Unitary seeks exceptional financial support to avoid Section 114 notice

The unitary authority said it had requested Exceptional Financial Support (EFS) from the Government in light of the challenges.

The news comes a month on from the council declaring a financial emergency at a cabinet meeting over its financial position.

The cabinet is now set to consider a new report on the council's finances in November, which will include greater scrutiny of the council’s spending and income than previous reports.

The report and projected position will not be finalised and published until 10 November, but early indications show that the council may overspend by £50 million by March 2026 if no alterations are made, the council said.

The council has over £34 million in its savings to help manage its budget this financial year, but this is not enough to cover the overspending, it added.

A council statement issued on Thursday (23 October) said: "Overspending is not permitted and if not resolved urgently the council may receive what is called a Section 114 Report.

"The government could then take action to reduce spending by taking control of the council with Commissioners."

The council said it is working to gain "some immediate stability", including stopping and reducing spending, increasing income and delivering savings.

These efforts are being implemented alongside longer-term plans, and amid discussions with the Ministry of Housing, Communities and Local Government (MHCLG) regarding funding.

The council has asked the department for urgent financial support to help it continue to deliver services until March 2026.

It has also previously asked the department for longer-term funding covering the next three years that could enable it to invest in transformation, stabilise its budget and bring an end to its financial emergency.

Cllr Roger Evans, Shropshire Council’s cabinet member for finance, said: "For a number of years now the council has been overspending its budget – a budget that was set by the previous administration.

“Reserves or savings have been used to meet this continued deficit to the extent that all have now been used up. There is none left for us to use to help us meet this shortfall."

He added: "It’s no surprise that the lack of Government funding is contributing hugely to our financial challenge. Year after year, this funding fails to account for additional cost of delivering essential services over a large, sparsely populated area.

“We will continue to lobby the government for fairer funding allocations that genuinely reflect the needs and challenges of all authorities, including in rural areas with complex challenges such as Shropshire, but we are also determined to reduce our spend to enable us to balance our budget and avoid the issuing of a Section 114 if at all possible.”

Fourteen councils have issued section 114 notices since the Local Government Finance Act 1988 became law – seven of which were issued in the last five years alone.

Adam Carey