Somerset County Council could be forced to issue a section 114 notice in October if plans to reduce a predicted £12m revenue budget overspend are unsuccessful, its chief accountant has warned.
The council ended last year with an overspend of £2m, and pressures on the council’s children’s service budget are expected to increase that amount significantly, according to a report to councillors.
In a stark warning, Lizzie Watkin, service manager and chief accountant, raised the prospect of Somerset having to follow Northamptonshire in issuing a section 114 notice, bringing a halt to all non-essential spending.
“Work is underway to reduce the predicted overspend but if that work does not materially change the prediction by the end of quarter two (October), there is a risk that the council may have to take a number of urgent decisions to rectify the financial position,” she said.
Room151’s Annual Conference – September 20th, 2018, London Stock Exchange
Local Authority Treasurers’ Investment Forum and FDs’ Summit
“…great opportunity to learn about the latest developments in treasury management and to network with other treasury professionals.”
Principal Accountant, Sevenoaks District Council
“An option that is available to the council, which is available to all authorities, is the issuing of a section 114 notice which imposes severe spending restrictions on the authority and brings into effect an emergency budget.”
Watkin’s report said that the council was struggling to fill permanent posts within its children and families operation, and that hiring locums had pushed up spending on salaries.
In addition, the budget for providing school transport is expected to rise 45% on the predicted £9.4m.
However, the council said that its use of the precept had allowed it to achieve a £1m underspend on adult social care during the first quarter.
The report to councillors said that the council is undertaking work to cut demand, but that work will “not reduce cost sufficiently quickly to ensure budgets are balanced by year end”.
Despite this, the council’s senior leadership team is “confident that it can deliver the necessary reductions by approving additional savings plans”.
“The chief executive has therefore confirmed that the primary focus of the authority is to find mitigating actions to deliver underspends across the whole council as well as in those core care services to off-set the overspend while transformation takes place,” said Watkins.
When quizzed by MPs this week, communities secretary James Brokenshire played down the chances of any further councils issuing section 114 notices, following the Northamptonshire crisis.
“As the inspector originally said, this wasn’t about government funding but poor financial management at the council,” he said.
“We are confident that no other authorities are in the same situation as Northamptonshire with very low reserves, audit concerns, overspending on key services and governance issues.”
