Southampton City Council warned it could run out of cash reserves

The council's chief financial officer issued a warning ahead of the approval of this year's budget

A council has been warned it could effectively go bankrupt by next year.

Southampton City Council might be left with no reserves and face major constraints on spending, a report has revealed.

The authority has approved plans to increase council tax by 4.99%, switch off street lights at night and increase the Itchen Bridge toll by 20p in a bid to save money and balance its budget.

But further savings are needed, its chief financial officer has warned.

It comes as he told councillors that a so-called Section 114 notice was "foreseeable and a major risk" during 2023-24.

If the notice is issued, the council would not be able to make any new spending commitments and must meet within 21 days to discuss what action to take next.

The budget for the 2023-24 financial year was approved by councillors at a full council meeting on Wednesday.

'Critical position'

But in an official report published ahead of the meeting, the council's chief financial officers revealed the budget had been balanced by using £20.6m from reserves, "leaving only a forecast £10.3m unallocated balance" in reserves.

The council said it also had an additional contingency of £10.1m.

But in his report the financial officer warned that, even assuming no further drawdown of the reserves was necessary, the reserve "expires completely" in 2024-25.

He said that given budget risks there was every chance reserves would be called upon before 2024-25 and "hence they could be fully utilised ahead of this point".

"This would mean no cover from reserves for large and uncertain financial risks, a critical financial position to reach," he said.

"To avoid that, and a risk of Government intervention being necessary, additional savings will be necessary."

Conservative councillor Daniel Fitzhenry, leader of the opposition, blamed the Labour administration for taking the council "to the of edge bankruptcy triggering a written warning from the chief financial officer".

"We know Labour are increasing council tax by 4.99% whilst delaying making difficult decisions on how to reduce costs until after this year's local elections in May," he said.

Councillor Satvir Kaur said despite the national pressure the council remained ambitious for the city

But leader of the council Satvir Kaur claimed the Conservatives left a £23m black hole in the council's finances from when they were in power in 2021-22.

She said Labour managed to balance this year's budget.

"However, the current situation is unsustainable over the long-term. We need to introduce a fair system of funding for councils, as a matter of urgency," she added.

The increase in council tax and in the toll for the Itchen Bridge will come into effect between the end of March and April this year.