Nottingham City Council has declared itself effectively bankrupt after issuing a section 114 notice.
The Labour-run local authority confirmed the announcement on Wednesday, saying its chief financial officer had decided it “isn’t able to deliver a balanced budget for this year, which is a legal requirement”.
As a result of the section 114 notice, all new spending – with the exception of protecting vulnerable people and statutory services – must stop immediately.
It becomes the second local authority this year to fail financially, after Birmingham City Council issued its own 114 notice back in September.
The council has come under financial pressures after its attempt to enter the power market with Robin Hood Energy (RHE) failed in 2020, losing the authority millions.
It later got into trouble after spending millions of pounds ring-fenced for local housing as part of its general budget.
But the authority was also hit hard by changes to central government funding under the coalition government back in 2013/14, as well as soaring inflation and growing demand for social care.
The Department for Levelling Up decided against bringing in a commissioner after the failure of RHE three years ago, but gave an advisory board more powers to ensure the council adhered to their advice – with the threat of the final option hanging over their heads if their financial performance didn’t improve.
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But now the section 114 has been issued, commissioners will likely be brought in to take charge.
A statement from Nottingham City Council said its executive board met last week to discuss a report into its latest financial position, as rumours swirled the authority was on the brink of bankruptcy.
Local or national government – who is to blame for struggling councils?
There is only one real political question about Nottingham City Council: Who shoulders more of the blame for running out of money – central government or the local politicians themselves?
Council budgets have been squeezed ever since George Osborne became chancellor in 2010: seen as an easy target for a Treasury hunting for savings.
According to the Local Government Association, since 2010 there has been a 27% real-terms cut in core spending power.
Given the spending pressures from inflation, particularly on social care, councils everywhere are suffering.
That said, of the 113 local councils in England, only 13 councils have issued section 114 notices – the action a local authority must take when it is about to spend more than their income. Birmingham was the last council to make the order in September, with Woking, Thurrock and Croydon before that.
Research by the Institute for Government found there is no correlation between the party that has political control of an authority and the likelihood of issuing a section 114 notice.
However, the government is very keen to make this a partisan issue, since Nottingham is a Labour council, and has been since 1998 – with not a single Conservative in the council chamber.
The council themselves blamed children’s and adults’ social care, rising homelessness and the impact of inflation, and claimed the “funding model” is broken.
However, the saga of “Robin Hood Energy” left a big dent in both the accounts and their credibility.
This scheme was established in 2015, set up to help people struggling with rising bills, and was heralded by Jeremy Corbyn when he was leader of the Labour Party – however it was unable to pay its bills, and ultimately closed, costing taxpayers £38m.
A damning report by an external auditor found the council was guilty of “institutional blindness” over RHE, prioritising political objectives over reality.
It found the council did not know the scale of the risk they had taken on and criticised the culture at the council, the reporting process and the way the company was handled, as well as the lack of accountability.
Hubris or well-intentioned but misguided, the council is still paying the price.
Whether the public draws political lessons remains to be seen.
It said the report highlighted that “a significant gap remains in the authority’s budget, due to issues affecting councils across the country, including an increased demand for children’s and adult social care, rising homelessness presentations and the impact of inflation”.
But, it added: “Past issues relating to financial governance… and an overspend in the last financial year have also impacted on the council’s financial resilience and ability to draw on reserves.”
Leader of Nottingham City Council David Mellen told Sky News. “We are going to be paying our staff. We are just saying in this financial year we’ll be overspending against our budget.
“For 13 years we have been underfunded, pressures on us from services are difficult.
“Many other councils are struggling – we are not the first, we won’t be the last. We are not incompetent – the government has not funded us properly.
“We have lost £100m in our budget every year for the past 10 years.”
All of the city’s councillors will now have to hold a meeting in the next three weeks to discuss the ongoing issues.
But Nottingham City Council said both senior officers and its members “remain committed” to working with the government and its advisers to “put the council on a stable financial footing for the future”.
