Nottingham Goes Bust

On Wednesday 29th November, Nottingham City Council’s chief financial officer issued what is known as a Section 114 notice under the Local Government Finance Act 1988, effectively declaring bankruptcy. The issuance of this notice means that the council does not have enough money in its reserves to cover all its obligations and so, with the exception of statutory expenditure and payments for wages, pensions and goods and services already received, Nottingham City Council will cease spending immediately pending Government intervention.

The city council is the eighth to issue a section 114 notice in three years. In September this year, Birmingham City Council also declared de facto bankruptcy and is currently run by Government-appointed commissioners. In Birmingham’s case, the council discovered that it had a £760m liability in the form of an equal pay settlement and a cost overrun on an already expensive IT project tipped them over the edge. For Nottingham, it was increased demand for social care, increasing homelessness and over eighteen months of rampant inflation which left them with a £23m overspend in the year 2023/24.

The list of eight councils which have issued section 114 notices in the last year includes Croydon in London, Thurrock in Essex and Woking in Surrey. There appears to be no pattern in terms of location, controlling party or local social problems which would give any indication in and of themselves as to why this is happening at the rate that it is. Government officials have already opportunistically accused the Labour-controlled councils which slipped into bankruptcy of blithering incompetence, however there is evidence that councils are speculating their money in projects which have lost millions of pounds, in some cases hundreds of millions, at the behest of the Government.

The Conservative-run Thurrock council in Essex issued a section 114 notice after it ended up with a staggering £500m black hole in its finances. The council spent £665m on the purchase of more than fifty solar farms through a company owned by businessman Liam Kavanagh, whose Toucan Energy Holdings 1 company went into administration, leaving Thurrock council making an expected loss of £188m on the deal. The council also lost some £65m following investments made through the Just Loans Group, which went bust in June 2022 with the council as chief creditor.

Nottingham City Council had been suffering from financial difficulties for years, yet sunk millions of pounds into Robin Hood energy, a not-for-profit energy company established to compete with the established energy cartel. It was closed down in 2020 and its consumer accounts were sold to Centrica, the parent company of British Gas. Leaked documents revealed that the venture had cost local taxpayers £38m. They also had to repay some £49m in ring-fenced housing revenue funds, which they spent on general expenditure.

Local government funding has been in dire straits for many years, arguably decades, but has had the screw turned to an even tighter extend by the Cameron Government’s austerity drive from 2010, with little relief in the years since. Councils are being tacitly encouraged by the Government to cover huge shortfalls in central funding, along with a 5% cap on increasing Council Tax, by speculating on schemes including energy companies, solar farms and green investments which has left them suffering huge losses which they have had to cover by slashing local services or, when there is no further fat to trim, issue a section 114 notice and wait for the Government to send in the commissioners.

The local government structure in Britain is bankrupt in every sense of the word. With services cut to the bone, central funding slashed and councils nudged towards betting their money on flawed business ventures, it is working class people who suffer most from both the penury and profligacy of a system that the ruling class have created.

The only answer to the crisis of local government funding is socialism: Only socialism can provide services based on need, fully funded and free at the point of use, democratically controlled and managed by the people who use them. To leave it to capitalism will mean that we will see many more section 114 notices in the future.