Slough Borough Council has announced they will stop all non-essential spending after the local authority "discovered" an estimated £96 million black hole by the end of this financial year. This follows a major accounting error two years ago which drained the council’s reserves by £7.5 million – around 90%.
The aspiring "world-class" local authority formally notified the Ministry of Housing, Communities and Local Government of the Section 114 Notice on Friday and will be seeking financial support from the Government.
According to a damning auditor's report, released only after May's local elections, Slough had insufficient capacity and skills within the finance department, as well as inadequate governance, monitoring and controls.
"There’s no getting away from the fact that we will still need to be making some realignment to services and reducing some services as part of the process," said Chief Executive Josie Wragg, who has rejected calls that she should resign.
CEO of CIPFA, the Chartered Institute of Public Finance and Accountancy, Rob Whiteman, said: “Slough’s section 151 officer [Finance Director] has done entirely the right thing, with the intention of this legislative provision being to implement a brake whilst the council plans an accelerated change of direction to restore its finances. However, it appears that the resource requested by Slough through the capitalisation directive is insufficient to balance the books."
While Slough has said it was hard hit by the impact of Covid on demand for services and income, it is only the third local authority to declare bankruptcy, following Northamptonshire County Council in 2018, and Croydon Council in 2020.
James is the Editor of Government Transformation magazine, and has been covering digital government and public sector reform for 20 years. He also oversees the development of the agenda for the UK's biggest public sector transformation conference.