A council in the north west has said it is facing potential bankruptcy – blaming the “devastating” impact of Rishi Sunak’s decision to scrap the HS2’s northern leg.
Cheshire East council revealed that it would have to write off £11m spent on preparing for the aborted high-speed rail project.
The Independent first revealed in September the radical move by Mr Sunak and his chancellor Jeremy Hunt to ditch the Birmingham to Manchester link.
Council bosses and business chiefs had warned the government of the devasting impact on investment, and the danger money already committed to the project would be lost.
Cheshire East council revealed that around £8.6m of the money earmarked for phase 2 of HS2 was borrowed, and would have to be found through budget cuts.
A report cited the “direct and devastating impacts” of the end of the rail project, and said it was seeking “fair and equitable deal to compensate for the losses to the council and the opportunity cost to the borough”.
Huw Merriman has agreed that a “dialogue between the council and government would continue” after meeting the Labour leader of the council Sam Corcoran.
HS2 site at Birmingham, where the project will now end
The Tory party’s group leader on the council Janet Clowes said there was “very much a cross-party Cheshire East remonstration with government” about the impact of the move.
The council has outlined a £18.7m budget black hole, and announced moves to shut its HQ, slash library opening hours and bring in new bin charges.
It comes as councils have warned Mr Sunak of a surge in effective bankruptcies across the country, unless he makes a last-minute intervention to boost next year’s financial settlement for local government.
A letter from council leaders to the PM, highlights an imminent threat to financial sustainability and support for the most vulnerable adults and children.
The Special Interest Group of Metropolitan Authorities (Sigoma) – which represents 47 councils in some of England’s most deprived areas – criticised the government’s proposals.
Sigoma said the overall allocation of £64bn from Michael Gove’s levelling up department will add about £4bn to budgets in 2024/25. This annual rise of 6 per cent “is not nearly enough to fix the financial situation councils find themselves in”, it added.
The group identified a funding gap of at least £1.5bn in adult social care next year if support is maintained at current levels, meaning the overall extra £1bn allocated for these services “will do little in the face of rising demand”.
The letter said it is crucial that funding elements increased in line with inflation must be based on the consumer price index figure for September of 6.7 per cent.
The letter, signed by Sigoma chair and Labour leader of Barnsley Council Stephen Houghton, added: “Without this support, as we head into next year, the current proposals by the government will see a surge of S114 [bankruptcy] notices.”
A total of seven councils have issued at least one such notice since 2020, three of which were issued this year. Nottingham City Council issued its second declaration of bankruptcy last month. The council has proposed cutting more than 500 jobs as it faces a £50m budget gap.
A levelling up department spokesperson said it estimated that £64bn will be made available and said councils “will see, on average, an above-inflation increase in the funding available to them next year”.
The government added: “Councils are ultimately responsible for the management of their own finances, but we stand ready to talk to any council that is concerned about its financial position.”
