Council not heading towards ‘effective bankruptcy’

It comes as Warrington’s Conservative councillors have warned the new Labour leadership that Warrington is ‘rapidly heading’ towards a Section 114 notice, which is often described as a council effectively declaring bankruptcy, and that this will happen within the next 24 months.

However, they say there may be a way out but only if urgent action is taken to ‘dispose of the council’s poorly performing assets’, adding this would reduce the debt and utilise the benefit of early repayment of the government loans to generate a premium that could be used to support council services.

The Conservative finance spokesperson Cllr Ken Critchley has written an open letter to Labour’s cabinet member for corporate finance, Cllr Denis Matthews, which highlights what is claimed to be WBC’s rapidly declining ‘usable reserves’, the significant overspend in the current 2023-24 budget, and the cost increases that are heading the council’s way in 2024-25.

Cllr Critchley said: “Once an entity starts to use its reserves to balance its budgets, unless there is a plan to replenish those reserves there will only be one outcome. For a private business this means bankruptcy and for a council it is a Section 114 Notice.

“The speed at which WBC has been consuming its usable reserves in the current year 2023-24 raises huge concerns over the sustainability of the council’s finances over the short term, 12 to 24 months.

“For over 2 1/2 years we have been urging the Labour leadership to review and dispose of their poorly performing assets and to exit the property portfolio that generates something in the region of a pathetic one percent net return.

“Our previous calls have been ignored, but we now call upon Labour’s new leader, Cllr Mundry, to break out of the echo chamber that has been responsible for WBC’s financial dead end.

“Labour must start to urgently address the issues that are driving Warrington Borough Council to a Section 114 notice, with £1.8 billion of debt and the damning letter received from a government minister regarding the activities of WBC.”

However, Labour has hit back, with Cllr Matthews saying that it is 'grossly irresponsible of the Conservatives to insinuate that Warrington is heading towards effective bankruptcy and what is officially known as a Section 114 notice'.

“This is simply not the truth,” he added.

“The Conservative’s sabre-rattling does nothing more than stoke and create ill-informed anxiety for our residents who continue to bear the brunt of more than 13 years of brutal Conservative austerity and Government cuts.

“Let me be clear, we are not in a position where we will need to issue a Section 114, despite the council facing budget challenges caused by the negligence of successive Conservative governments.

“The sound management of council finances if of utmost importance, our plans and actions will ensure our budget remains as stable as possible into the future.

“Local authorities up and down the country continue to face increased pressures on their budgets, because of the Conservatives negligence and mishandling of the economy. Including Liz Truss’ disastrous mini-budget which sent financial markets into meltdown.

“The Local Government Association, the leading body representing councils across the United Kingdom has reported that without government support 1 in 5 councils are considering issuing a Section 114 over the next 24 months.

“Furthermore, half of councils asked have said they will not have enough funding to fulfil their legal statutory duties in the next financial year.

“I want to reiterate to our residents that this is not the case for us here in Warrington.

“Warrington Borough Council (WBC) has faced cuts of more than £200 million, as a direct result of Conservatives. In 2010 we received £70 million in revenue support grant funding we now receive less than £2million every year.

“As a result of Government cuts, Councils like WBC were encouraged to be more commercial by the Conservative Government, an approach we took here in Warrington.

“As part of this approach, we invested in things like solar farms that power council buildings, and loans to social housing providers to provide much needed affordable housing for our residents.

“The council regularly reviews its investment portfolio which continues to provide a surplus of around £23 million every year after all costs and interest payments has been deducted.

“This profit goes directly into supporting Warrington’s most vulnerable residents, more than 80 per cent of every pound we spend goes into protecting vulnerable children and adult social care.

“We could not stand by while our vulnerable residents were put at risk by the Conservatives.”

Furthermore, Cllr Matthews says the majority of Warrington Borough Council’s investments are secured and were borrowed when interest rates were low, meaning they are locked in at low rates for the long term.

He said: “Government ministers are now actively encouraging local authorities to use their reserves as a means to balance their budgets, this comes after the Conservatives refused to provide adequate funding for councils in the recent Autumn Statement.

“Unfortunately, just like their counterparts in the Government the Conservatives here in Warrington have no grasp of public finances, they are just as irresponsible.”