The Isle of Wight Council is not heading for bankruptcy, its finance lead has said after members faced 'significant financial challenges' while drawing up its spending plans for the year ahead.

The Alliance Administration recently announced its budget plans for the Island with a 4.99 per cent council tax increase for residents.

Among spending plans and saving initiatives, it is also proposed the authority heads into the next financial year with a £1.2 million structural deficit, which will then have to come out of the council's reserve fund.

Answering to the authority's scrutiny committee last night (Monday) over the administration's budget proposals, Cllr Ian Stephens, the cabinet member for finance and housing, said they had tried to be pragmatic with diminished funding and he would not forgive anyone for saying the authority was a "sinking ship" heading for bankruptcy.

He said: "The financing of local government is a concern nationally. ... We are living in challenging times, and we could do with more money, but it is not helpful for people to say we are backs against the walls or going under.

"We are not near a section 114 notice through the skill and prudence of our staff and members not being outlandish with what we are trying to achieve.

"We have a steady ship at this moment in time and are heading in the right direction."

Cllr Stephens said the Alliance had bought forward savings to alleviate the deficit further and noted the financial forecast put forward in the next three years would bring the deficit down to zero.

The director of finance, Chris Ward, said officers always have a rolling forecast of the authority's finances and while it may show a structural deficit this year, moving ahead to 2025, the council will have a structural surplus of £2.9 million.

While the council has not received any confirmation about whether the additional £3 million given to the Island this year will continue, Mr Ward says that money is part of his forecast and if necessary, will continue to campaign for the funding.

Concerns were raised about the amount of 'wiggle room' the authority would have in its reserves moving forward, with only a gap of £2.9 million before the council is automatically issued with a section 114 notice, which effectively declares itself bankrupt.

Mr Ward said the council is stable but admittedly fragile. Overall, he said, the budget is robustly based and has provisions for potential risks — including a £5 million Covid legacy contingency and £4.2 million corporate contingency.

Opposition groups will have a chance to present alternative budgets and amendments at the full council meeting on February 28, when the final figures will be set.