Government allows Northamptonshire to use £70m capital receipts to tackle deficit

The Government is to allow Northamptonshire County Council to use £70m in capital receipts to rebuild its revenue reserves and manage the financial risks to a stabilisation plan that has been drawn up.

The capitalisation dispensation would help Northamptonshire “to reduce its deficit and put it on a more sustainable financial footing”, the Ministry of Housing, Communities and Local Government said.

The Ministry has also issued its consultation on proposals for the establishment of two unitaries in the county, and published the first progress report from Commissioners Tony McArdle and Brian Roberts since they were sent into Northamptonshire.

The Commissioners’ report, written in September, revealed a projected overspend in 2018/19 of £30m against the county council’s budget in the absence of any corrective action, and a £35m unfunded deficit in the financial year 2017/18.

Northamptonshire’s Stabilisation Plan, published last month, set out the approach for addressing the unfunded deficit and a detailed plan on how to balance this year’s budget. Measures included freezing all non-essential spending with funding allocated against a ‘hierarchy of need’ in core spending areas.

Communities Secretary James 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.

“Since this report, Northamptonshire County Council has taken the positive step of agreeing the Stabilisation Plan and made significant progress appointing a new chief executive and a new finance director which has instilled a positive cultural change.

“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.”

In relation to local government reorganisation, seven councils in Northamptonshire submitted a proposal to the Communities Secretary to replace the current 2-tier system of local government with two new unitary authorities.

If implemented, this would see one unitary authority covering the area of Daventry, Northampton and South Northamptonshire while the another would oversee Corby, East Northamptonshire, Kettering and Wellingborough.

The Communities Secretary has announced that he proposes to delay elections in Northamptonshire due in May 2019 until May 2020. This follows a request from all of the eight Northamptonshire councils to do so and “will be done as soon as practically possible”.

The Commissioners, who are due to be in place until 31 March 2021, said in their progress report: “When we arrived it was clear that the authority had not had effective leadership for some considerable time – it lacked integrity and was operating without a corporate centre. It was failing to manage its activities in accordance with the established norms of a local authority. This was most pressingly reflected in its financial situation.”

In order to re-instate that integrity and establish the norms they would expect, the Commissioners have taken as their priorities: the recovery of the financial position; the re-creation of a corporate centre; and engagement with partners and residents.

Amongst other things, McArdle and Roberts highlighted how 70% of Northamptonshire’s expenditure was through external contracts for service delivery. These are being reviewed on the basis of the best opportunity for efficiency.

“There will be an undoubted requirement for contract rationalisation, re-negotiation and, in some cases, termination,” the Commissioners said. “This will be managed robustly, but with due regard to the need for the council to keep partner agencies informed and involved in any potential consequences.”

In relation to the re-creation of the corporate centre, the Commissioners said it was well documented in the previous report prepared by Max Caller (which led to their appointment) that Northamptonshire’s governance arrangements were weak.

“Sustained effort will be necessary to instil and consistently apply the principles of good governance in the work of the Council. In the first instance we are addressing the Council’s decision making structure and processes, which are cumbersome, long winded and lack focus,” they said. “Putting these right enables the platform upon which to develop better behaviours and enhanced ethical standards.”

The Commissioners added that with new senior staff leadership, changes to operating procedures, changes to scrutiny arrangements - which will have their initial impact on improving the development of the 2019/20 budget, a rebuilding of corporate services and the reestablishment of management discipline, it was their “firm belief that cultural changes are beginning”.