Southampton councillor blasts 'abject failure' over bankruptcy risk

Councillor John Hannides attacked the leadership after chief finance officer John Harrison warned the authority could burn through its reserves by next year.

Full council approved a council tax hike of 4.99 per cent but could have to declare a section 114 notice warning of bankruptcy - triggering a restriction on spending to only essential services.

The Labour group has insisted it produced a "balanced budget".

READ MORE: Southampton City Council could go bankrupt by next year - finance chief

Speaking on Wednesday, Cllr Hannides said: “I take no pleasure in drawing attention to what is nothing other than an abject failure by the Labour group collectively.

“Our chief finance officer has been compelled to make extensive observations in this budget report because of the considerable financial risks this council now faces, described later in his report as the finances being on a cliff edge – a situation never before seen in this city. 

“Today is truly a historic day. It’s the first time we have a lord mayor presiding over a budget meeting.

“But sadly today will be remembered for the wrong reasons.

“The day in which Labour presented the most disturbing budget proposal on record – in which the worst is yet to come.

“The full extent of just how bad things have become under the watch of the Labour group is highlighted extensively in the budget report.”

Cllr John Hannides

Chief finance officer Mr Harrison warned the council's reserves could be wiped out.

In a report he said: “This would mean no cover from reserves for large and uncertain financial risks, a critical financial position to reach.

“To avoid that and a risk of government intervention being necessary, additional savings will be necessary.”

Even if the council manages to achieve its £22m plus in savings, according to the figures, it could still be left with not enough reserves to pay for services. 

The report warns "the council is spending unsustainably" and that there is an ‘unprecedented and very real prospect’ that the medium term financial risk reserve could run out ‘within a matter of months’. 

In the report, the officer said a budget shortfall of £20m had been balanced by drawing from reserves.

This would lead to a forecast of £10.3m in "unallocated balance" in the reserve.

In the senior officer's view the budget proposals are "inadequate" due to a risk of increased demand and cost of living pressures, plus the risk of savings not being made.