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Move over Derek Hatton and Red Ted: Northants faces the ultimate shame

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If you type the word “bailout” into the search function of Health Service Journal, 233 results are displayed.

The vast majority of the 61 articles returned when you do the same on LGC are HSJ articles shared with us. This differential is explained by the simple fact that councils, unlike NHS bodies, do not get bailed out.

However, today’s revelation of the scale of Northamptonshire CC’s financial strife makes it difficult to comprehend how the county can balance its books without a bailout.

The council, which today issued its second section 114 notice in the space of five months, faces a financial shortfall of £60m-£70m on a revenue budget of £441m in 2018-19.

The council’s lead commissioner Tony McArdle told LGC that “radical action” was required. But while he insisted the county would “need to plan” to balance its books this year he could not be certain of the “timescales” required to put it on an even keel.

He noted the statutory need to break even had to be counterbalanced with the need to provide statutory services and “the moral imperative to keep people safe”.

This all raises the question of whether Northamptonshire can achieve financial balance in April.

The low-tax Tory county faces the indignity of becoming the first council since Liverpool City Council and Lambeth LBC – the councils of Derek Hatton and ‘Red’ Ted Knight respectively – if it fails to balance its budget.

Tony Travers, the font of all local government knowledge, tells LGC that during the mid-80s rate capping rebellion Liverpool and Lambeth delayed setting a budget. As a result of this they saw a surcharge imposed on councillors who were then disqualified from office. In addition, other councils only notionally balanced their budgets during this period through the use of “unallocated savings” in their figures.

As Mr McArdle noted to LGC, Northamptonshire’s situation is “unprecedented”, at least in the current political era.

The county faces a full council meeting next week which will determine a new “core offer” for local services (ie it has been too generous and needs to rein services back).

Mr McArdle – who successfully turned around Lincolnshire CC and Wellingborough BC from crises earlier in his career – has perhaps the finest pedigree in local government for his latest role. But even he admits Northamptonshire faces “an extraordinarily challenging situation”.

“The local authority will do what it needs to get itself out of this. It’s the intention of the commissioners to do that,” he said.

The county faces a painful autumn as the full (as yet unconfirmed) scale of its financial shortfall emerges when its auditors finish their work. A plan will then be produced to place the county on a secure footing.

At Northamptonshire, as at other counties, social care, children’s services and highways make up the three biggest areas of expenditure. All will all be targeted for significant cuts. Contracts with third parties will come under particular scrutiny and there will surely be redundancies.

Northamptonshire is alone – for the time being – in the depth of its financial crisis. But other plenty of other authorities are plugging gaps in spreadsheets through the use or reserves or the adoption of a broad definition of what constitutes capital expenditure.

Chartered Institute of Public Finance & Accountancy chief executive Rob Whiteman recently told LGC a “clutch” of councils were within a year or two of issuing their own section 114 notice. However, he said volatility in children’s services could – potentially – result in as many as five additional such notices within the next six months.

This afternoon ministers churned out a slew of announcements in advance of the parliamentary recess. Among these were the indication that authorities facing negative revenue support grant next year may get additional help, while council tax could rise again by 3% next year. There will also be a new round of pilots on the 75% retention of business rates.

However, there is little indication that the sort of radical financial reform is in the offing that can place all of the sector on a financial footing.

Northamptonshire may not be alone in requiring a bailout.

HSJ reported in May how NHS trusts drew down £3bn in cash bailouts (or “working capital loans”, to use the official parlance) in 2017-18. While local government will never be offered such largess and its culture is to balance the books, what once seemed inconceivable now seems probable.

Nick Golding, editor, LGC

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