences could include the appointment of commissioners from the Department for Levelling Up, Housing and Communities, (DLUHC), and potential restrictions on the decision-making powers of local leaders.

The spokesperson said: “Cheshire East Council has made a number of public statements in recent months regarding financial pressures on the council’s budget and the in-year position.  

“The council’s committees have considered two detailed financial reports – first financial review in October and second financial review in November 2023.

“Local council finances have been under increasing pressure for a number of years.

“There are various pressures on Cheshire East Council’s finances, including the impacts of high inflation and high interest rates on loan payments seen throughout the year, the high level of demand for council services and increasing costs and complexity of needs for those children and older people who most need the council’s help.

“There is also financial uncertainty following the Government’s announcement, in October, of the cancellation of HS2 north of Birmingham and the potential impacts on Crewe, Cheshire East and the wider region.

“This is on top of reduction of Government funding for day-to-day services.”

The spokesperson added: “Cheshire East Council is seeking compensation from the government for the losses sustained by the council and the surrounding area.

“Cheshire East Council alone invested £11m in HS2 coming to Crewe with £8m that may now have to be written off.

“The economic benefits of HS2 for Crewe and the surrounding area were forecast at £750m per annum.

“Together these factors bring significant financial pressures for the current year and for planning a balanced, affordable budget for the year ahead, with adequate reserves to protect against risk.”

Yesterday (Thursday), the council’s finance sub-committee considered a report on the council’s third quarter financial review.

The spokesperson said: “This report is forecasting a pressure of £13m by March 31, 2024, an improvement of £5.7m compared to second quarter financial review.

“Improvements since second quarter financial review include increased use of flexible capital receipts, increased income, holding vacant posts and reducing non-essential spend.

“However, this does not mean we can afford to stand still.

“As the council continues to monitor the position closely, the aim is to reduce the financial pressure to nil in 2023/24. This will ensure that the council’s reserves will be protected for future years.

“The council has now launched its budget engagement for next financial year.  The consultation survey is for residents and other stakeholders to provide feedback on a range of budget proposals which will be considered by councillors as part of the decision-making process to set a balanced budget for the council in 2024/25.