The leader of Northamptonshire CC is to ask the government for permission to overspend its annual budget as long as it achieves balances within five years.
In an interview with LGC, leader Heather Smith (Con) said she was “seriously worried” about the future of her local authority’s finances.
While the county council’s chief finance officer is “not about to issue a notice saying we can’t fund ourselves”, Cllr Smith said the local authority is at the point of “stopping everything except the absolute statutory services”.
She is now calling on the government to get on with its fair funding review, which ministers have committed to doing.
“They have said they will still look at fairer funding but it is taking so long and we’re running out of time,” said Cllr Smith. “If they can’t get that resolved fairly quickly then we need some agreement from them that we don’t have to come in within budget every year, that we could present a budget over four or five years that shows we might overspend for a couple of years but we will pull it back in again when all of the changes we are putting through have had a chance to start to reduce our running costs.”
While she has yet to present her proposal to ministers, Cllr Smith has started discussing it with local MPs. Those who have engaged with her so far have been supportive, she said.
Rob Whiteman, chief executive of the Chartered Institute of Public Finance & Accountancy, told LGC councils can overspend as long as they have enough money in their reserves to cover it.
Northamptonshire CC has a net revenue budget of about £416m in 2017-18. Cllr Smith said there is about £12m in unallocated reserves – an amount Mr Whiteman said was “inadequate”.
He said: “Northamptonshire’s difficulty is they don’t have reserves to cover their desire to overspend in the early years whereas other councils are in the position they can manage their finances in the way Northamptonshire’s leader has set out.”
As a result legislation would need to be changed to accommodate Cllr Smith’s request, said Mr Whiteman. While he “wouldn’t rule it out”, Mr Whiteman said the government would “look long and hard before making such a change” due to concerns it might cause other councils “to have less grip on their finances”.
A cabinet report by Northamptonshire’s chief executive Paul Blantern said the county council has delivered £376m savings since 2010. It is projected savings will have totalled about £0.5bn by 2021.
“Unfortunately, this still isn’t enough,” Mr Blantern’s report said.
The report said Local Government Association modelling had “recognised the fact that NCC was the county council least able to fund ourselves in the future, and indeed one of the worst positioned in the whole of the country”.
Cllr Smith said Northamptonshire is “one of a few” to fall into that category now.
“In spite of what everyone has said about us we have still managed to come in on budget every year and we will continue to come in on budget every year,” said Cllr Smith. “Our section 151 officer is not about to issue a notice saying we can’t fund ourselves. What we’re having to do instead is stop things we don’t want to stop.”
An equality impact assessment, which also went before cabinet last week, said “the financial pressures facing NCC are such that” it was recommended the council “increases its focus on statutory services and interventions… as opposed to investing in primary prevention which may not see an impact for a number of years”.
Cllr Smith said pressures within children’s and adult services had hit the county’s finances “really hard” in recent years and had become “so extreme it’s something government is going to have to tackle”.
While Cllr Smith had been supportive of the coalition government’s policy of freezing council tax at the time, she said “that has really bounced back and bitten us” even though the county council “ended up on the naughty step one year because we ignored it and put council tax up by 2%”.
Cllr Smith added: “In the years we followed it – three out of the five – that’s done us huge harm now because you can never get that money back.”
For every 1% increase in council tax, Northamptonshire gets about £2m extra in revenue.
With referendum thresholds still in place, Cllr Smith is reluctant to ask the public to pay more especially as “I still don’t think we would get the result we would want”.