Redcar and Cleveland Council 'could go bust within two years'

An ongoing use of Redcar and Cleveland Council's reserves "cannot be sustained", the auditor has warned

A council could go bust within two years unless its spending is slashed or central government plugs the gap, a meeting has heard.

Redcar and Cleveland Council's current financial plan means its £25m reserves will run out by 2021, according to the authority's auditor.

Setting aside that money for future budget shortfalls would leave it close to the "cliff edge", it added.

The council and the government have been approached for comment.

A meeting of the authority's governance committee heard the budget for the current financial year had been balanced with £8.9m from its revenue reserves.

Its remaining £16.1m reserves are earmarked for use in 2020-21, but that would still leave the council £1.6m short of balancing its books.

With no reserves left to draw on the following year, the council's overspend would be £10.8m and then £11.8m in 2022-23, the Local Democracy Reporting Service said.

'Significant concern'

Mike Barker, from the Mazars audit group, told councillors the authority "doesn't have sufficient reserves to meet the budget gap".

"The current trajectory is for reserves to go down further to the point where they will run out in the next one to two years," he added.

"That is a significant concern."

Mr Barker went on to say the council was closer to the "cliff edge" than other authorities but that he expected more to find themselves in difficulties due to uncertainty over government funding.

Referring to Northamptonshire County Council, which imposed emergency spending controls last year, he said: "At least one has already gone over that cliff edge, and we've all seen what happens when that happens."

Earlier this month, the Department for Housing, Communities and Local Government said total funding for local authorities had gone up by nearly 3% this year to £46.4bn, with an extra £650m to help councils provide care for the elderly.