Seven things we learned in dramatic week with Wirral Council in crisis

It has been a huge and difficult week for Wirral Council. Teetering on the edge of possible bankruptcy, the struggling local authority held two crunch meetings that could have major ramifications for the council and its taxpaying residents.

On Tuesday, auditors gave their verdict on the council’s financial situation and how effectively it is being run with questions directed to top officials of the local authority as well as Grant Thornton who audited the accounts. The following day, councillors approved a request for the local authority to ask the government for a bailout of up to £40m.

If the bailout is approved by the government, the borrowing will be paid back over many years adding further pressure to council budgets down the line. Council finance bosses have made clear that without the funding, the local authority would have to issue a Section 114 notice, effectively declaring bankruptcy.

READ MORE: Half of council budget could be swallowed up by £208m school black hole

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

If this happened, commissioners would likely be brought in, taking power out of local hands with tough decisions taken to balance the books regardless of how unpopular they might be to the public. Issuing this sort of notice is considered an absolute last resort, although it has been hanging over the council for several years now.

At the meeting on January 14, there were calls for “transparency and oversight at every level” and councillors “should be prepared to make tough decisions even if they are unpopular.” The threat of a bankruptcy notice loomed large over the debate.

Here’s what we found out this week:

People will be paying back the bailout for 20 years

On January 15, senior councillors on the local authority’s Policy and Resources committee meeting asked the government for up to £40m to bail them out. If approved, £20m will be used to prop up this year’s budget where the local authority has gone over budget due to social care increases and to a lesser extent, its neighbourhood services.

£20m will be requested to cover next year’s budget for both redundancy payments as well as any other budget overspends. This will be funded through borrowing and paid back over the course of 20 years.

This means council budgets until 2045 will be hit with a roughly £2m bill each year putting further pressure on funding some services people rely on. Councillors have asked for the £40m figure to be reduced if it is not needed but the bailout is still likely to be a significant sum.

Whether the government grants the council £40m or slaps strict conditions attached to the funding remains to be seen. Wirral still owes £11m from the previous emergency government funding given to the local authority three years ago.

£25m worth of cuts are coming to council services

Unlike previous years of budget cuts when the council published early in January what it could be cutting, Wirral Council is keeping a tight lid on what people can expect next year.

In previous years, members of the public found out what was being considered in January but this year Wirral is arguing these options are exempt entirely. Councillors of different parties have argued the organisation needs to be transparent but little has been made public so far.

The local authority has been asked for an explanation about why it is not saying anything until February and only now do we know the council is considering £25m worth of budget cuts for next year. A source previously told the LDRS leisure, library, and housing services could be under threat while Unison, which represents over 2,500 council workers, have raised concerns about redundancies.

David Jones, Wirral branch secretary for the union, said they were “concerned decisions might be taken in haste,” adding: “The workforce has been cut significantly over the years and has continued to provide essential services.

“We cannot continue to provide the same level of services with an ever reducing staff number. We are aware of the financial position but there are questions that need to be asked.”

Director of Finance Matthew Bennett said details of the budget will only be published once they've been agreed by senior councillors "when we have a finalised position." The council found out how much money it was getting from the government just before Christmas as has been the case in previous years.

However Wirral Council has said the papers and what options are being considered won't be published until February 4 less than three weeks before it sets its budget. Wirral Council has been asked about whether it plans to ask the public for their thoughts before deciding where it will be cutting services though committee reports suggest this will be in January.

The Local Government Association (LGA), which represents councils, makes clear "decision-making about the budget needs to be transparent" and "the budget is a basis for public debate." The LGA also makes clear when decisions around budget options are made, "a lot of information needs to be put into the public domain at this stage and into the hands of full council."

A Wirral Council spokesperson said: “The budget setting process for Wirral Council has been particularly challenging this year due to the requirement for the Council to seek exceptional financial support from MHCLG (Ministry for Housing, Communities, and Local Government.) This, coupled with a financial settlement that was announced just before Christmas, has delayed the usual process.

