Halton Council could go effectively 'bankrupt' after going more than £20m over budget – unless it gets emergency help from the Government.

Council chiefs will be told on Thursday (Nov 14) that the authority will overspend by £20.642m this year but only has £11.6m in reserves, meaning it will not be able to set a balanced budget as required by law.

Councillors will be asked to approve seeking Exceptional Financial Support (EFS) from the Government so it can continue to meet its obligations, if not – and unless it can find another way to balance its books – the council would have to issue a section 114 notice.

Section 114 notices are often referred to as ‘effective bankruptcy’, and although a local authority can technically not go bankrupt in the traditional sense, it would mean the council would have to operate under severe financial restrictions and not commit to any new spending. A meeting of Full Council would have to take place within 21 days and decide the way forward, which could include more cuts.

EFS is one way of staving off a section 114. If granted, it would ease the rules around what the council can do to fund itself. Local authorities have two budgets – capital funds which it spends on infrastructure and major projects – and revenue, which funds day-to-day spending on things like wages. They are usually not allowed to overlap, but EFS would grant something called a ‘capitalisation direction’ permitting Halton to use capital cash to fund revenue expenditure.

Halton would then borrow capital money from the Public Works Loan Board (PWLB). The borrowing would incur interest and everything would have to be paid back over the next 25 years.

Once extremely rare, several councils have issued section 114 notices in recent years, most notably Birmingham, Nottingham and Woking.

The World understands the Government is looking to stave off more councils issuing section 114s, and that EFS is its preferred route for funding struggling councils in order to allow them time to stabilise their finances.

A report to the Executive Board said this year’s overspend had been largely driven by the cost of employing temp agency staff, such as social workers and care workers, and expensive residential placements for children. Another report to the council recently revealed Halton was spending up to £15,000-a-week with care providers to look after a single child.

The report to the Executive Board, said: "Ministry of Housing, Communities and Local Government officers have been made aware of the council’s financial position and will continue to be updated. Discussions have taken place regarding the process the council will need to follow in order to apply for the Government’s EFS arrangement."

Neighbouring Cheshire East recently applied for EFS and a survey by the Local Government Association (LGA) - the body which represents local authorities - found one in four English councils believe they will have to apply for EFS in the next two years

The council is also facing a stark, longer term funding picture, with a report also revealing Halton could be forced to slash its budget by £69.2m over the next four years, equating to almost half of its entire 2024/25 budget.