Blog: 28/01/22 - David Kitson, Bevan Brittan

Despite the temptation to write about ‘party-gate’, or commenting on the artist formerly known as the MHCLG and their much anticipated ‘levelling up’ white paper, I thought it might be useful to provide a little light relief and focus instead on a topic that is close to all of our hearts at this time of year – budget setting.

Councils will of course be well into the budget setting cycle, however what can often be a difficult task to start with can become even more difficult with local elections on the horizon for many.

As readers are aware, Councils are required by law to set a balanced budget before 11 March each year. If the budget is set after that date, this does not of itself mean that the budget when eventually set is invalid, however delay may have significant consequences. There are potentially a whole host of unwelcome consequences should a Council fail to set a balanced budget, some of which I touch upon below:

Having no lawfully agreed budget from which to finance functions is likely to mean that a Council may not be able to deliver services, putting the Council in breach of its statutory duties, and having potentially severe impacts upon service users (particularly around social care). The Council will not be able to enter into new agreements with significant financial outlay, as these would be potentially unlawful unfunded commitments. Having not set a budget, the Council would not be in a position to make a lawful decision on Council tax, and would not therefore be able to request payments from taxpayers. The Council would however be required to make payments to precepting authorities. Further, a Council is likely to be at high risk of defaulting on existing contracts, which may carry hefty financial penalties. This is not to mention damage to the Council’s reputation and the impact upon commercial confidence in the Council. The failure would also likely trigger statutory reports from both the CFO and the MO.

So what can be done to mitigate against this risk? Members must be warned in advance not only about the potential consequences for the Council, but also for themselves. Failing to set a balanced budget would not only be contrary to the Nolan Principles and the Code of Conduct, but also the fiduciary duty to taxpayers. Members may find themselves personally liable for civil or criminal action, and unable to rely on their statutory indemnity, therefore requiring them to make good any loss.

David KitsonBevan Brittan LLP
david.kitson@bevanbrittan.com