An audit prompted councillors to ask about the risk of Brighton and Hove City Council being unable to set a balanced budget next year.
Independent councillor Pete Atkinson said that the annual auditors’ report to the end of March last year indicated that the council faced a risk of a “section 114 notice” being issued.
A section 114 notice is issued when a council can’t pay its bills or set a balanced budget and would halt council spending, unless permitted by the council’s finance chief.
Councils can’t go “bankrupt” in the same way as a business but they are required by law to set a balanced budget.
Councillor Atkinson raised the concern when the council’s Audit, Standards and General Purposes Committee met on Tuesday (27 January) when the annual audit report for 2024-25 went before members.
The auditors, from Grant Thornton, said that without “urgent clarity and decisive action” the council’s 2026-27 budget faced a serious threat of prompting the issue of a section 114 notice and government intervention.
Councillor Atkinson said: “What we’re looking at is probably being duplicated right across the country in terms of the financial problems that councils are under.”
He asked what a section 114 notice would mean – and he was concerned about the need for “significant improvement” in managing the council’s Housing Revenue Account (HRA).
Conservative councillor Anne Meadows also raised concerns about the HRA, which is funded from council tenants’ rents, because the council is building more homes while tackling a repairs backlog flagged up by the social housing regulator.
When the draft budget for 2026-27 went before the council’s People and Place Overview and Scrutiny Committees on Monday 19 January, the general fund, which covers the council’s daily spending, had a £12.4 million gap.
At this stage, the council had already put forward more than £12 million in savings.
Pressures on the general fund included the increasing demand and cost of temporary and emergency housing for the homeless.
The council’s interim director of finance and property John Hooton said that he would only issue a section 114 notice if the council could not set a balanced budget and could not manage its in-year finances.
Mr Hooton said: “The thrust of their (the auditors’) recommendations are as a council we need a really good financial plan to get us into a good sustainable position.
“They refer to needing a transformation plan and we’ve spent the last year building that plan and we’re taking that set of plans to cabinet next month (February).”
The future financial plan is looking at high-cost areas such as spot-purchased emergency housing and adult social care placements, Mr Hooton said.
Cost-cutting measures included moving council staff out of Barts House, in Brighton, to Hove Town Hall.
On the HRA, Mr Hooton said that the reserves were “ok”, standing at just over £12 million. But the council is aware that it should not “eat into that”.
The final budget proposals are due to be published on the council’s website next Wednesday (4 February), with the general fund, Housing Revenue Account and capital spending up for debate at a cabinet meeting on Thursday 12 February.
The annual “budget council” meeting – where all 54 councillors are charged with setting the budget – is due to take place on Thursday 26 February.
Lucky that BHCC have spent £7m over and above the central government fund in the disaster that is VG3.
The council are proposing to build a new swimming pool on the King Alfred site. The new pool will cost many millions of pounds. Also the proposed leisure facilities will be a lot less than what we already have. Also this new development will put the resident ratepayers into dept for years to come, as the council want to take out a loan to cover the cost of this development . I as a resident and ratepayer do not want this building to go ahead. I would prefer to save money and keep the original King Alfred building.
Yet Labour councillors continue to bury their head in the sand and refuse to challenge their Labour government colleagues about the impact Labour austerity is causing.
Instead they are willing to close libraries, make cuts to community care services, close nurseries, charge for toilets, fail to fix potholes, and make other terrible and devastating decisions which have the potential to cause real harm to residents. All rather than speaking out and being prepared to call on ministers to right the wrongs of austerity and local government funding cuts.
They are simply putting party loyalty over people and it’s shocking that so many of the administration are complicit in this harm and damage being done to our city and the people in it.
Unfortunately, councillors of any colour cannot conjure funding by “speaking out”. They are legally required to set a balanced budget, and refusing to do so simply triggers the imposition of deeper, officer-led cuts with even less democratic control. Atkinson comes across as being rather disingenuous with his question, in my opinion, perhaps you feel the same?
The real challenge is reversing long-term damage. Locally, there have been genuine failures of judgment, the amended loan by the Greens for the i360 being the most obvious alongside their reported financial incompetence. But also, the 14 years of Tory government-led austerity left little resilience. Undoing that was never going to be quick or painless.
Labour has been clear about moving away from short-term bidding pots towards multi-year settlements and reforming the drivers of demand, particularly in ASC. That does not fix everything overnight, but it is at least a credible route back to stability.
Yet the borrowing binge for vanity projects that no one wants continues as if there is no tomorrow. Every time a financial question was asked, it was glossed over or fudged. One of the most horrifying moments on the webcast was Charles Harrison’s question about why an emergency procurement for £18m to provide bedspaces for the homeless had been made to a company only three years old and worth £9k? Where was the financial due diligence and tendering process for this contract. Heads should role if this is how wreckless they are with public money. There are also rules about trading whilst insolvent if the 114 bankruptcy axe should fall.
Why would you have a tendering process for an emergency procurement, James?
What does one expect with a darn and stitch council like this one,its ego ,and those who run it are of the scale in terms of everything they do is is absolutely right,,period,how crass .
Don’t worry MUTEN will complete VG3 ,shut more roads,build more cycle lanes nothing to worry about. Potholes-not important.
You’re aware of the £8 million this council acquired through government grants specifically for pothole repair, damages which are the result of the 14 years of underfunding by the Conservative government? They actively shrank and destabilised the money available for routine road maintenance through a mix of policy choices that pushed councils into reactive, short-term fixes.
You’re right to be mad at the conditions of the roads, and it is purely down to the Tories.
What is also concerning is the fact we have an Interim BHCC Chief Financial Officer in a crisis. Why have we been without a permanent CFO for almost a year and what happens when John Hooton – former CEO of Barnet Council – moves on? Is he prioritising the council’s statutory goods and services over vanity projects or just signing one project off after another? How can he justify the massive council borrowing planned for the King Alfred and other capital projects when the city is in already in £420m debt and at risk of his own Section 114?
There is a difference between asking hard questions and implying illegality where none has been evidenced. Audit warnings are about risk management, not accusations of misconduct.
So much money is being wasted by councillors in charge, particularly Councillor Muten. Not long to go to replace them.
I complained to Hooton and the auditors Grant Thornton that the Council are fraudulently inflating assets to cover up their losses. For example they have valued the pavilion at £203 million in their books this year increased from £170 million last year and added this to reduce their deficit… Incredibly they are using the insurance value as the Valuation of the property which is clearly deceptive. They will do anything to cover up their massive salaries and the huge amount of people who are underemployed with vast salaries and pensions that you will have to pay for. The council is run for the benefit of its employees especially the high paid ones. 20 of them are over 100 K per annum if you add in their pension benefits. This has to stop.
The Pavilion is a restricted heritage asset. It cannot be sold, does not fund services, and balance sheet valuations do not reduce revenue deficits or pay salaries. If you’re alleging fraud, where exactly has a valuation been used to offset a loss?
As for the council procurement scandal, its coming soon and its going to be epic.
Hardly a scandal, James. The contract was an urgent response to soaring temporary housing costs and the growing number of households in need. Emergency procurements exist precisely because waiting for a full tender process could leave residents without accommodation, which would breach statutory duties.
Once again, you are misrepresenting the situation and don’t contribute to an informed discussion. Be better.
I would be interested to know what additional adult social care costs the council is having to pay when they do things such as invite asylum seekers to move to Brighton. Nationally these are meant to be very high and as the council is now actively lobbying to have more asylum seekers in Brighton the budget implications of this should be considered. We are obviously very short of housing already but this is an additional cost.
It’s a good question; my understanding is that the costs are covered by the Home Office, rather than the local council.