PROOF! HILLINGDON COUNCIL APPLIES FOR GOVERNMENT BAILOUT TO AVOID BANKRUPTCY

Following on from Hillingdon Labour’s news release saying that the Conservatives had driven Hillingdon Council to the brink of bankruptcy, Hillingdon Labour has now published the evidence that the Council finances are in such a bad state that the Conservatives are having to apply for a government bailout through what is called the ‘safety valve’ mechanism.

Page 20 of the Council’s own budget report downplays the serious nature of the Council’s finances, but they have an obligation to report the basics. The Schools Budget has been operating at a deficit for some time, but now the deficit is forecast to be £38m by the end of March 2022. This deficit is now larger than the Council’s entire general reserves which are projected to be £26m at the end of March. If the Government does not approve Hillingdon’s application under the ‘safety valve’ mechanism, the Council will be forced to issue a Section 114 notice which means bankruptcy.

63. At month 7, the Schools Budget is reporting an in-year deficit of £12,657k which represents a net £5,329k adverse movement from the original budgeted position. The cumulative deficit is therefore forecast to be £38,043k at 31 March 2022.
64. At the time of writing the Council is currently in discussion with the DfE on a Safety Valve Agreement with the objective of securing conditional funding that would allow the DSG deficit to be eliminated over the five-year MTFF (Mid-Term Financial Forecast) period.
65. As in previous years the draft budget for the 2022/23 financial year will propose a transfer of funds from the schools block into high needs to mitigate an element of the growing pressure. This disapplication process will form part of the ongoing safety valve discussions.

The decision by the Government on whether to bail out Hillingdon’s significant deficit is due next month.

69. If the proposals are agreed to by the Secretary of State, they will be reflected in a published agreement and will form the basis of the DSG MTFF (Designated Schools Grant Mid Term Financial Forecast) going forward. The agreement will require the authority to implement reforms to the agreed timetable, whilst maintaining an agreed savings profile within a prescribed and robust monitoring regime. It will set out additional funding which the Department will release to support the reduction of the cumulative DSG deficit aligned to the savings profile. The achievement of these milestones Cabinet report: 16 December 2021 Classification: Part 1 – Public will be key to securing the release of further funding. The Schools Budget report will set out these proposals in detail in February

The issue has been caused by the Council failing to tackle the challenges in Special Education Needs (SEND). The lack of SEND school places means that the Council is having to send children out of Borough, which has significant costs attached, or make adaptions to other education settings. The Council also prioritised creating excess primary school places which are now being downsized again because the places are not needed. This means that significant funding has been spent on creating primary school places instead of SEND places.

Minutes from Hillingdon’s School Forum also show that the option available to the Council if the Government does not agree to the bailout is a Section 114 notice, which is bankruptcy and statutory spending only.

“If Hillingdon could not agree a plan with the DfE/ESFA, the deficit would wipe out the Council’s reserves, risking a Section 114 Notice where only urgent spending was permitted. This could have considerable consequences for all residents.” – Hillingdon Schools Forum 

Hillingdon Labour has been calling on the Council to recognise the escalating problems in the schools budget for years, but the Council have consistently failed to take action – which has resulted in the need for a bailout.

Hillingdon Labour’s lead on Finance, Cllr Tony Eginton said:

“Over the last six years, the Tories have tried to ignore the growing problem.  It is quite extraordinary that they claim to be financially competent when this deficit risks the whole council.”

The Hillingdon Conservatives are downplaying the risk of bankruptcy, which is to be expected from a Council that has declared the success of its ‘sound financial management’ over the years, but we know that it is false. They spent money in other areas, ignored the growing deficit in the schools budget, and it is now Hillingdon residents that will pay the price.

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Notes:

–       Safety Valve mechanism explanation – https://www.gov.uk/government/publications/creating-sustainable-high-needs-systems/sustainable-high-needs-systems-learning-from-the-safety-valve-intervention-programme

–       Schools Forum minutes attached – they are supposed to be published, but have not been done so since 2020 (https://www.hillingdon.gov.uk/schools-forum#Minutes%20of%20past%20meetings)

–       Council’s general reserves – Cabinet Report December 2021, Budget Monitoring Report Month 7