Nottingham City Council has become the latest local authority to buckle under its mounting debts.
The Labour-run council has issued a section 114 report, declaring that it is unable to deliver a balanced budget for 2023/24 in the face of a £23m overspend.
Nottingham is the sixth local authority to issue such a notice since 2021. However, unlike Birmingham, which was hit by a £760m equal pay bill, Woking, which was hobbled by property debts, or Thurrock, which made disastrous investments in renewable energy, the council said it had simply fallen to the pressures of “increasing demand for services and cost inflation”. This had been compounded by drastically reduced funding from central government, which has shrunk by £100m since 2010.
Nottingham was keen to point out, in a statement, that it is not “bankrupt” or insolvent, and has “sufficient financial resources to meet all of its current obligations”. However, it will enter a 21-day “prohibition period” that will prevent any new agreements that may incur expenditure, which will continue unless the budget gap is closed.
Chief finance officer Ross Brown made the decision to not deploy £13.165m of reserves, as “this would not only be insufficient to close the gap, it would also significantly undermine the financial resilience of the council”.
The council’s own assessment of its holdings shows over 3600 property assets, with an asset value of over £1bn.
Its asset register reveals that in fact it owns nearly 5,000 freeholds which could potentially be marked for sale. These include more than 2,000 plots of land, alongside nearly 3,000 plots with buildings.
However, this would pose a number of problems. Many of those freeholds either cannot be sold, due to their use, leasehold arrangements or covenants, or have little value. Even if they were to be sold, the council would not be allowed to use the proceeds as revenue without specific authorisation from central government, although it could be used to pay down debt.
However, the council was already working to identify land and buildings for sale before the section 114 notice was issued. In 2021 it announced that it wanted to raise more than £100m from property sales, and was drawing up a list of potential targets. Earlier this year it said it would have reviewed 550 higher value assets by the end of 2023.
Asset sales and cost cutting at the council have already chipped in to its £1.3bn debt burden, but that hasn’t been enough to tackle the growing gap between income and expenditure.
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