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How Do Councils Go Bust?

Nottingham, Birmingham and Woking councils all went bust in 2023. They followed Thurrock and Croydon (for the third time) in 2022 - with half of councils warning of effective bankruptcy within five years without reform, in part driven by rising social care demands.


Councils technically can't go bankrupt - but they can issue what's called a section 114 notice, where they can't commit to any new spending, and must come back with a new budget within 21 days that falls within their spending envelope. Councils are required by law to have a balanced budget each financial year and provide "Best Value" to residents.


In meeting these requirements it often means an impact on residents with severe cuts to frontline services and those with a care need are most vulnerable.


Thirteen section 114 notices have been issued since 2018 - compared to just one before 2018.


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