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Analysis: 'No sanctions for failure' revealed in inspector's report

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Inspector Max Caller’s report on Northamptonshire CC paints a disturbing picture of a council seemingly so dysfunctional that fundamental principles of governance and responsibility appear to have been treated as an inconvenience.

The report details how the council counter-intuitively abandoned budgetary control at a time when financial pressures were mounting in 2013, in pursuit of a brave new world “next generation model” that would transform service delivery and place the authority on a sustainable footing.

It is difficult to understand how, politically and corporately, the council bought into the dream when, as Mr Caller points out, a “hard-edged” business plan or justification to support the ambition never appears to have existed.

Mr Caller says the cause of the subsequent financial meltdown that led to the first section 114 notice to be issued in almost two decades is simple: the next generation model could not address mounting budget overspends and its implementation coincided with the emergence of culture in which transparency, accountability and best practice were side-lined.

Northamptonshire became seemingly blinded to risk by an unobtainable dream.

Reserves shrunk from £57.7m in 2013-14 to £8.8m in April 2017 to plug holes in revenue expenditure.

Seemingly worried, the council “seized” on a move by the government in 2016-17 to allow capital receipts to be used for “transformation” to re-classify expenditure for the same purpose.

The report says that until this current budget cycle, statutory guidance for the use of capital receipts in this way, which requires a detailed report setting out what specific transformation was being achieved, was seemingly ignored.

“Councillors were certainly neither clear nor briefed on the rules and application of this funding source,” the report says, and the first attempt to comply with statutory guidance was identified in cabinet papers for a meeting on 13 February this year.

The inspector said the “federated” approach of the next generation model lacked transparency and created an impression that “units could do their own thing… and not be accountable to the centre”.

He added savings targets were imposed without understanding of “demand, need or deliverability”, with clear evidence some chief officers did not consider they were accountable for the delivery of savings they had advocated.

Moreover, the section 151 officer to this day still has no staff supporting him in the delivery of the financial management for the council, Mr Caller said.

It is not as if there was a complete absence of any early attempts from within the council to challenge the perilous direction of travel. Strikingly, in October 2015 Northamptonshire’s 151 officer in October wrote to chief executive and architect of the next generation model, Paul Blantern, with a stark warning.

They signalled an intention to issue a section 114 report, adding: “‘We are experiencing a significant financial crisis but there is avoidance of the term and a lack of action appropriate for the situation we find ourselves in.

“At the heart of this is the corrosion of our financial management arrangements over the past eighteen months; there has been a change of culture and behaviour where overspending is acceptable and there are no sanctions for failure.”

The section 114 report was not subsequently issued and there was no change in the council’s approach, it says.

“The inspection team has been unable to find any record of more effective budgetary control following that correspondence. Services continued to overspend and failed to deliver planned savings in 2015/16,” Mr Caller’s report adds.

Mr Blantern was also subsequently out of the country when the Local Government Association undertook a peer review of his council’s financial position in September last year. He announced his departure weeks later.

However, even when Mr Blantern left the council, there was evidence of ongoing issues at the top. The inspector found evidence the council continued to not have the processes in place to control budgets and ensure they are delivered.

Northamptonshire’s interim chief executive Damon Lawrenson was himself abroad when the section 114 report was issued on 2 February, despite the inspection team, external auditors and, “presumably” senior managers being informed it was forthcoming before he left the country, Mr Caller’s report said.

“This left the leadership of the organisation in something of a limbo during the first crucial days following imposition of expenditure controls,” Mr Caller said.

He added that while service directors lead with “dedication”, “there did not appear to be a corporate sense of leadership or even urgency to address the financial situation”.

Scrutiny functions appeared to have been essentially discarded. The inspection team was said to be “struck” by the volume of councillors who reported they had been refused information when they sought to ask questions.

The process by which Northamptonshire decided to sell and lease back its recently-completed £53m headquarters on 13 February was ongoing evidence of the continuing malaise, the report said. Bizarrely, during that full council meeting, cabinet members announced they were “privy” to confidential information which supported their decision to back the plan, but this would not be made available to other councillors.

“To refuse it outright is just wrong,” Mr Caller said.

It was not just internal scrutiny that was seemingly dismissed.

In an unusual move, the local government and social care ombudsman Michael King contacted inspectors to inform them that Northamptonshire “was one of the most difficult authorities the Ombudsman had engaged with both in terms of the time taken to respond in the course of investigations but also in the authority’s approach to complaint handling, learning from mistakes and remedying injustice”.

Mr Caller considers the problems at Northamptonshire so ingrained, that the required change to “organisational and cultural ethos” would take five years and a substantial injection of funding, which would effectively be a reward for failure.

His recommendation for the county to be split into two unitary councils, with commissioners running services in the interim, was expected.

But due to the scale of the failings that gripped Northamptonshire, the day local residents are served by a council they deserve and can be proud appears a long way off.

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