Scrapping of HS2 could force Cheshire East to issue a section 114 notice

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Cheshire East Council could be forced to issue a section 114* notice following the cancellation of Phase Two of HS2.

The Council is 'seeking a fair and equitable deal to compensate for its losses along with 'the opportunity cost to the borough' following the Prime Minister's announcement in October that the Government was cancelling the HS2 scheme north of Birmingham.

According to a report prepared for the Full Council meeting on 13th December, the Council has spent over £11million preparing for HS2 and the Crewe Hub, including £8.6 million funded by borrowing.

Under local government accountancy regulations, the Council will be required to write off this expenditure which would include expensing the £8.6 million through the Council's revenue account.

As a result, the Council looks unlikely to be able to balance its budget unless they are compensated by the Government.

The report states "The requirement to fund this expenditure from revenue could therefore trigger a s.114 notice as the Council could be placed in a position where there are insufficient funds, and inadequate reserves, to manage in-year expenditure."

HS2 was set to deliver up to 5-7 HS2 trains per hour calling at Crewe station and an hourly HS2 service to London from Macclesfield which the Council says would have provided a catalyst for growth and regeneration in these towns and the wider borough - delivering nearly 5,000 new jobs, 4,500 new homes and boosting the local economy by £750m in Crewe alone.

* UK local authorities cannot go bankrupt. A section 114 notice indicates that the council's forecast income is insufficient to meet its forecast expenditure for the next year. A section 114 notice means the council cannot make new spending commitments and must meet within 21 days to discuss what do next. Most councils under a section 114 notice will then pass a new budget to introduce cuts and reduce spending.

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