More Shropshire Council requests for government bailouts likely
Cash-strapped Shropshire Council could ask the Government to bail it out for the next three years.
The local authority has already requested £15 million of exceptional financial support (EFS) for this financial year to ensure it is in a legal position.
Latest figures show that the council’s predicted overspend is just over £47m. However, with the council only having £34.3m in its reserves, it means it is in an illegal position by just under £13m.
If the Ministry of Housing, Communities and Local Government (MHCLG) grants the £15m, it will mean it will be in a legal position.
However, James Walton, the section 115 officer who is legally responsible for the proper administration of the council’s finances, said the council will also need around £10 million to help with its transformation costs, taking the total to £25m. There is also uncertainty as to what will happen to the £39m that has been spent on the North West Relief Road (NWRR).
“We’ve said to the MHCLG if everything else falls apart and we have to write off that entire cost through revenue, then that is £39m of EFS that we would need,” said Mr Walton.
“That is just looking at this financial year. The next step however is looking for exceptional financial support for the next financial year and the years after.
“The same process applies. We make an application in December and we hear in late February – just about the time that council sets the budget. Even if it’s the day before council, it means we can take that budget report in late February. The process allows us to apply for exceptional financial support for in-year and the next financial year.
“We have to make the assumption that the process will continue each year after that. We know that we will need exceptional financial support for 26/27 and 27/28, and probably 28/29. And possibly further.”
Mr Walton said the level of EFS the council will need next year “will be a big figure”. Therefore, the authority will need to make sure it then reduces it to ensure it doesn’t become reliant on financial help.
“There are other authorities around the country that are reliant on exceptional financial support in the long term,” said Mr Walton.
“We don’t want to be in that situation because every time you want to take exceptional financial support, you borrow, which accrues debt charges and they have to be covered.
“Our model which we have built allows us to reduce the level of exceptional financial support and, built into that, is the cost of the exceptional financial support from the previous year. So our savings targets allows us to tier it down.
“The obvious conclusion is the less exceptional financial support that we need, the easier it is to wean ourself off it and cover those debt charges.”
