It is being reported that the Section 151 Officer of Croydon Council has issued a Section 114 notice to her authority. Such notices are issued where expenditure is likely to exceed the resources of the authority and the result is that expenditure will be curbed until councillors meet and have fully considered the matter.

Pressures on local government budgets have been exacerbated by Covid-19. The pandemic has both increased demand for services whilst reducing income from charges and commercial investments.

There has been much speculation about whether (and how many) authorities would need to issue Section 114 notices as we make our way to the 2021/22 financial year. Concern was so great that CIPFA, earlier this year, amended its guidance to Section 151 Officers emphasising early engagement through informal channels both internally and with Government before issuing a notice. 

Local authorities cannot become insolvent (with possible winding up) in the same way as private entities. However, the Section 114 process is one of last resort and in extreme circumstances, like in Northamptonshire, can prompt the Government to step in and intervene in the authority. We have seen in Northamptonshire that the end result was the complete restructuring of local government in the county.

It will be very interesting to see how the Government responds to the situation in Croydon and whether any more authorities follow this route.