Frequently asked questions (FAQs) about Section 114

By law, the council is required to set and deliver a balanced budget each year, and if the council’s Section 151 Officer concludes that it is unable to meet this statutory requirement, he must issue a report under Part VIII, section 114(3) of the Local Government Finance Act 1988 (the Act).

The council’s Corporate Director for Finance and Resources has issued a report under section 114(3) of the Act in his role as Section 151 Officer to all councillors, because in his professional opinion, despite the introduction of spend control measures in July, we cannot balance our budget for the financial year 2023/24, which we must do by law.

Local authorities in the UK cannot go bankrupt as they must be supported by Government, which means that all creditors and existing contractual commitments are secured, and the council will continue to deliver services, particularly those to vulnerable children and adults. A section 114(3) report indicates that the council’s forecast resources is insufficient to meets its forecast expenditure but to be clear, the council has sufficient financial resources to meet all its current obligations to pay staff, suppliers, and grant recipients in this year.  

A meeting of all councillors must now take place within 21 days to consider the report and decide what action it intends to take. Until all councillors have met, an immediate Prohibition Period is legally required which means that all new agreements that might result in expenditure will stop, unless there is explicit written consent from the Section 151 Officer. He has initiated and will chair a regular Spend Control Board that will review all requests.

Further spend control measures are likely to be implemented following the meeting of all councillors which will then remain in place until lifted by the Section 151 Officer. It should be expected that these will remain in place for the foreseeable future.

Money can continue to be spent on:

• existing staff and payroll costs
• goods and services which have already been received
• contractual commitments (but we cannot enter into new agreements requiring a cost)

The answer above confirms that money can continue to be spent on:

• existing staff and payroll costs
• goods and services which have already been received
• contractual commitments (but we cannot enter into new agreements requiring a cost)

During the Prohibition Period the requirement to stop all new agreements that could incur expenditure applies to all council services.

This includes:

• services funded by all funding sources, including grant funding or third-party funding
• services which the council has a legal duty to provide
•  services being delivered through companies controlled by the council
• services where the council supplies funding to companies that it jointly or partly owns.

This means that during the Prohibition Period all new agreements that might result in expenditure will stop, unless there is explicit written consent from the Section 151 Officer. He has initiated and will chair a regular Spend Control Board that will review all requests.

Existing agreements and care packages that are already in place will continue to be paid during the Prohibition Period.

All existing grant agreements will be honoured. Future grant agreements will be reviewed using the spend criteria under which the council is working.

Yes. Existing contractual commitments will be honoured, and all invoices for work delivered will be paid.

This Section 114(3) report relates to the current financial year and as Council Tax is set in the annual council budget due around March 2024, no decisions have been made yet. 

All salaries and wages will be paid as normal and at the normal time. Pensions will not be affected as these are paid by pension funds external to the council. The council will continue to make contributions to the pension fund as it is required by law to do so.

Whilst existing staff and payroll costs will continue to be paid as normal, Managers will need to seek approval through the Spend Control Board for any staff expenses, overtime and other staff payments such as honoraria, in advance of the activity or expense being agreed or incurred.