A ‘FINANCIAL emergency’ is expected to be declared by Somerset Council on Wednesday (November 8) as it teeters on the edge of bankruptcy.
Council auditors Grant Thornton has warned the Liberal Democrat-run authority faced issuing a Section 114 notice - effectively a bankruptcy declaration – as early as February next year.
Meanwhile, parish councils across the West Somerset and Wellington areas were bracing themselves for an announcement in the next fortnight of wholesale cutbacks in services currently provided by the unitary authority, such as grass cutting and road sweeping.
The unitary council is expected to slash the services it provides to just those it is required by law to provide, a decision which could lead to thousands of staff redundancies in the New Year.
Council chief finance officer Jason Vaughan said the council faced a ‘stark and challenging financial position with its cost of delivering services increasing significantly faster than the income it receives’.
Mr Vaughan told councillors in a report being considered on Wednesday: “An emergency response is required immediately.”
He said the budget gap over the next three years was now estimated at £100 million and rising, while general reserves stood at less than £50 million and using them would leave the authority financially unsustainable.
Mr Vaughan said he had already written to the Department of Levelling Up, Housing and Communities (DLUHC) to warn the council might have to issue a Section 114 notice unless the Government provided ‘significant additional funding’ or legislation around adult social care support changed.
He said a recruitment freeze had been in place and capital spending was being slashed with a review of every existing project and every new bid in order to reduce borrowings and make savings.
Wednesday’s meeting of the council’s executive is also expected to approve setting up a special group to oversee a sell-off of the authority’s property portfolio.
Mr Vaughan said Somerset Council on its creation in April of this year inherited a property portfolio from the county’s four former district authorities including shops, offices, car parks, and warehouses across the country which last year was valued at £290 million.
However, he said the value of the portfolio was now put at £220 million, leaving the council facing a £70 million loss.
Mr Vaughan said other council-owned property would also have to be sold as the authority ‘rationalised’ its estate.
He said a special meeting of the council’s audit committee was being called next month to consider Grant Thornton’s concerns over the authority’s financial state.
Council deputy leader Cllr Liz Leyshon denied there was going to be a ‘fire sale’.
Cllr Leyshon said it was a ‘calculated sale of our assets and each premises will be sold at the right time on a case by case basis’.
The former district councils planned to invest money in the properties to gain income through rent from tenants, but the general market values of UK commercial investment properties have fallen by more than 20 per cent since April, 2022.
The former Somerset West and Taunton Council, which was also run by the Liberal Democrats, had increased its borrowings in just two years from £6 million to £100 million to buy up properties around the country.