Middlesbrough Council told it must apply for government support to avoid bankruptcy

Middlesbrough Council will have to request exceptional financial support from the government if it is to avoid effective bankruptcy, the council's executive has been told.

A report said failure to approve a move at a meeting next week would see a section 114 notice issued - meaning the council would not be able to meet its legal requirement of balancing the budget by March.

Despite proposing a raft of cost-cutting measures, the council still faces a funding deficit of £6.3 million.

The council has already signed off on the sale of assets, while further proposals to save around £14 million are currently out for public consultation - including job cuts, reduced waste collection, and a council tax increase of 4.99%.

A statement in the council’s draft accounts report said, along with consideration of the Local Government Finance Settlement, the measures will not deliver “sufficiently robust and implementable savings plans” in time.

It says an application to the Department for Levelling Up Housing and Communities (DLUHC) “will be necessary during January 2024”.

If approved by the Government, the move would then be voted upon by the full council.

A report to the Executive said: “Middlesbrough Council’s financial position is critical. At the time of writing, the council are consulting on a budget gap of £6.3 million for 2024/25, with the risk of the council issuing a section 114 notice remaining a possible outcome.”

A council spokesperson said: “The council is taking this decision in order to seek to avoid the more severe consequences of issuing a Section 114 notice, which have been issued recently by other local authorities, but that risk remains if a balanced budget cannot be achieved by the statutory deadline of March 11.”

Labour took control of Middlesbrough Council in the local elections of May 2023. It had previously been run by an Independent-Conservative administration, with both sides blaming each other for the council's financial difficulties.

The report to the Executive blamed the council’s “critical” financial position, in part, on “past failures” to establish and deliver sufficient savings plans and “over reliance” on revenue reserves to meet overspending.

The council’s draft accounts for 2022/23 show reserves have been used to support overspends across services, particularly in children’s social care which had a final overspend of £9.4 million.

In December, Tees Valley Mayor Ben Houchen and Middlesbrough and East Cleveland MP Simon Clarke wrote to Simon Hoare, Parliamentary Under-Secretary of State for Local Government, requesting commissioners step in and take over the running of the council.

Mayor of Middlesbrough, Chris Cooke, said the letter to Mr Hoare was “littered with inaccuracies” and insisted it was “a call to abandon Middlesbrough”. 

At a meeting in December, he told the Executive: “I’m of the opinion that what we are doing is difficult but the option of section 114 or any equivalent level of intervention would actually put us in a much worse place.

"What we are seeing around the country with a 10-15% rise in council tax, what we are seeing with libraries closing, residential care homes closing, that is not a situation that I think we should be in.”

A statement from the Department for Levelling Up, Housing and Communities said: “Councils are responsible for the management of their own finances, and it is right they take the necessary decisions to manage their position, but we remain ready to talk to any concerned about its financial position.

“We recognise councils are facing challenges and that is why we have announced a £64 billion funding package to ensure they can continue making a difference, alongside our combined efforts to level up.”

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