Does an S114 really spell electoral disaster?

This year's election is ramping up to be a make-or-break contest for the Conservatives, as the party faces many tight races in unitary and district councils. One possible challenge facing the party is Thurrock, a Conservative authority in deep blue Essex, but lying in the deep financial red. Conservatives have led the council since 2016 with an overall majority since 2021.
 
The recent headache pertains to the fact that in December Thurrock issued a S114 order, otherwise known as declaring effective bankruptcy. The effect is that all discretionary spending is stopped.  For years, administrations undertook several attempts at business investments to remedy finances, including investing £650m in solar farm deals and £94m in a flawed credit company. But these decisions exacerbated the council's pre-existing debts and inflated the council's deficit to £500m.
 
The authority has borrowed over one billion pounds from other councils and has had to accept increased government oversight. The council Chief Executive was forced to resign and the publication of a Best Value Inspection Report by Essex County Council has been delayed.
         
Since then, the government's frustration at Thurrock's slow recovery has only grown with the Department for Levelling Up, Housing and Communities removing decision-making powers and appointing the former chief executive of Sunderland City Council, Dr Dave Smith, as managing director commissioner to address the council's debts of £1.3 billion.
 
As we approach the elections, one may think the Conservatives are on course for an electoral wipe-out in Thurrock, but the electoral reality suggests it’s more complicated.
 
There have been mixed results in other S114-issuing councils. In Croydon, which issued two S114 notices in 2020, voters punished Labour, with the party losing both the new mayoral position and overall control of the council to the Conservatives.
 
In Slough, which declared bankruptcy in July 2021, Labour maintained dominance last year, only losing one seat. But Slough Labour’s position was always more secure than Croydon Labour’s. This year the authority is moving to all-outs, as several financially challenged councils have. Despite ongoing criticisms of Labour's management of council finances, the party is expected to maintain control: the demographics are in Labour’s favour and there’s a lack of unity among the Conservative opposition. This was recently confirmed when Councillor Wayne Strutton, a long-serving Conservative representative of 16 years, announced that he would run as an independent candidate, citing his disillusionment with the party for abandoning its traditional values.
 
In Thurrock, Labour leader Cllr John Kent has looked to capitalise on voters' frustration at the council's financial mismanagement by calling for a public inquiry. But when looking at the electoral reality of this election, winning an outright majority for Labour is more challenging as Thurrock runs its electoral cycle in thirds. As a third of seats will be up for grabs, Labour must defend four of their existing 14 seats and would need to gain 11 seats to claim an overall majority.
 
Meanwhile, the Conservatives are starting on higher ground and only have to defend 8 of their 30 seats. Of course, they could lose all eight seats. But when factoring in support for the existing councillors, the Independent councillors (who are, in many cases, former Conservatives) and the wider opposition to the London Mayor’s ULEZ expansion for claimed negative impacts on adjacent authorities, we would expect the party to lead a minority administration, even if voters punish them. Losing six would lose overall control.
 
Thurrock residents now receive "substantially reduced" services while having to pay 10% more in taxes to make up for the council's financial shortfall. As Labour is unlikely to win an outright majority in May and powers have been stripped from the authority to delegate on tax rates, it’s unlikely there will be any quick reversal of intervention measures. Another third is up for election next year, which will keep the pressure up for whoever leads the administration.
 
In Woking, on the cusp of issuing a S114 notice recently, a third of seats are up for election. Last year saw the Lib Dems take overall control for the first time since 1996. With the perilous financial state and a few slim majorities in the borough, Conservatives hope to make gains. However, any psephologist would note that the Tories’ decline here has been gradual – they’ve lost seats at all five local elections since 2016.
 
Meanwhile, many other local authorities will be keenly watching the results – the Government has commissioned a review of the debt levels at Eastleigh Council, officers have warned Southampton Council that they have to make big spending cuts to avoid a S114 next year, and rumours are that more than 20 further local authorities could be facing the same issue in the coming months. Other local authorities look set to exceed the levels of debt in Thurrock with Spelthorne now running at over £1billion and Woking topping £2 billion of debt – their budget plan to alleviate the risk of a S114 sees their forecast debt rise to £2.4 billion by 2026.