Claims have been made in a report that Copeland Borough Council is heading for Government intervention due to its “severe” financial picture.
The Chartered Institute of Public Finance and Accountancy has been tasked with scrutinising the council’s coffers by the Department for Levelling Up, Housing and Communities.
The institute’s report revealed that Copeland Council could be heading for a Section 114 notice in the near future, unless action is taken – a S114 notice means that a local authority is effectively bankrupt and can only spend money on essential services.
Mayor of Copeland Mike Starkie has said that although the council has experienced huge financial challenges in recent years, it was “absolutely not the case” that a Section 114 notice would be needed.
The CIPFA report said: “Drawing on our experience of over 200 financial management reviews and our policy work setting financial standards for local government, the current financial challenge facing the council is severe.
“The financial ‘gap’ currently forecast for 2022/23 of £4.2m, combined with the draining level of reserves, is a significant risk for the authority’s financial sustainability in the short term.
“Without further exceptional support and use of reserves will leave the council in the territory of issuing a Section 114 notice according to council officers.”
Mr Starkie said that a cyber attack in 2017 and a successful business rate appeal from Sellafield in 2015 were among the biggest factors leading to Copeland’s financial situation.
For a number of years, Copeland’s leadership has been lobbying the Government for support.
Mr Starkie told the Local Democracy Reporting Service: “We’ve had to go through a process where we had a report done that’s evidenced everything we’ve been telling the Government over these past four to five years.
“In the report it said it could possibly lead to a Section 114 notice, that’s absolutely not the case.
“I’m about to set the seventh consecutive budget for Copeland. In terms of financial pressures, the council’s been under financial pressures for decades and certainly right through the austerity period because the level of funding that comes from Government has reduced to zero.
“Since 2015 we’ve had £3 million less a year to spend through Government cuts, we’ve had to find £13 million to fill the financial black hole that was left.”
Mr Starkie said that the council was “24 hours from bankruptcy” when he discovered the £13 million shortcoming in the council’s finances.
Copeland will be ruled by the new unitary authority, Cumberland Council, in 2023 along with Allerdale and Carlisle.
The report said: “The council is likely to have greater prospects for sustainability under local government reform.”
However in the short term, balancing the council’s budget will need to be the priority. CIPFA said that “substantial” savings are required for the 2022/23 budget which equates to almost half of the council’s core budget.
The potential increase in risk from borrowing is estimated to be £22 million by 2023/2024.
