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Bradford Council to avoid bankruptcy after Government agrees 'exceptional financial support'

Thursday, 29 February 2024 17:04

By Chris Young, Local Democracy Reporter

Bradford Council will not need to declare bankruptcy after the Government today agreed to measures that would allow the cash-strapped authority to borrow millions.

The “exceptional financial support” announced by Government will also allow the council to spend money made from the sale of buildings and assets to plug financial gaps in its services.

Bradford Council’s leader said the announcement was “welcome news” but would still require the council to cut services, raise costs and sell millions of pounds worth of assets.

And borrowing would lead to large interest payments in future years.

Faced with a huge budget gap, the council asked Government for a “capitalisation directive” that would allow it to bring cash in through other means including loans and property sales.

The council has now had confirmation that the Government is minded to agree financial support of £220m for Bradford – made up of £80 million in the current financial year (2023/4), and £140 million for 2024/5.

This will allow the council to present a balanced budget.

After today’s announcement, a spokesman for Bradford Council said: “This means that the 151 (chief financial) Officer will not currently need to issue a 114 (bankruptcy) notice and Bradford will not be subject to external commissioners and that decision making in Bradford will therefore remain in the hands of local councillors.

“This also enables the council to commence the delivery of a five-year recovery and transformation programme and asset disposal process as set out on the budget proposals that will align income with expenditure and reshape the council for the future.

“It also enables the Bradford Children’s Trust to continue its improvement journey.”

If the council had gone bankrupt, services would have been reduced to a bare minimum, Council Tax could have risen dramatically, and Government-appointed commissioners may have been brought in to make decisions.

Speaking after the announcement, Susan Hinchliffe, leader of Bradford Council, said: “It is welcome news. It will be £80m this year and £140m next year.

“But just to be clear, this is not a grant – this is money we will have to pay back.

“And it is sobering to think of the changes that will have to be made to the council over the next five years that we’ll need to make to reduce the size of the council to make sure we are financially stable for the future.

“The past few months have been very nerve wracking for council staff, not knowing what their future was. This is welcome news because residents need to know there will still be services provided – we’ll still pick up the bins, still clean streets.

“But you’ll see a change in how the council operates in the future.

“But this announcement doesn’t mean we are able to stop the cuts – in fact we’ll need new cuts on top of what we’ve already announced.

“But this support gives us space to implement a five-year plan to make the council more sustainable. It gives us the stability that we need.

“What it doesn’t do is answer how councils can better fund adult and children’s social care. Councils are spending 70, 80 or even 90 per cent of their budget on these services. Council Tax alone isn’t sufficient to fund these services.”

She compared the financial support to being like an overdraft adding: “We’ll have to pay it back, with interest. That is why we are planning on selling assets – we have to sell them to help pay off the loan.”

Referring to £40m worth of planned council cuts announced earlier this year, Cllr Hinchcliffe said: “They still have to go through. The Government expects us to follow through on the cuts we’ve proposed. If we don’t take the difficult decisions, they’ll they’d come in and make them for us.

“Bankruptcy has been avoided, but we have to make sure we carry on with our proposals to make sure it doesn’t happen again.”

She said the council would have to find around £35m worth of savings each year for the next five years.

The council will meet next Thursday to vote on its budget for the upcoming year. That budget will include unpopular proposals, such as the closure of three tips and a council-run children’s activity centre in North Yorkshire.

Asked how the announcement might affect the budget, Cllr Hinchcliffe said: “What the Government is expecting by granting us this is that we’ll make difficult decision this year and next year. If we’re not able to do that, they will intervene in the running of Bradford.”

Eileen Milner, chair of Bradford Children and Families Trust, which is funded by the council and runs Children’s Services in the district, said: “This is positive news for both the council and the trust, although we acknowledge that there are many challenges ahead.

“The trust is a new organisation, but we have a clear plan in place to continue to make improvements in the services we provide for children and families in Bradford and, as we do so, to continue to drive down costs. The work of the last 11 months is already demonstrating good progress.”

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