What does a Section 114 mean for Wirral and how likely is it

Councillors hear from auditors in Wallasey Town Hall which one person described as "a really good public caning"
-Credit:Colin Lane/Liverpool Echo


The news this week that Wirral Council has applied for a £40m bailout from the government will have likely raised questions for many about what this actually means, with the future of key services remaining in doubt. The local authority’s council leader Cllr Paul Stuart said his administration is planning around £25m worth of cuts next year.

Finance bosses have made clear that without the government support, they believe they will have to issue a notice before the end of the current financial year in March declaring the council effectively bankrupt. Finance director Matthew Bennett said the council expects to hear back from the government at the end of February on the bailout and told councillors on January 15 the local authority was effectively bankrupt.

Local authorities cannot actually go bankrupt in the way that a company or individual can so instead they issue what is called a Section 114 notice. This means the council’s finance director, in Wirral’s case Mr Bennett, would have to issue this notice if they believe the council was about to spend money it does not have which would break the law.

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Once this notice is issued, Wirral Council would not be able to carry out any new spending unless permitted by Mr Bennett with money only going towards essential spending. The Council leadership must also meet within 21 days to discuss how to balance the books.

The only spending allowed is for existing staff and pension costs, spending on goods and services already received or contracts already signed, spending required to deliver services mandated by law “at a minimum possible level,” urgent spending required to safeguard vulnerable people, grant funding, or any necessary to achieve value for money.

This would likely lead to spending cuts, the reallocation of budgets, council tax rises, bailouts, and central government intervention. A number of councils of different political colours have already issued notices, the biggest being Birmingham.

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Library and leisure services could see cuts as well as park maintenance, projects promoting economic development, garden waste collections, and theatres. Council-owned car parks are also a discretionary service and the controversial introduction of charges in these private car parks have been linked to the local authority’s financial situation.

According to the Institute for Government (IFG), “each local authority that has issued a section 114 notice has done so due to some degree of financial mismanagement” though cuts to council funding and demand for adults and children’s social care have also contributed to pressures on council budgets across the country.

However the IFG believes more councils would have gone bankrupt if not for the previous Conservative government’s “extensive use” of council bailouts with £1.4bn given for the financial year between April 2024 and March 2025. Wirral Council previously received emergency financial support in 2021.

Before the government gives Wirral any extra money, it has commissioned the Chartered Institute for Public Finance and Accountancy to do a rapid review of the council’s position to confirm things are as dire as Wirral Council is saying. Mr Bennett said he was “confident unfortunately that they’re going to find there is no alternative to that position and therefore they will recommend to the government that the exceptional financial support is agreed.”

However the granting of £20m for the next financial year from April 2025 will only be provisional subject to a further review. It’s not known how extensive this review of the council’s finances will be.

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Mr Bennett told councillors the council is “in a serious financial position,” adding the bailout is “absolutely necessary in order for the council to avoid a Section 114 position. That would be the only reasonable alternative at this point in time.

“We would otherwise have to expend all available reserves including the general fund reserve. That would leave us in an unsustainable position going forward as we would have no reserves to deal with any unforeseen events that came about.”