What failure looks like

5 Nov 19

Northamptonshire Council’s financial collapse wasn’t inevitable. It ran out of money because it failed at the fundamentals

For almost a decade now, the trade press and, on occasion, the national media, have carried earnest and learned commentaries from many an expert, gloomily pronouncing on the sector’s impecunious arrival at the edge of the cliff – predicting the impending collapse of perhaps 50 local authorities in the foreseeable future.

We have spent a long time on that cliff edge. So far, only one authority has gone over – Northamptonshire. It did so kicking and screaming, protesting at the unfairness of the system and lamenting the fact that, although it had done everything right, it had been cruelly abandoned. 

Eighteen months on and government intervention has been seen as successfully initiating a process of repair, Northamptonshire exposed as having, in fact, done very little right, and rather than being cruelly abandoned, given every chance – which it obstinately refused to take. 

Indeed, the council proved to be not the victim of some ghastly set of circumstances inflicted upon it, but rather the first local authority in the land to bring itself down through a series of catastrophic failings of its own. 

Even at the end it didn’t recognise the reality of the circumstances it had created for itself: insolvency; diminished, often dangerous services; the distrust of partner agencies; the despair of the local voluntary sector; the sense among staff that their professionalism, dedication and effort was being traduced and betrayed; the total opposition of the county’s MPs and district councils; and the ridicule of the local press. 

Every council in the land falls out with some of these interests, some of the time. Here, however, was total desertion.

For a council that had once charmed the sector with its visionary aspirations, the end, when it came, had aspects of the hallucinatory.
The council quite genuinely believed that it had balanced its books and begun a new year with £8m to spare. It did think that the year ahead might conceivably prove tricky, but had, in reality, failed to work out that it was already over £40m in the red and was engaged in running up a further £30m that it couldn’t cover. It didn’t make a conscious choice to operate while insolvent, it was just that its operating methods had become so chaotic that it simply didn’t know that it was doing so. Northamptonshire didn’t fail because it ran out of money. It ran out of money because it failed.

It all started with a problem that quite a few will recognise. In 2013, an “inadequate” Ofsted judgment concerning Northamptonshire’s children services generated a surge in activity to rectify the situation. However, instead of taking a focused approach, a series of very expensive, drawn-out and frequently odd decisions saw the council’s reserves drained and the funds and operational base of many of its other services sacrificed, all to no avail. All of this was played out in public, marked by inspection reports, audit letters and media investigations. 

The council had a story to tell in the face of these difficulties. It essentially focused on how badly off the council fared from the national funding formula; how much it had tried to keep council tax down in line with the government’s wishes; how little it received in order to handle the growth and scale of demographic change which the county saw; how visionary it had been in setting out a brave new model of operation; how bold it was to create a state-of-the-art operating base from which to deliver quality services; and how much time it needed to prove itself.

‘The council proved to be not the victim of some ghastly set of circumstances inflicted upon it’

These arguments had an element of truth about them. Northamptonshire did fare badly under the funding formula – although others fared worse. It had a low council tax – although others had lower. And it was trying new, bold approaches – although so were others, with better risk management. The fact remains, however, that while the council was promoting and pursuing these brave new world policies, reserves were running down, services were shrinking, staff were leaving, performance was declining and time was running out. 

Checks and balances
At some point during the five years leading up to the council’s collapse, the checks and balances that leaders and managers across local government use all the time would have been expected to kick in. The inspection and audit reports, the scrutiny from the media and political opponents – even political friends – should have at least moderated the approaches taken by the council. The mechanisms, formal and informal, in which members and officers engage with, support and challenge one another should have brought a degree of reflection, and a much-needed reality check. 

Instead, the collective response was to circle the wagons and defend the cause. It must have been really difficult for anyone to be on the wrong side of that cause. No one wants to be the one to tell the emperor that he has no clothes.

Many things could have happened, and should have happened, to prevent this collapse, wholly preventable as it was, but they did not. None are exotic or unusual. In his report that precipitated the intervention, government inspector Max Caller lamented the fact that the council had lost the ability to “do the boring well”. Leaders and managers need to:

Hold people to account for the things they commit to doing. Savings targets were high on that list. If a service consistently falls well short in this area, do something to remedy the situation from the outset. In each of the three financial years prior to intervention, Northamptonshire failed to hit even half the savings targets it set itself. Unless an underlying inability to robustly set and deliver budgets is tackled, a council is doomed. It is only a matter of time. 

Invite challenge. It is healthy, it improves decision-making and builds inclusive ownership of difficult decisions. If you perceive it as a threat, ask yourself why. In Northamptonshire, challenge was not welcome. 

Be careful not to instigate projects or programmes to achieve transformation or improvement and then assume you have discharged your responsibility. These things are difficult and will wander off point if they are not closely monitored and managed. They don’t come free or cheap either. Be prepared to make the investment, but only on the basis that you are convinced you will achieve the return. Business plans need to be real and deliverable, not written simply to satisfy a perceived need 
to do so.

‘The collective response was to circle the wagons and defend the cause’

Prioritise. If your crisis is in one area, don’t allow whizzy and exciting things elsewhere to become the focus of attention. Don’t fall for the seductive distraction of something interesting that may save the pennies in favour of something boring that will save millions. The Next Generation model that saw Northamptonshire float off all its services into a range of different operating vehicles, while retaining a minimum core client staff, had to be unwound, as it quickly became part of the problem while offering no real part of its solution.

Recognise that the crisis heads the agenda until it is resolved. Senior managers must support members to keep their attention fixed on the things that are not always interesting… and members must be able to hold senior managers to account for progress.

Not let the fundamentals fade away. Your corporate plan, medium-term financial plan, capital programme, transformation plan, workforce strategy – whatever you call these things – is your cornerstone. Once it’s allowed to crumble, you have lost the fundamentals upon which to build.

There should not be another Northamptonshire. The fact that it happened shamed the sector. But the real losers are the residents of the county who, for years to come, will pay for the resolution of problems that need not have arisen and the recovery of opportunities that need not have been lost. For the wider world of local government, the best that can happen is that the lessons are learned. 

  • Tony McArdle

    Tony McArdle is the lead commissioner at Northamptonshire County Council

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