Kirklees Council has warned that it could face a section 114 notice in 2024/25 if the authority does not deliver required savings and minimise its expenditure this financial year.
A report, which is to be presented to the council’s cabinet on 15 August, outlined that Kirklees has a revenue budget of £379.4m in 2023/24, which is partly funded by a contribution from unallocated reserves valuing £24.6m. It also stated that the budget includes in-year planned revenue savings of £19.8m.
The report detailed that the council has forecasted to overspend its budget by £20.3m this year, which if sustained until the year end could increase the drawdown from unallocated reserves by £44.9m.
In turn, this would reduce Kirklees’ unallocated reserves to £2.1m, which is significantly below what is considered to be ‘adequate’ by the council’s director of finance.
Therefore, the report warned that if overspending is not dealt with in 2023/24 and carried over to the next financial year it would increase the requirement of savings in 2024/25 and provide no scope to draw on the council’s reserves.
“As outlined in this report, whilst a s114 report is not considered necessary at this point, unless the actions outlined in this report and those that shall come forward as part of setting the budget for 2024/25, the issue of such a report remains a possibility,” the report said.
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Combined funding gap of £50m
The report outlined that Kirklees Council faces a funding gap for 2024/25 of c£30m. This position, combined with the forecast outturn for 2023/24, could require savings of £50m in the next financial year.
Kirklees must therefore strengthen and continue with actions implemented last year to control its expenditure, the report urged, with its spending being “significantly greater” than available sources of funding, including reserves.
“The seriousness of the council’s financial position cannot be understated,” the report added.
The report outlined that since 2011, Kirklees has faced continuing funding reductions and increasing demand pressures far greater than more affluent areas with lower levels of relative needs, factors which have contributed to the council’s current financial position.
“By way of background, since 2011 the council has delivered over £250m savings as a result of national austerity measures,” it said.
The report also stated that Kirklees Band B and D council tax is lower than the average for metropolitan local authorities and, given the number of properties in council tax Bands A to C, it has a significantly lower tax base. This has meant that the authority does not have the taxable capacity to increase its council tax to compensate for the loss of central government funding.
“These structural issues with the council’s funding settlement combined with the impact of the cost of living, rising demand for services and the lack of investment funding from government are all factors that have contributed to the council’s current financial position,” the report added.
This comes as Kent, Guildford, Hastings, Southampton and Bradford councils have also warned that they face potential section 114 notices in the past month.
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