Northamptonshire CC has issued its second section 114 notice in the space of six months.
In a letter to councillors, finance director Mark McCloughlin detailed a budget shortfall for this current financial year of £60m-£70m on an overall net revenue budget of £441m for 2018-19 as one reason for the notice.
A section 114 notice prevents any future expenditure for the rest of the financial year and is required in order to deliver a balanced budget.
Finance commissioner Brian Roberts said: “We are fully supportive of the issuing of this Section 114 which underlines the truly perilous state of Northamptonshire County Council’s finances.
“We have been very clear that we did not arrive in Northamptonshire with additional money and that to put itself on a secure financial footing very difficult decisions will need to be taken. It is clear the time for these decisions is now.
“It will require a determined response from the council to do everything in its power to address this significant financial shortfall, while protecting vulnerable people. We will ensure that such a response is made.
“All that is required of the council is that it lives within its means, just like every other council. This is harder than it should be given the over-expenditure of recent years but not impossible.”
In an email seen by LGC, council leader Matthew Golby (Con) announced an extraordinary full council meeting will take place on 1 August at 5.30pm to discuss the council’s “spending priorities”. A subsequent full council meeting will take place “later in the month” to discuss the Section 114 notice.
Cllr Golby (Con) wrote on Tuesday morning: “The gap in funding means that very significant savings will have to be made. I am sorry to say it needs to be understood that we are now entering a phase never seen before and some very difficult decisions will have to be made.”
In a separate statement issued by the council Cllr 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.
“At the meeting next month, we as a council will discuss a set of priorities built around delivering statutory services and services for the most vulnerable in our communities, and this means there will be difficult decisions that have to be made.”
Northamptonshire CC issued its first section 114 notice on 2 February, following warnings in January 2016 that it was on the “precipice” of issuing a section 114 notice.
Government commissioners were sent in to take over the running of the council in May following a highly critical report on the council’s leadership and management by inspector Max Caller. This has also recommended breaking the county up into two unitary councils with options currently being considered.
Former Lincolnshire CC chief executive Tony McArdle and Brian Roberts, former deputy chief executive of Leicestershire CC, were appointed as commissioners to take over the management of the council’s governance and scrutiny functions, appointment of statutory officers, and oversight of the authority’s strategic financial management. According to the government, the commissioners are due to remain in place until 31 March 2021.
The Chartered Institute of Public Finance and Accountancy said it was “unprecedented” for a council to issue a second second 114 notice.
“It demonstrates the reality of the dire financial difficulty the county council is currently in and drives home the urgency for action to support the sector’s finance challenges more widely,” a statement said.
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 twenty councils at risk along with the essential services for several million citizens. Understanding and acknowledging the scale of pressures, and responding early, to financial stress is essential to avoid seeing more councils fail.
“Cipfa is encouraging the government to use the forthcoming spending review to find money for adult and children’s social care pressures whilst using rate retention and fair funding to provide additional resources to the sector.
“We also believe there is a case to accelerate and broaden reorganisation to reduce overheads. However, given the deteriorating fiscal position and wafer thin control of Parliament, our advice to councils is that medium-term planning cannot be founded on any assumptions of material government support.”
A spokesman for the Ministry of Housing, Communities & Local Government said: “It is essential residents are able to have faith in their council, particularly in the responsible use of taxpayers’ money.
“The financial challenges facing the council are clearly serious and reinforce how important it was that we took swift action to appoint commissioners.
“These commissioners will continue to work closely with the council as it takes the necessary steps to rebalance its finances.”