What is a Section 114 notice? What will it mean for the council?

Croydon Council today admitted that it had gone bust.

Under the Local Government Finance Act 1988, Section 114 (3) dictates that: “The chief finance officer of a relevant authority shall make a report under this section if it appears to him that the expenditure of the authority incurred (including expenditure it proposes to incur) in a financial year is likely to exceed the resources (including sums borrowed) available to it to meet that expenditure.”

This means that is the chief finance officer, or CFO, sometimes also called the Section 151 officer, who in Croydon is Lisa Taylor, has the role under law of being the most senior financial advisor to the wider council’s leadership on its financial plans. Uniquely across the public sector, the CFO has the power and legal responsibility to suspend a council’s spending for a period of time if they judge the council does not have a balanced budget or the imminent prospect of one.

What does the S114 notice mean for council services?

It means that no new expenditure is permitted, with the exception of that funding statutory services, including safeguarding vulnerable people, although existing commitments and contracts will continue to be honoured.

Council officers must therefore carry out their duties in line with contractual obligations and to acceptable standards, while being aware of the financial situation. Any spending that is not essential or which can be postponed should not take place and essential spend will be monitored.

The only allowable expenditure permitted under an emergency protocol would include the following categories:

  • existing staff payroll and pension costs
  • expenditure on goods and services which have already been received
  • expenditure required to deliver the council’s provision of statutory services at a minimum possible level
  • urgent expenditure required to safeguard vulnerable citizens
  • expenditure required through existing legal agreements and contracts
  • expenditure funded through ring-fenced grants
  • expenditure necessary to achieve value for money or mitigate additional in-year costs

The council will have 21 days from the issue of a Section 114 notice to discuss the implications at a meeting of full council.

Read more: ‘I can’t guarantee we won’t issue a Section 114 notice’
Read more: Whitehall has waived finance rules to save councils from S114
Read more: Minister’s approval required for cuts plan
Read more: Council calls in auditors as it faces covid cashflow crisis 

About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
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