Hillingdon Council ‘must deliver’ £34 million in savings outlined in its budget this year or face the possibility of declaring bankruptcy due to reserves reaching a critical position. A report by the Chief Financial Officer for the council states that issuing a Section 114 Notice – councils technically can’t go bankrupt but issuing a section 114 Notice is effectively this because it means it cannot commit to any new spending – is a ‘possibility’ following years of declining reserves, overspending, and under saving.
Despite this, Council Leader Councillor Ian Edwards remains optimistic that the Local Authority (LA) can deliver the savings needed to avert a crisis. He told the Local Democracy Reporting Service (LDRS): “I believe and trust in our officers that if they say they can deliver this, I believe they can deliver it.
“As a consequence of the setting this saving target of £34 million, we are able to quite rapidly turn around the situation.”. Since 2010, Hillingdon Council has made savings averaging £13 million per year, more than double that figure is now required for 2025/26.
Council needs to understand ‘overspending is unacceptable’. The damning report states the council has been ‘heavily reliant on the drawing down’ of the now ‘extremely low’ reserves to cover day-to-day costs, something officers have warned is unstable. Reserves fell by 25 per cent in 2023/24, and are projected to drop to £20.3 million next year, a loss of £41.7 million in four years.
The report states that the culture within the council needs to change to one where ‘overspending is unacceptable’. It goes on to say there has been an ‘optimism bias’ within the authority that hasn’t met the promises of several budgets. These concerns raise the possibility that if savings are not met this year, the council may need Exceptional Financial Support from the government. The report states: “Government will be reluctant to provide exceptional financial support mid-year, and therefore were the authority to be in a position where its outgoings were to exceed its income there is a possibility that a S114 Notice would need to be issued.”.
In December 2024, the Council Leader told the LDRS that Hillingdon is in a ‘sound’ position financially, and ‘not at risk’ of issuing a Section 114 notice. When asked whether this was misleading Cllr Edwards said: “I still do believe we are in a sound financial position, and we are not at risk of a Section 114. The budget shows that we are not at risk.”.
Hillingdon Council has been an authority that prides itself on low taxes and charges for residents, something the report describes as ‘contributing to financial challenges’. This has led to the need for hard decisions that will impact services in a way councillors strove to avoid, according to the report.
Cllr Edwards said: “I’m only responsible for decisions that we’ve taken. We’re very proud that the council was able to keep council tax down for many many years under the predecessor, and actually provide the benefits to our elder residents. What is a failing is governments failing to acknowledge the demands on a borough like Hillingdon.”.
‘Governance failures and poor oversight’. Another damning finding from external auditors was that the council ‘lacks proper governance structures’ and uses ‘poor quality information when making decisions’. The report states: “The council does not have proper arrangements in place to identify and manage risks to its financial resilience.”.
This poor information and outdated systems are said to have made it increasingly difficult to make sound financial decisions or to track spending. LBH (London Borough of Hillingdon) moved towards a new system for financial management in attempts to modernise, however this was ‘poorly implemented’. Cllr Edwards said the council is moving rapidly towards digitising to avoid these issues in future.
The report also flagged concerns about the Hillingdon’s financial transparency, particularly its use of ‘netting’ and ‘amalgamation’. Netting means offsetting income against spending, which can make financial pressures seem smaller than they are. Amalgamation is when different budget lines are merged, making it harder to track where money is being spent.
These practices have made it difficult to understand the true nature of the council finances. Cllr Ian Edwards told the LDRS: “We need to be more transparent. One of the earliest demands I made on the new Corporate Director of Finance was to improve financial reporting to Cabinet, because frankly it has been rather weak.”.
The report also cited a ‘past culture where service areas did not have proper responsibility and accountability for their budgets’ as having made financial management a challenge for Hillingdon recently. Cllr Edwards said: “The transparency has to improve, he [Corporate Director of Finance, Richard Ennis], knows that, that has been a requirement of him set by myself and cabinet. But there also needs to be more ownership by very senior directors of their own budgets and budget positions.
