Oadby and Wigston Borough Council is welcoming government interest in its financial position as it seeks to reach a sustainable long-term financial footing.
Michael Gove, who heads the Department for Levelling Up, Housing & Communities (DHLUC), has said his department will begin talks “this month” with the council to discuss its financial position, with the prospect of a section 114 notice raised in recent council statements.
Gove made the commitment having been contacted by Conservative MP for Harborough Neil O’Brien, who requested government intervention into the council’s finances as he believed it could be “on track to run out of money”. O’Brien raised concerns that the council may have to make emergency spending cuts and that it could be on course to use all its reserves much sooner than the currently projected 2026/27 financial year.
O’Brien also compared the council’s predicament to Croydon and Thurrock councils – which have struggled financially and issued section 114 notices. These notices ban all new spending with the exception of protecting vulnerable people and statutory services and pre-existing commitments.
However, the leader of Oadby and Wigston Borough Council, councillor Samia Haq – a Liberal Democrat – said that government intervention and support would be welcomed, and disputed the accuracy of many of the claims made by O’Brien. In a statement, she said it was vital for politicians to understand the constraints smaller councils are working under, and noted that corrective financial actions were being put in place.
“We’ve been seeking more support from government for a long time, so it is excellent news that they are taking an interest in our position,” said Haq.
“It’s important those in Westminster understand how the current funding systems in place aren’t fit for purpose and unfairly hold back boroughs such as Oadby and Wigston. Our size severely constrains our ability to benefit from major funding streams such as the New Homes Bonus and business rates, leaving us with a fraction of the money other councils in the area receive.
“We look forward to sharing our ideas and receiving feedback on our long-term sustainability plans we’ve put in place to mitigate the continued financial challenges ahead.”
Putting the struggles in context
Oadby and Wigston Borough Council chief executive Anne Court sent a letter to Gove earlier this month (5 April), following on from the one sent by O’Brien, in which she aimed to provide context around the council’s financial circumstances and position.
As one of the smallest councils in the country, Court noted that Oadby and Wigston “is unique in Leicestershire in that it is unparished and is therefore delivering and funding additional services that elsewhere are funded through parish precepts – such as parks, open spaces and cemeteries”.
Additionally, the borough is “severely constrained” in size, restricting the council’s ability to benefit from income streams such as those noted by Haq, while it receives “a fraction of the money neighbouring Leicestershire councils receive”.
Court also noted that the council, through s151 officer Tracy Bingham – who is leaving her position as strategic director at Oadby and Wigston in June to become the new strategic director (corporate resources) at South Derbyshire District Council – reached out earlier this year for support from O’Brien regarding the council’s funding predicament “without success” and so his letter to Gove “came somewhat as a surprise”.
Court said Oadby and Wigston was “well aware” of the financial challenges it faces and has proactively engaged with the Local Government Association (LGA) through a financial health check in 2021 and a peer review in 2022, which are additional to its continued engagement with DHLUC since 2019.
“The peer review recognised that we had fully implemented the recommendations from the financial health check, including increasing resilience in the finance team,” she wrote. “The council disputes Mr O’Brien’s comparison with ‘councils which have failed recently, like Croydon and Thurrock’. Oadby and Wigston’s financial sustainability concerns are characterised by low levels of spending power rather than high levels of debt and financial mismanagement.
“The council’s capital financing requirement of £37.6m is made up in the main of 23% relating to the commissioning of its two leisure centres in 2015-16 with 52% relating to the HRA arising from the self-financing decisions.”
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Like all other district councils, Oadby and Wigston’s net general fund annual budget has reduced over several years – in its case from £8.5m in 2010/11 to £6.5m in 2022/23 – due to the loss of the Revenue Support Grant from 2019. “Consequently, with a funding system that diverts funding in reward for growth, spending power and absolute funding has diminished in Oadby and Wigston,” Court wrote. “Despite a low tax base, council tax now makes up 62% of the council’s funding, up from 43% in 2010/11.
“The ratio of useable reserves to net revenue expenditure of Oadby and Wigston is worse than any of the other Leicestershire districts and boroughs because the council has had to make use of its reserves to balance the budget in the face of diminishing spending power.”
Oadby and Wigston has taken steps to address the financial challenges, recognising its diminishing funding position as its key strategic risk in its Medium Term Financial Strategy, which was approved in September 2022. “We have developed and mobilised with members a sustainability plan for closing budget gaps, but we recognise the savings projected will not cover the deficits projected in full,” wrote Court. “We have been able to maintain front line services, but income generation, along with the use of reserves, has recently become the means of balancing the books.
“The council is taking steps to generate capital receipts, with the objective of this activity to reduce ongoing operational revenue expenditure and deliver economic regeneration and enhancement of community facilities at no/low cost. Examples of this are downsizing the office headquarters and the sale of a former swimming pool site.”
Tackling the financial challenges
In an interview with Room151 in March, outgoing s151 officer Bingham noted that Oadby and Wigston highlighted that the council had been “financially challenged for a very long time”, with “really low reserves” and the possibility of a section 114 notice on the horizon for 2026/27.
Over recent years “the core spending power in Oadby and Wigston has completely diminished in real terms”, Bingham noted, with it also having no business rates growth as well as lower-than-average increases in council tax and New Homes Bonus. The council is “never going to achieve growth above baseline”, she said.
Bingham stated in March that Oadby and Wigston was only able to deliver a balanced budget for 2023/24 with the use of reserves and still faces projected funding deficits for the following financial years.
With Oadby and Wigston being an unparished authority, it has to “pick up the bill” for the services that parish councils usually provide, but within limited means due to the 2.99% or £5 district council tax referendum limit envelope.
The only way forward to overcome this disparity in the council funding system is through local government funding reform, she told Room151.
“The disparity is because we are so far deep into this funding regime now that when things are being taken away, like New Homes Bonus, the councils that have had the New Homes Bonus are then being compensated with a funding guarantee,” Bingham said.
“This transitionary funding is the right thing – we need to protect councils from dramatic changes in funding. But what about the councils that never got any of that incentivised funding in the first place? We can’t seriously be saying that’s fair.”
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