Section 114 notices — the closest thing to municipal bankruptcy — piled up between 2018 and 2023, then stopped. What changed was not council finances: a record £1.5bn in emergency government support for 2026/27 alone is bridging the gap, and the next cliff-edge, a special-needs funding deficit heading for £5bn, was deferred to 2028, not solved.
A section 114 notice is a report a council's chief finance officer is legally required to issue the moment they believe the authority cannot balance its budget for the year, under section 114 of the Local Government Finance Act 1988.1 It halts new spending outside legal duties and forces councillors to meet within 21 days — it is not a bankruptcy in any legal sense, since UK councils cannot be liquidated, but the effect on residents (frozen projects, emergency cuts) is real enough that the media shorthand has stuck.1
English councils have issued at least 18 such notices since 1988, in two distinct clusters: a handful around 1988–2002, then a much larger wave from 2018.12 At least 11 of those notices, covering seven councils, were issued between 2018 and 2023 for the classic reason — an authority could not set a balanced budget — culminating in Birmingham (2023) and Nottingham, twice.2 Since Nottingham's second notice on 29 November 2023, no English council has issued one for that reason.2 The sole exception, Barnet in January 2025, was a narrower type of notice triggered by unauthorised pension-fund payments, not an inability to balance the books, and did not require the council to halt spending.3
The mechanism is called Exceptional Financial Support (EFS). A council facing a budget it cannot balance can ask the government for a "capitalisation direction" — permission to treat day-to-day revenue costs as capital spending, funded by borrowing or asset sales, rather than issue a section 114 notice.1 It is meant to be temporary bridging support tied to an improvement plan, not a subsidy.6
The number of councils using it has grown every year for which figures are available. Worcestershire is a representative case: its 2025/26 budget report stated plainly that "without this temporary support, the council would have been required to issue a Section 114 notice"7 — and EFS covered it again in 2026/27.7 Birmingham, still under government commissioners after its 2023 notice, drew on EFS worth up to £490m for 2024/25 alone before its leader declared the city "no longer 'bankrupt'" in February 2026, with a balanced budget proposed for 2026/27.8
The nearer-term threat to council solvency was never the general fund — it was special educational needs and disability (SEND) spending. Since 2020, an accounting rule called the "statutory override" has let councils keep their SEND deficits off their main balance sheets.9 That override was due to expire in March 2026, and the National Audit Office warned that up to four in ten councils could be at risk of effective bankruptcy once the deficits landed back on their books — a projection, not a measurement, but one taken seriously enough to shape policy.10
In February 2026 the government acted twice: it extended the override to March 2028, and it agreed to fund 90% of councils' cumulative SEND deficit up to that point, then projected at £5bn nationally — in effect writing off roughly £4.5bn of historic debt.911 The County Councils Network, representing county and unitary authorities, said the move "avoids an immediate catastrophe" but is not itself a fix.9 Deficits accrued from April 2026 onward are not covered by the write-off, and a "comprehensive solution" for what happens when the override finally lapses has been promised, not delivered.9
There is no way to measure how many councils would have issued a section 114 notice absent EFS — that is a counterfactual, not a fact, and this piece treats it as such. The £5bn national SEND deficit figure underlying the February 2026 write-off is DfE's own projection to March 2026, not an audited outturn, and could be revised once councils' accounts are finalised; the write-off amount computed here (90% of £5bn = £4.5bn) follows directly from the government's stated percentage and that projection. EFS totals are "in-principle" allocations published as agreed, not confirmed final spend, and prior-year figures have already been revised upward for some councils (Birmingham's 2024/25 support, for instance, was later reduced from £685m to £490m in official documents). Whether Barnet's January 2025 notice should count in a "no bankruptcy since 2023" headline is a judgement call this piece makes explicit rather than hides: it excludes it because the notice was issued under a different part of the Act, for a different reason, and did not require the council to stop spending.
The underlying figures — the notice count, the EFS totals, the override extension — are not disputed. What credible sources disagree on is what the two-and-a-half-year pause actually shows.
Government ministers frame EFS as temporary, conditional support tied to improvement plans, not a bailout — and point to Birmingham's exit from effective bankruptcy in February 2026 as evidence that councils under support can recover. On this view, more councils applying for help is a sign the safety valve is functioning, not that the underlying system is broken.68
The Local Government Association, County Councils Network and the sector's own treasurers argue EFS and the SEND override mask growing structural deficits rather than close them: EFS recipients rose from 18 councils to a record 35 in three years, and Worcestershire's own budget papers project its funding gap widening to £297m by 2028/29 even with support.79 On this view, the absence of new notices reflects a longer fuse, not a defused bomb.
Two threads held back to keep this a medium read.