Enfield Council facing ‘enormous financial challenge’ with ‘potential’ for bankruptcy

Latest warning over council finances comes after soaring temporary housing costs drive massive overspending at Enfield Civic Centre, reports James Cracknell

Enfield Civic Centre

Enfield Council faces an “enormous financial challenge” as overspending on this year’s budget is now forecast to reach £29million – with a “potential” for bankruptcy if it cannot be brought under control.

This is according to a new report which also states that the next year’s budget has been “provisionally balanced” thanks to a raft of new cuts.

The report – written by head of financial strategy Neil Goddard and due to be presented to the overview and scrutiny committee tonight (Monday 15th) – declares the council will balance its 2024/25 budget by making a “suite of savings” amounting to £7m, assuming a 5% council tax rise is also agreed by councillors next month.

The proposed cuts include £4.2m in “efficiencies” and £2.8m from “receipts and income generation” partly resulting from a general 9% rise of fees and charges. An additional cut to the council tax support scheme for the borough’s poorest households, announced last summer, amounts to a further £8.8m saving.

However, the last two years have seen significant and “unsustainable” overspending on the budget – particularly on temporary accommodation for homeless families – which has slashed the council’s risk reserve by circa £77m to leave only around £41m remaining for future overspends.

The Goddard report states that should the current rate of overspending continue through the 2024/25 financial year beginning in April “this would require a further unplanned, potentially unsustainable, draw from reserves”.

Using stark language, it further warns: “The council faces an enormous financial challenge, and it is essential that the recommendations in this report, to approve savings and make changes to council tax and the council tax support scheme are implemented in order that the council has a balanced and sustainable budget and is not subject to a potential Section 114 notice.”

Several local authorities have issued a Section 114 notice in recent years, which is the council equivalent of bankruptcy. These have included Birmingham, Croydon and Thurrock.

While poor investment decisions or other mitigating circumstances have been blamed for such bankruptcies, there is now growing concern that scores of other councils are teetering on the brink thanks to general economic and demographic pressures, plus a lack of financial support from government.

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Since 2010 core funding for Enfield Council from government has reduced by £81m (42%), with cuts of £228m made over that time. While there is a net increase in government funding to Enfield of £3.9m for 2024/25, the rise is described as “insufficient to meet all of our cost pressures” by Goddard in his report.

The council’s overspending is being driven by huge expenditure on temporary housing – following an exponential rise in the use of expensive emergency accommodation such as hotels. Goddard states in the report: “The cost pressures in temporary accommodation remain acute, despite action being taken to address this challenge.

“Therefore, in the coming months, the council will need to implement further cost control measures to protect the reserve position to smooth the impact of the demands for and cost of temporary accommodation.

“The council has lobbied for additional funding, given the exceptional impact on our financial position, the distribution of the additional £120m the government announced for homelessness prevention is much needed, albeit the allocation is unlikely to meet our demand.”

Last November, a previous financial report examining overspending, written by assistant director of finance Steve Muldoon, warned: “The in-year pressure and anticipated increase in the budget gap in 2024/25 mean the council needs to challenge everything it spends money on to find savings and efficiencies, but may also mean needing to stop services which cost money but are not a statutory requirement.

“Some difficult decisions are highly likely to be needed and only spend which is absolutely necessary should be incurred.”

While some measures have already been taken to curb council spending, including a pause on all non-emergency housing repairs, the forecast overspend for 2023/24 has since worsened and is now reported to have reached £29m. Temporary accommodation is accounting for around two-thirds of this figure, while other cost pressures include wage inflation and property maintenance.

Another compounding factor is the council’s total debt of £1.1billion, which is the tenth-highest in the country.

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