“Wirral Council has been open and transparent throughout regarding its budget position and will comply with all its statutory requirements in setting the budget for coming year.”

No easy options left for the council

Auditors were clear the council is in real difficulty when addressing councillors on January 14 telling them if their instructions on how to try and sort out the council’s finances were not accepted, they would have to consider taking things further. Sarah Ironmonger from Grant Thornton reminded the council it had a responsibility to manage its resources to deliver services within a balanced budget.

The council has a low level of reserves, which are back up funds meant to be used in one-off emergencies and then replaced. These reserves cannot cover how much it is expected to go over budget over the next five years. The council was also told it had been too optimistic about how many children it could place in foster homes which is much lower in cost than residential children’s homes.

Ms Ironmonger said if the council didn’t put “credible” plans forward to manage its budget going forward, it would have to declare bankruptcy. The auditor made it clear to councillors that they need to be the ones to make the decision to balance the budget, adding: “It’s a very difficult landscape and the era of easy solutions is probably past us.”

Jobs will be lost

It’s not known how many jobs will be lost in the coming weeks and months at Wirral Council but it could be a significant number and may involve compulsory redundancies down the line. The local authority is looking to avoid that outcome by opening up a voluntary redundancy scheme next week in order to get the ball rolling and engaging with trade unions like Unison whose members in the council’s parks and environment team attended the extraordinary council meeting on January 14.

Part of the £40m bailout would be used to cover redundancy payments and it’s been put to the LDRS that housing, leisure, and library services could be affected. When asked a question about the scale of job losses in the local authority, Chief Executive Paul Satoor said they were looking to avoid job losses within the council as much as possible, adding: “It would be foolhardy to put a number on what we need until we finalise the budget.”

Further tensions between some political parties

Tensions between Labour and the Green Party are common but this week, the latter went a step further calling for the Labour leader of the council, Cllr Paul Stuart, to step aside criticising his leadership.

Cllr Jo Bird said money was being “wasted every single day while precious jobs and services are facing the chop,” adding: “Some of the very same councillors are still driving our council to the brink of bankruptcy yet again.”

Cllr Stuart pointed out every councillor was now involved in decisions made by the council, adding: “Both you and your party are very good at purporting blame and taking no accountability of the decisions that you make.”

The calls are unlikely to make any political traction for now with Conservatives even praising Cllr Stuart for his leadership at the meeting on January 15 during what is a difficult time for the council. The Green Party currently holds only 14 out of Wirral's 66 councillors.

Wirral Council reportedly failed to claim thousands in VAT

During the meeting on January 14, Cllr Kathy Hodson suggested there had not always been 'oversight and accountability' when it came to the council's finances.As part of their recommendations, auditors said councillors needed more of an idea of what is going on.

Cllr Hodson said the council had a policy in place between 2019 and 2023 which should have put checks on council purchases, but said the authority had paid a 'staggering' £144.7m with a retrospective purchase order.

Concerns were also raised about what Cllr Hodson said was another non-adherence to council policy over the use of purchase cards, which allows employees to make purchases without going through the traditional purchasing process. She said in 2024, there were 5,028 transactions but a requested breakdown of all of these showed a minimum of £75,000 of VAT hadn’t been reclaimed.

Council facing £3m bill due to government changes to National Insurance

Conservative Cllr Jenny Johnson asked about the government’s changes to the amount of National Insurance employers have to pay announced in October as part of its next budget. This increase of 1.2% will kick in from April 2025.

The government has already said it would be paying the costs incurred by public sector organisations and Wirral’s finance director Matthew Bennett said the government had already confirmed it is funding the local authority’s £3m bill as a result of the changes. However the council will face knock on costs for many contracted services.

This ranges from bin collections to social care and community organisations. Mr Bennett said: “We are still working with the sector and quantifying the fee increases for next year and what that will potentially cost us but again it will be within the inflation allowance for all different contracts whether that be waste and bill collections and the like but I don’t have a figure for you at this point in time.”