A council in one of the wealthiest parts of the UK has warned it faces potential bankruptcy due to the “devastating” impact of cancelling the northern leg of HS2.
Leaders of Cheshire East council in north-west England said the authority had spent £11m preparing for the high-speed rail link, and this would now have to be written off.
Most of this money – £8.6m – had been funded by borrowing and would now have to be funded from the council’s already-stretched revenue budget.
As a result, the council, which is a unitary authority covering Crewe and Macclesfield, could be forced to trigger a section 114 notice, effectively declaring bankruptcy, according to a report by council officers.
Nearly one in five council leaders in England have said they are likely to declare effective bankruptcy within the next year due to a lack of government funding. One in four councils in Scotland said they faced the same prospect.
Labour-run Nottingham city council last month became the fourth authority in the past year – and the eighth in six years – to declare effective insolvency.
Cheshire East council said it faced “direct and devastating impacts” from Rishi Sunak’s decision to abandon HS2 north of Birmingham.
It said these impacts were not mitigated by the government’s “network north” proposals which were released to quell widespread anger from political and business leaders over the axing of HS2.
The report submitted to a full meeting of Cheshire East council on Wednesday said it was seeking a “fair and equitable deal to compensate for the losses to the council and the opportunity cost to the borough” of Sunak’s decision.
The council, which reported a forecast £18.7m shortfall in its budget earlier this year, has already introduced a number of cost-saving measures, including charges for green bins, cuts to library opening hours and closing its headquarters.
The council’s Labour leader, Sam Corcoran, has met the rail minister, Huw Merriman, who “agreed that a dialogue between the council and government would continue”, the meeting was told.
The Conservative group leader, Janet Clowes, added that there was “very much a cross-party Cheshire East remonstration with government”.
She said: “I accept that it’s my government, if you like to put it that way, but we have a really good case to bring forward and we have a right to expect more in terms of the response that we can get as how those monies are now going to be allocated.
“Because Crewe deserves it, as does the rest of Cheshire East that was set to benefit indirectly from being the gateway to the north.”
The mayor of Cheshire East, the Liberal Democrat Rod Fletcher, said he wanted to take the “unusual step” of speaking on the issue as he was a retired railway operating manager. “I was personally devastated,” he said of the cancellation.
The Department for Transport has been contacted for comment.
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