Northamptonshire CC’s unfunded deficit for the last financial year has risen by more than £6m, after reserves were found to have been reduced inappropriately, it has emerged.
A letter from Northamptonshire’s lead commissioner Tony McArdle and finance commissioner Brian Roberts to housing and communities secretary James Brokenshire, published on Tuesday, says the council has identified an “unexpected” year-end deficit for 2017-18 of £41.5m. This comes after external auditors KPMG had previously reported a headline figure of £35.3m.
The letter said further scrutiny of measures taken by the council to close its 2017-18 accounts had identified the “imprudent reduction” of earmarked general fund reserves of £4.4m and a shortfall in the insurance reserve of £1.8m.
The letter says: “These reserves should have been retained to cover commitments or continuing risks and will have to be reinstated.”
Northamptonshire was granted permission by the government to use £70m of capital receipts to help balance its books after commissioners warned the council would not be able to set a balanced budget this year.
The letter added: “We have not drawn upon the allowance in order to balance the budget because savings outside of those listed in the stabilisation plan have been found. However, we propose to use capital receipts equivalent to £7.8m of the allowance in order to increase the council’s reserves.”
The commissioners said the council’s stabilisation plan had reduced a projected overspend of £30m this year to £1.4m, which was expected to reduce further.
The plan contained proposals worth £7.8m involving the transfer of council tax surpluses, which was reliant on agreement from the county’s district and borough councils and external auditor.
However, the commissioners said this would not be “forthcoming this year”.
They added: “Our view is that the regulations do provide flexibility to permit them to be paid to us by the districts and boroughs, but it is clear that in order to make this happen we would need to pursue it through the courts, incurring costs to the public purse by all parties.
“This would be highly inappropriate and counter-productive, and we will not do so. We will instead account for the surpluses in 2019-20 and reduce the savings target to a more manageable level in that year.”
Commissioners were sent in to Northamptonshire last year after the county council, in February, became the first council in almost two decades to issue a section 114 notice. In March last year government inspector Max Caller recommended the county be split into two unitaries.
The latest commissioners letter later says “it is clear” Northamptonshire’s relationship with the county’s three districts and four boroughs “are often influenced by the past experience which partners and residents have had in their dealings with Northamptonshire County Council, and by the positions being taken by different organisations in order to maximise their influence in the reorganisation debate”.
Responding to the commissioners letter, Mr Brokenshire said he was currently considering the restructure proposals but had not yet made a decision.
The West Northamptonshire Joint Committee, consisting of Daventry DC, Northampton BC, South Northamptonshire Council and Northamptonshire CC, will meet for the first time next Tuesday.
It is set to discuss its terms of reference for activities the councils will have to undertake for the creation of a shadow authority ahead of the likely creation of one of two new unitary councils spanning the county.