What does it mean when a local authority goes “bankrupt”?
Local authorities cannot actually go “bankrupt” in the way that a company or an individual can. Instead, they issue what is known as a section 114 notice. This is a report from the council’s finance officer that they believe that the authority is about to incur expenditure that is unlawful according to the Local Government Finance Act 1988.
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https://www.legislation.gov.uk/ukpga/1988/41/section/114
Expenditure can be unlawful for various reasons. But the primary reason why most authorities issue a section 114 notice is because they expect their expenditure to exceed their income for a particular financial year – which is not permitted…