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However, Nottinghamshire MP and government minister Robert Jenrick attacked the Labour leadership at the council, saying they had “proven themselves utterly unfit to govern this great city”.
He added: “Their breathtaking waste and incompetence have let residents down for long enough. It’s time for the secretary of state to appoint commissioners to restore order.”
Today, Sir Keir Starmer will deliver on his pledge to recognise a Palestinian state – after setting out a series of conditions in July which there was little prospect Israel could meet, including agreeing a ceasefire with Hamas.
The prime minister will say it recognises the “inalienable right” of the Palestinian people and what he feels is a moral responsibility to keep a two-state solution alive, amid the devastation of the war and concern about settlement expansion in the West Bank.
This will be formally put forward by the British government at a conference of the UN General Assembly in New York this week, after a diplomatic push led by Emmanuel Macron. Canada and Australia are also expected to recognise it, although may call for Hamas to disarm.
But Labour has always said it’s a move they would make as part of a peace process, which looks further away than ever.
What does it mean?
The move has been heavily criticised and leaves a number of questions not only about what it will achieve – but about whether it will have the opposite effect on the conflict.
David Lammy as foreign secretary conceded when the pledge was announced that “it will not change the position on the ground” which can only come through negotiations.
After all, 147 of the 193 member states of the United Nations recognise it already. Palestine has permanent observer status at the UN – speaking rights, but not voting rights – where it’s represented by the Palestinian Authority. Any move to full status would have to be agreed by the Security Council where the US has a veto.
Sir Keir has made clear he doesn’t accept Hamas – which he calls a “brutal terrorist organisation” – as a government in Gaza. The borders of such a state, wrangled over for decades during multiple rounds of negotiations between Israel and the Palestinians, are also not agreed.
Recognition is opposed by the Trump administration, as the US president made clear in London last week. US secretary of state Marco Rubio has said it would “embolden Hamas” and be symbolic only.
In Britain there is cynicism too. Kemi Badenoch, the Conservative leader, has accused the prime minister of a “desperate and insincere attempt to placate his backbenchers”. He heads to the party’s conference in Liverpool next week with a further slump in his approval ratings to -42%, around where Rishi Sunak’s was after his D-Day blunder.
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1:28
Could recognition of Palestine change the West Bank?
Other Labour MPs oppose the recognition move. The Labour Friends of Israel group has said: “It is important to recognise that Israel is not the only party to this conflict… Hamas could end this conflict tomorrow by releasing the hostages and laying down its arms.”
The move is also opposed by the families of the hostages in Gaza, of which 20 are believed to be alive – for not imposing their release as a condition on Hamas.
Ilay David, the brother of Evyatar David, who recently appeared emaciated in a Hamas video, said: “We want to meet with Starmer but he refuses to meet with us… Giving this recognition is like saying to Hamas: ‘It is OK you can keep starving the hostages, you can keep using them as human shields’. This kind of recognition gives Hamas power to be stubborn in negotiations. That is the last thing we need right now.”
Sir Ephraim Mirvis, the UK’s Chief Rabbi has said the “unconditional” recognition of the state “is not contingent upon a functioning or democratic Palestinian government, nor even upon the most basic commitment to a peaceful future”.
Image: Sir Keir Starmer welcomed Mahmoud Abbas, president of the Palestinian Authority, to 10 Downing Street earlier this month
What happens next?
Sir Keir met 89-year-old Mahmoud Abbas, the president of the Palestinian Authority, in London this month and they agreed Hamas should not be involved in the governance of Gaza.
Efforts to set up a transitional government have been discussed between the US and Gulf states. But Mike Huckabee, the US ambassador to Israel, said last week there was nothing “ready for signature”.
The UK government is expected to announce further sanctions on Hamas figures this week. But the Israeli government has already responded with fury to the prospect of recognition and it’s reported that retaliation could include further annexations in the West Bank.
The UK government sees this as an important diplomatic move with allies, when nothing else is moving the dial. But it can only be made once, and even supporters in government acknowledge that on the ground in Gaza it won’t immediately change very much.
