Northamptonshire County Council and the financial mess that they are in

By Mick Scrimshaw on February 6, 2018

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After years of financial mismanagement and problems, Northamptonshire County Council have effectively declared themselves bankrupt!

The new Section 151 Officer (Finance Director) at the council has issued a 114 Notice. This is the legal process he has to go through to announce that the County Council can no longer pay its way and cannot continue financially as they are likely to not be able to balance this year’s budget as they are legally required to do. This is the first time any council anywhere has felt the need to do this in about twenty years!

An emergency debate at the next meeting of the Full Council on 22nd February will follow, but this could now end up with the government having to step in and take over the running of the council.

Why an emergency meeting hasn’t been called before then I cannot explain, other than the Council’s leadership hasn’t been able to come up with anything to halt this mess during the last few years so it’s probably unlikely they will do so in the next few weeks.

We are now in uncharted territory and Northamptonshire County Council is now in both financial and political chaos! Resignations must surely follow.

It has been obvious to me for many years that the Council could not cope with their financial position and on behalf of the Labour opposition group I have taken every opportunity to raise this both publically and to make sure that the Conservative Administration were aware of the danger. At first they said I didn’t know what I was talking about, and then later that I was scaremongering.

There have been times over the last few years when I have felt like I have been banging my head against a brick wall, and even started questioning myself as to whether I wasn’t over exaggerating the dangers. It seems not, and the results from the recent Peer Review into the council’s finances from the Local Government Association [LGA] and the Government’s response of sending a high-powered inspector into the Council followed by this latest development, shows obviously not!

Click here to read September's critical Local Government Association report - if (If you don’t want to read the whole report, the Executive Summary can be found on page 1 and 2...).

Click here to read my reporting of and analysis on the Local Government Association's report.

There are several things that have contributed to the Council’s failure, with cuts from central government obviously being an obvious major factor, but other councils up and down the country have had those cuts of between 40% and 50% too, and yet none have them have yet managed to get themselves into the financial mess NCC have, although I expect others may follow in due course if nothing changes.

One local aspect is the Council’s reluctance to raise Council Tax. Although none of us want to do that because we all understand the pressure it puts on residents and families, we are now paying the consequence which is arguably causing much greater hardship.

For many years the proud boast of Northamptonshire Conservatives was of having the lowest Council Tax of any County Council in the country. Labour have always considered that small, measured, rises in Council Tax, perhaps around the rate of inflation would be a better long-term and financially sustainable approach. It obviously has implications for the base budget and would have done away with the need to veer from one extreme to the other which is the current position with the low taxing Conservatives.

This has led them to having no choice but to respond by having the highest possible increases that they’re legally allowed to over the last couple of years. A point since publically accepted by the Council’s leader who has admitted on several occasions this was a mistake and even suggested lobbying government to remove the cap so they could put in even higher increases, although ironically in response to the 114 Notice she went on national media complaining they had such a low Council Tax base.

But Council Tax is just one issue where the decisions taken locally have added to the financial mess that Northants County Council is in. For the last five years the Council’s leadership has had an obsession with their Next Generation Council plan.

They intended to remove all services from the County Council into separate organisations, or to private companies or the voluntary sector (at the same time as cutting their funding) and reduce directly employed staff down to about 150-200 people. This notion came in for particular criticism from the LGA with them saying that senior councillors and officers didn’t even understand how it was supposed to work!

Yet for years the answer to anything and everything was that Next Generation would solve it all. It would bring savings and extra income as they could sell their services to others, although this was clearly nonsense. Who would pay Northamptonshire Couty Council to run Children’s Services for example when they have such a bad reputation in that area across the country within the sector? This is one of the reasons they still can’t get permanent social workers and need to use expense agency workers!

The only difference the whole Next Generation approach would have made is having the same people effectively doing the same jobs, at inflated salaries in other organisations, but divorced from the main Council and thereby losing the benefits of economies of scale and having less accountability to councillors and the public as a whole.

I’ve spent five years saying it was crazy but it has taken this long for the Conservatives to realise it and step away from it. In the meantime, they have spent literally tens of millions of pounds trying to set it up on consultants and management restructures. Nobody can tell me exactly how much but we estimate well over £40 million and I would welcome any cabinet member challenging that figure.

The Council’s independent auditors KPMG have for two years running issued reports with an adverse value for money assessment, the last one interestingly showing a tightrope walker on the front cover – what more clue was needed? These auditors have now been replaced by another company, as has the independent chair of the Council’s audit committee who had also been publically critical about the Council’s finances not least around the unanswered questions surrounding the move to the Next Generation Model.

Click here to read my reporting of the last independent auditor's report from KPMG.

There has also been a reluctance over the years to face the obvious financial cliff edge that was coming. For the last four years on behalf of the Labour Group I have put forward costed alternative budget suggestions aimed to offer ideas to help them. This included the absolute need to bring about revenue income from commercial investments in the way that other councils up and down the country were doing (including local Boroughs in Northamptonshire).

These ideas were described by the now Finance Portfolio holder as “socialist claptrap” even though they have now belatedly started to adopt them albeit in a smaller and slightly different way. They have also started to take on some other of our suggestions about using social impact bonds, bringing together management functions and rearranging contracts. All of this, however, is too little, too late as the current position shows.

The latest debacle has been following the opening of the new County Council’s HQ which took years of planning and cost £53m to build (I was told a couple of years ago by a senior officer that on completion it would only be worth about £38m). The whole point of this was to reduce year-on-year running costs.

However, they announced a couple of weeks ago they intended to sell it and rent it back over 25 years. This would give a cash injection now which they intended to spend over the next two years under, but they would then be left to rent the building back with the rental probably being around £3-4m a year! And is that really likely to happen in the next few weeks before the end of the financial year?

This is a very worrying time for residents of Northamptonshire and nobody really knows what’s going to happen next. Given the Conservatives haven’t been able to come up with a plan over the last few years I don’t imagine they will come up with a plan in the next few weeks.

I don’t know what’s going to happen but have recognised the seriousness of the position. Indeed, I spoke to a residents meeting just a week before the 114 notice was issued and tried to explain the seriousness by saying, “We are well past the stage where people like me point fingers at our opponents and try to blame them”. I said, “The Council was in a critical state” and I have clearly been proven right.

I suspect the government will have to come in and take control of the Council off of the Conservative leadership but goodness knows what the implications of that will be. My fear is they may want to somehow penalise the Council as a way of sending a message to other struggling Councils up and down the county and who knows how that will affect us locally?

We are also currently being subjected to the internal bickering of the Conservative party with the local MPs issuing statements blaming the Conservatives at County Hall and the Conservatives at County Hall blaming the Conservative Government and therefore the Conservative MPs. Meanwhile, we as residents are stuck in between them, not exactly a good place to be.

Please also see my Councillor Facebook page where I have discussed many of these issues and as you can imagine this has also stimulated much local debate.

Click here to go to my Facebook Councillor Page and feel free to like it to help keep updated on these and other Northamptonshire County issues.

Mick Scrimshaw is the Leader of the Labour Group at Kettering Borough Council, the Shadow Cabinet Member for Finance at Northamptonshire County Council. He has a public record of standing up for Kettering as a County Councillor for the Northall division in Kettering, Northants and since May 2015, a Borough Councillor for the William Knibb ward. He is a keen cyclist and also runs a family business with his wife.

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