Medway Council saved from bankruptcy after government allows borrowing
The cashed-strapped authority is meeting to decide its budget on Thursday (February 29th)
Medway Council will avoid having to file for effective bankruptcy after central government confirmed it will allow the authority to borrow money to balance the budget.
A written statement from the department for levelling up, housing, and communities (DLUHC) announced today (February 29) it will allow selected councils to use exceptional financial support.
Medway Council was included in the list of local councils which will be allowed to borrow additional money to cover some of its running costs, which local authorities are not typically allowed to do, as well as to pay up-front costs for efficiency schemes.
The council announced earlier this month it would be asking Westminster to be allowed to borrow £14.7 million in order to balance the books and get on a stronger financial footing.
This was based upon recommendations from the Chartered Institute of Public Finance and Accountancy (CIPFA), who the council invited in to look over the authority’s books in November.
CIPFA recommended this approach and said without it the council could not create a credible budget, effectively saying without it the council would have to declare a Section 114 notice, commonly known as bankruptcy.
The permission does not mean Medway Council is receiving extra funding from central government, just that it can borrow money in the short-term which it will have to pay off later.
The announcement comes on the day when the authority will agree its budget for the coming financial year, something it may not have been able to do without the confirmation from DLUHC.
In their statement to parliament announcing the move, the Simon Hoare MP (Con), minister for local government, said the permission to borrow was only for councils in exceptional circumstances.
He also said the exceptional support will come with conditions for efficiencies and councils will be required to show improvements which justify the use of powers.
The council administration will make a statement on the announcement at this evening’s (February 29th) Full Council meeting.