Hillingdon Council risks bankruptcy due to critically low reserves and £34 million savings target.
The council might have to issue a Section 114 notice, meaning they cannot commit to new spending. The council leader is optimistic about reaching savings, trusting staff can deliver the needed cuts to ensure a quick turnaround.
The council has saved money before, cutting about £13 million yearly since 2010. Now, they need to save much more. The council must understand that overspending is unacceptable.
Reserves are very low, the report says, making covering costs with reserves unstable. Reserves fell by 25% last year and could drop to £20.3 million next year, a £41.7 million loss in four years
The council’s work culture needs to improve. Overspending must stop being tolerated. In the past there was too much optimism, and budgets did not meet their goals.
The council might need government help if savings fail, called Exceptional Financial Support. The government is reluctant to give money mid-year, so a Section 114 notice might happen otherwise.
The council leader said Hillingdon was in a good position last year, and claimed it was not at risk of the Section 114 notice. He maintains they are still in a sound position according to the current budget.
Hillingdon takes pride in its low taxes. The report calls it a financial challenge, requiring difficult choices that will affect services. Council members wanted to avoid this.
The council leader takes responsibility for past choices and expresses pride in keeping taxes low previously. He says the government fails to acknowledge demands, as Hillingdon faces unique pressures.
External auditors found major problems, indicating the council lacks strong governance and uses poor information for crucial decisions. The council doesn’t manage financial risks well.
Poor data makes it hard to track spending. In addition, a new financial system was poorly implemented. The council is now rapidly modernizing things to avoid these problems.
The council uses “netting” and “amalgamation,” practices lacking financial transparency. Netting hides spending by offsetting income, while amalgamation merges budget lines, making money trails harder to follow.
These practices cloud the true finances. The council leader wants improvements in this area and demanded better financial reports for Cabinet, as the current reporting is rather weak.
Service areas lacked budget responsibility creating challenges for financial management. The council director knows transparency needs to improve, and directors must control their budgets and become increasingly more accountable.
Cabinet will soon present its budget with plans to save £34 million. If they fail, they might need government support, meaning Exceptional Financial Support.
A government bailout is not guaranteed. The council believes it can balance finances, and they hope to make large savings without help to avoid government influence significantly increasing.
The government prefers not to provide aid mid-year. A Section 114 notice then becomes possible, stopping all non-essential spending. Commissioners would likely take over the council, but the council leader remains confident they will succeed.
A Labour leader is shocked by the report, claiming the budget is not robust. December’s consultation budget showed no failing. They had warned about deficit and reserve issues, and these systemic failures endangered services.
Poor oversight led to this crisis, and a lack of understanding affected estimates. Low quality data caused rushed decisions, and services are damaged by this poor mismanagement. The council is now on the brink of bankruptcy.
A Taxpayers’ Alliance representative is worried, fearing potential council tax hikes. Complacency caused these financial problems. Town hall bosses must improve governance, and this situation must never happen again.
Hillingdon Council will soon meet to debate the budget. They will discuss the report and proposed savings.