Worcestershire County Council could declare itself bankrupt

Worcestershire County Council will effectively declare itself bankrupt if it doesn’t get exceptional financial support from the government.

The council is facing a funding gap of £33.6 million for the next financial year, rising to £43.6m the year after.

Agenda papers published ahead of a cabinet meeting next week reveal that the council plans to ask the Ministry of Health, Communities and Local Government (MHCLG) for help.

Councils worried about being unable to set a balanced budget can ask the MHCLG if they can bridge the budget gap using a capitalisation directive.

This would allow the council to sell assets or carry out extra borrowing to fund day-to-day costs.

“If MHCLG do not grant the dispensation request the council will not be able to balance the 2025/26 budget,” the cabinet report states.

This would force the council to issue a section 114 notice, which is when an authority effectively declares itself bankrupt.

Councils can’t actually go bankrupt but a section 114 notice, issued by its finance officer, means it cannot commit to new spending and makes service cuts more likely.

“Therefore, the whole council must respond to this financial challenge and focus on reducing our spend and how services are delivered now and in the future to avoid the risk of s114 notice being issued,” the report goes on to say.

The council says that at the draft budget stage the remaining budget gap is £48.6m, which can be reduced “on a one-off basis” by the use of £15m worth of reserves, leaving the “unmitigated” figure of £33.6m for 2025-26.

Council leader Simon Geraghty told a full council meeting on Wednesday the authority had already made £37m of savings and efficiencies.

“75 percent of that is on track to be delivered by the end of the financial year,” he said.

“But some are difficult and the demand pressures on the budget are growing.”

Cllr Geraghty described the settlement the council is getting from government as “very challenging”.

“We’re going to have to make some tough choices in terms of how we balance the books.”