Liverpool Council has more than £200m in outstanding debt that it does not expect to recover.
As the local authority moves ever closer to finalising its budget for the next financial year, a statement on the strength and viability of its plans by its own chief finance officer has indicated how much money the council has lost out on over previous years. In his assessment of the robustness of the budget estimates for 2023/24, Ian Duncan, interim chief finance officer wrote how Liverpool Council has set aside more than £270m to “cover the cost of known liabilities of previous years.”
Mr Duncan’s report said “by far the largest amounts” are for bad or doubtful debts. This amounts to almost £230m, according to the officer’s analysis, that Liverpool Council either must write off or does not expect it will get back.
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The document said: “It is good practice to keep under regular review the need to write off bad debts, but this does not appear to have been done for some time. Consequently, the city council has some extremely old debt on its books, and it will be necessary to bring forward reports to formally write off debts.”
Last week, the city council confirmed its final budget proposals for the next financial year following receipt of a government settlement just before Christmas. As a result, the amount the city needs to save stands at £49m rather than the eye-watering £73m previously feared.
Council tax could go up by almost 5% to help plug that gap but some of the more unpalatable plans such as cuts to benefits services and One Stop Shops have been spared.
Failed collection of council tax and business rates have contributed to Mr Duncan’s analysis of the council’s bad debt position. His report said the city’s share of business rates income has been set at £171m.
It said: “For each 1% not collected the cost is approximately £1.711M in lost income to the City Council. While these estimates are robust the City Council does have a low collection rate in comparison to other core cities, therefore significant focus of the Finance Improvement Plan has been placed on improving income collection and recovery.
“A strengthened debt management policy was approved in 2022 to support this.” Reacting to Mr Duncan’s assessment, Cllr Richard Kemp, leader of the opposition Liberal Democrat group, said: “The city council has historically had appalling collection rates.
“I’m glad officers are looking at these debts but we need to make sure systems are in place to make sure new debts don’t replace old ones. You’ve got to be on top of debts.”
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