29.11.18

Government rescues ‘dysfunctional’ Northamptonshire with £70m bailout

The government has accepted a recommendation from independent commissioners to effectively bail out Northamptonshire County Council by allowing it to use the £60m gained from the sale of its HQ in order to wipe out its massive debt and fund at-risk everyday services.

In the first progress report published by the two commissioners currently helping manage the bankrupt local authority, they set out how to rebuild the “dysfunctional” council and warned that it will be unable to set a balanced budget this year.

Setting out the true scale of the problem at hand, they identified an “unprecedented” £35m unfunded deficit from 2017-18 which has been carried over to this financial year on top of the predicted £30m overspend in 2018-19 – although figures are yet to be fully confirmed by an external auditor.

“As it stands, this significant legacy deficit must be carried forward into the 2018-19 financial year, and addressed within the year. Whilst we can, and will, take such action as is necessary to restore the council’s finances to an ongoing operating balance, the requirement to find further savings to the extent necessary in order to neutralise this historic deficit represents an extraordinary challenge,” the commissioners’ report said.

“Considered against the concomitant need to maintain the integrity of critical public service delivery, it is a challenge that is beyond being met in a single year. We are compelled to the view that the finding of an alternative mechanism for addressing this legacy will be unavoidable.”

The most obvious mechanism to fix this would be reducing the deficit over a period of years rather than a single year, but this will not be possible due to the potential local government reform set to take place in the region. The alternative option would be to use available capital receipts to meet both this year’s and last year’s deficit.

Today, the government has confirmed that it will allow Northamptonshire to use up to £70m of capital receipts to balance the budget in a move called ‘capitalisation dispensation,’ which the Ministry of Housing, Communities & Local Government argues will help put the authority on a more sustainable footing moving forward.

The first progress report on the council also “re-affirms the seriousness of the situation at the council” and sets out a series of measures the commissioners have employed to restore balance to the budget and “bring about cultural change.”

As well as the capital bailout, changes are also being implemented to restore the council to a “proper set of operating principles” that can carry on into the new unitary organisations.

Lead and finance commissioners Tony McArdle and Brian Roberts reported that their priorities are to stabilise the council’s focus on financial recovery, recreate a corporate centre, and engage with residents.

But the commissioners did acknowledge that “positive cultural changes” has already started to take effect following the appointment of a new chief executive and finance director, and widespread consultations had taken place on the changes being implemented.

In response, communities secretary Brokenshire said: “Clearly, the situation in Northamptonshire is very serious. I am grateful to the commissioners for uncovering the council’s true financial position and the robust steps they have taken to improve its financial management and governance.

“There is still much to do, but I fully support their resolve to ensure the people of Northamptonshire receive the efficient, effective and sustainable services they deserve.”

The commissioners are due to be in place until 31 March 2019 monitoring progress and will continue to update the communities secretary every three months.

Brokenshire announced in a ministerial statement, alongside a postponement for local elections, that a consultation on reorganisation will run up until 25 January after councillors voted in favour of the proposals to create a unitary authority in August.

In February, the county council became the first council in 20 years to issue a section 114 notice.

The council has since issued its second section 114 notice, and in May the government appointed commissioners to be sent into Northamptonshire to help balance the books.

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