Bradford Council still has to identify £34m in asset sales over the next two years as early forecasted overspends in some of its service departments for 2024/25 represent a cause for “significant concern” at the authority.
“Every action” will need to be taken by department managers to mitigate these overspends if a section 114 notice is to be avoided, according to a Q1 finance position statement for 2024/25.
Other councils are also continuing to face major threats to financial stability, with Sheffield City Council projecting an overspend of £34.3m for 2024/25. The authority said in a Q1 Budget Monitoring Report that while it would likely avoid issuing a section 114 notice by utilising reserves to balance this year’s budget, the financial outlook remains “difficult”.
Council leaders at Bristol City Council and Kent County Council also offered stark financial outlooks in recent interviews with the BBC. Bristol’s Tony Dyer said he “couldn’t guarantee” that a section 114 notice wouldn’t be issued in light of a projected overspend of £22m at the authority.
Kent’s Peter Oakford said many local authorities, including his own, could be disbanded and replaced by a model of Metro mayors and unitary authorities if the outlook for local government funding does not improve.
Nearby Medway Council’s newly-published Medium Term Financial Outlook for 2024-2029 states that the authority will now need to prioritise income generation “as the mechanism through which [its] budget can be balanced”, following successive years of making savings and increasing efficiency.
This will include “maximising our taxbases, debt recovery, fees and charges and raising funds through the disposal of assets as appropriate”, the authority said.
Medway faces a potential budget gap for 2025/26 of £28.844m, or £45.147m excluding exceptional financial support (EFS) from government. This cumulative projected gap rises to £114.205m across the medium term, or £140.808m excluding EFS in 2025/26.
Longer-term solutions
Back at Bradford, the council is currently forecast to overspend its £435m of sustainable net budget by £140m, meaning that it too will require the EFS that was previously approved.
But the authority recognises that a capitalisation direction is “only an interim solution”. To achieve a financially sustainable position, Bradford said it would need to deliver a “combination of” outcomes. These include the delivery of a “significantly higher level of savings than the council has previously achieved; additional income, further asset disposals and further capital expenditure reductions”.
In an update on its asset disposal programme, Bradford said just £0.8m of a £100m target over two years is so far completed. However, c£4.7m is with solicitors, c£47m of assets are coming to the market, and c£13.2m is in the pipeline to be marketed, the authority said.
That leaves c£34m to come from asset sales not yet identified. The authority said a further review of the estate is “ongoing” and it “is looking at circa 350 additional sites/land for possible disposal, of which sites worth £9m have currently been identified and are to be added to the pipeline”.
With the council reliant on EFS, Bradford must capitalise c£570m of additional costs to return to a sustainable financial position by 2029/30, as it currently plans. Aside from the potential £100m generated by asset sales, the remainder will be funded by c£470m of additional borrowing at penalty interest rates (PWLB rates +1%), the authority said.
“As each £10m borrowed results in an interest and repayment cost of c£0.9m every year for the next 20 years, council spend on financing this borrowing will consequently increase vastly (rising to c£41m per year by 2029/30), with the opportunity cost of those same amounts not being able to be used on council services,” the Q1 finance position statement read. “In short, additional cuts to budgets of an equivalent amount will have to be made to council services to pay for the additional borrowing.”
The statement reported that should the council “deviate” from its plan or “it is not delivered”, a section 114 report would be issued.
While all these councils – and many others – have plenty of work to do, much will also rest on chancellor Rachel Reeves’ scheduled announcements on 30 October on the availability of funding for local authorities for 2025/26 and across the period of the next spending review.
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