Sheffield councillors oppose government plan to plug budget gaps as “selling family heirlooms” to pay bills

Members of Sheffield City Council’s finance committee (January 23) discussed their response to a briefing document from the government, looking at easing the rules on council spending and borrowing.

At present, the proceeds from the sale of assets such as buildings must go into the council’s capital budget to pay for projects such as building new facilities or buying development land. Government ministers are considering allowing councils to use that money in the revenue budget instead, which covers day-to-day running costs.

The proposals could also allow councils more flexibility in borrowing and making investments.

Director of finance Philip Gregory said that the options would be offered to councils in financial distress following conversations with the government’s Department for Levelling Up, Housing and Communities.

The discussion is taking place against the background of government cuts in council spending and a growing number of councils declaring bankruptcy. Sheffield Council has forecast a budget gap of £61.2m over the next four years, of which £18.1m is predicted for 2024/25.

Bankrupt

The council says that it receives 29 per cent or £856 per resident less in real terms, compared to 2010.

Six local authorities including Nottingham and Birmingham have issued section 114 notices since 2021, effectively declaring themselves bankrupt. More are predicted to do the same in the near future.

Mr Gregory said: “We may well have an asset strategy that requires us to sell assets but we would do that in a considered way, we would not do that in response to a cost pressure.”

Read this: Questions over regeneration plan changes

Read this: “Unacceptable delay” in returning park area to public use

Coun Bryan Lodge said that the government is “seeing a way to try and fudge it again to try and put the onus back on to local authorities to use what they’ve got, sweating their assets and selling them off, to mask the lack of funding that’s coming through”.

Committee chair Coun Zahira Naz agreed, saying: “You almost feel like, because there isn’t any extra money or any new money, they’re almost saying ‘fine, use your capital assets to fund your general cost pressure’, and it does worry and concern me also.”

‘Dire’

Coun Mary Lea said: “It’s a bit like saying to a household at this time, suffering with the cost-of-living crisis, ‘you can’t afford your electricity, well go and sell something you’ve got in your house, sell your family heirlooms, something that belonged to your grandmother, and fund it from that source’ and that’s what they are saying to local authorities, particularly those who are in dire straits – ‘go and sell something’ – but you might want to use it in the future or years from now.”

She added: “This has been going on since 2010, when we’re cutting, cutting, cutting, and we’re in this dire situation.”

Coun Mike Levery said it was like a fire sale: “If you’re in a financial position where you have to sell your assets off, you do not get the true value and never will, and this isn’t a good way to go about things.

“The last thing we want is a fire sale in this council because if we’re going to sell assets, we’re going to sell them at the market value and not be undercut by the fact that we’re short of cash.”