Havering Council is “on the brink” of issuing a section 114 notice after being “short-changed” in the finance settlement.
The only alternative to “effectively declaring itself bankrupt” is applying for a substantial loan from the government, according to council leader Ray Morgon.
He cited the cost of social care, homelessness and inflation being greater than the money the authority receives as the cause of Havering’s precarious financial position.
Morgon said the government’s proposed solution of increasing council tax above the threshold without a referendum was “insulting”.
“The only reason why most councils are in this position is because of the lack of funding from the government to deliver social care and homelessness services which we have to do by law,” he said.
“We also don’t think it appropriate or fair that council taxpayers should take the burden of these costs, for government failure to deliver on the fair funding review and the use of data that is over 10 years out of date.”
Morgon said Havering had been warning the government for “some time” about rising costs and a lack of funding, but “despite these warnings, they have not helped us deal with this problem”.
Government funding in terms of the Rate Support Grant has reduced from around £70m in 2010/11 to under £2m today, he added. Meanwhile, Havering Council has made over £160m of savings plus efficiencies and fee increases over the same period and has sold more than £160m of assets to fund its capital programme, Morgon said.
“Although we have seen a small rise in core spending power in the settlement, which includes increasing council tax to the maximum without a referendum, it is a mere drop in the ocean and goes nowhere near to meet the rapidly rising costs to carry out the services that we must provide by law,” he added.
“The rise was even less than what we were expecting. Our population has the second oldest population in London and now has one of the fastest growing children’s populations in the UK, which means our costs with inflation are predicted to be over £45m next year, yet our grant increase is just a mere £5.6m.
“There is also uncertainty and decreases in other grants such as the Household Support Fund which impacts those who are suffering from the cost-of-living crisis.
“We are getting to the point where we have no choice but to push ahead with issuing a section 114 notice or applying for a substantial loan from the government.”
—————
FREE weekly newsletters
Subscribe to Room151 Newsletters
Follow us on LinkedIn
Follow us here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
