Gloucester City Council needs Government bailout loan to avoid bankruptcy
Councils cannot technically go bankrupt but can issue a section 114 notice
Gloucester City Council needs a Government bailout loan of up to £17.5m to avoid becoming effectively bankrupt.
Cabinet is expected to approve submitting an exceptional financial support application at their meeting next week to ask for between £12.5m and £17.5m from ministers as a way to avoid issuing a section 114 notice.
Councils cannot technically go bankrupt but can issue a section 114 notice which means they would not be able to commit to any new spending.
Finance chiefs are understood to have been in talks with the Ministry of Housing, Communities and Local Government about its dire financial situation for around a month. Achieving the loan would avoid the need for a section 114 notice to be issued.
Details of the full extent of the overspend have come to light as the council has caught up on getting its unaudited accounts from previous years checked by external auditors.
"black hole"
The council says the financial challenges stem largely from the aftermath of the cyber-attack the authority suffered in December 2021 which made it difficult to get a clear picture of the council’s finances until recently.
Council chiefs discovered a £1.5m “black hole” in their finances in the summer. However, the full extent is only now starting to come to light.
The budget for last year showed the council was facing an estimated overspend of £4.3m for 2024/25.
And figures for the council’s current budget are predicting an overspend of £2.5m for the rest of 2025/26.
The overspend is understood to be due to unrealistic revenue income targets including reduced income due to delays in completing The Forum development and increased interest on borrowing.
There has also been lower-than-expected rental income from commercial properties and significantly increased IT equipment and infrastructure costs.
As part of the council’s recovery plan they will cease the lease they have from English Heritage for Blackfriars Priory from May next year as the cost to the council of continuing to run it would not be financially viable.
And opening days will be reduced from six to four days per week at the City Museum and temporary exhibitions will be paused.
Festivals and events in the city will receive reduced financial support from the council and there will be a reduction of staff in the culture and community wellbeing teams.
There will be increases to green and multi waste fees and fly-tipping penalties will be hiked from next month.
The councillors’ community funding scheme which provides small discretionary grants for specific local projects will be closed.
And they are introducing a mutually agreed resignation scheme for staff.
"absolutely appalled"
City MP Alex McIntyre said he is “absolutely appalled by the findings of financial mismanagement” at the authority and at “the apparent lack of care or attention shown towards taxpayers’ money”.
“Having been made aware of the facts only today (December 2) I am focusing my attention on doing everything I can to protect local services for Gloucester residents by encouraging the Department for Housing, Communities and Local Government to bail the City Council out with emergency funding.
“There are serious questions for the City Council to be answered about how it is possible to run such large overspends year on year without anyone noticing. The people of Gloucester really deserve better than this.”
Community Independents group leader Alastair Chambers (Matson, Robinswood and White City) labelled the situation a “complete failure of financial control”.
“This is no longer just mismanagement,” he said.
“This is financial collapse in slow motion.
“The so-called ‘financial black hole’ is no longer a hole — it is a crater.
“Council taxpayers are being taken for fools while millions disappear due to weak governance, poor leadership and a complete failure of financial control.”
Labour group leader Terry Pullen (L, Moreland) believes heads must now roll at the council and believes there has been a cover-up and the opposition has been kept in the dark.
“unprecedented situation for the people of Gloucester”
“There has been gross financial incompetence and mismanagement at the City Council on a massive scale and I am astounded that this has been allowed to happen,” he said.
“I called for an independent financial enquiry back in the summer to establish what has gone wrong and am shocked to find out what has been uncovered.
“I have been concerned that there were financial irregularities in the council’s finances for some time but didn’t honestly think things were this serious.
“Gloucester City Council is virtually bankrupt and will have to seek help from the Government to bail it out.
“The monitoring and financial information that has been provided over recent years has been vastly inaccurate and misleading.
“Senior managers and council leaders have big questions to answer. Someone at the council knows what has gone wrong and someone is responsible for this.
“They must be held accountable, take full blame and suffer the consequences. Heads must roll for this.
“The people of Gloucester have been let down on an epic scale and will pay the price for the council’s incompetence. I am really worried that people will lose jobs and essential council services will suffer.”
Conservative group leader Stephanie Chambers (C, Quedgeley Fieldcourt) said it was “truly shocking” and an “unprecedented situation for the people of Gloucester”.
She said she would be demanding answers to questions to understand how it has reached this point and how the council intends to get out of it without severely impacting residents.
“A high level recovery plan is being proposed but at the moment I am not reassured of the integrity of that plan,” she said.
“If the Government does not approve this bailout, Gloucester City Council will be forced to issue a Section 114 notice, effectively freezing all non-essential spending.
“As the representatives of the residents councillors must be strong advocates for the taxpayers of Gloucester and do everything in our power to protect their hard earned money and vital services. The Conservative group will be doing exactly that.”
Council deputy leader and resources cabinet member Declan Wilson (LD, Hucclecote) said the “extremely difficult” decisions are necessary to protect essential services.
“We want to be as open as possible about the challenges the council is facing,” he said.
“These are extremely difficult decisions, but they are necessary to balance the books and protect essential services. Applying for exceptional financial support will give us the breathing space we need to make changes and secure the council’s future.”