BARNSLEY will not be following in other local authorities’ footsteps in potentially issuing a no-spending order - despite a body which represents dozens of councils revealing one in ten are considering doing so.
A recent survey by the Special Interest Group of Municipal Authorities (SIGOMA), which represents 47 urban authorities, looked at the state of local councils’ finances and found that ten per cent of members were considering making a Section 114 this year, while close to 20 per cent said it could be possible in next year.
A Section 114 notice - which means a council cannot commit to any new spending commitments - was agreed by Birmingham City Council as its debt level topped £1.5bn.
Many councils said this was the first time they were having to consider such drastic action due to their lack of cash reserves to balance the current year’s budget.
Inflation, energy costs and wage rises were significant factors, with the situation set to get worse as high interest rates will soon begin to impact as existing loans mature, bringing more financial pressure.
However Coun Robert Frost, cabinet spokesperson for core services for Barnsley Council, confirmed a Section 114 notice was not being contemplated.
“We are by no means in the position of some of the councils that have hit the headlines recently,” he said.
“However, that doesn’t mean we’re immune to the impact of cumulative funding cuts, demand pressures linked to national issues in social care and the broader economic picture.
“I need to be clear that the position is indeed challenging but our long track record of good financial management means that I can assure people that we have been able to put a plan in place to balance our 2023/24 budget.
“In addition, we are also updating our three-year financial plan taking us up to 2026/27.
“The plan looks at how we can deliver services more efficiently to help meet future anticipated financial pressures - that will be shared as part of the upcoming budget process.
“Based on current assumptions it has confirmed to me that issuing a Section 114 notice is not within contemplation, neither at this time or in the future.”
A report into the council’s financial commitments and subsequent future borrowing needs showed the local authority now has a debt totalling more than £800m.
Local authorities’ external debts - which refers to the amount councils owe through either short-term or long-term loans - is capped at just over £1bn through the Local Government Act and Barnsley’s figure topped £836m at the end of the 2022/23 financial year.
No new long-term borrowing was done by Barnsley Council in 2022/23, although £144.8m will be required by the end of 2024/25, of which £71.1m will be on fixed-rate deals rather than high-interest alternatives.
Sir Steve Houghton, chair of SIGOMA and leader of Barnsley Council, added: “The government needs to recognise the significant inflationary pressures that local authorities have had to deal with in the last twelve months.
“At the same time as inflationary pressure, councils are facing increasing demand for services, particularly in the care sector.
“Pay increases are putting substantial pressure on budgets, and so the government must ensure that local authorities have the additional funding they need to fully fund these pay increases or risk impacting future service delivery.
“The funding system is completely broken - councils have worked miracles for the past 13 years, but there is nothing left.
“The government should provide additional in-year funding to relieve inflationary pressure, including for the pay deal this year.
“This additional funding should also be targeted toward children’s services, which is the greatest area of pressure for our members.
“Councils are facing severe uncertainty - the government must deliver clarity on funding in the coming years, including on proposed reforms that are long overdue.”