The council also revealed £25m worth of cuts will be coming to key council services
A gloomy Wallasey Town Hall(Image: Colin Lane/Liverpool Echo)
Taxpayers in Wirral will likely be paying off the debts of a government bailout of up to £40m for the next 20 years as the local authority pleads to the government for support. Finance bosses said the request was “absolutely necessary” as the council was “effectively bankrupt” with £25m worth of cuts coming in February.
This has been a significant week for Wirral Council and its future as it looks to avoid issuing a Section 114 notice – declaring effective bankruptcy. On January 14, the council’s external auditors Grant Thornton requested an emergency meeting as they are concerned the council can’t balance the books while the huge bailout request was made at a Policy and Resources committee meeting this evening on January 15.
Councillors approved requesting a bailout of up to £40m to prop up its budget over two years. The struggling council will keep a spending freeze and recruitment controls in place “to limit expenditure to only absolute essential items” for this year and next year as well as begin a voluntary redundancy process from next week to avoid compulsory redundancies down the line.
If approved by the government, a report said the £20m for this year will be used to mitigate the council’s budget black hole due to rising demand in social care while next year’s £20m would be used to “support the one-off transformation costs essential for driving service reform and operational efficiencies” as well as further social care costs.
This bailout will be repaid over 20 years meaning people in Wirral will be paying it off until 2045. Cllr Jeff Green argued the requested money needed should be reduced as much as possible but the council still needed it to address expensive redundancy payments and tackle the financial crisis.
During the meeting, it was revealed next year’s budget is expected to include £25m worth of budget cuts including redundancies as part of a council restructure and downsizing. Wirral Council leader Cllr Paul Stuart said it would inevitably impact people in Wirral as well as the local authority’s staff.
The council’s finance director Matthew Bennett said the request was “absolutely necessary” as the council had no reasonable alternative other than bankruptcy and the council’s savings relied on the council reducing the number of staff it employed telling councillors “we are effectively bankrupt.” Over the next five years, he said the council was looking at going over budget by between £70m to £80m.
While the UK government has promised to bring in funding settlements for councils over three years, he said it wouldn’t be prudent for the council to assume this would help resolve its situation. Voluntary redundancy will be offered to every employee in the council and senior officers said they were already in discussion with trade unions.
Cllr Phil Gilchrist praised the offer of voluntary redundancy calling the council “a thoughtful organisation,” adding: “The worst thing is to be in a period of uncertainty and I hope that we can get through this period without too much damage to staff morale.” Councillors sought assurances they will be kept informed going forward.
Despite calls to step aside by Wirral’s Green Party, the council’s Labour leader Cllr Stuart got support from Conservatives on the committee thanking him as well as Chief Executive Paul Satoor for their leadership. It’s not just the Conservatives either.
Taking questions from BBC Merseyside on January 15, Liverpool City Region Metro Mayor Steve Rotheram argued Cllr Stuart had only led the council for a short period, adding: “Give him some time so that he can try to work with all of the relevant agencies, with the new government and see whether we can turn this corner in the next few years.”
Mr Rotheram also criticised previous Conservative governments, adding: “That is the result of all of those 14 years of austerity coming home to bite us on the backside. We need to do everything that we possibly can so that Wirral Council don’t have to face that 114 notice but it’s looking really really precarious.”
A review of council finances is underway by the Chartered Institute for Public Finance and Accountancy while a review by the Local Government Association is expected to be published next month. Controversial decisions to cut much-loved council services may also take place over the next few months.
Councillors also approved reducing its council tax reduction scheme and starting the process to set up a framework for awarding contracts for construction and development projects to help support its regeneration plans in the borough. Officers said this would help the council avoid fees in the short term but also the possibility of making millions in the long term if other councils decided to use Wirral’s service.