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Play by the rules and get punished. Be reckless and earn reward

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Commentary on James Brokenshire’s final finance settlement this afternoon

“Nothing succeeds like failure.”

So said Tony Travers to LGC this afternoon in relation to the government’s decision to let Northamptonshire CC increase its council tax by two percentage points more than any other authority.

The leniency shown towards Northamptonshire – the ultimate symbol of financial failure in local government – is unprecedented (well, LGC cannot think of a precedent anyway).

Manage your finances prudently and you have to play by the rules; take risks and blow your money and you get a special dispensation to raise extra council tax.

None of this is to say that James Brokenshire was wrong to allow Northamptonshire to increase its council tax by 5%, as he announced this afternoon in the final local government finance settlement.

The council has been in a dire financial predicament. Commissioners Tony McArdle, Brian Roberts and Malcolm Newsam and chief executive Theresa Grant deserve credit for striving to stabilise a ship which was most definitely sinking. It appears that the ship will still sink – the county and its districts are set to be replaced by two new unitary councils – but Mr Brokenshire’s announcement (alongside the work of the commissioners and chief) is designed to help ensure it doesn’t take its cargo of services with it into the murky depths.

As Chartered Institute of Public Finance & Accountancy chief executive Rob Whiteman told LGC, the new authorities, under which these services will end up, need to be put on a sustainable baseline. But why only allow an extra 2% leniency? These new authorities and the local public service user in the county should not be penalised forever more for past mistakes of predecessor organisations. Is 2% on council tax going to set these organisations up for prosperity and sustainability? Not necessarily.

Northamptonshire may be the council in the direst predicament but it is not alone in its travails. LGC’s Confidence Survey in October showed 42% of the senior officers responding believed their authority was on course to issue a section 114 notice at some point in the next four years. Cipfa research before Christmas suggested 15% of councils show signs of financial failure.

Councils including Lancashire, Somerset and Worcestershire CCs have been revealed to have been in a shocking financial position. Rotherham MBC revealed it faced a £30m financial black hole as a result of the its expenditure to recover from its child sexual exploitation scandal. If ever there is a council which should be ‘the exception’ then surely it is Rotherham?

So why are not these councils being offered the same special dispensation? Surely it is better to tackle a financial problem before a section 114 becomes necessary, not after the event.

We are left in a situation where one council receives the flexibility (as it did previously when rules were bent – OK, torn up – to allow it to use capital receipts to balance its budget), raising the possibility that it may be the thin edge of the wedge. Rules cease to be rules when they are not upheld. Other councils may feel some hope that they will in future get to raise council tax more, although this power will only be much use in areas with high property prices. Northamptonshire is rewarded for its failure – but not sufficiently so to safeguard its services in the future.

Today’s special dispensation for Northamptonshire is most unsatisfactory, even if it is a necessity. Far better we move to a system in which councils have far greater ability to raise the money they need themselves, rather than one in which they are continually reliant upon (but not getting) the generosity of the centre.

Nick Golding, editor

 

 

 

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Readers' comments (2)

  • Northamptonshire have learnt from the best - the NHS.

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  • The problem with an arbitrary percentage cap ignoring historic low levels of council tax. The introduction of a notional council tax in the fair funding review may enable a tiered approach to be produced - those below could raise by more and those above, less.

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