Council looks at possible bankruptcy with severe cuts to services expected

Severe cuts to council services could be coming down the line for people in Wirral with the possibility Wirral Council could declare bankruptcy later this year. The local authority’s finance director said he didn’t see a way the council would balance the books this year.

The council is expecting to have gone over budget by £21.5m by March 2025 and will need to find £36m for the next financial year. Two reports providing updates on the council’s budget this year and next year said the local authority is not in a sustainable position and uncertainty over council funding has made future planning “almost impossible.”

At a policy and resources committee meeting on November 6, the local authority’s finance director Matthew Bennett said things had improved a little and it was expecting to be able to reduce the budget black hole to £15m by the end of the year. He said the biggest drivers was an unexpected increase in social care demand in adults’ and childrens’ services.

For example in August, approximately 30 more children than planned were in residential placements which cost £5,045 a week each. Wirral Council is expected to spend £7m more than expected on placements this year.

However Mr Bennett said: “It is inconceivable that we will get back to a balanced budget within the year regardless of the action that’s taken given the nature of the overspend,” adding: “The general reserves are at such a low level we have reached a position where we would potentially have to issue a Section 114 Notice.”

While the council has made progress on savings in its adult social care services of £4.6m and could save more than expected, unexpected winter pressures and the local NHS issues made things difficult to plan going forward. In response to a question from councillors, he said there would be no easy wins.

To balance the budget, the council could raid millions of pounds from its reserves, both money earmarked for specific purposes like public health and £13.3m of backup funds that can be used on anything. However officers warned this would come with consequences including the council not having backup money if a disaster occurred.

Mr Bennett said: “We can’t be in a position where we run the reserves down to nil. It would tie our hands to such an extent we wouldn’t be able to operate and we wouldn’t be able to respond in the event of a disaster.

He said the council was currently discussing with the government about additional financial support though he said the local authority was not in the position yet to issue a Section 114 notice effectively declaring bankruptcy this year. He said this was the least likely option but very much a possibility.

However if the council uses up all its backup reserves this year, it means it will face £80m in pressures next year to replace them and the council will have to declare bankruptcy unless it gets extra funding from the government. The other option was the council manages to balance things this year but cuts in next year’s budget could be so severe councillors don’t vote for it.

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