UK councils at breaking point turn to ‘imaginative procurement’

UK councils at risk of bankruptcy are turning to ‘imaginative procurement’ in a bid to rescue their ailing budgets.

A recent survey by Sigoma, who represents the 47 urban authorities in the Special Interest Group of Municipal Authorities, discovered that a third – many in some of Britain’s most deprived areas – are experiencing severe financial strain.

Five are currently deciding whether to file a Section 114 notice this year – which confirms their inability to balance their annual budget and prevents all new spending – while a further nine said they may have to effectively declare bankruptcy next year.

Sigoma said it believed at least 12 other councils who are not part of the group were considering a Section 114 notice and warned “many councils said this was the first time they were having to consider these drastic actions due to their lack of cash reserves.”

The increased demand for children’s social care services was the most cited cause of financial pressures, followed by “sky-high inflation costs and related wage rises.” 

Stephen Houghton, Labour leader of Barnsley Council and Sigoma chair, said, “The government needs to recognise the significant inflationary pressures that local authorities have had to deal with in the last 12 months. 

“At the same time as inflationary pressure, councils are facing increasing demand for services, particularly in the care sector.

“Pay increases are putting substantial pressure on budgets, and so the government must ensure that local authorities have the additional funding they need to fully fund these pay increases or risk impacting future service delivery.”

He added, “The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left.”

Sigoma Senior Policy and Communications Officer, Sam Blakeman, told Supply Management there are several ways councils could mitigate impacts.

He said, “Councils may seek a renegotiation of existing contracts or look for options within them to mitigate costs. This might be an area where procurement could play a part. There is obviously scope within this situation for imaginative procurement working closely to understand what the council needs and what it can afford.

“We aren’t suggesting that there is any magic solution that procurement can provide, but capable officers who can communicate with providers and understand the needs of service directors thinking about how statutory services can be discharged without increasing cost, will be an essential part of the mix.”

However, he expressed the difficulties of meeting demand for social care means councils might struggle to manage the “statutory requirements” to deliver these services.

Blakeman continued, “Procuring care services is a complex and increasingly expensive activity with councils often forced into bidding wars to procure the services they need. Councils are treading a line between obtaining the most favourable terms in care contracts without forcing suppliers out of the market.”

If a council triggers a Section 114 notice, all spending stops. Only statutory services will be funded, with the council then having three weeks to respond with cuts.