Gloucester City Council is urgently seeking a government bailout loan of up to £17.5 million to prevent itself from falling into effective bankruptcy. Councillors are expected to approve an application for exceptional financial support at a meeting next week, aiming to secure funds to avoid issuing a Section 114 notice.
A Financial Black Hole Uncovered
The council has stated it is confronting a catastrophic 'financial black hole' and cannot commit to any new spending without the emergency loan. Finance officials have been in talks with the Ministry of Housing, Communities and Local Government for about a month regarding the dire situation.
While local authorities cannot technically declare bankruptcy, issuing a Section 114 notice would freeze all new expenditure. Securing the loan, which is requested to be between £12.5m and £17.5m, would remove the immediate need for such a drastic measure.
The full extent of the overspending has only recently become clear as the council finally brought its unaudited accounts from previous years up to date. Leaders initially discovered a £1.5 million deficit this summer, but the total problem is far larger.
Causes of the Crisis and Immediate Cuts
The authority primarily blames the fallout from a devastating cyber-attack in December 2021, which crippled its ability to get an accurate picture of its finances until now. Last year's budget showed an estimated overspend of £4.3m for 2024/25, and current projections indicate a further £2.5m overspend for the remainder of 2025/26.
Contributing factors include:
- Unrealistic projections for revenue income.
- Reduced earnings from delays in completing The Forum development.
- Higher-than-expected borrowing interest costs.
- Lower rental income from commercial properties.
- Substantially increased spending on IT equipment and infrastructure.
To stem the losses, the council has announced a severe austerity package:
- Terminating its lease from English Heritage for Blackfriars Priory from May 2025.
- Reducing opening days at Gloucester City Museum from six to four per week and suspending temporary exhibitions.
- Cutting financial backing for city festivals and events.
- Reducing staff in culture and community wellbeing departments.
- Increasing charges for green and multi-waste collections and raising fly-tipping penalties from next month.
- Shutting down the councillors' community funding scheme for local projects.
- Introducing a mutually agreed resignation scheme for staff.
Political Outrage and Demands for Accountability
The revelations have sparked fury across the political spectrum. City MP Alex McIntyre said he was "absolutely appalled by the findings of financial mismanagement" and the "apparent lack of care... shown towards taxpayers' money". He is pushing the government to provide emergency funding to protect local services.
Alastair Chambers, leader of the Community Independents group, branded it a "complete failure of financial control", stating: "This is financial collapse in slow motion. The so-called 'financial black hole' is no longer a hole - it is a crater."
Labour group leader Terry Pullen suspects deliberate concealment and called for accountability: "Heads must roll for this... The people of Gloucester have been let down on an epic scale and will pay the price for the council's incompetence."
Conservative group leader Stephanie Chambers described the situation as "truly shocking" and unprecedented, pressing for answers on how the authority plans to recover.
Council deputy leader and resources cabinet member, Declan Wilson (Liberal Democrat), acknowledged the "extremely difficult" decisions were necessary to protect core services. He emphasised a commitment to transparency, stating the application for financial support would "give us the breathing space we need to make changes and secure the council's future."
The council's fate now rests on the government's decision regarding the bailout loan. If refused, the issuance of a Section 114 notice appears inevitable, triggering a full spending freeze.
