External auditors tasked with inspecting Halton Council's books have raised 'serious concerns' over its finances, claiming the authority has not shown ‘sufficient urgency’ in dealing with problems they had previously identified.

Grant Thornton have written to borough Chief Executive Stephen Young citing a number of areas of concern with the council’s financial situation.

These include the council only having £11.5m of usable reserves, but being forecast to overspend £20.4m this year - which could mean it is unable to set a balanced budget next year.

The letter said the council had begun a transformation programme which it hoped would deliver savings of £4m this year, but is currently forecast to make zero savings.

The letter said: “The programme is currently being rescoped despite having been established over two years ago, with benchmarking exercises being repeated and a new member governance board set up in July. We understand that member governance was established in July 2024 but was not expected to meet until September 2024, and there is no officer board at a senior level to drive programme management."

The letter said budgets for temp agency staff were also a 'significant factor' in overspending. It said: “In 2023/24 the council spent £14.3m on agency fees, an increase from £13.6m in 2022/23. The council did not make any allowance for the overspend on agency in 2023/24 in the 2024/25 budget, setting the expectation that agency costs are covered by departmental budgets.” It added: “The council is also maintaining its £5m contract with (staffing agency) Matrix for agency costs so it is unclear how significant savings will be achieved.”

It said the council’s forecasts also show the Dedicated Schools Grant (DSG) - ring-fenced government cash that provides each local authority with an allocation of funding for schools and services for pupils - deficit rising from £2.9m in 2023 to £33.9m by 2028. At the moment, the deficit is not included on the council’s books because of a government ‘statutory override’, but like with all local authorities, this is due to end in March 2026. The letter said the deficit could be more than the council has in reserves and presented a ‘significant risk’ if the override was not extended.

It added that investment would also be required to address issues in Halton's failing children’s department following a succession of damning Ofsted reports, but said there were concerns about where this money would come from.

The letter said: “These initial findings set out an extremely challenging situation, particularly because of the low level of reserves available and the risk that the council’s reserves will be fully depleted.

"We are concerned that the council has not made sufficient progress in addressing the significant weakness we identified in financial sustainability arrangements in our 2022/23 Auditor’s Annual Report, which we presented to the Audit and Governance Committee in March 2024.

"Whilst we understand that there has only been five months since we reported and there has been disruption caused by the general election in this time, we are concerned that the council has not demonstrated sufficient urgency in taking control over these issues."

In a worst case scenario when councils can not balance their budgets they can issue a section 114 notice, an emergency measure which means it cannot make new spending commitments until a new budget is passed - one which usually introduces more cuts and spending reductions. Once considered a rare and extreme measure, according to a Local Government Information survey, 51 per cent of councils are likely to issue a section 114 notice in the next five years. 

Cllr Mike Wharton, Leader of Halton Borough Council, said: "Like many councils across the country, Halton has been forced into this dire financial position as a direct consequence of the last government’s decision to cut Council funding for more than a decade.

"This situation has been exacerbated by increased costs, coupled with a rise in demand for our services, as our residents face greater hardship with lives that have become more complex.

"We are working at pace to tackle the current position, focusing on transformation, bringing our costs down and delivering vital services to the right people at the right time.

"However, we will continue to support our residents but recognise that we will have to make even more major changes over the coming months and years."