Common Questions

What happens when a council issues a Section 114 notice?: The chief finance officer issues a Section 114 notice under the Local Government Finance Act 1988 when the council cannot set a lawful balanced budget. Non-essential spending is frozen immediately and the Ministry of Housing, Communities and Local Government typically appoints commissioners to oversee the authority.
Which councils have issued Section 114 notices recently?: Thurrock issued a Section 114 notice in 2022 after a £1.5 billion investment loss. Birmingham and Nottingham both issued notices in 2023. Thurrock remains under MHCLG commissioners as of 2026.Source: Lowdown
How many councils are at risk of issuing a Section 114 in 2026?: The Local Government Association found that 22% of upper-tier councils responsible for adult social care, children's services and statutory housing are balancing 2026/27 budgets only through Exceptional Financial Support, suggesting a large proportion are structurally at risk.Source: Local Government Association
Is a Section 114 notice the same as a council going bankrupt?: No. Councils cannot legally go insolvent under UK law. A Section 114 notice is the functional equivalent — it freezes non-essential spending and triggers government intervention — but councils continue to operate and statutory services are maintained.

Background

A Section 114 notice, issued under Section 114 of the Local Government Finance Act 1988, is the mechanism by which a council's chief finance officer formally declares that the authority cannot balance its budget lawfully. Issuing a Section 114 effectively freezes all non-essential spending and triggers Ministry of Housing, Communities and Local Government intervention, typically in the form of commissioners. Birmingham (2023), Nottingham (2023), and Thurrock (2022) are among the most prominent recent issuers.

Section 114 is not bankruptcy in the strict legal sense — councils cannot go legally insolvent — but it is the functional equivalent: an admission that the statutory duty to set a balanced budget cannot be met. Causes have included equal pay liability (Birmingham, ~£760 million), failed investment strategies (Thurrock, £1.5 billion loss), and rising adult social care and children's services demand outpacing funding. The Local Government Association found in its Spring Statement submission that 22% of upper-tier councils relied on Exceptional Financial Support to balance their 2026/27 budgets, suggesting Section 114s are a leading indicator of a systemic funding crisis.

Section 114 sits at the centre of the 2026 local elections narrative: councils that have issued or nearly issued notices are facing the electorate on their financial records, while Reform UK uses the notices as evidence of Labour and Conservative mismanagement.

How the World Sees Them

Reform UK

Uses Section 114 councils as campaign evidence that Labour and Conservative administrations have mismanaged public finances.

HM Treasury

EFS is described as targeted emergency support; Treasury resists framing it as normalised.

Local Government Association

Section 114 notices are no longer exceptional — 22% of upper-tier councils needed Exceptional Financial Support for 2026/27, signalling a structural funding crisis.