Middlesbrough Council issues serious warning over £11.5m hole

Middlesbrough Council has held regular meetings with the government about its financial situation

Middlesbrough Council has issued a serious financial warning due to a predicted £11.5m hole in its budget.

It said it may have to issue a section 114 notice - meaning it would stop all spending except for critical front-line services - if "robust and timely" action was not taken.

Cuts of £2.5m have been identified so far, leaving a further £9m to be found, the Labour-run council said.

Elected Mayor Chris Cooke said it was in a "really serious position".

Despite setting a balanced budget for 2023-24 in February as required by law, the authority said a combination of factors had thrown it off course, including:

• Continuing inflationary pressures

• Increasing demand for children's and adult social care

• Home-to-school transport costs

• Homelessness provision

Section 114 notices, which effectively declare bankruptcy, have only been issued in a handful of cases over the past 20 years, with Woking and Croydon councils among the latest to take this step.

The council said "rigorous" spending restrictions had been implemented and would remain in effect until further notice.

Government concerns

The predicted overspend amounts to 9.2% of the previously-approved £126m annual budget for 2023-24.

At the start of the year the Department of Levelling Up, Housing and Communities wrote to the council formally notifying it of its concerns about management and governance.

It also reminded it of its "best value" duty, with changes needed to avoid intervention.

Meetings have been held monthly so the government could be kept updated.

Mayor Chris Cooke says services would need to be delivered "in a different way"

A report previously warned that robust cost controls would be necessary, something endorsed by current interim chief finance officer Debbie Middleton.

Pressed by the Local Democracy Reporting Service about the potential of a section 114 notice being issued, she said it could not be ruled out with the next step being to apply for financial support from the government should it be required.

Mr Cooke, who was elected as mayor in May, taking over from Independent Andy Preston, blamed previous overspending.

"If we want to keep the council going we need to reduce our expenditure and look at delivering services in a different way - if we don't do that, someone will come in and do it for us," he added.

"It isn't impossible, but it is going to be tough."

A year ago a damning report found a "pervasive lack of trust" at Middlesbrough Council among elected members and between council officers and politicians.

It also unlawfully employed an adviser and made wrongful payments to a publicity firm.

'Safety net'

In November auditors said they would not take further action against the council after steps were taken to tackle problems.

Mr Cooke said his administration was already moving in the right direction and trying to make sure it spent within its means.

He said the council's reserves - which he described as a "safety net" - had been depleted by some 75% since 2019 as the local authority attempted to keep its head above water.

"We need to make sure that we get the balance right. We need businesses to come into the town and be here and thrive, but the council also has a role in looking after some of the most vulnerable people," he said.

Council chief executive Clive Heaphy said it was "working very closely" with the government to demonstrate "how we are going to get out of this situation".

"Our aim is to make sure we are a financially sustainable council and that we do the right things to make sure the services we can and should provide are going to be there for the future," he said.