Bradford Council close to declaring effective bankruptcy

A new report into the Council’s finances says that without “exceptional” Government support, the authority will have to issue a Section 114 notice – meaning the Council is essentially bankrupt.

Councils legally have to balance their budgets at the end of each financial year, and the report says Bradford Council is unlikely to achieve this.

Financial support for local authorities that the Council hoped would emerge in the Chancellor’s Autumn Statement last month did not happen – and the statement actually added to Bradford’s financial black hole, the document adds.

The Section 114 Notice would mean Bradford Council could make no new spending commitments – and may have to reduce the services it provides to just those deemed essential, including social care and bin collections.

The Council has said it will have to implement a “significant savings plan” – likely to include job cuts, raise income, and carry out “a plan for the disposal of Council owned land and assets.”

Budget proposals will be revealed early in the New Year.

Bradford Council bosses have blamed Government cuts and spiralling costs of children’s social care placements for the predicted overspend, which now stands at £73m for the current year.

The budget for the Bradford Children and Families Trust alone is expected to overspend by over £45m.

A report going before the Council’s Executive next Thursday says the Authority will make a request to Government for “exceptional financial support” over the next two years.

It explains: “The Council faces an unprecedented financial situation with significant funding gaps forecast for the current financial year and for 2024-25 and beyond.

“Since 2011 Bradford Council has had to find over £350m in cuts and savings due to national austerity measures, inflation and increased demand. More recently exceptional inflation and energy prices have put additional pressure on budgets for all local authorities.

“The Council is currently forecasting budget pressures of £73m in the current financial year and £103.6m in 2024-25.

“The Council has a track record of delivering balanced budgets and maintaining healthy balances of reserves.

“Deployment of reserves to balance the 2022-23 budget and set a budget for 2023-24, in the face of soaring inflation and cost and demand pressures has however, left them depleted.

“Reserves will be exhausted by the end of 2023-24 with a consequent impact on the Council’s financial resilience, meaning a request for Exceptional Financial Support in both 2023-24 and 2024-25 will be required.

“The Chancellor’s Autumn Statement provided no new funding for Local Authorities in 2024-25 beyond those amounts that had been announced in last year’s Autumn Statement, nor did it make reference to the pressures on children’s social care.

“However, the increase in National Living Wage to £11.44 was higher than had been factored into inflation estimates, and it will add £5m of pressures to Bradford’s contract expenditure.

“The Council has been in close dialogue with Department for Levelling Up, Homes and Communities and the Department for Education about its financial challenges over the last year, and Exceptional Financial Support is the only mechanism available to support the Council through a difficult financial position.”

Referring to the overspend in Children’s Services, the report says: “Soaring growth in demand for, and the costs of, children’s social care is a national phenomenon which is being experienced particularly acutely in Bradford where it represents the biggest single financial pressure.”

A night view of City Hall (Image: Paul Dalton/T&A Camera Club)

A statement from the Council said: “The numbers of children in care rose by 61 per cent between 2012 to 2022 while the rate of children in need increased by more than 60 per cent over a similar period.

“The cost of providing placements for children has increased with residential placements going up from an average cost of £3,600 a week for each child in 2020-21 to an average £6,000 per week in 2023.

“For context this means that the average cost for one placement each per year is now £312,000, which is similar to the annual council subsidy of a small leisure centre.

“As a measure of the extraordinary pressures facing the Council, forecast spend on Children’s Services and Adult Social Care would be equivalent to over 87% of the Councils approved budget in 2023-24.”

Bradford Council Leader Councillor Susan Hinchcliffe said: “Our finances, like many other across the country, are in a perilous position.  “We are being forced to look at all the services that we provide and make extremely difficult decisions and we know these will not be popular and will have an impact on our residents.

“The Bradford Children and Families Trust is led by a respected and experienced chief executive and I am calling on the government to make sure that is properly funded. We need the government to provide better funding for disadvantaged children across the children’s social care sector nationally.”

Councillor Mike Pollard (Image: newsquest)

Councillor Mike Pollard, Conservative Group Spokesman for Finance and Projects said, “A dreadful situation - I am far from happy that the council is effectively bankrupt and it’s a potentially bleak prospect for service users and Council Tax payers, but I am pleased that the council has finally accepted reality.

"Sadly, this is somewhat belated and I have been publicly stating throughout the current Council financial year that this catastrophic financial collapse was clearly visible, dominating the horizon.

"I have fluctuated between perplexed and agog as the situation has evolved, wondering why I was aware of and alarmed by the huge scale and acute urgency of the need for the council to amend how it sets it budget and how it prioritises its use of revenue.

