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File image of school classroom(Image: PA)
Bristol City Council faces a “ticking time bomb” and could go bust within 10 months if the government does not extend a deadline for it to plug a black hole in the schools budget, it is feared.
A huge deficit has built up, mostly because the organisation has had to spend more money than planned supporting youngsters with special educational needs and disabilities (SEND).
The government has given the council special permission to carry it over each year, called a ‘statutory override’, but this expires at the end of March 2026, with no indication either that it will be extended again or that the required funding for many local authorities in similar situations, totalling billions of pounds, will be provided by Whitehall.
That means Bristol City Council could face having to find a forecast £63million to pay it off, on top of any other cuts to set a balanced budget.
Cllr Jonathan Hucker (Conservative, Stockwood), a qualified accountant, said this raised the prospect of the organisation effectively having to declare bankruptcy.
He said: “I am very worried about the deficit.
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“It is the most critical financial issue that the council faces.
“If the government does not act, it is likely that the council will go bust at the end of this financial year.
“It is as serious as that.
“In order to avert this cliff edge, the government would need to either fund the deficit or extend the statutory override.
“It is very unlikely that the government will fund it.
“The statutory override will expire in just 10 months, and currently there is no indication from the government as to whether it will be extended.
“It is a ticking time bomb.
“To withstand such a major financial shock would be difficult at the best of times.
“However, the council’s financial sustainability has been seriously compromised by the £80million hit to reserves arising from the disastrous Colston Hall refurbishment project.”
Cllr Hucker told the council’s audit committee on Thursday, May 29: “I don’t wish to sound too alarmist but if the statutory override is not extended and there isn’t any other mechanism put in place then there’s a very real possibility the council could go bust.”
Bristol City Council finance director Andy Rothery replied: “In terms of any clarity from the government at the moment, there is nothing on record in terms of the continuation of the statutory override.
“I’m sure the government will be thinking carefully given the full balance nationally that goes into the billions in terms of deficits on councils’ balance sheets.
“So the government will be thinking carefully about the risk of not continuing the statutory override.”
Mr Rothery said the Department for Education was conducting a major review of SEND funding.
Barrie Morris, director at the council’s external auditors Grant Thornton, told the meeting: “There needs to be a national solution to this.
“We can’t be in a position where there is a negative balance sheet so we would expect there either to be additional funding to remove the need for that statutory override or to allow the arrangement to continue or some other solution which nobody has communicated yet.
“But we can’t be in a negative balance sheet position.”
Cllr Hucker said: “There doesn’t appear to be a solution in place and there is less than a year to go.
“I would be amazed if central government didn’t come up with some sort of solution to this because it affects many councils but it is a very significant variant of uncertainty, and really central government need to provide an indication as to the way forward on this.”
A report to the committee outlining the risks facing the local authority said that if the override was not extended then the deficit in the schools budget would need to be added into the council’s main general fund, which pays for day-to-day services.
It said: “This could result in the council having insufficient reserves to continue normal operations and that would then require severe remedial actions to be undertaken.”
The report said that could mean the organisation having to issue a notice declaring effective bankruptcy stating “the council is unable to set or maintain a balanced budget, the council has no prospect of setting a balanced or lawful budget, the council has inadequate reserves to meet emergencies”.
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