Southampton City Council alerts government over financial emergency

Southampton City Council is on the "edge of bankruptcy", opposition Conservatives said

A council has warned the government it may run out of money this year.

Southampton City Council is spending beyond its means and may exhaust its reserves, a report has said.

The Labour-run council has brought in external accountants and is holding weekly meetings to cut costs. The Conservative group's leader said the city was on the "edge of bankruptcy".

Council leader Satvir Kaur said the authority had a "robust recovery plan" and would not need government funds.

Labour council leader Satvir Kaur said the problems were created by the government

In his report, financial planning chief officer Steve Harrison warned the council was at risk of "financial failure".

He said: "The in-year forecast may be significantly above the approved revenue budget and reserves available.

"Informal discussions have commenced with government to appraise them of our financial situation."

Mr Harrison said the council had commissioned the Chartered Institute of Public Finance and Accountancy (CIPFA) to review its finances.

Conservative group leader Dan Fitzhenry said Labour had mismanaged spending

CIPFA's report, which will be presented to councillors on 19 July, concluded: "The council has, in recent years, relied on reserves to meet gaps in its budget.

"It is evident that there has been a culture that overspends will be covered."

It said a so-called "Section 114" report - resulting in a spending freeze and government intervention - was a growing possibility in 2023/24.

Conservative group leader Dan Fitzhenry, who led the council until last year, said his administration left a £10m underspend and £30m in reserves.

He said: "The council from the summer of 2022 has been overspending. Consequently it has blown its budgets and spent its reserves.

"Bankruptcy is a real possibility. There's not much they can do without support from government."

But council leader Satvir Kaur said the problem had been created by the government's handling of the economy.

She said: "We're on austerity on steroids. We're an urban city so demand for adult and children's social care has skyrocketed.

"We're facing the budget challenge... with a robust recovery plan and have had support and reassurance from CIPFA and the government."