Evidence published by Hillingdon Labour this week demonstrates that Conservative-run Hillingdon Council is currently seeking a Government bailout through the so-called ‘safety valve’ mechanism.
Page 20 of the Council’s own budget report downplays the serious nature of the Council’s finances, but they are under 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.
A 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's failure to provide enough Special Education Needs (SEND) school places in Hillingdon. This failure has meant they have had to send children with Special Educational Needs to schools outside the Borough or make adaptions to other education settings; both of which have significant costs attached. 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 highlight that if Hillingdon Council's bailout application is refused by the Government, it will have no alternative but to issue 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’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 risk of bankruptcy undermines Hillingdon Conservatives' claim to ‘sound financial management’ and comes less than 6 months before the local elections.
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