Northamptonshire CC has announced it will “effectively exhaust” its general and earmarked reserves in order to balance its budget this year.
The acting leader of Northamptonshire CC Matthew Golby (Con) said in a statement the council had made the “difficult decision”, as it was not allowed to use capital receipts.
Auditors KPMG warned the council on 20 February that its budget proposal was “unlawful” as the forecast income was overly reliant on the sale of public land.
The council said it plans to plug its existing forecast overspend of £16.7m with total reserves of £16.9m which had been “set aside for capital projects”. Of this total figure, £12m will be made available from general reserves and £4.9m from earmarked reserves.
“These reserves would need to be replenished in 2018-19 and so further savings will need to be identified within the new financial year,” the council said in the statement.
Cllr Golby said: “Given the fact it is not an option for us to fail to deliver a balanced budget by the end of the financial year, we are looking to make the difficult decision to use our general and earmarked reserves to negate the forecast overspend.
“This would effectively exhaust our reserves and as such really is a last resort option. It is now the only option available to us. We have communicated directly to government about this as part of our ongoing discussions about our situation.”
The Ministry for Housing, Communities & Local Government has been contacted for comment.
The recent inspection report by Max Caller found that Northamptonshire CC had effectively abandoned budgetary control in 2014.
The National Audit Office warned in a report earlier this month that 20% of top-tier councils will exhaust their reserves within five years if they continue to spend them at the current rates.