Manchester council’s leader has said the risk of the authority effectively facing bankruptcy later this year is ‘increasing rather than decreasing’.
The threat of a section 114 notice - which prevents local authorities from spending money on all but statutory services - was first mooted by the town hall last month.
But Sir Richard Leese has now warned that without a ‘significant improvement’ in government funding, the council might even struggle to deliver its statutory responsibilities next year.
Reserves could be used if the latest round of funding falls short of what is needed to cover the oustanding deficit of £5.4m.
And the financial outlook remains bleak for 2021/22 when the council needs to meet the £162m in lost income from council tax, business rates and the Manchester Airport dividend.
Speaking at a meeting of his executive on Wednesday, Sir Richard said the council’s position would become clearer once the government announces its spending review in the autumn.
“We have a third package of funding and I have to say that at best it makes a marginal difference to the council’s short-term position,” he said.
“From what I can see unless there’s a significant improvement in resources available to the council over the next three years, it is difficult to see how we will be able to have a legal budget for next year that can deliver our statutory responsibilities.
“I think the risk that later in the year we’ll be in section 114 territory is increasing rather than decreasing.”
Councillors have already been told by city treasurer Carol Culley that the financial fallout from Covid-19 could affect the council's budgets for as long as five years.
Manchester and Trafford have both threatened section 114 notices, which have only been issued twice in 20 years, and most recently by Northamptonshire in 2018.
Local authorities across Greater Manchester are expecting a financial black hole of £368m even after government bailouts have been accounted for.