Image: One of three Russian MiG-31 fighter jets in images shared by Sweden’s armed forces. Pic: Swedish Armed Forces
The three incursions into NATO airspace fuelled concerns about the potential expansion of Russia‘s three-year war in Ukraine and have been seen as an attempt by Moscow to test the military alliance’s response.
The incident over Poland prompted its prime minister, Donald Tusk, to warn that his country was the closest to “open conflict” it had been since the Second World War, while the UK announced it would provide Warsaw with extra air cover.
Two RAF Typhoons, supported by an RAF Voyager air-to-air refuelling plane, took off from RAF Coningsby, in Lincolnshire, on Friday night to defend Poland’s skies before returning safely early on Saturday morning.
Image: A Gerbera drone landed in a field in the Olesno region of Poland
Defence Secretary John Healey said the mission sends a clear signal that “NATO airspace will be defended”.
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“I’m proud of the outstanding British pilots and air crew who took part in this successful operation to defend our allies from reckless Russian aggression.”
He said the mission was “especially poignant” coming as the UK marks the 85th anniversary of the Battle of Britain – when Polish pilots came to the aid of the UK – this weekend.
The head of the RAF, Air Chief Marshal Harv Smyth, said: “This sortie marks the RAF’s first operational mission on Eastern Sentry, reinforcing the UK’s steadfast commitment to NATO and its allies.
“We remain agile, integrated, and ready to project airpower at range.”
The prime minister had called on Benjamin Netanyahu’s government to take substantive steps to end the “appalling situation in Gaza“, agree to a ceasefire, commit to a long-term sustainable peace, allow the UN to restart the supply of aid, and not annex the West Bank.
The Israeli foreign ministry furiously rejected his statement, with Mr Netanyahu claiming that “Starmer rewards Hamas‘s monstrous terrorism and punishes its victims”.
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1:28
Could recognition of Palestine change the West Bank?
Ilay David, brother of Hamas hostage Evyatar David, who was seen emaciated in a video last month, said giving recognition was “like saying to Hamas: ‘It is OK, you can keep starving the hostages, you can keep using them as human shields.’
“This kind of recognition gives Hamas power to be stubborn in negotiations. That is the last thing we need right now.”
There has been no ceasefire, and the situation in Gaza has deteriorated, with a declaration of a famine in Gaza City and the expansion of Israeli military operations.
Israel has launched a major ground offensive to seize all of Gaza City and destroy Hamas in an operation which has prompted widespread condemnation, with UK Foreign Secretary Yvette Cooper calling it “utterly reckless and appalling”.
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What changed in UK’s Gaza policy?
Earlier this month, a UN commission of inquiry concluded that Israel has committed genocide against Palestinians in Gaza. Israel said the claim was “distorted and false”.
The UK will join 147 of the 193 members of the UN who recognise Palestine ahead of the UN General Assembly in New York on Monday.
Other nations, including France, Australia and Canada, have said they plan to take the same step at the UN gathering as part of a broad international effort to put pressure on Israel.
During a joint news conference with the prime minister at Chequers on Thursday, Donald Trump said he disagreed with recognition, and US politicians have urged the UK and other allies to reverse their stance.
Image: Sir Keir Starmer is expected to deliver the announcement on Sunday. Pic: PA
Sky News understands that Israel is considering options in response to the UK’s decision, but the strength of that reaction is still under consideration.
Family members of some of the 48 hostages still in captivity, after Hamas and other militant groups stormed into Israel on 7 October 2023, have written an open letter to Sir Keir, condemning the move.
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2:38
Israel ramps up attacks on Gaza City
“Hamas has already celebrated the UK’s decision as a victory and reneged on a ceasefire deal,” they said.
“We write to you with a simple plea – do not take this step until our loved ones are home and in our arms.”
The UK government is understood to be looking at further sanctions on Hamas, and has demanded the group release all hostages, agree to an immediate ceasefire, accept it will have no role in governing Gaza, and commit to disarmament.