Council to apply for £15m loan to avoid bankruptcy

Middlesbrough Council's executive met on Wednesday

Middlesbrough Council has agreed to ask the government for an extra £15m in emergency financial support.

The council's executive has already agreed to sell assets to avoid bankruptcy.

The authority said it is struggling to set a balanced budget for 2024-25, with costs rising because of inflation, increased social care needs and critically low reserves.

Simon Clarke, Conservative MP for Middlesbrough South and East Cleveland, has requested government intervention in the running of the authority.

Middlesbrough Council leaders unanimously agreed to seek £15m in exceptional financial support in a bid to balance the books and fund redundancies.

A meeting of the Executive heard the cash would be used to plug a gap of at least £6.3m in the budget for 2024-25 as well funding redundancies in the early part of this year, the Local Democracy Reporting Service said.

• Why do councils go bust and what happens when they do?

Councils technically cannot go bankrupt, but they can issue a section 114 notice under which they cannot commit to any new spending and must come back with a new budget.

Councillor Nicky Walker, executive member for finance and governance, told the meeting on Wednesday that exceptional financial support is not an admission of effective bankruptcy.

“It’s a move by which we would seek to avoid a section 114 notice,” she said.

“It isn’t a grant, it isn’t a handout and it isn’t, as has been incorrectly claimed, an emergency bailout by the government. The government don’t actually give us any money.

“It is a way to get permission to borrow and spend our own money in a way that national restrictions on local authorities wouldn’t normally permit.”

Mayor Chris Cooke said the £15m would be “akin to an overdraft” and the amount requested is “not necessarily” the amount which would be used.

A public consultation on a list of potential savings, which include changing to fortnightly bin collections and the potential closure of the Captain Cook Birthplace Museum, ends on Thursday.

MP Simon Clarke has said the council's situation is "completely untenable"

Responding to the bailout vote, Mr Clarke said: "It is plain for anyone to see that the situation at the council is now completely untenable.

"Now it is time for independent professionals to be brought in to deliver stability and a plan for recovery for the people of Middlesbrough."