Sheffield Council budget: We answer your questions as ‘finances spiral out of control’

Director of finance Ryan Keyworth pulled no punches in a report about the council’s predicted £44m overspend.

Officers say it is the largest forecast overspend that anyone can remember at this stage in the year. Social care is the biggest drain with costs rising at an “unsustainable rate

We take a look at what it actually means:

Could Sheffield Council go bust?

First of all, not setting a legal budget would be highly unusual and there would likely be a number of interventions first with the Government stepping in.

There is no procedure in law for a council to go bankrupt and no local authority has ever been declared bankrupt before but the council can issue a section 114 notice.

What does a section 114 notice mean?

We asked the Chartered Institute of Public Finance and Accountancy, an institute for accountants dealing with public money, to explain.

“This has to be issued by the council’s chief finance officer if they believe the council is unable to set or maintain a balanced budget.

“The role of the chief finance officer has statutory status and is responsible for the financial administration of the council, including duties related to reporting on its financial resilience.

“The section 114 may be issued by the chief finance officer if they believe that the council’s expenditure (including future spend) is likely to exceed that of the resources (including borrowing) available to it.

“After a section 114 is issued, the council may not incur any new expenditure commitments, and must meet within 21 days to discuss the report.

“Following this meeting, the Executive must inform the chief financial officer on what actions it will take, or explain why no action will be taken.”

What happens if the Government intervenes?

Among the first questions it will ask is what savings has an authority already made?

Last week, Wirral Council was criticised in a government report for a “prevailing culture” of avoiding tough decisions including its reluctance to make cuts to any of its 16 libraries, make staff redundant or increase car park charges.

Acknowledging the crisis is also important and Sheffield Council is well aware of the challenges ahead unlike Peterborough Council.

Last week Government minister Kemi Badenoch MP wrote a letter to Peterborough saying she was ‘concerned’ the authority had ‘not yet fully grasped’ the scale of the financial problems it was facing.

Can Sheffield Council balance its budget before it’s too late?

Finance chiefs say “careful prioritisation, focused investment and significant efficiencies” could avoid a disaster.

But councils nationwide are facing extremely tough spending decisions and will likely need to divert funding from services to prop up their statutory duties. Even then it might not be enough to protect them from further cuts.

After 10 years of austerity and the Covid pandemic, there’s certainly tough times ahead at Sheffield.