Cash-strapped council overspending by almost £2m a month
Bosses in Southampton have been warned the authority could face government intervention
A key financial report has revealed cash-strapped Southampton City Council was overspending by nearly £2million a month last year.
The figure, which is deemed to be ‘out of control’ was included in a report by CIPFA (Chartered Institute of Public Finance and Accountancy) who the city council has brought in to help deal with its financial situation.
The report is due to be discussed by members of the full council on Wednesday. It says tens-of-millions of pounds are needed by October this year to bridge a gap in the council’s budget and avoid a section 114 notice being issued which could lead to Government intervention, and effectively, bankruptcy.
The CIPFA report lists ‘indicators’ that point towards the ‘financial stress’ of the council and states that the council ‘is at risk if improvements are not put in place quickly’.
The document which states the council has a ‘tendency to overspend’ also says: “This is evident in both the 2022/23 financial year where the run rate averaging at £1.8m per month could be considered out of control – and in the 2023/24 financial year where a forecast overspend has been presented at the end of month one, along with additional growth.”
On top of this, only 39% of the planned savings the council made actually came into effect – decreasing CIPFA’s confidence in the council’s financial ability.
The tens-of-millions of pounds the council needs to avoid the section 114 notice is considered optimistic as CIPFA says the local authority is apparently presuming a savings target of £20m this year (2023/2024) will be met. It is also presuming that 100% of planned savings will come into action and that the local authority will better its 39% savings delivery it achieved last year (2023/2024).
CIPFA says this ‘must be at risk of non-delivery’. If it isn’t delivered – and the savings delivery rate is the same as last year (2023/2024) – then even if the council does manage to bridge its financial gap, it will still find itself with a nearly £14m shortfall.
Full council will meet on Wednesday (July 19th) to discuss the situation.