Northamptonshire CC has been granted permission by the government to use £70m of capital receipts to help balance its books after commissioners warned the council will not be able to set a balanced budget this year.
This comes as the government launched an eight-week consultation on the proposal to create two new unitary authorities.
The first report by lead commissioner Tony McArdle and finance commissioner Brian Roberts to housing and communities secretary James Brokenshire, which was sent in September but published for the first time today, said an identified unfunded deficit of £35m in 2017-18 had been carried forward to this year.
It said: “Whilst we can, and will, take such action as is necessary to restore the council’s finances to an ongoing operating balance, the requirement to find further savings to the extent necessary in order to neutralise this historic deficit represents an extraordinary challenge.
“Considered against the concomitant need to maintain the integrity of critical public service delivery, it is a challenge that is beyond being met in a single year.”
The report added an alternative mechanism for addressing the deficit will be necessary, but the option of reducing the deficit over a number of years is not available due to forthcoming local government reorganisation across the county.
The report mooted using available capital receipts to balance this year’s budget.
The government has since granted the council’s request to use £70m of capital receipts. “This significant step – called capitalisation dispensation – will help the council to reduce its deficit and put it on a more sustainable financial footing,” the Ministry of Housing, Communities & Local Government said.
Government commissioner Tony McArdle said the funds would be split into three pots and would not be allowed to balance next year’s budget. The first pot will be used to pay the council’s legacy debt of £35m for 2017-18, while £15m would be used to help to deliver a balanced budget for this financial year. The final £20m will be used to create a new reserves account.
Northamptonshire’s commissioners said in a statement: “It will enable Northamptonshire to pay off the deficit carried over from last year, and to restore a sensible level of reserves, all from within the council’s own financial resources.
“It is also notable that the conditions attached to the dispensation do not allow for the funds to be used to subsidise next year’s budget. This will require the council to apply proper rigour and discipline to budget-setting which will set its services on a sustainable path for the future.”
Leader Matt Golby (Con) said: “We’re pleased that the government has recognised the robust steps taken by the authority to stabilise the council’s position, and the approval of the capitalisation grant is a significant step in the council’s recovery journey.”
He added draft budget proposals for 2019-20 are due to be published next week.
Mr Brokenshire said the consultation on reorganisation in Northamptonshire will run for eight weeks up to 25 January 2019 in a written ministerial statement published today.
District and parish council elections in Northamptonshire will also be postponed from May 2019 to May 2020, following a request from the local councils.
This date would bring the new elections in line with the creation date of any potential new authorities, according to a separate report which recommends they be established on 1 April 2020.
Mr Brokenshire said: “I am consulting all principal councils in Northamptonshire, principal councils neighbouring Northamptonshire, Northamptonshire Chamber of Commerce, South East Midlands Local Enterprise Partnership, the Northamptonshire Police and Crime Commissioner, local health bodies, the University of Northampton, and representatives of the voluntary sector.
“We also welcome views from any interested persons, including local residents and organisations.”
With the exception of Labour-controlled Corby BC, all of the county’s councils voted to submit proposals to split Northamptonshire into two unitaries at the end of August.
Leader of South Northamptonshire DC Ian McCord (Con) said at the time: “We now need to do what’s in the best interest of our residents and we have a responsibility to get the best deal for them. First we need to end the omnishambles that is Northamptonshire CC.”
Mr Brokenshire said: “Once the consultation is concluded, I will then as statute provides decide whether or not to implement, with or without modification, the proposal that the councils have submitted to me. In taking that decision I will have regard to all the representations received from the consultation exercise along with all other relevant information and material available to me.”
Mr Brokenshire also said there are risks to holding elections next year.
“These risks are, as the councils have highlighted to me, that if following the consultation I were to decide to implement the councils’ proposal and Parliament approves legislation establishing the two new unitary councils from April 2020 with elections in May 2020, district councillors elected in May 2019 would serve for only one year with their council then being abolished.
“Elections in such circumstances risk confusing voters and would involve significant costs that would be hard to justify,” he said.