By Joe Locker, Local Democracy Reporter
The leader of Nottingham City Council says he is disappointed after the Government said it planned to further intervene in the authority amid serious financial problems.
At the end of November, the Labour-run authority’s chief finance officer, Ross Brown, said the council would be unable to set a balanced budget as required by law and consequently issued a Section 114 notice.
The notice, effectively declaring bankruptcy, was issued amid a £23m in-year budget gap.
It came shortly before a report, published ahead of an Executive Board meeting on December 19, further revealed a separate £53m gap in the council’s budget for the next financial year, starting in April 2024.
In response the council has proposed a raft of major cuts to services, as well as the loss of 554 jobs.
Despite already being overseen by a Government-appointed improvement board, the Secretary of State for Levelling Up, Michael Gove, decided on December 13 further intervention was necessary to make critical changes.
“The Secretary of State is minded to appoint commissioners to exercise certain and limited functions as required, for two years,” the Government said in a statement on Wednesday.
The move would effectively remove power from Nottingham’s elected councillors and place it in the hands of a board of officials, in a bid to “ensure that the necessary improvements are made for the benefit of the local community.”
However, responding to the decision, council leader Cllr David Mellen (Lab), said: “Clearly the appointment of commissioners would be very disappointing and not something that that we would want to happen.
“Any decision that reduces democratic accountability, however limited and temporary this may be, should not be taken lightly.
“The current situation for Nottingham and a great many other authorities is very challenging and in much part caused by underfunding.
“There will continue to be difficult decisions that have to be made. But we are committed and determined to do what it is right for the city and its residents.”
The council’s past issues have included the collapse of Robin Hood Energy and the unlawful spending of council tenants’ money on the wrong services, which led to poor financial resilience and impacted the council’s ability to draw from reserves.
However it has blamed the majority of its contemporary troubles on a series of factors impacting local government as a whole.
Soaring demand and costs associated with social care and homelessness services, alongside high inflation, the Covid pandemic and reduced Government funding, have led many authorities to a financial knife-edge.
As a result the council, alongside many others, has been forced to sell off assets, reduce services and raise council tax in a bid to make ends meet.
Yet, for many councils, including Nottingham and Birmingham most recently, these efforts have proven fruitless, leaving them no choice but to issue Section 114 notices.
According to Nottingham Trent University’s Professor Peter Murphy, the solutions councils have been relying on to raise cash are unsustainable and urgent action is required.
Writing for The Conversation, he said research from the Nottingham Business School shows demand on councils for social care, welfare, housing and homelessness support has been increasing since 2010, with many the result of austerity measures.
At the same time, there has been substantial decrease in the funding councils receive for these services.
“Add to this the recent unprecedented rises in interest rates and inflation, and you have the fundamental factors behind what has happened in Birmingham and Nottingham,” he adds.
“While there were other specific financial challenges in both cities, it is the impact of these fundamentals that suggests the inevitably of more section 114 notices coming soon.”
Professor Murphy, who previously worked in local government in Leicestershire, says many councils are now being placed in a relationship with the Government “akin to a company going into administration.”
This means major decisions to cut services to save money, as well as get rid of or employ staff, can be made by unelected officials who cost taxpayers anywhere between £900 and £1,200 a day.
In Nottingham the commissioner team, if appointed, would consist of three appointments including a lead commissioner; a commissioner for finance; and a commissioner for transformation.
“The organisation is effectively led and managed by commissioners appointed by the government,” he adds.
“In the most serious cases, these commissioners can end up taking over all responsibility for an authority.
“In Northamptonshire in 2018, they recommended the abolition of the county council and a complete overhaul of local government in the county, with eight councils being replaced by two new ones.”
The council now has until January 2 to make its representations to the decision.