"I am somewhat more confident that a new sense of realism and urgency is coming from the Council’s new Chief Executive, but most certainly not confident in the Council’s political leadership.

"Listening to the Leader of the Council blaming anyone and everyone for what are demonstrably the failings of the Labour Council throughout her time at the helm, has tiresomely repetitive.  

"The truth of the matter is that whilst there are financial pressures upon councils of all colours and sizes, with a number of them experiencing financial hardship not of their own making, a huge amount of Bradford Council’s damage is self-inflicted. Under Labour’s control the council has been self-harming for quite some time now.

"If the Council had prioritised Children’s Services when, about a year before the disastrous OFSTED inspection of 2018, the then Director of Children’s Services asked for a mere £1.5m to improve pay for Children’s Social Worker salaries, to prevent them from leaving en masse to work for neighbouring Councils, as Kirklees Council did, we would  probably have saved much of the massively larger sum subsequently spent on agency staff, since our staff predictably migrated en masse to Kirklees and other neighbouring councils with higher pay.

"All the financial projections that I have made, all of the woeful failings that I have identified, were pulled from the council’s own papers, available to the Corporate Management Team and the Council Executive Committee. So now we approach the end game.

"The Council is, as expected, seeking Exceptional Financial Support from Government. This is a fairly frequent precursor measure sought by Councils attempting to stave off the better known and I believe, slightly more onerous, Section 114 Notice.

"The scale of the gap needed to be bridged to balance the Council’s budget outturn for the current financial year and for 2024/25 is so great as to give me major cause for concern.

"Councils receiving Section 16/20 ‘Exceptional Support’ via a ‘capitalisation direction’ enabling the treatment of revenue budget (i.e. ‘day to day’) costs as capital expenditure, are usually expected to demonstrate a feasibly achievable Financial Recovery Plan. If that is not capable of being so demonstrated, the Section 114 route is inevitable.

"Under either ‘route’, however, the financial terms of any capital borrowing are much the same – it would be with a ‘proxy asset life’ repayment term of 20 years at a 1% premium on standard Public Works Loan Board rates.”   

Councillor Matt Edwards (Image: newsquest)

Councillor Matt Edwards, Leader of the Greens on the Council, said: "We need to be clear that the situation Bradford finds itself in is catastrophic.

"We are looking at potentially brutal cuts to front line services. Things like waste services, street cleaning and highway maintenance that council tax payers pay their bills for could be drastically cut.

"Much of this overspend is down to overspend at the Bradford Children and Families Trust which is trying to clean-up the mess Labour left our Children's Services in.

"But we can't escape the reality that Bradford is not alone in this financial situation. Council's across the country have already said they can't balance the books and according the the Local Government Association, one in five councils are expecting to issue Section 114 notices in the next twelve months.

"This Conservative Government has decimated local council finances with brutal cuts over the last decade. The government need to fund local councils properly."

Councillor Brendan Stubbs (Image: Newsquest)

Councillor Brendan Stubbs, leader of the Liberal Democrats on Bradford Council, said the situation was "getting worse by the day."

He added: "The scale of the financial nightmare facing Bradford Council is so huge that many of the services residents rely upon are at real risk. The request for exceptional financial support from the Government will come with awful strings attached for local services and Council taxpayers. 

"The Labour-run Council will have to implement deep cuts to services, it will have to take out loans and sell public buildings and assets and it may also be required to raise Council Tax beyond the means of many families as we all pay the price for Labour Council and Conservative Government failure. 

"65 per cent of the deficit comes from the years of failure in Children's Services where Labour's poor leadership and inability to fix the problem saw the Government forced to step in and remove the service from their control.

"The service is now in a trust but Council taxpayers are still paying the ever-rising bill with budgets for the trust seemingly out of control. 

"Labour leaders in Bradford have compounded what is a huge national funding problem in Children's Social Care in this sector by years of failed management and now a poorly funded contract for the Children's and Families Trust, a contract that from day one has not been fit for purpose. 

"While all councils have faced cuts in support from the Government over the past decade it is those Councils like Bradford who have made poor local decisions and failed to run services adequately who now face financial meltdown.

"The Government have been negligent when it comes to funding Council services across the country. Likely, the funding to be announced from the treasury in the coming days will not put right over a decade of reduced budgets and increased demands for Councils.

"Sadly it will be the most vulnerable and poorest in Bradford who will pay the most for these collective failures by the Labour-run Council and the Conservative Government."