Council prepares bid for £15m government loan

A council is expected to make an application for a £15m government loan to save it from effective bankruptcy.

Budget projections for Shropshire Council suggest it will overspend by £50.746m if the books cannot be balanced. Its savings of £34.28m would not be enough to meet the shortfall.

Unless more money was found, the council said it would have to issue a Section 114 notice, the mechanism by which local authorities declare themselves effectively bankrupt.

The council, which has been in the hands of the Liberal Democrats since May, declared a "financial emergency" in September and said it would have to make "some difficult decisions".

The councillor responsible for finance Roger Evans told a meeting the paperwork for the loan application had been drawn up and he expected to submit it to the government on Friday.

The Lib Dem administration said it wanted to avoid issuing a Section 114 notice if possible.

If one was necessary, the government could take action to reduce spending through the appointment of commissioners, as it did in Birmingham when a financial black hole emerged in the city's books.

Shropshire Council said it had also been having conversations with the government about longer-term funding, to allow it to stabilise its budget.

The authority was run by Conservatives until the Liberal Democrats took control and Evans had previously said: "For a number of years now the council has been overspending its budget – a budget that was set by the previous administration."

He said the council had been using reserves to meet the deficit and there was now "none left for us to use to help us meet this shortfall".

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