Yorkshire council on the brink of bankruptcy halts 'non essential' spending

Kirklees Council approved the move earlier this week, claiming it will need to issue a Section 114 notice, effectively declaring itself bankrupt, unless it can cut costs and find savings.

It came after Middlesbrough Council warned it will need to issue the same notice if it cannot plug a £11.5m funding gap with “rigorous" spending restrictions.

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

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

The local authorities, which are required to set balanced budgets, have been struggling with inflation, soaring energy prices and the rising cost of providing care to elderly people and vulnerable children.

After recording a £27m budget overspend last year, Kirklees Council said that if it continues spending at the current rate it will need to use almost all of its reserves (£47.1m) to balance the books in 2023/24.

Councillor Paul Davies said: “Extra demand for services that safeguard our most vulnerable residents including child protection and residential placements for children in care have been the main drivers for the increased costs alongside social care for older people and residents with learning disabilities.

“Inflationary pressures on goods such as food for school, catering services and IT equipment are also driving up costs.”

He said the Labour-run council has “already put measures in place” to reduce costs but “it is now very clear that we need to go further”.

The decision to halt “non-essential” spending means the council will only spend money on providing essential services, honouring contracts and running activities which generate significant income.

Trade union Unison claimed the council is looking to make around 250 people redundancies.

Leonie Sharp, regional manager for Yorkshire, said: “After 13 years of underfunding, local authorities have no meat on the bone left to cut. We can't see any way cuts at the council can be made without dire consequences.”

A handful of councils have gone bankrupt in recent years, including Croydon and Woking, but several others have needed government bailouts to stay afloat.

The Labour-run local authority is due to appoint Stephen Mawson as its new chief executive after Jacqui Gedman announced she would quit the role in September.

Shabir Pandor resigned as council leader last month as he was due to face a vote of no confidence which he was expected to lose.

It comes as other councils in Yorkshire are struggling to balance the books. Leeds City Council said it needs to find £58.6m of savings in 2023/24, while Sheffield City Council is looking to plug a £47m gap.

Local authorities claim they have already made swingeing cuts because Government funding was slashed during austerity.

According to the LGA, they lost £15bn between 2010 and 2020, equating to around 60p in every £1.