Gove sets out plans to bolster intervention at Nottingham in “minded to” letter

The Secretary of State for Levelling Up, Housing and Communities is minded to send commissioners into Nottingham City Council in light of the council's decision to issue a section 114 notice and a series of damning reports on the council's governance and financial position.

In a letter to the authority's chief executive, Mel Barrett, the Department for Levelling Up, Housing and Communities (DLUHC) said Gove had concluded the council was not meeting its best value duty under Part I of the Local Government Act 1999.

Gove wishes to appoint three commissioners, including a lead commissioner, a commissioner for finance and a commissioner for transformation, subject to representations received.

The council has until 2 January to make representations concerning the proposal.

If implemented, commissioners will replace an "Improvement and Assurance Board", which was first appointed in January 2021 and has since issued four reports about the council.

Alongside the announcement of Gove's intentions to escalate the intervention at the council, the DLUHC published the board's third and fourth reports yesterday (13 December).

The fourth report – issued before the council’s s114 notice – reveals that the board had raised serious concerns about the council's financial position despite "very substantial mitigating actions" during the lead-up to Nottingham issuing its s114 notice.

The panel, which is chaired by Sir Tony Redmond, said the forecast for 2023/24 showed a deteriorating "rather than an improving or at the least, stabilising financial position".

It noted that the council's projected year-end overspend at period four monitoring is £33 million, of which £22 million relates to social care.

"This is extremely disappointing as the position has deteriorated from the previous period forecast of £26 million despite very substantial mitigating actions being put in place," the report said.

The board said it recognised external pressures facing the whole sector but voiced particular concerns about senior managerial "grip with fundamental responsibility and accountability to constrain spending within the departmental budget set for the year".

It complained that there was "not the evident pace and substance of action plans in response to a seriously worsening position within directorates", especially regarding social care.

It also claimed there "remains an ineffective culture of budget accountability departmentally and corporately".

The board warned that poor quality budget forecasting – "especially" but not only in adult and children's social care – could mean that the £33 million forecast overspend for the year could be "significantly understated".

The significant increase in overspend for 2023/24 also "markedly" widened the gap for 2024/25 to at least £50 million, according to the board’s report.

The council had failed to provide convincing evidence of being able to take and implement fundamental decisions about the size, scope and focus of its operations to maximise chances of financial stability, the report added.

According to the report, a 'planning machinery' had been implemented by the board, which was designed to challenge duties and powers across all the services – but "confidence levels, are perhaps, not high at this point" concerning the programme's results.

The council's ability to deliver change agendas to which it had already committed was also criticised.

"In particular, the council's major transformation programme – the fundamental pillar of its medium term financial strategy – is set again to undershoot significantly against the planned savings target," the report said.

The document did note that governance arrangements were being improved in places. It said that a review of decision-making had been carried out, and "there is much evidence that the process itself has been improved in terms of clarity of roles and streamlining of leadership meetings including the Executive Panel".

It also highlighted an increased awareness of the need for members and officers to observe the council's officer/member protocol and that the ambiguity relating to some roles was being eliminated.

However, the board ended the report noting that while some progress had been made, "there remain serious concerns about the failure to address particular weaknesses in finance, transformation and the underlying culture of the organisation in respect of governance and the workforce".

It said: "The current service pressures which the council is facing are acknowledged but the pace of change remains unsatisfactory. The financial resilience and sustainability of the authority is clearly at risk and this must be tackled as a matter of real urgency.

"These shortcomings clearly undermine the potential to deliver a successful transformation of the council's structure, organisation and its potential to deliver best value in service provision. The [board] remains of the view that effective and efficient ways of working are not being comprehensively applied. The changes so far are inadequate.

"The corporate leadership, both members and officers, must correct these shortcomings and be afforded the highest priority because there is now no scope whatsoever for any further slippage in performance against the IAB instructions."

Responding to the Government’s announcement, Council Leader, Cllr David Mellen, said: “Clearly the appointment of Commissioners would be very disappointing and not something that that we would want to happen. Any decision that reduces democratic accountability, however limited and temporary this may be, should not be taken lightly.

“The council has already made progress on a number of the improvements expected of us by the Board and the Government. In particular, we had set a balanced budget and medium term financial plan in March prior to the soaring inflation, high energy costs and increased demand for services supporting vulnerable people that have severely affected the finances of councils up and down the country.

“These pressures have meant our budget is overspent this year leading to a section 114 Report being issued by our Chief Finance Officer, which has clearly been a factor along with recent reports from the Improvement & Assurance Board, in the Government’s announcement that it is minded to appoint Commissioners.”

He added: “Although not the cause of the overspend in the current year, we know there have been specific issues in Nottingham due to decisions made in the past which have affected the council’s financial reserves and resilience.

“The current situation for Nottingham and a great many other authorities is very challenging and in much part caused by underfunding. There will continue to be difficult decisions that have to be made. But we are committed and determined to do what it is right for the city and its residents.”

Chief Executive Mel Barrett said: “Although we have previously said that our strong preference was to continue working with the Improvement and Assurance Board, we are committed to working effectively with whatever arrangements Government put in place, so that the intervention can be as successful as possible in as short a time as possible. 

“While a lot of progress has been made, we need to go further and faster to consistently demonstrate we are providing Best Value for local people and we will ensure we work effectively with the Commissioners.”

In a Levelling Up, Housing and Communities Committee session last week, Gove insisted that Nottingham’s financial position was the result of "systemic problems with leadership and governance".

"I don't believe that it is the fault of central government at all," he added.

This was despite the council’s claim that it had issued its s114 notice because of the rising costs of its children's and adults' social care services, homelessness.

Adam Carey