Immediate action needs to be taken to stave off the threat of Wolverhampton City Council becoming "effectively insolvent" in 2015/2016, cabinet councillors will be told tomorrow (Wednesday 8 January ).

A report to tomorrow night's cabinet meeting, prepared by assistant director for finance Mark Taylor, describes "the most challenging period that the council has ever faced".

Mr Taylor will tell councillors that the extent of savings the authority needs to find now stands at a predicted £123 million over the next 5 years.

This figure has increased from the £98 million reported last October and is largely a direct result of the Government's recent announcement on council funding covering the next 2 financial years - which in Wolverhampton's case means further significant reductions.

Wolverhampton's financial plight is in common with many other councils across the country.

Assuming the Government goes ahead with its intended funding reduction for Wolverhampton in 2015/2016, it would mean that the grant monies given to Wolverhampton will have reduced by £147 million - which is more than half (52%) - in real terms compared to 2010/2011.

The cabinet will be told that with this new huge savings requirement the total cuts needed over 5 years is £123 million, £31 million of this needs to be achieved this coming financial year, which means large scale budget cuts - over and above those already announced - need to be identified, approved and implemented as soon as possible.

Not achieving this level of savings in the next financial year and in future years would force the council to exhaust its reserves and become insolvent.

The council is already consulting on 165 savings proposals which it revealed in October, but these cuts will now need to be deeper and happen faster to cope with the worse than expected financial position.

The action that the cabinet will be asked to approve tomorrow night includes:

  • immediately stopping all expenditure by council departments for the remainder of this financial year on everything which is not absolutely essential
  • accelerate the implementation of some of the 165 savings proposals - which are currently being consulted on and subject to the outcome of that consultation - to bring forward a minimum of £4 million to take effect in 2014/2015
  • identify a minimum of £5 million of new savings proposals or an increase in the value of the existing savings proposals to take effect in 2014/2015
  • identify a minimum of £10 million of new savings or increase in the value of the existing 165 savings proposals, subject to consultation, to take effect in 2015/2016
  • that a report be presented to cabinet to change the terms of the council's redundancy policy to statutory minimum.

Councillor Andrew Johnson, the council's cabinet member for resources, said: "When the Government made this announcement just before Christmas, I warned that it put this council in a position where we could struggle to provide essential services such as caring for the elderly or emptying bins.

"Regrettably, now that our finance people have had time to analyse the impact of the Government's 18 December announcement in detail, I have not changed my view.

"We are now realistically looking at the prospect of becoming insolvent unless we make very deep and very fast cuts to address this enormous budget deficit which has been forced upon us by Government.

"The report that will be presented to my cabinet colleagues tomorrow evening makes for very grim reading.

"The fact is that we have already announced 165 savings proposals which we are consulting on now and it is fair to say many of them have not gone down well.

"The brutal truth is that this situation is going to get worse because these savings already identified don't go anywhere close to addressing the huge deficit we face. So my message to the people of Wolverhampton is unfortunately a very tough one - more cuts are on the way.

"This Government is proposing to reduce the funding it provides to Wolverhampton by what will amount to more than half the level it was at when it came to office in real terms. We have been treated very unfairly compared to some councils in wealthier areas of the country.

"You simply cannot lose that much money without it having a devastating effect on services and jobs.

"None of us want to be cutting services and we share the anger people have shown towards those proposals we've been consulting on. Sadly more pain is to come because this Government continues to slash Wolverhampton's resources."

  • released: Tuesday 7 January, 2014