Council facing deficit of almost £50m attempts to stave off bankruptcy

It comes after senior councillors recently decided to restrict all spending deemed “non-essential”, in an attempt to stave off bankruptcy.

The Labour-run council has blamed inflation, claiming the cost of caring for elderly people, supporting children with special educational needs and providing schools with all of the equipment they need has soared.

But the local-authority, which held almost £634m of debt in March, said the cost of borrowing has also risen sharply over the last year, following a series of interest rate rises.

The council recently warned it will need to issue a Section 114 notice, effectively declaring itself bankrupt, unless it can cut costs and find savings.

According to a new report, the latest projections show the local authority needs to find an extra £47.8m to balance the books by 2024/25.

After spending on services went £27m over budget last year, the council is predicting a £20.3m overspend in the current financial year.

The local authority claimed it will need to use almost all of its reserves to cover its losses, meaning there is “no scope to use reserves” in 2024/25 and “any funding gap must be bridged by reductions in the base budget”.

It comes as some staff are considering strike action, after trade union Unison warned the council is planning to make 250 redundancies by March 2024 to save money and 750 overall.

Kirklees Council has imposed a recruitment freeze and said it will only spend money on meeting its legal obligations to deliver key services, honouring contracts and running events which generate significant income.

There are plans to “accelerate the sale" of various buildings to raise around £12.8m, hike fees and charges, cut administration costs and review the council’s investment plans, to see if any projects can be delayed to save money in the short term.

The council also said it will also look to kickstart development in Kirklees, as new homes and businesses will provide additional income.

Councillor Graham Turner, Cabinet Member for Finance, said a plan to shore up the council's finances over the next two years is due to be discussed at a meeting next week.

“This financial plan shows we’re facing up to the challenge,” he said. “We’ve taken urgent action to address the immediate financial issues and this updated strategy will build on that work to safeguard the financial future of the council, which is key to delivering all our services.

“Growing our economy, making efficiencies and prioritising spending will be key to overcoming the pressures we face.”

Councillor Cathy Scott has been appointed as acting leader of the council following the resignation of Shabir Pandor, and Steve Mawson became the new chief executive earlier this month.

It comes as local authorities across the country, which are required to set balanced budgets, are struggling with inflation, soaring energy prices and the rising cost of providing care to vulnerable people.

The Government said councils are responsible for managing their own finances but their “core spending power”, which includes council tax revenue, increased by £5.1bn in 2023/24.

But the Local Government Association (LGA) has warned councils still need almost £3bn of additional funding to pay for services over the next two years.