Somerset Council’s Executive has this week set out the actions it proposes to take in response to soaring costs and demands on services. The latest budget figures show Somerset Council is facing a funding gap of £100m for 2024/25 due in large part to an expected increase of £70m in the cost of adult social for 2024/25.

Without immediate action this could lead to Somerset being forced to follow the likes of Birmingham and Woking councils by issuing a Section 114 notice – effectively declaring the council bankrupt.

On Wednesday 8th November, Executive members voted to declare a financial emergency and noted controls being put in place across the organisation to limit spending. They also agreed to dispose of commercial investments, and pledged to step up ongoing talks with the Department for Levelling Up, Housing and Communities (DLUHC).

Cllr Liz Leyshon, Somerset Council’s Lead Member for Resources & Performance and Deputy Leader, said, “”It is clear we are one of the growing number of councils nationally to be facing a financial emergency. There is a fundamental structural problem with local government budgets as our costs are rising much faster than our ability to raise income. While we will continue to call for a national solution to this national problem, we are also determined to do everything we can to reduce our budget gap to ensure we continue to provide support for those most in need.”

Officers are drawing up savings proposals which will be voted on by Executive at its December meeting. These could include:

• selling assets and buildings, including offices;
• increasing Council Tax, fees and charges as much as possible;
• reducing staffing levels; and
• reducing council services to statutory levels.

Meanwhile, Council Leader Bill Revans has this week written to all city, town and parish councils in Somerset to ask them to consider taking on greater responsibility for local community assets and services. Somerset Council has been in conversation with local parishes about devolution for many months and work is well advanced on a draft framework and a prioritised programme for devolution. In his letter, Cllr Revans explains that although no decisions have been made, the financial emergency could impact on the delivery of local services in future. The letter includes a list of potential assets and services which local councils may wish to support, and highlights ways they can do so. The list includes everything from public toilets, theatres and libraries, to bus services, flood prevention measures, grass and hedge cutting, ditch clearing and drain jetting, fly tipping and carnival clear-ups.

Cllr Bill Revans said, “We will need to review all our assets and services as we take action to address this financial emergency. Many city, town and parish councils have already expressed an interest in devolution and we recognise that some may wish to consider taking on community functions which could be at risk if we can no longer afford them. Transferring ownership and management of services at a local level, means communities can tailor them to meet the specific needs and preferences of their neighbourhoods.

We will need to review all our assets and services as we take action to address this financial emergency. Many city, town and parish councils have already expressed an interest in devolution and we recognise that some may wish to consider taking on community functions which could be at risk if we can no longer afford them. Transferring ownership and management of services at a local level, means communities can tailor them to meet the specific needs and preferences of their neighbourhoods.

“Local councils also have access to funding sources not available to the larger authorities. And they’re great at tapping into their networks to mobilise volunteers and partners. We’re committed to working with our city, town and parish councils to achieve the best outcomes for our communities. It’s time to move forward together, and take advantage of the many opportunities that lie ahead”.

The latest budget figures presented to Somerset Council’s Executive on 8 November show an estimated £70m increase in expected adult social care costs for 2024/25. This means the Council cannot rely on reserves to cover the gap for next year and without action will need to issue a Section 114 notice, or effectively declare the council bankrupt, at the point of setting next year’s budget in February.

Several councils nationally have been forced to do this in recent months, including Woking and Birmingham, with many others warning it could be a possibility without Government support.

In August, Somerset Council warned that it would need to use reserves to balance the books for this year. Latest figures show the budget gap for the current financial year now stands at £27.3m. Although this figure could be covered by reserves, the projected shortfall for the following year is now £100m, far exceeding levels of reserves.

The main driver of this is an £70m increase in adult social care costs, caused by proposed changes to national policy which aimed to make the cost of care fairer. Although the policy change was later abandoned by Government, in Somerset this has led to significant rises in the costs of residential and nursing care placements. For example, residential care placement costs have risen from around £577 per week in 2022/23 to £900 per week next year.

The work to avert a Section 114 Notice continues, including within departments, with Government, and with parish/city/town councils (see below).

What is a section 114 notice? 

Councils are required by law to have balanced budgets – this means the council’s income has to match its projected spending. If a council cannot find a way to finance its budget, then a section 114 notice of the Local Government Finance Act 1988 must be issued. The issuing of a section 114 notice prohibits all new spending with the exception of protecting: 

• vulnerable people 

• statutory services (such as education services; children’s safeguarding and social care; adult social care; waste collection; planning and housing services; road maintenance; and library services) 

• pre-existing spending commitments

A section 114 notice will only allow essential spending, which will make sure the Council can continue providing vital services to our most vulnerable residents. If a section 114 notice is issued, it would mean the council cannot enter into new agreements requiring a cost, but can still spend money on: 

• existing staff and payroll costs 
• goods and services which have already been received 
• delivering statutory services at the minimum possible level 
• safeguarding vulnerable residents 
• contractual commitments 
• ring-fenced grants 
• improving services to reduce overall costs 

Therefore, there should be no disruption to essential services, all existing grant agreements would still be honoured, and agreed Care packages will continue to be paid.

If a section 114 notice is issued, a council has 21 days from the date of the notice to hold a meeting to consider the section 114 report, decide if it agrees with the views contained in the report, and what action to take in consequence of it. 

The previous Somerset County Council came close to issuing a Section 114 notice in 2018 – see here.

Please see also:

• official Somerset Council press releases – 30 October, and 8th November 2023.
• Somerset Council Executive meeting agenda and papers on 8th November, including general fund budget monitoring report in item 6, and the Financial Strategy report in item 7, with letters to the Government’s Dept for Levelling Up, Housing and Communities (26 Sept), from the Council’s accountants Grant Thornton (17 Oct), and an update on progress in 17 key areas of the budget.
• A letter sent to all parish/city/town councils in Somerset on the potential need and opportunities for asset and service devolution:

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