By Matt Jarram, Local Democracy Reporter
Nottingham City Council has been warned the Government could step in to control of some of its spending if it does not make satisfactory progress on reducing its debt.
The Labour-run authority has three years to get its house in order on the back of a string of financial issues including setting up a failed energy company, Robin Hood Energy, which caused an estimated £38 million in losses.
Conservative MP Robert Jenrick, who is the Secretary of State for Housing, Communities and Local Government, sent out a strong warning to the council expressing serious changes need to be made by August.
He said if a new plan to curb the council’s debts is not delivering, he will “need to strongly consider the need for statutory action to limit the council’s debt”.
Councillor Sally Longford, deputy leader of Nottingham City Council, said the council had agreed not to exceed that level of debt, much of which she described as ‘historic’.
She added while she accepted work still needs to be done, the authority is “making progress”.
Last year, a public interest report, published by an external auditor to approve the city council’s annual accounts, outlined ‘significant failures’ by the local authority.
It accused the council of ‘institutional blindness’ when it came to the financial position of Robin Hood Energy, before the company was sold to Centrica, the parent company of British Gas.
As a result, the council had to produce an action plan, which was approved by the Government.
The council and the Government also agreed that a Non-Statutory Review would be undertaken, focussing on the council’s financial stability and governance.
It identified “a significant weakness in the council’s approach to risk” and the delivery of a three-year recovery and improvement plan was needed.
An Improvement and Assurance Board (IAB) was also set up to monitor it, chaired by Sir Tony Redmond, a former local authority chief executive and former local government ombudsman.
The IAB is required to produce a report to the Secretary of State on the council’s progress against the Recovery and Improvement Plan on a quarterly basis.
The approved plan includes “approximately 200 milestones, several of which had to be achieved within a relatively short timeframe”.
Writing to the board following the May report, Mr Jenrick said: “I am encouraged by the commitment of the executive board and the council leadership to delivering the plan.
“I fully agree with your assessment that we now need to see an increase in pace and delivery by the council over the next quarter.
“This is especially so given the council’s stated intent to complete their Medium Term Financial Plan for 2022 and beyond by September.
“Progress against the council’s voluntary debt reduction programme, a credible and deliverable asset disposal programme, and continuing culture change.
“Progress in these areas will inform my decisions on our involvement with the council and its financial arrangements and my final decision later in the year on any additional capitalisation support.
“In particular, given the clear recommendation in the non-statutory review on the need to limit the council’s borrowing, if there is any indication that the voluntary plan on debt is not delivering the required change, I will need to strongly consider the need for statutory action to limit the council’s debt.”
In August, Mr Jenrick wants the council to have developed “a credible strategy for long-term transformation”.
He said that “any faltering” would be “a considerable concern” and could lead to the “reconsideration as to whether a more statutory approach might be appropriate to secure the improvements that are necessary”.
The letter was revealed at the Overview and Scrutiny committee held at Nottingham Council House on Wednesday, July 7. The meeting was to discuss the progress of the recovery plan.
A Strategic Council Plan is currently under ‘serious consideration’ with the intention of it being completed by no later than September this year.
The plan will highlight the key decisions that must be made in prioritising services and how they can be delivered within current financial constraints.
An illustration of the council’s strategic intent is the reduction of “approximately 500 in the workforce of the authority”.
The report sent to the scrutiny committee states: “Whilst there is clear understanding by the council leadership and senior management of the need to make very difficult decisions to ensure the council lives within its means, there is more to be done to instil this way of thinking across the whole organisation.
“The council is very much aware of these challenges and some progress has been made in achieving these goals. However, the financial plan for 2021-24 must now incorporate specific actions to reduce the level of revenue spending and future pressures which will affect permanent and sustainable reductions in service costs to match underlying resources going forward.”
The report to overview and scrutiny also adds there is “a very substantial portfolio of companies owned, or part owned, by the council may expose the city and its residents to unnecessary risk. It is understood that the current review will seek to address this significant challenge.”
At the scrutiny meeting, Councillor Longford outlined some of the changes already being made which includes looking into “what we own and how we manage it”.
The council has also been successful in obtaining a grant to demolish part of the Broadmarsh and new corporate directors have been appointed to look at decision making across the council.
Services are also being looked at on how they can be delivered in a new and different way.
“The change is massive because there is so much to do and it touches upon every area of the council,” she told the committee.
“The council does all sorts of things really well, some things quite well, but some things have not been done well in the past and we need to pull it up to that better level.”
Mel Barrett, chief executive of the city council, added: “Our council does things very well, but we have made mistakes and we need to put them right and we have a comprehensive programme of improvement. Part of the challenge is we are doing our improvements in a very public way.”
