Council could face 'effective bankruptcy' - report

The review conducted by senior councillors and officers from other authorities was critical of many aspects of Cheshire East’s operation

A council could be facing "effective bankruptcy" unless it acts soon due to its low reserves, historical overspending, challenging savings targets and inadequate Ofsted rating, an external review has found.

The corporate peer challenge of Cheshire East Council, conducted by senior councillors and officers from other councils, said it was "seriously concerned" about the "immediate financial stability and sustainability" of the authority.

Members of the review team spoke to about 165 people, including councillors, officers and residents in March, and reviewed key documents provided by the council.

Cheshire East Council said the report's findings reflected its own concerns and work to address many of the recommendations was already in progress.

'Significant change'

The report said that in 2023/24 the council had used £11m of its reserves to set a balanced budget, with £20m needing to be saved in 2024/25.

The council would still only be left with £2.1m in reserve by the end of this financial year, the report said, even if these savings were delivered.

It called for "significant change" to avoid the authority being issued with a section 114 notice in the near future, the Local Democracy Reporting Service said.

A section 114 is when a council cannot commit to any new spending, and must come back with a new budget within 21 days that falls in their spending envelope.

The report makes for "grim reading", the Conservative opposition group leader Janet Clowes said.

She said her party had "consistently raised concerns about the fiscal sustainability of Labour-led Cheshire East Council".

But Labour, which has run the council with the Independents since 2019, has laid the blame at the door of the former Conservative administration which, it said reduced the general reserve by £12m in ten years.

There was praise for council staff in the report, which said: “Despite instability and capacity challenges in senior roles, the council has continued to deliver services to the benefit of local residents, often through significant contribution and commitment of officers and frontline staff.”

A Cheshire East Council spokesman said the peer team had heard of "good examples of services that are appreciated by residents".

It also recognised the "real will for improvement" among staff and stressed the urgency to address "significant challenges", he added.

“The findings very much reflect the council’s own concerns about financial sustainability, growth in demand, adequacy of funding, and our plans to address those pressures."

He said the peer challenge report would guide the council's "improvement journey", and added that an action plan was due to be published in August.

Analysis

BBC Cheshire Political reporter, Kaleigh Watterson

There have been many warnings in recent months over how Cheshire East Council operates, with issues in areas including its reserves and SEND costs.

Some of these have come from within the council themselves - especially warnings about how the cancellation of the northern leg of HS2 would impact its finances - while the leader earlier this year said he was doing everything he could to try and avoid a s114 being issued.

So this new report adds to the concerns some already have about how the council runs.

Many local authorities are facing challenges as costs have risen and funding from central government has fallen.

While Cheshire East is trying to tackle the issues, it’s looking at cost saving measures including potential library and tip closures, changes to parking charges and bringing in garden waste charges.

Many of these have been unpopular with local residents, who do have concerns about their local authority - and this report may add to some of those fears.