Gloucester City Council is on the brink of financial collapse and is preparing to request an emergency bailout loan of up to £17.5 million from the Government to avoid effectively declaring bankruptcy.
At an upcoming Cabinet meeting, council leaders are expected to approve a formal application for exceptional financial support, seeking between £12.5 million and £17.5 million to prevent issuing a section 114 notice. While councils cannot technically declare bankruptcy, a section 114 notice halts all new spending commitments, crippling council operations.
Finance officials have been in discussions with the Ministry of Housing, Communities and Local Government for about a month, seeking assistance as the council grapples with a serious budget shortfall. The full extent of the financial difficulties has only recently come to light after delayed external audits of previous years’ unaudited accounts.
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The council attributes much of its financial crisis to the fallout from a cyber-attack suffered in December 2021, which delayed a clear financial overview. Initially, a £1.5 million deficit was identified last summer, but ongoing reviews reveal a much larger problem.
For the 2024/25 fiscal year, the council faces an anticipated overspend of £4.3 million. Current budgets project a further £2.5 million deficit in 2025/26. These overruns stem from unrealistic revenue targets, delays in key projects like The Forum development, increased interest on borrowing, reduced rental income from commercial properties, and soaring IT infrastructure costs.
In response, the council plans tough cuts including ending its lease of Blackfriars Priory from May next year due to unsustainable running costs, reducing City Museum opening days from six to four per week, pausing temporary exhibitions, and cutting financial support—and staff—in cultural and community wellbeing teams.
Waste fees will rise, fly-tipping penalties will increase starting next month, and the discretionary councillors’ community funding scheme will close. A voluntary staff resignation scheme will also be introduced to reduce workforce costs.
Local politicians expressed outrage at the scale of mismanagement. City MP Alex McIntyre condemned the financial oversight as “appalling” and is pressing the Government to provide emergency funding to protect local services.
Community Independents leader Alastair Chambers described the crisis as a “complete failure of financial control” and a “crater” rather than just a “black hole,” highlighting weak governance and poor leadership.
Labour group leader Terry Pullen called for accountability, stating “heads must roll” following “gross financial incompetence.” He warned of job losses and service reductions and accused council management of misleading financial reporting.
Conservative group leader Stephanie Chambers called the situation “truly shocking” and vowed to seek answers and ensure taxpayer interests are protected amid concerns over the recovery plan’s viability. She cautioned that without government bailout approval, the council would have no choice but to issue the crippling section 114 notice.
Council deputy leader Declan Wilson acknowledged the “extremely difficult” but necessary decisions to balance the budget and safeguard essential services. He emphasized that obtaining the emergency loan would provide crucial time to implement recovery measures and secure the council’s future.
The coming weeks will be critical for Gloucester City Council as it navigates unprecedented financial challenges, seeking government support to avoid an unprecedented fiscal crisis that could severely impact residents and services.