'Effective Bankruptcy': They're At It In The East Midlands Too

Posted on Dec 04, 2023. by NTI

In an attempt not to be outdone by its West Midlands counterpart in Birmingham, Nottingham City Council has also declared itself ‘effectively Bankrupt’ in recent days.

This means that like Birmingham City Council, Nottingham City Council will stop all spending other than those services it must provide by law.

The ‘effective Bankruptcy’ comes as a result of a Council filing a s114 Report under the Local Government Finance Act 1988.

Nottingham has apparently received an increased demand for children’s and adults’ social care, as well as increased levels of homelessness and also cited inflation as having had an impact on its finances.
Nottingham City Council will now work with the Department for Levelling Up, Housing and Communities (“DLUHC”) to “put the council on a stable financial footing for the future”.

This comes as Nottingham had opened a new £10m library last Tuesday, however City Council leader David Mellen has said that “We will continue to pay our bills… and staff”.

There are some similarities with the issues faced by Birmingham City Council, who filed a s114 Report in September, but one apparent difference is that Nottingham does not appear to be beset by a staggeringly-large Equal Pay claim.

Nottingham City Council has had “serious governance and financial issues” and DLUHC had to intervene last year. Labour, who run the Council, said that "All councils are facing these pressures and many will be considering the issuing of a section 114.”

Back to Birmingham, and it emerged in recent weeks that the equal pay claims encountered there were thought to be able to be settled for a fraction of the potential £760m it is anticipated the Council will have to pay. An alleged ‘memorandum of understanding’ was entered into with trade unions and staff, but then the deal collapsed when it was discovered that the Council had not implemented a crucial job evaluation scheme to ensure male and female employees were paid equally, and that their old ‘task and finish’ practices were still ongoing (where staff could clock off once their work was done, and still be paid for their full shift).

Michael Gove, Secretary of State for Levelling Up has said that Birmingham had suffered from "under-performance, poor leadership, weak governance, woeful mismanagement of employee relations and ineffective service delivery”.

« Back to articles