One of the councils on the abandoned route of HS2 to Crewe says the impact of the cancellation could force it into effective bankruptcy.

Cheshire East Council, which covers Crewe and Macclesfield, said it had spent £11 million preparing for HS2, of which £8.6 million had been borrowed.

The money will have to be found from general revenues but the budget is already under pressure, despite a number of economy measures, and had been facing a deficit of £18.7 million even before HS2 was cancelled in October.

Councils facing a cash crisis can publish a ‘Section 114’ notice under the 1988 Local Government Finance Act, which is issued by the chief finance officer when it appears that a council’s spending will exceed its resources. The result is a halt in any new spending for up to 21 days, during which time the full council must meet and decide what to do next.

Similar cash problems have already affected other councils, including Nottingham and Northamptonshire, although their shortfalls were not connected with HS2.

Cheshire East Council said the government’s alternative ‘Network North’ plans, which are intended to use the £36 billion which would have been spent on HS2 on other rail and road projects in the years ahead, will make no difference to its plight. 

The council has been holding talks with rail minister Huw Merriman. At a meeting of the full council, deputy leader Craig Browne said leader Sam Corcoran had met Mr Merriman and they had ‘agreed that a dialogue between the council and government would continue’.

In a related development, it has emerged that Prime Minister Rishi Sunak could face legal action over the cancellation of HS2 Phases 2A and 2B to Crewe and Manchester.

New Civil Engineer reports that the campaigning Good Law Project has told the government that it is considering an application for a judicial review of the decision, which was announced by Rishi Sunak at the Conservative Party Conference on 4 October.

NCE quotes Good Law Project director Jo Maugham as saying the organisation has ‘sent a formal letter before action to Rishi Sunak threatening to challenge his unilateral decision to ignore what Parliament has enacted about HS2, cancel the project, and salt the earth by selling all the land.

‘We haven't yet formed a view about whether we will sue – we want to know whether affected Mayors and MPs are serious about their opposition.’

The Government has given a preliminary response, claiming that transport secretary Mark Harper rather than the Prime Minister was the ‘decision maker’, but the Good Law Group has pointed out that Mr Sunak used the words ‘I am ending this long running saga and cancelling the rest of the HS2 project’ in his speech to the Conference, and repeated ‘I am cancelling the rest of HS2’ in a post on his Twitter account later the same day.

Although Mr Sunak had wanted to begin reselling the land on Phase 2A to Crewe within weeks, the Department for Transport’s permanent secretary Dame Bernadette Kelly has stated that this cannot be done without a further Act of Parliament being passed first.