Northamptonshire issues second section 114 notice

24 Jul 18

Northamptonshire County Council has issued an unprecedented second section 114 notice curbing all but essential spending, the council has revealed.

In a letter to councillors outgoing finance officer Mark McLaughlin identified a budget shortfall of £70m and indicated that the spending limit could remain in place for the “foreseeable future”.

He said the aim of the section 114 notice was to “make it clear to members of the council that it faces a financial situation in 2018–19 and 2019–20 of an extremely serious nature; with unfunded financial deficit forecast in the current year.”

The decision to issue the notice was made in discussion with the government-appointed commissioners.

Northamptonshire became the first council to issue a section 114 notice in 20 years, in February 2018.

McLaughlin, who handed in his resignation in early July, said that the projected deficit of between £60m and £70m “is a prudent figure to prompt action” and that the council “has no financial resilience”.

He added: “Given that no immediate remedy is available, it is likely that the section 114 notice will remain in place for the foreseeable future.”

An extraordinary full council meeting will now be held on 1 August to discuss a set of spending priorities in light of the budget controls.

Rob Whiteman, CIPFA chief executive, said: “The NAO’s most recent financial sustainability report points out that 10% of upper-tier authorities are similarly vulnerable to financial failure.

“That could be more than 20 councils at risk along with the essential services for several million citizens.”

Whiteman highlighted the importance of responding early to financial stress in local government and urged the government to use the forthcoming spending review to find money for adult and children’s social care.

“We also believe there is a case to accelerate and broaden reorganisation to reduce overheads,” he added.

CIPFA said it was shocked to see the scale of the council’s financial mismanagement and that service users and staff had been “let down by the collective failure of leadership”.

Council leader Matthew Golby said: “The financial challenge facing Northamptonshire County Council remains critical and the spending controls we have in place are vital to ensure we are focusing our limited funding on only the most essential services.

“We remain committed to doing everything we can to identify the savings required to reach a more stable financial position whilst ensuring those in out communities at risk of harm are protected.”

The notice means that no new expenditure is permitted, with the exception of safeguarding vulnerable people and statutory services.

Image credit: Hazel Nicholson, Flickr Images

Timeline

January 2018 – Then communities secretary Sajid Javid sends in inspector to investigate the council’s financial management

February 2018 – The council issues the first Section 114 notice in 20 years, banning all spending except on statutory services

February 2018 – The council plans to sell off their brand new headquarters to generate cash

February 2018 – Auditors warn the council’s budget may not be lawful

February 2018 – The council passes a revised budget

March 2018 – Inspector Max Caller publishes report recommending the county is split into two unitaries

March 2018 – Council accepts the report’s findings; leader Heather Smith steps down

March 2018 – Javid announces that the council will continue to make majority of decisions despite government commissioners’ involvement

April 2018 – Matthew Golby appointed new council leader

April 2018 – Leaseback agreement of headquarters is agreed

May 2018 – Council announces plans to set up improvement board

May 2018 – Council balances its books with the use of reserves

May 2018 – Commissioners are announced by new secretary of state James Brokenshire

May 2018 – Auditor’s interim report reveals potential figure of PHE grant repayment

June 2018 – Final sum of misspent PHE grant is settled

July 2018 – CEO and CFO step down

July 2018 – New CEO appointed

July 2018 – Second section 114 order is issued

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