Refusing to set a budget

What are the consequences if councillors are unable or refuse to set a budget? Geoff Wild explains.

Section 30(6) Local Government and Finance Act 1992 provides that the council has got to set its budget before 11 March, although failure to do so does not invalidate that budget if set later. Such delay, however, may have significant financial, administrative and legal implications, including potential individual liability for those members who contributed to the failure to set the budget.

Section 66 LGFA 1992 provides that the failure to set the council tax can only be challenged by way of judicial review.

Delay in setting the budget may affect the council's ability to enter into new agreements as these would be potentially unlawful as unfunded commitments. Councils also have important financial and corporate governance reputations to keep strong and the failure to set a council tax could have an adverse impact on the council's reputation.

If members decide not to set the council tax, there are likely to be some liability issues. Members have to abide by their council's Code of Conduct and, as they have a duty to ensure that the council sets a lawful budget, voting against those proposals repeatedly knowing that the result will be no budget is almost certainly incompatible with their obligations under the Code as it is bound to bring the council into disrepute.

Furthermore, although surcharge has long since been abolished, if a councillor's wilful misconduct in refusing to set the budget causes a financial loss to the council, they may be liable to make good such loss. To get such a finding, it must be proved that the members were acting deliberately or recklessly in a way which involved persistent failure to facilitate the setting of a lawful budget and amounted to wilful neglect of a public duty.

In such a situation the Secretary of State could intervene and direct the council to take any action that they consider necessary or expedient to secure compliance with the requirements of Part 1 of the Local Government Act 1999, which could include setting a budget by a specified date.

The council as a corporate body and the members, both individually and collectively, have a fiduciary duty to council taxpayers to avoid things that would result in loss of revenue or failure to deliver services and they have a legal, moral and democratic obligation to set the council's budget on behalf of the electorate.

Both the Monitoring Officer and the Section 151 Officer may need to consider the use of their formal legal powers to report in such situation.

Geoff Wild is an experienced monitoring officer, consultant and interim manager for law and governance.