Council needs to make 'significant change at pace' to avoid Section 114 notice

According to a damning new report "Cheshire East Council (CEC) needs to address a number of significant issues, the most immediate being the organisation's financial sustainability which is in jeopardy" to avoid issuing a section 114 notice*.

A Corporate Peer Challenge (CPC) has been carried out by a team of leaders and senior officers from councils across the country along with representatives of the Local Government Association. They were onsite for four days, conducted 48 interviews and spoke to 165 people, including residents, councillors, staff and partners.

They concluded that "The financial position of Cheshire East is a significant concern to the Peer Team, with the context of low reserves, historic overspending, challenging saving targets and an Inadequate OFSTED rating creating an increasingly likely position whereby the Council will be required to issue a section 114 notice."

In 2023-2024 the Council have used £11 million of their reserves to set a balanced budget and has a savings requirement of £20 million for 2024- 2025. If these savings are delivered, it will still only leave the organisation with £2.1 million in reserve by the end of this financial year.

As a result the peer team reported "In this context of low reserves, historic departmental overspends, and a lack of organisational confidence regarding the delivery of existing saving plans, if there is not significant change at pace, it is very likely that the Council will be required to issue a section 114 notice in the near future."

The following key recommendations were made, which have been prioritised on grounds of urgency, sequencing, and importance - many of the report states the Council will be able to address as "quick wins":

• Adopt a crisis management approach in responding to issues raised
• Urgently agree and recruit to the Council's Permanent Senior Leadership Officer Structure
• Engage with external challenge, support, and oversight through an externally chaired Improvement / Assurance Panel
• Promote increased compliance across the organisation through visible senior leadership for the 'basics
• Consistently apply principles of people and performance management for the year of 2024-2025
• Develop a customer focused Transformation Plan to support longer-term improvement
• Develop and agree a new multi-year Council Plan
• Urgently review the Council's decision-making framework
• Empower the Corporate Policy Committee to lead on financial recovery
• Give more time and emphasis to Scrutiny across the Council
• Improve the quality and clarity of reports presented to Committees
• Improve financial reporting mechanisms and training
• Review delivery and issues associated with the Council's new finance system
• Launch a programme of training and development for members and officers
• Adopt a corporate approach to programme and project management
• Develop a clear communication and engagement strategy to support the Council's improvement and transformation proposals
• Act on the issues identified through the LGA's Decision Making and Accountability (DMA) tool
• Consider the corporate capacity required to support the Chief Executive

A Cheshire East Council spokesperson said: "Cheshire East Council invited the Local Government Association to undertake a corporate peer challenge at the council in March.

"The peer team heard of good examples of services that are appreciated by residents and that there is a real will for improvement in the organisation among members and officers. They also recognised that the council urgently needs to focus on significant challenges, including the financial position and longer-term transformation.

"The findings very much reflect the council's own concerns about financial sustainability, growth in demand, adequacy of funding, and our plans to address those pressures. A number of council reports, over the last few months including when setting our budget for the year, have set out the council's position and approach to addressing these pressures. These reports have included those around medium-term financial strategy, transformation, application for exceptional financial support from government and DSG management plan.

"The peer challenge report provides a comprehensive view of the council that will guide our improvement journey and supports a range of developments that we already have underway. Work to address many of the recommendations is already in progress, and we are working on an action plan to set out how we will address all the recommendations, for publication in August."

Cheshire East Council are required to develop and publish an action plan addressing the recommendations in the report no later than 28 August. The draft action plan has been published as part of the agenda pack for the Full Council meeting on 17 July.

Click here to read the full report. 

* 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.