Cheshire East council facing bankruptcy after investing £11m in scrapped HS2 leg

Cheshire East Council has warned it may have to declare itself bankrupt due to the Government’s decision to cancel the northern leg of HS2[1]. The council has spent GBP11m preparing for the high-speed line, including GBP8.6m funded by borrowing. A report from its full council meeting this month said it would have to write off the expenditure, including expensing the GBP8.6m through its own revenue account.

The council said it faced “direct and devastating impacts” from Rishi Sunak’s decision to abandon HS2 north of Birmingham. It said these effects were not mitigated by the Government’s alternative proposals for transport investment, Network North. It said because it has “insufficient funds, and inadequate reserves, to manage in-year expenditure” it could be forced to issue a [Section] 114 notice[2] – meaning it is effectivly declaring itself bankrupt and must cease most spending.

The announcement comes after Nottingham Council last month declared itself effectively bankrupt by issuing a section 114 notice after forecasting a GBP23.4m budget deficit.

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Birmingham City Council’s also filed a 114 in September[3], which is believed to have been linked to a GBP760m bill from an equal pay settlement. The council has paid out almost GBP1.1bn in equal pay claims since a landmark case was brought against it in 2012. According to a survey by the Local Government Association, nearly one in five councils in England say they are likely to declare effective bankruptcy as a result of them not being given enought Government funding.

One in four councils in Scotland said they may face going bankrupt due to a lack of funding. Today i revealed Hampshire County Council is considering making various cuts to public services[4] including social care and school safety patrols in a bid to recoup a GBP132m budget shortfall. Cuts are likely to affect all services the council is not legally obliged to provide reduced to “bare minimum levels”.

Hampshire’s plans inlclude removing school crossing patrols from routes considered “safe” or where other pedestrian facilities could be installed in order to save GBP1.1m.

References

1. ^ cancel the northern leg of HS2 (inews.co.uk)
2. ^ [Section] 114 notice (inews.co.uk)
3. ^ Birmingham City Council’s also filed a 114 in September (inews.co.uk)
4. ^ cuts to public services (inews.co.uk)